Market Insight

WWE to roll out international OTT network in 2014

January 15, 2014


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World Wrestling Entertainment (WWE) is set to launch an over-the-top (OTT) network later this year, bypassing a traditional live linear channel on pay TV. The WWE Network is due to launch on 24 February in the US, with the UK, Canada, Australia, New Zealand, Singapore, Hong Kong and the Nordics set for late 2014 or early 2015. The online network will combine a 24/7 linear stream and video-on-demand (VoD) library and is set to include live pay-per-view events as well as original programming and 'encores' of Raw and SmackDown programming, which will continue to air on traditional TV.

The  service will debut at $9.99 a month and will require a six-month commitment. In the US, each pay-per-view event sells for $45 - $50, implying the cost of the six-month package will be about the cost of a single pay-per-view purchase. International prices have yet to be announced. The service will be largely free of advertising at launch although there will be sponsorship opportunities.

WWE Network, which is powered by MLB Advanced Media (which is also set to power Sony's new 'virtual MSO'), will initially be available on the following devices: PCs/Macs (WWE.com), iOS devices, Android devices, Kindle Fire, Xbox 360, Playstation 3 and 4, Roku. Additional devices, including the Xbox One and smart TVs, are expected to be added to the tally over the summer.

The company is expecting to have achieved around 1m subscribers by Q4 2014 and expects the business to stabilise at between 2-3m subscribers in the and 0.75-1m  internationally.

Even as it launches an OTT offer, WWE remains keen not to alienate its current relationships with both pay TV providers and traditional broadcasters. Broadly speaking there are three prongs to the WWE's existing TV business.  

  • Program sales to traditional broadcasters and cable networks (e.g. SmackDown is on SyFy in the US)
  • Pay per view (PPV) events
  • A small quantity of revenue from WWE Classics, an SVOD service available through US pay TV operators.

Of these it is the program sales business that is the largest and most important, accounting for over 60 per cent of WWE television revenue in 2012.

According to WWE's SEC filings, the company's fees from US television rights have been growing over the last few years. In Q3 2013, the last quarter for which data is available, US TV rights generated 53% more than they did in the same quarter in 2011; while between Q2 in 2011 and Q2 2013, fees increased by 22%. The company continues to sell PPV events through pay TV operators. PPV sales remain down on 2007 and 2008; however there is some evidence that the decline has stabilised - prompted by better online performance. PPV sales for WWE have been broadly flat over the last few years, with low-level revenue growth being driven by increased average prices. These flat sales have come from the combination of both online and traditional platforms, while IHS understands from online platform owners that WWE sales have been growing, implying some erosion of WWE's traditional pay TV PPV business.

In this context, launching an OTT network including flagship content can only been seen as a bold move from WWE. In this context, launching an OTT network, including flagship content should been seen as a bold move from WWE, as it has the potential to impact all three pillars of the company's existing TV business.

However, in some respects it is how the WWE offer interplays with the linear channel business that represents the most interesting part of the WWE's OTT initiative. This potential comes from rather different directions:

  • Program sales: the WWE has promised to provide pre and post shows for Raw and SmackDown, its flagship shows on traditional broadcast; but it is also planning to offer 'encores' of those shows. As yet, no details are available about how those encores are to be windowed; but if they are available too close to the initial transmission date the WWE's broadcast partners may start to offer lower fees for the traditional programs.
  • Channel sales: The WWE is widely understood to have been looking at launching a a basic or premium TV channel of its own as far back as 2010 (see: http://www.screendigest.com/news/nbc-universal-key-to-us-wrestling-channel-launch/view.html ). Despite the rumours, the company did not launch a basic channel, with the first signs of its new strategy being the announcement of the OTT play on 8 January. On the surface, the move is reminiscent of a channel owner unbundling from the operator and a prerequisite of cord cutting; however, it remains possible that, like Netflix in Europe before it, the WWE's OTT service could find itself integrated into traditional TV services. However, any such move must be weighed against its potential impact on the lucrative program sales business.

According to company reports, WrestleMania 28 achieved 1.3 million buys, generating more than $30 million in spending. Given that the event is priced at $59.95, a six month commitment to WWE's new OTT play resembles as much a pre-purchase as it does a subscription. Careful pricing policy ensures that should the only customers to the online service be existing PPV buyers, revenues relating to core events are not impacted too severely; although the company is further sweetening the pot by throwing in all monthly PPV events at no additional cost - banking on the subscription effect encouraging greater uptake and per-user spend in the long run. In this context the enhanced value provided by the OTT subscription, coupled with a low monthly fee, compared to a large one off payment may mean that the goal of 1m subs by the end of 2014 is achievable.

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