Editor's Note: This FanPost has been mildly edited for promotion to the front page and various sections within Cageside Seats for your enjoyment, Cagesiders!
*Author's Note: Feel free to correct me on my math wherever applicable.
Several months ago, when the news slipped that WWE was contemplating the possibility of making its long-delayed WWE Network an a la carte premium channel, the immediate reaction was that Vince was out of his mind. Then, it was revealed WWE would likely include every pay-per-view (PPV) event of the year, other than WrestleMania, as part of the network's programming. Instantly, this made the concept of the WWE Network a much more appealing proposition, especially given that WWE generally runs one PPV event per month.
Now, instead of forking over $44.95 (or more) each month to watch a PPV, WWE fans would have the option to pay less than half of that in exchange for the pay-per-views PLUS a full slate of other programming, making this an attractive product for the WWE Universe.
This product model was confirmed today (Feb. 28) when WWE issued a press release stating it plans on eventually launching the channel as rumored at the low rate of between $12.99-$14.99 per month. The problem with this nugget of information, however, was in figuring out exactly 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 the subscription only Wrestling Observer Newsletter, WWE has averaged 152,350 domestic buys per non-WrestleMania PPVs from 2007-2012. This figure represents approximately $6,855,750 in raw revenue generated per PPV. Extrapolated over eleven PPV events (WWE has 12 PPVs scheduled for 2013); the number comes to approximately $74,413,250 per year in non-WrestleMania PPV revenue.
WrestleMania figures have been excluded in this calculation as it sells for a slightly higher price ($54.95, as opposed to the standard $44.95), and since WM 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 PPV revenue over the last six years to around $110,850,750 per year.
According to today's (Feb. 28) WWE press release, WWE Network is anticipated to require one million subscribers to break even. 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.
Now, 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 PPVs, 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 its new product is in enough homes to make the long-term goal of two-four million subscribers a feasible probability. Currently, WWE only seems to have interest from DirecTV.
According to the corporate website, DirecTV has 20.08 million customers in the United States. If they were 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 it desires.
Another unknown, is just how many fans The WWE Universe consists of. 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 its homework and spent plenty of time studying trends, but that number seems a bit high.
Even if the figure of 47 million is accurate, the single biggest "x-factor" of them all is whether or not the members of 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 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 its press release that there is no guarantee its massive fan base will translate into a proportionate number of subscribers.
Still, it's early in the game.
WWE is clearly deeply invested in the Network and is 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.