Wednesday, May 7, 2014

Why the WWE Network is Failing and How to Fix It

The WWE did not try to grow their customer base, they tried to squeeze it.

It is not working.

I’ve lived through this before in a previous job. I was working for a technology company and our subscriber base was stagnant and fickle. They bought our products only when they desperately needed them. This meant that our sales numbers went up and down despite any of our best marketing efforts. Finally, after they kept going down, our investors decided we needed to change.

We needed to provide steady numbers each quarter. To do this, we tried to switch from a single-purchase model to a subscription model. It did not work. People didn’t want to pay us every month. People want to pay us one and leave.

It didn’t work for that company either.

I was routinely criticized for a post I wrote on the WWE Network because I saw exactly what the WWE was trying to do because I had lived it. I’d seen it fail.


“The ones that will be drawn to the network…are the hardcore fans that buy multiple pay-per-views per year. The WWE, in a bizarre move, is actually submarining their own revenue in an effort to show off their shiny new toy.

It’s a corporate move as old as time. Revenue will go down from pay-per-views but the WWE will point to the subscriber numbers as if that will appease investors. If you’ve ever been in a conference room with investors, you’ve seen this charade play out.”

daniel bryan wrestlemaniaFrom a business point of view, the WWE Network was not changing the financials of the WWE’s bottom line. They were trading pay-per-view revenue for WWE Network revenue. The goal, however, was to have a steady stream of revenue coming in each month as opposed to large spikes around WrestleMania and SummerSlam, while months like October cratered with few pay-per-views.

In the lead-up to the Network’s launch, everyone could not stop heaping praise upon Vince McMahon. This was hailed a victory for cord-cutters and the future of content distribution. This was going to increase WWE profits. Millions upon millions would sign up because they longer had to deal with Comcast or Time Warner. They could access great wrestling whenever they wanted.

Some folks even went to absurd extremes, with analysts claiming the WWE Network could hit 2 or 4 million subscribers by the end of the year and easily hit 8 million in the four years.

The problem with this thinking is that the WWE Network was not offering the average WWE fan anything new – the 14 year old with zero interest in WrestleMania 8 – they were just providing it in a different form.

Guess what? People weren’t buying WWE pay-per-views because they weren’t interested in them. It had nothing to do with price or content distribution – they did not like the product.

In the wake of the first subscriber count for the WWE Network, the stock plummeted, down to just over $17 as I write this from a high of $31. The subscriber count of 667,000 was far short of the 1 million mark, which the WWE needs to break even, and the Network’s VP of Programming, Matt Singerman, was canned after being hired only in November.

This is the part where I explain the problem with the WWE Network. And it has nothing to do with the WWE Network.

If you’re a pro wrestling fan, the Network is practically heaven, as I can attest to taking advantage of two one-week trials. There is every pay-per-view ever aired in one place whenever I watch. More classic television shows are being added. More original shows are being added, looking back at old WrestleMania matches for example.

This is all well and good but the audience for classic wrestling is miniscule. The WWE’s last attempt at mining gold from that well – WWE Classics on Demand – topped out at 300,000 subscribers.

For the WWE Network to work on the scale necessary – the WWE has lost $20 million in six months largely due to costs associated with getting it launched – it needs people to buy it in mass numbers. The draw of the Network, and its success, will be based on the monthly pay-per-views.

Nothing has changed except the delivery method.

The scariest number – by far – for the WWE is the 400,000 people that bought WrestleMania. They did not buy the Network. Those are the people, like the customers at my previous job, that have zero interest in the WWE beyond that one show a year. Even though that $60 would have gotten them five other pay-per-views and 14,000+ hours of wrestling, they decided against it.

The WWE can put up literally every single wrestling match that has ever taken place and it wouldn’t matter. They need to get people to care about the matches that haven’t happened yet.

This is the great problem the WWE is facing and one that investors haven’t figured out. Pro wrestling is not built to appease investors on quarterly calls or provide steady income month after month.

Pro wrestling exists through boom periods and down cycles. Stone Cold Steve Austin doesn’t happen if the WWF isn’t on the verge of bankruptcy. John Cena doesn’t ascend in 2004 if Triple H doesn’t drag everything down in 2003.

The WWE has a core of about 3.5 to 4 million people that watch Raw every week. They didn’t change anything about the product and expected that core group to simply hand over more money. It is worth noting that very few of those fans bought any shows other than WrestleMania in 2013. A year of the Network is asking them to double that.

It reminds me of SEO firms – snake oil salesmen – that try to game the system. You know what makes the best SEO? The best content. If people want to read your stuff, it’ll be linked to, it’ll be shared and it’ll be bumped up the rankings.

The WWE, right now, is not providing the best content. The next WWE Network special is expected to have the exact same top three matches that its last special had. Why would you pay for that?

The pay-per-view market was drying up for the WWE and they blamed the content distribution model. That was false. UFC and Floyd Mayweather have proven time and time again that fans will pay for good content, regardless of the model.

The WWE needed to change its product, not its distribution.

For the WWE Network to work, the WWE as a whole needs to work. It’s the same problems they’ve been facing for five years, with the same guys on top, the same John Cena routine and the same lack of change.

The WWE needs real change. The WWE Network is preventing that change.

The only silver lining is that in pro wrestling – great failures usually begat great successes. 

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5 comments:

  1. Dude, WWE have been putting plenty of new talent on top recently. How can you ignore the Shield, the Wyatt's, Cesaro, Bryan, and even NXT guys like Sami Zayn?

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    1. he didn't. he just pointed out that the rumored card for the next ppv has the same card as "Extreme Rules".

      and not only that, at that ppv, we have seen The Shield and Bryan go over clean ("clean" at least in the context of those matches) and Cena dominating all three Wyatts (after he had already pinned Bray at WrestleMania) - how does that sound like an event which people would pay a lot of money for? (and that's what it SHOULD sound like. if people have no regret on "missing out" current ppvs, it is one less argument for subscribing to the WWE Network).

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  2. While I agree on the whole with you, I think the failure to mention both the US only nature of the service and its distribution platforms tempers the argument a bit. Beyond the natural bump they will get when the Network goes live overseas, you have to realize that obviously the "core" audience that watches Raw has cable, but may not have a PS3/X-Box/streaming device in their household and has no desire (or no means) to buy one on top of the $120 a year commitment. Once the network is available by slightly less laborious means (as in, on Smart TVs), that might help.

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  3. ok but remember the network is only available in the US right now and think about how many of the 400,000 that bought mania and not the network were international customers

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    1. that's not true. those 400,000 were domestic not international.

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