Wrestlemania XXX Pay-Per-View Sales a Good Sign for WWE Network

When World Wrestling Entertainment (WWE) announced that it had 667,287 subscribers to its new digital streaming service 42 days after launch, many wondered if the company had made a mistake putting its biggest pay-per-view event on the network for free. Those fears seem unfounded now as the company reported that nearly 400,000 homes in the United States purchased Wrestlemania XXX.

That's down from the the 650,000 North American buyers that purchased the show last year but still a stunning number when you add in the people who purchased the network. It's of course possible that there is some overlap among those who subscribe to the network and bought the PPV the traditional way. (This makes sense for people that are huge wrestling fans but don't own a device -- like a Roku player or Apple (NASDAQ: AAPL) TV that allows them to watch the streaming network on their TV.) 

Still the overlap number is likely relatively small and the number of people willing to buy the PPV in the U.S. in the traditional way is not only good for the short-term finances of the company, but the long-term prospects for the network.

The short-term impact

In the short term seeing such a strong number of PPV orders mitigates any revenue loss coming from offering the PPV for free as part of the network. Assuming an average PPV price of $59.99 (the actual price varies by system and by whether you order in HD or not) 400,000 buys equals roughly $24 million in revenue, of which WWE gets half.

In 2012 with 650,000 domestic buys the total haul would be around $39 million, so after the PPV providers take their cut WWE took in $19.5 million in domestic PPV revenue on Wrestlemania XXIX vs. $12 million on Wrestlemania XXX. But that's not the whole picture for this year's show -- WWE also had 667,287 subscribers pay $9.99 a month for the network with a mandatory six-month signup. 

As I wrote in WWE Network Numbers Show Reasons for Cautious Optimism it's impossible to know the exact breakdown of revenues for the network subscribers because WWE receives a different cut of the total depending upon how a subscription is sold. If customers sign up on WWE.com the company keeps all the money; if they sign up through Apple, Roku, or other companies those entities take a cut. If we assume a worst-case scenario of WWE paying a 30% share on all 667,287 subscribers, the company will bring in $4,666,337 each month and $27,998,027 during the mandatory six-month signup period.

Add $4.6 million to the $12 million the 2013 show brought in on traditional PPV and you're at $16.6 million -- much closer to the PPV revenue of $19.95 million brought in last year. Realistically though a large portion of the subscribers who signed on for the network did so because of Wrestlemania, which is by far the biggest show of the year. If you assume that just 25% of the subscribers were swayed into the purchase because of Wrestlemania the revenues for this year's show would be around $19 million -- almost a dead heat with last year (with the added bonus of future revenue being locked in).

The future of WWE Network

The most encouraging piece of news for WWE is that there are 400,000 homes interested enough in its product to pay roughly the same for one PPV as it costs to get the network (and six PPVs) for six months. Those people may have been afraid of the technology or lacking a device to comfortably watch the show on.

As digital streaming networks become more common and WWE Network gets added to devices like Google's (NASDAQ: GOOG) $35 Chromecast and Amazon's (NASDAQ: AMZN) $99 Fire TV, those people are likely to become network subscribers. It simply makes no sense to shell out for each PPV event when a network subscription gives you access to all of them (and a ton more content) for about the same price as buying one PPV every six months.

Even if it takes until next Wrestlemania for most of the people who shelled out to watch this year's show to subscribe to the network, WWE officials have to be breathing a heavy sigh of relief over these numbers. In the short term the company faces problems like satellite and cable companies choosing to stop showing its PPV events. But with the size of the potential audience now clearly established, that happening may actually lead to the network growing faster.

WWE has a stated goal of 1 million U.S. subscribers in the first year of the service and when it announced the initial figures that number seemed possible but not likely. Knowing that the company has around 400,000 more fans (minus any overlap) willing to pay $59.99 for a PPV suggests that 1 million subscribers in year one is completely realistic.