The future of the WWE (NYSE:WWE) Network -- which appears to be off to a promising start -- may very well rest on whether the company can stream Wrestlemania without any glitches. That's a huge hurdle as WWE's biggest event of the year is likely to be one of the most-watched live streams of all time ... and a smaller event on the network had streaming problems.
How many will be watching Wrestlemania?
Wrestlemania is WWE's largest event of the year and last year's show had 650,000 pay per view buys in the United States, Ben Miller of leading pro wrestling news source WrestlingObserver.com told the Fool. Since WWE recommends cable companies charge $59.99 for Wrestlemania, a large percentage of those who tuned in last year (plus maybe some new people who wavered on spending that much for one show) are likely to be watching live on the WWE Network.
The network costs $9.99 a month with a locked-in six-month subscription, which gives subscribers free streaming access to Wrestlemania, along with all other PPVs, original shows, and a huge content library. Essentially you can pay $60 to watch just Wrestlemania as an old-school PPV or $60 to watch Wrestlemania and five other PPVs along with a host of other programming. Given the value proposition, you have to assume the streaming audience for the big show will be massive.
The WWE Network has had glitches
Since the network launched there have been a number of relatively minor glitches, including problems with registration on opening day and recurring issues for Xbox users. These problems, now resolved, don't specifically speak to how the company will deal with the large amount of customers hoping to watch the Wrestlemania, but problems experienced during the network's first live special are relevant.
The special, which featured WWE's minor-league development territory NXT, was aired as a two-hour live event on the network in exactly the fashion Wrestlemania will be streamed. It mostly went off without any problems, but late in the telecast enough users experienced issues that WWE ultimately ended up apologizing.
"During tonight's live NXT Arrival special, we unfortunately experienced technical difficulties, which are to be expected when launching a new digital network. We will work aggressively to solve these glitches and deliver quality service. The complete event will be available on-demand overnight," the company said in an email to subscribers.
The glitches were not massive but they did affect a large percentage of viewers, according to a poll on WrestlingObserver.com.
"Based on our poll, 47% reported minor problems, in most cases losing about five minutes of a Tyler Breeze vs. Xavier Woods match and angle involving Alexander Rusev. Another 23% reported that there were significant problems watching that made it frustrating to watch. 21% said the delivery was flawless. And 10% said the delivery was so bad throughout that it was impossible to watch," the site reported.
NXT is small, Wrestlemania is huge
Being the first special on the network likely brought more viewers to a show featuring the largely unknown NXT brand, but that number is still small compared to the likely Wrestlemania audience.
"When it was over, I felt more uneasy than ever about WrestleMania, considering the network had technical issues trying to handle an audience that is likely to be minuscule in comparison," the Observer wrote.
Still NXT was the first live special and WWE was not only quick to apologize, it was quick to realize it needed more tests. Following the NXT glitches the company added a weekly live streaming of its Main Event program to the network. WWE also heavily promoted the live stream on its RAW and Smackdown shows. The company also offered fans better match-ups than usual on Main Event, likely to attempt to put as much stress on the network as possible in order to prepare for Wrestlemania.
WWE is taking steps to prepare
WWE seems to understand that ensuring a positive streaming experience to customers for Wrestlemania is critical to the long-term health of the network. In a statement sent to the Fool, the company detailed the steps it was taking for the April 6 special event.
"Notwithstanding the overwhelmingly positive response to WWE Network, we want to ensure subscribers have the highest-quality experience watching WrestleMania 30 and all our programming, and thus have put in place significant quality assurances," WWE said in an email. "These steps include increased capacity to handle high volumes of transactions, logins, and concurrent live streams, daily 'stress' testing of all systems over an extended period, and the addition of technology experts to review our plan and procedures. We're confident that we'll be ready on Sunday, April 6."
Will WWE be ready?
Because network customers are locked into a six-month subscription, there won't be any immediate financial fallout from a bad Wrestlemania streaming experience. Where the real damage will occur is in future signups and customers' willingness to trust the network,
Wrestlemania watching is often done in groups (in the past partially due to the high price for the show), but you have to assume that lots of casual fans will be watching at the homes of network subscribers. It's these fans that WWE needs to become network subscribers to reach the 3 million subscribers WWE CFO George Barrios told Deadline.com could drive it to become a "major source of future earnings growth," with as much as $150 million a year in cash flow.
WWE has a lot riding on the success of the network -- creating it meant angering its traditional PPV provider partners and mostly foregoing the $83.6 million in PPV revenue in 2012 the company took in, according to WWE's most recent annual report. It's likely that whether the network succeeds or fails there is no going back to the old way of doing things.
The company is taking the right steps and saying the right things about its efforts to make sure Wrestlemania streams without a hitch, but the company is in uncharted territory. I'm inclined to believe that the company will pull it off because it's taking very direct steps to prepare for the show.
Though no sign-up numbers have been released, WWE knows how many network subscribers it has and how many it expects to have on April 6 for Wrestlemania. Barring a huge surge in late sign-ups (which would not be atypical behavior for wrestling fans), the company should have a solid audience estimate. You can assume that the vast majority will attempt to watch live. If WWE pulls it off without a hitch, the future of the network becomes a lot more solid.
Daniel Kline has no position in any stocks mentioned. He is a subscriber to the WWE Network. 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.