Advertisement

WWE leans toward launching pay-TV channel

September 10, 2012|By Joe Flint
  • WWE Chairman Vince McMahon, left, seen with wrestler Triple H, may be betting on a pay cable channel.
WWE Chairman Vince McMahon, left, seen with wrestler Triple H, may be betting… (Getty Images )

Are there enough John Cena and Triple H fans to justify the launch of a WWE pay cable channel?

That's what WWE Chairman Vince McMahon and the rest of the executive team are going to be wrestling with for the next few months.

More than three years ago, McMahon unveiled plans to create a WWE cable channel that would capitalize on the company's vast library as well as feature new programming. But since then there have been lots of fits and starts and delays but no channel and little about it coming out of the WWE. Wall Street is eager to see movement because WWE has been telling investors it thinks having its own distribution platform could be a game changer for the company.

"You guys need to say more than you have," an exasperated Brad Safalow, an analyst with PAA Research, said on the WWE's second-quarter-earnings call last month. McMahon promised more clarity on the company's next earnings call. So far, WWE has spent about $40 million developing a programming service, according to its financial filings.

The reason WWE is being cagey is that it is still not sure what kind of channel it will launch. Originally, WWE wanted to build a broadly distributed commercial channel with hopes of getting a subscription fee in the neighborhood of 20 cents per month per subscriber.

However, not only is space tight on most cable and satellite systems, there were concerns about the amount of WWE content already available limiting the growth potential of a stand-alone commercial network. WWE has shows on the USA and Syfy cable channels and a new program for the ION broadcast network. It is also producing a kids show for the CW Network.

"Clearly the cable operators didn’t view what they brought to market as compelling enough," said Safalow in an interview.

Now the WWE is switching gears and focusing its efforts on creating an HBO-like pay cable channel that consumers would order on an individual basis and that would be commercial-free, people familiar with the company's thinking said.

On paper, the WWE certainly has a base to support such a venture. It produces a dozen pay-per-view events every year. In 2012, through eight events, WWE is averaging 250,000 buys in the United States. "Wrestlemania," its biggest event, had 850,000 buys. Add in international purchases and those figures grow by several hundred thousand. The price tag for WWE's pay-per-view programming is $44.95, except for "Wrestlemania," which goes for $54.95.

If WWE goes forward with a premium channel, it would likely place some or most of its pay-per-view events (which besides "Wrestlemania" includes "Summer Slam" and "Royal Rumble") on the network to entice people to sign up. That does not mean WWE would get out of its lucrative pay-per-view business. It will try to have its cake and eat it too by continuing to offer its events on pay-per-view for nonsubscribers. Also, "Wrestlemania" would likely remain strictly a pay-per-view event.

The price tag WWE would seek for a premium channel would be north of $10.00 a month and perhaps as much as $15.00, which would be cheaper than buying all or even half of the pay-per-view events. Typically, the subscription fee is split 50-50 between the programmer and distributor.

Besides its pay-per-view content, WWE would also create some new shows that would complement its content on other channels and use its library fare as well.

"Subscribing to the network would be a 'no brainer' for the company's hardcore fans," Safalow wrote in a recent report. Safalow said he anticipates a price of $14.95 for the channel and that WWE should be able to get 400,000 subscribers out of the gate and almost double that in two years. In 2014 Safalow projects that a pay channel could add as much as $141.6 million in revenue to WWE. 

Whether pay-TV distributors will be on board remains to be seen. The PPV revenue that WWE generates for cable and satellite operators is not insignificant. There may be fears that making the majority of that fare available on the channel too will hurt the pay-per-view business without proof that there is enough appetite to sustain a full-time network.

The WWE is still not ready to declare what type of channel it is planning. George Barrios, the WWE's chief financial officer would only say: "The WWE Network in any form is a transformative opportunity if we execute it right." As for the growing impatience on Wall Street over the network, Barrios said: "It is taking the appropriate amount of time for us to identify the best strategic and financial opportunity.”

Despite the  slow pace of the channel's development, analysts such as Safalow are not ready to throw in the towel. The WWE's recently launched YouTube channel WWE FanNation has already become one of the most popular outlets on the site with more than 600,000 subscribers, an amount that Safalow feels is further proof that there is a market for a cable outlet.

"Vince is a very competitive empire builder," Safalow said. "Whether you like him or what his product is, he runs a very good business and has a very long history of building upon his success."

ALSO:

WWE to get a makeover

WWE shows its softer side

Fox announces deal with UFC

Follow Joe Flint on Twitter @JBFlint.

Advertisement
Los Angeles Times Articles
|
|
|