Earlier this week WWE updated their key performance indicators for the year with the big news being that WrestleMania 30 drew 690,000 buys on pay-per-view in addition to the 667,000 paid subscribers to the WWE Network at the time of the event.
I'm sure the spin here will be that by naively adding the two numbers together (not allowing for those Network subscribers who also bought the pay-per-view itself due to a lack of confidence that WWE would be able to air the event glitch free with their new over the top technology), WWE will proclaim a record number of 1.357 million worldwide homes watched their biggest show of the year and that they are thus on target of quickly meeting the Network's international break-even point of 1.3-1.4 million subscriptions after the channel is rolled out in their most important foreign markets.
However, delving a bit deeper, the statistic is not as impressive as it seems. With WWE already reporting that nearly 400,000 American homes bought WrestleMania 30 on PPV, that means the extravaganza only garnered about 275,000-350,000 buys abroad. Such a figure is deeply disappointing, as last year roughly half a million of the buys came from outside of America. So what does this mean?
Firstly, it might be evidence that there was less overseas interest in this year's WrestleMania as internationally famous movie star The Rock didn't wrestle on the show and only made a guest cameo appearance that was put together at the last minute and thus wasn't announced in advance on their programming. The departure of cult hero CM Punk couldn't have helped either. But clearly that factor can't explain the whole drop on its own.
Thus, its solid proof that a significant proportion of WWE Network subscribers already come from outside America. Indeed, Dave Meltzer in this week's Wrestling Observer Newsletter put his mathematics professor's cap on and from the data at his disposal conservatively estimated that 20% of current subscribers are foreign, meaning that only 533,000 American homes would have purchased the WWE Network by WM 30. This is plausible as it's well known online that despite not living in the U.S.A. you can still get the Network by simply giving a fake address.
What this suggests is that WWE has grossly overestimated their potential subscriber base domestically, as their target by the end of the year was a million U.S. subscribers, which would be tough to get to if they were only just over halfway there at their annual interest and popularity peak. Conversely, they seem to have underestimated somewhat the potential of the WWE Network overseas, as they already seem to be hitting their projection of 20% foreign subscribers before they even roll the channel out elsewhere.
I'm still confident that the Network will have its first profitable month by April 2015, the month of WrestleMania 31, but WWE didn't spend $75 million and growing for a break-even venture.
It has been projected that the company needs an average of 1.9 million subscribers in 2015 to cover the cannibalisation of pay-per-view profits as well as the huge running costs of the Network. It's hard to see how they can hit that lofty mark, even with the international roll out. But they really do need to hit that target, as they're rapidly running out of their cash-in-hand to fund their network expansion whilst keeping their dividend high, and also investor patience is in short supply too after the botched handling of their new TV rights deal with NBCUniversal.
Hopefully WWE will have some bright news to tell in August when they release their second quarter financial results, as the current business outlook seems pretty bleak and racked with uncertainty.