WWE sticking to their guns with their Network projections

Savvy WWE onlookers who listened to the investor presentation by WWE's Chief Strategy & Financial Officer George Barrios and their Chief Brand Officer Stephanie McMahon at the 17th Annual Needham Growth Conference on Tuesday were probably left asking themselves: "Is this the real life or is this just fantasy?" Unfortunately, WWE are caught in a landslide with no escape from reality, regarding their current Network subscriber base.

That's because Barrios is rigidly sticking to his guns regarding the growth potential of the WWE Network. Still believing the ridiculous survey that estimated they had 98 million active WWE broadband homes in their top 16 global markets and that it's feasible to get 3-4% of those households to subscribe to the Network, Barrios continued to speak evangelically about one day getting 3 to 4 million subscribers to their online channel. Much more of this and Barrios will transform into a Del Boy Trotter type comedy character, who constantly tells his brother Rodney that "this time next year we'll be millionaires" immediately prior to one of his harebrained get rich quick schemes going belly up.

I'm being harsh, but it's hard to see WWE hitting that aspirational target in the foreseeable future, when they only had 731,000 subs at the end of Q3 last year and the growth rate during that quarter was a measly 4.4%, despite opening the service up in over 170 new countries and a well hyped SummerSlam main event.

It's not that their strategy of making the WWE Network available in new geographies (like the UK and Ireland this week, but also India, Italy, Germany, Japan, China, Thailand, Malaysia and the United Arab Emirates at a later date), creating new content and features, expanding its distribution platforms and executing high impact marketing programs to attract customers is flawed on paper, but with the abundance of wrestling programming available on cable television and on YouTube, there's naturally going to be a cap on the number of people who are willing to spend $119.88 on the service for a whole year and that upper bound is a lot lower than what WWE executives think it is.

Perhaps most telling was when Barrios argued that the whole thesis of the WWE Network was that by lowering the price and driving content they "could make elasticity be our friend". The idea that because we used to get a million people to buy three pay-per-views a year, we could treble or quadruple that on a monthly basis by offering them at a much lower price point with a huge video library thrown in to boot. That would have been a defensible premise when the Network first started out, but when only 667,287 fans signed up to watch WrestleMania 30 on your new heavily hyped online channel, then you have to come up with some better Q&A spin than that slick slogan in my book.

It doesn't help that the WWE product isn't clicking currently and unless they pull a rabbit out of their hat this year's WrestleMania will have less public interest than last year's show. Nor too that the company's top decision makers fail to have their fingers on the pulse of what wrestling fans want from the WWE Network, as demonstrated by Barrios likening the WWE Rivalries series as being akin to ESPN's 30 for 30 sports documentaries.

Thankfully, Barrios was on much surer ground when talking about TV rights fees. By virtue of negotiating new TV deals in the U.S., Canada, Mexico, the U.K., India, Thailand and the UAE in 2014, their annual TV revenue should increase by $105 million over the next four years, which will help them through their current growing pains with the WWE Network. This is a company on track to healthy profitability again, if not to the transformational levels Barrios is pitching that they can accomplish to their shareholders.

Barrios also touted WWE having 3.4 billion YouTube views and 450+ million total social media followers in 2014, which are mind blowing numbers to be sure, but he was unable to voice a coherent strategy for turning that huge online presence into serious cash. At the moment, these statistics are about as meaningful as WWE's flawed survey results and their Network projections.

From a financial perspective, Stephanie didn't add much to the discussion, but other than a few verbal hiccups, I thought she did her job of putting over the WWE brand and that they're good corporate citizens well.