*Note: I invite anyone who reads this to PLEASE question my math & improve on it where applicable.*
When I first heard several months ago that WWE were thinking of making their long delayed WWE Network an a la carte premium channel, my immediate reaction was that Vince was out of his mind. Then I heard they would likely include every pay per view event of the year, other than WrestleMania, as part of the network’s programming. This instantly made the concept of the WWE Network a much more appealing proposition, especially given that WWE generally runs one pay per view event a month. Now, instead of having to fork over $44.95 (or more) each month to watch a pay per view, WWE fans would have the option to pay less than half of that for the pay per views PLUS a full slate of other programming. This would clearly make an attractive product for the WWE Universe.
This was confirmed today when WWE issued a press release stating they plan on eventually launching the channel as rumored at the low rate of between $12.99-$14.99 per month. The problem I had was figuring out how this premium channel could prove to be financially viable for the company. Assuming WWE Network is available on most major cable or satellite systems (and this is a HUGE assumption as DirecTV is currently the only television provider to have publicly acknowledged interest), WWE would stand to lose millions of dollars in revenue on most of their pay per view events.
However, after doing some math based on approximate domestic buyrates for WWE’s 2012 PPVs, it appears as though WWE might just be on course to make a great deal of money with their newest television venture.
This was confirmed today when WWE issued a press release stating they plan on eventually launching the channel as rumored at the low rate of between $12.99-$14.99 per month. The problem I had was figuring out how this premium channel could prove to be financially viable for the company. Assuming WWE Network is available on most major cable or satellite systems (and this is a HUGE assumption as DirecTV is currently the only television provider to have publicly acknowledged interest), WWE would stand to lose millions of dollars in revenue on most of their pay per view events.
However, after doing some math based on approximate domestic buyrates for WWE’s 2012 PPVs, it appears as though WWE might just be on course to make a great deal of money with their newest television venture.
Using numbers arrived at by Dave Meltzer of WrestlingOberserver.com, WWE has averaged 152,350 domestic buys per non-WrestleMania pay per view from 2007-2012. This represents approximately $6,855,750 in raw revenue generated per PPV. Extrapolated over eleven pay per view events (WWE has 12 PPVs scheduled for 2013), the number comes to approximately $74,413,250 per year in non-WrestleMania PPV revenue.
I have left WrestleMania out of these figures as it sells for a slightly higher price ($54.95 as opposed to the standard $44.95), and usually generates a domestic buyrate of at least double the yearly average. In 2012, WrestleMania 28 generated a whopping 733,000 domestic buys, nearly five times more than the average buyrate for the remainder of WWE’s PPVs that year. Working in the same time period of 2007-2012 and using Meltzer’s numbers, WrestleMania has averaged 662,500 buys per year. Using the current price tag, that is an estimated $36,437,500 per year in revenue.
For the purposes of this analysis, this brings WWE’s average total pay per view revenue over the last six years to $110,850,750 per year.
According to WWE’s press release today, they anticipate WWE Network would require one million subscribers to break even. I think this number may be a bit high. Starting at the lowest potential rate of $12.99 per month and assuming only 500,000 subscribers, the company stands to earn $78,000,000 per year from WWE Network alone. Combine that with our average WrestleMania figure and the company will have earned approximately $114,437,500 between Network subscriptions and a la carte WrestleMania buys in the United States alone. This number also does not take into consideration a la carte buys for non-WrestleMania pay per views, which will still be available to all non-Network subscribers.
When one looks at that math, it’s easy to see why the company believes WWE Network can prove to be a game changer. Of course, there are still a few “x-factors.” One is whether or not WWE can strike a deal with the necessary television providers to ensure their new product is in enough homes to make their long-term goal of two-four million subscribers a feasible probability. Currently, WWE only seems to have interest from DirecTV. According to their corporate website, DirecTV has 20.08 million customers in the United States. If they are the only provider carrying the Network, WWE would be depending on roughly 20% of DirecTV’s customers subscribing to reach their break-even point. This seems highly unlikely. WWE would surely need to land contracts with at least two more of the country’s “Big Four” television providers (Comcast ~22M, DISH ~14M and Time Warner ~12M*) to have a realistic chance of reaching the number of subscribers they desire.
I have left WrestleMania out of these figures as it sells for a slightly higher price ($54.95 as opposed to the standard $44.95), and usually generates a domestic buyrate of at least double the yearly average. In 2012, WrestleMania 28 generated a whopping 733,000 domestic buys, nearly five times more than the average buyrate for the remainder of WWE’s PPVs that year. Working in the same time period of 2007-2012 and using Meltzer’s numbers, WrestleMania has averaged 662,500 buys per year. Using the current price tag, that is an estimated $36,437,500 per year in revenue.
For the purposes of this analysis, this brings WWE’s average total pay per view revenue over the last six years to $110,850,750 per year.
According to WWE’s press release today, they anticipate WWE Network would require one million subscribers to break even. I think this number may be a bit high. Starting at the lowest potential rate of $12.99 per month and assuming only 500,000 subscribers, the company stands to earn $78,000,000 per year from WWE Network alone. Combine that with our average WrestleMania figure and the company will have earned approximately $114,437,500 between Network subscriptions and a la carte WrestleMania buys in the United States alone. This number also does not take into consideration a la carte buys for non-WrestleMania pay per views, which will still be available to all non-Network subscribers.
When one looks at that math, it’s easy to see why the company believes WWE Network can prove to be a game changer. Of course, there are still a few “x-factors.” One is whether or not WWE can strike a deal with the necessary television providers to ensure their new product is in enough homes to make their long-term goal of two-four million subscribers a feasible probability. Currently, WWE only seems to have interest from DirecTV. According to their corporate website, DirecTV has 20.08 million customers in the United States. If they are the only provider carrying the Network, WWE would be depending on roughly 20% of DirecTV’s customers subscribing to reach their break-even point. This seems highly unlikely. WWE would surely need to land contracts with at least two more of the country’s “Big Four” television providers (Comcast ~22M, DISH ~14M and Time Warner ~12M*) to have a realistic chance of reaching the number of subscribers they desire.
Another unknown is just how many fans the WWE has. In today’s press release the company claimed to have “a projected base of approximately 47 million WWE digital TV households in the US (including lapsed fans).” Surely the company did their homework and spent plenty of time studying trends, but that number seems a bit high to me.
Even if the figure of 47 million is accurate, the single biggest “x-factor” of them all is whether or not the WWE Universe will be willing to fork out the extra 13-15 bucks a month for more wrestling content. How many of those 47 million households are home to WWE fans who watch WWE programming religiously, but do not control the cable bill? How many of those 47 million households will simply not be able to afford the extra $156-$180 per year for a channel consisting entirely of sports entertainment? How many WWE fans in those 47 million households are devoted enough to the product to pay a premium for more than the 6.5 hours of television the company is already basically giving them for free? Will the WWE Universe see the value in the product?
These are the big questions. WWE even went so far as to acknowledge in their press release that there is no guarantee their massive fan base will translate into a proportionate number of subscribers. Still, it’s early in the game. WWE are clearly deeply invested in the Network and are willing to do whatever is necessary to make it a success. With no official launch date set, the company has plenty of time to continue analyzing the numbers and formulating the best product possible. In the meantime, all we can do is sit back and hope the company can figure out a way to get this thing over.
*Source: http://www.ncta.com/Stats/TopMSOs.aspx
Even if the figure of 47 million is accurate, the single biggest “x-factor” of them all is whether or not the WWE Universe will be willing to fork out the extra 13-15 bucks a month for more wrestling content. How many of those 47 million households are home to WWE fans who watch WWE programming religiously, but do not control the cable bill? How many of those 47 million households will simply not be able to afford the extra $156-$180 per year for a channel consisting entirely of sports entertainment? How many WWE fans in those 47 million households are devoted enough to the product to pay a premium for more than the 6.5 hours of television the company is already basically giving them for free? Will the WWE Universe see the value in the product?
These are the big questions. WWE even went so far as to acknowledge in their press release that there is no guarantee their massive fan base will translate into a proportionate number of subscribers. Still, it’s early in the game. WWE are clearly deeply invested in the Network and are willing to do whatever is necessary to make it a success. With no official launch date set, the company has plenty of time to continue analyzing the numbers and formulating the best product possible. In the meantime, all we can do is sit back and hope the company can figure out a way to get this thing over.
*Source: http://www.ncta.com/Stats/TopMSOs.aspx
You are forgetting that they aren't *not* showing the PPVs normally; if they average 150,000 buys/PPV and half of those people now get it for free on Dish, there's still 75,000 people buying it normally (at $44.95 a pop).
ReplyDeleteAlso, 500,000 is pie-in-the-sky dreaming. 250,000 would be a major coup.
I buy exactly 1 PPV per year (Royal Rumble), and probably will continue to do so regardless of if there is a WWE network or not. I imagine for a lot of people it's a "game day call" as to whether they order or not, and WWE hasn't been putting out a great product lately.
I do mention the non-Wrestlemania PPVs still being available to everyone a la carte. While there's no real way to speculate what those buys would look like, they will certainly not be as high if the Network is made available by most television providers. Still, whatever that number is will supplement the revenue generated by the Network.
ReplyDelete