WWE, Dish Network on Course for a Smackdown

In launching its new network, the WWE has told the cable companies carrying its pay per views that their services are not needed anymore. Some of them are not taking it lying down.

Feb 19, 2014 at 2:03PM

When World Wrestling Entertainment (NYSE:WWE) announced it would make all of its pay-per-view specials available to subscribers to its new network, the company was essentially throwing its cable TV partners out of the ring.

The network, which is available online and on platforms including Sony's  Playstation, Microsoft's Xbox, Google's Chromecast, and Roku players, costs $9.99 a month. For that $9.99, subscribers not only get the monthly PPVs -- which cost between $55 and $70 each -- but original shows and a huge archive of older programs.

This move makes it so that anyone who buys two WWE PPVs a year would be better off subscribing to the network, essentially cutting WWE's cable partners out of the deal. PPV revenue is split 50/50 between WWE and the cable companies, but cable and satellite won't get a cut of network sales. So far, the major cable players have been quiet about this punch to the gut, but satellite companies Dish Network (NASDAQ:DISH) and DirecTV (NASDAQ:DTV) are not.

Is WWE a bad partner?

Even after the network launches, WWE still plans to offer its PPVs through cable and satellite companies. Of course, while there might still be some viewers who buy them, the number is likely to plunge dramatically. For Dish and DirecTV, which made good money doing very little selling WWE PPVs, the WWE network takes cash out of their pockets.

To protest, both Dish and DirecTV are threatening to not carry Sunday's Elimination Chamber PPV, the last one before the network launches.

"Clearly we need to quickly reevaluate the economics and viability of their business with us, as it now appears the WWE feels they do not need their PPV distributors," DirecTV said in a statement, reported by the Los Angeles Times, adding that the audience for its events "has been steadily declining, and this new low-cost competitive offering will only accelerate this trend."

Will this be a trend?

Benjamin Miller, a writer for WrestlingObserver.com, the top newsletter for the pro wrestling industry, told the Fool that he expects the dispute will ultimately work out with concessions made by WWE.

"I believe that DirecTV will continue to air WWE PPVs. My reasoning is that they target sports fans. I expect the PPV price to drop at some point, however."

As for Dish, he wrote on the Wrestling Observer site, "WWE ain't gettin' on Dish unless the pay-per-view price drops to $9.99."

Miller also told the Fool that Comcast (NASDAQ:CMCSK), which currently holds right to WWE's flagship TV programs, "may drop WWE PPVs or demand a price decrease if WWE TV programming leaves NBC/Universal networks. I expect smaller cable networks to continue to offer PPVs."

Dish, DirecTV not the risk for WWE

In announcing and launching the network, the WWE essentially told its fans that it was giving up on the traditional pay-per-view model. That move is risky since PPV revenues, according to the WWE's 2012 annual report, "were $83.6 million, $78.3 million, and $70.2 million, representing 17%, 16%, and 15% of total net revenues in 2012, 2011, and 2010.

Playing chicken with Elimination Chamber with Dish and DirecTV will cost WWE some money if the two satellite companies end up not airing the show and some if they drop future shows. But with its network, the clear goal of WWE is getting its fans to subscribe and watch the PPVs there. The risk of losing revenue for one PPV on two providers pales in comparison to the risk WWE is taking by spiking a key part of its revenue stream on the assumption it will do better using a new model.

A bad precedent for satellite

The real risk for Dish and DirecTV comes if other premium content providers decide to follow the WWE model. What would happen if a premium service like HBO decided to no longer require a cable/satellite subscription for people to access its HBOGo mobile service? Worse yet for satellite and cable, what if Time Warner's (NYSE:TWX) HBO decided to charge less for that service than cable/satellite companies do?

Dish, DirecTV, and the cable world should be concerned by the WWE network. If it works, then any premium TV content with a devoted fanbase might be more valuable sold a la carte rather than through a third party. With Netflix already helping millennials justify cutting the cord, the last thing cable and satellite companies need is HBO, ESPN, or the Disney Channel doing the same.

A  Wrestlemania moment

Ultimately, if Dish, DirecTV, and the cable companies drop WWE's, that will only matter if the company fails to get fans to buy its network. The WWE network essentially launches with Wrestlemania -- the company's biggest PPV, which on its own costs around $70.

Last Wrestlemania had, according to the WWE, over 1 million PPV buys. And while not all of those are domestic, $216 million of the company's $276 million in revenue during the second quarter in 2013 (which contained Wrestlemania) came from North America, so let's assume around 75% of them were.

If there is the same interest in the U.S. for this year's Wrestlemania, it makes no sense for any of those buyers to purchase the show through a cable company. If they purchase the network ($9.99 a month with a six-month minimum) they spend less and get five other PPVs plus the rest of the network programming.

1,2,3 pinfall for WWE

The match is already over for DirecTV, Dish, and the cable companies. If the network fails, WWE has likely devalued its PPV product to the point that it won't be able to bring it back to cable at the old prices. If the network succeeds, then the audience for buying PPVs the traditional way will be small enough that it likely won't be worth carrying them.

The next step for you

Want to figure out how to profit on business analysis like this? The key is to learn how to turn business insights into portfolio gold by taking your first steps as an investor. Those who wait on the sidelines are missing out on huge gains and putting their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal finance experts show you what you need to get started, and even give you access to some stocks to buy first. Click here to get your copy today -- it's absolutely free.

Daniel Kline is long Microsoft and attended Wrestlemania XX. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information