World Wrestling Entertainment (NYSE:WWE) wants to enter the wonderful world of video-on-demand. It's a script that makes a lot of sense (unlike the XFL).
Vince McMahon (not the evil Vince we see on TV, who throws his hapless victims into steel cage matches with deranged lunatics under his command, but the actual, more humble, creative head honcho) is sitting on a pile of library products. Some reports peg it at close to 75,000 hours, and much of this was collected over the years through such acquisitions as Extreme Championship Wrestling (ECW).
Within these golden oldies, you'll find famous artificial feuds between the likes of Ric Flair and Ricky Steamboat, Jerry "The King" Lawler and Brett Hart, and Mankind and the Undertaker. The idea is to start a subscription video-on-demand (SVOD) channel that will rotate old wrestling events on a monthly basis. The channel will be called WWE 24/7. Who could ask for anything more?
There's as much value locked up in the WWE's expansive and impressive portfolio as there are catchphrases rolling around in the angry, bald head of Stone Cold Steve Austin. The maximum exploitation of products from the vaults is an ideal mechanism of growth for media companies, and video-on-demand technology is the most suitable medium.
Every studio should be foaming at the mouth to get as much of their stuff out there as possible. Disney (NYSE:DIS), Time Warner (NYSE:TWX), Fox Entertainment (NYSE:FOX), and Viacom (NYSE:VIA) are trying out this model with services like MovieLink and MovieBeam. But with the explosion of the DVD market -- especially through such channels as Netflix (NASDAQ:NFLX) and Best Buy (NYSE:BBY) -- there doesn't seem to be as much momentum in this area as there probably should be. Netflix itself is on the offensive with VOD, as Don Crotty reported today, but the overall trend for the industry still seems to be for DVDs at the moment.
The sales and rentals of the discs are bringing in reams of cash, so much so that the market is looked upon as a good substitute for syndication in certain instances (as is the case with so many old television shows being released in complete-season installments).
Herein lies the potential concern. Until DVD sales mature, companies may rely on this market too much to drive growth in library revenues. There is really no pricing power in DVDs going forward. Until a new technological format is launched, it is possible that prices may go as low as that of new VHS releases.
That's why SVOD is so attractive. No software to manufacture, no inventories to store, no returns to estimate. If consumer behavior can be switched from buying vault products on discs to digital downloads from cable/satellite providers at the customers' beck and call, then the prospects look bright for the entertainment industry.
In the future, when SVOD technology really goes the way of The Jetsons, WWE would no longer have to produce copies of Wrestlemania I through X if it so chose. Headlock aficionados could access whatever product they desired from total access to the library through their SVOD channel at any time, reliving the days when Hulk Hogan was Hollywood Hogan and Shaun Michaels leaped bloody and bruised from high atop a shaky ladder in the squared circle.
As WWE announcer Jim Ross likes to say, "Business is about to pick up."
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Fool contributor Steven Mallas thinks Vince McMahon is a genius, but was against the XFL from the beginning. He owns shares of Disney.
