Will the WWE network need over a million subscribers to break even?

Vince McMahon is still yet to make a decision on the format of his WWE network, but a recent survey undertaken by the company confirms the rumours that they are leaning towards a subscription based business model for the channel. The research is being done to discover how much money would their fans be willing to pay for the product and thus find the price per month that would maximise the revenue generated for the project. At the moment, it looks like the price will be $15-18 a month or $150 for an annual subscription.

It sounds like a lot of money to shell out, until you realise that WWE still plans to move almost all their PPV shows to the network once it is launched. As things stand, only WrestleMania and possibly SummerSlam would not be available on the channel.

Dave Meltzer in the July 9th Wrestling Observer Newsletter explained why this is likely to be a flawed business strategy:

Vince McMahon is looking at selling the network on the greatest value in entertainment in the sense the die-hard fans are going to save themselves significant money by subscribing. The theory espoused is that the PPV numbers domestically are down so much because the younger demos are pirating everything but Mania, and maybe Rumble and SummerSlam. McMahon apparently believes that for $14.95 a month, with the ability to watch in HD on their television legally, he can get them back. The problem is, the number of people who pirate all over the world for a usual show of late has been less than 200,000, and maybe half of that would be in the U.S. Even if every one of those people now buys the network, and that's not going to happen, you are still taking in significantly less than what they are already getting for the PPVs alone.

Yes, despite the lower price, most pirates will continue to obtain the PPVs illegally, because they are used to getting them for free, not to mention that converting them all into paying customers again wouldn't be enough to cover the lost revenue from moving most monthly PPVs to the cheaper network.

By Meltzer's calculations, WWE may need as many as 1.05 million subscribers to the network to break even if they charge $15 a month, between the operational running costs and killing their monthly PPV business dead. Thus, even if WWE managed to turn everyone who bought a non-WrestleMania PPV in the last twelve months into a subscriber, then they'd still be on course to make make major losses. The sums don't seem to add up and they never have, but if WWE does get this project off the ground, then they will have to find a way to make it work. Failure could even threaten the company's very existence.