World Wrestling Entertainment (NYSE:WWE) yesterday announced its much anticipated network at the Consumer Electronics Show (CES) in Las Vegas, but with a few changes from the model it described when it started the process. Most notably, instead of a cable TV channel, the new WWE Network is online.
Subscription-based and running 24/7, the entirely online network will gather WWE's extensive wrestling back catalog, both original and acquired, stretching back more than 60 years. More important will be its ongoing original content produced weekly.
Priced at $9.99 a month with a six-month commitment, the WWE Network is a reasonable deal for the wealth of content that is aimed at WWE's established fan base. The WWE Network will launch online on Feb. 24.
"Today is a historic day for WWE as we transform and reimagine how we deliver our premium live content and 24/7 programming directly to our fans around the world," said CEO Vince McMahon at the press conference. "WWE Network will provide transformative growth for our company and unprecedented value for our fans."
The network will launch only in the United States, but is expected to expand in Canada, the U.K. late in 2014 or early 2015, followed by Australia and New Zealand. WWE draws particularly strong numbers for its TV shows in the U.K. and Ireland, airing on Sky Sports, and the company's two European live tours every year usually draw big business. Don't be surprise if WWE moves for a quicker international rollout, since many many speculate that the network will need about a million subscribers initially to break even.
TV viewers will still get their Smackdown
WWE won't be leaving behind traditional TV completely -- flagship weekly shows Raw and Smackdown will remain on cable TV. They currently air on USA and SyFy, respectively, and Raw pulls in an average audience of roughly 4 million, according to Nielsen. WWE also airs related shows on other channels, including the reality TV show, Total Divas, on the E Network.
Another substantial element of WWE's business is pay-per-view events. Its monthly PPV show has seen lower-than-expected buy rates in recent months, but that model is about to get knocked to the mat. The WWE Network will stream PPVs -- including April's Wrestlemania -- to subscribers, radically changing this part of its business.
If you were to buy every WWE PPV event, you're looking at a cost of at least $600 a year (prices generally run $50 to $60 per event, depending on your provider and if you opt for HD). At $9.99 a month for all of these events and a slew of other content, it seems like WWE is undervaluing its content. On the plus side for WWE, it largely solves its problem of pirates streaming PPV content illegally online.
Free to fee
As a possible precursor to its network, WWE has partnered with YouTube for years, providing new and archived content. WWE has been able to learn how people view the content online, but it could be a challenge to get viewers who are used to getting it for free to hand over their money. But at such a low cost, and with original content streaming every week, WWE is optimistic. And expect that free YouTube content to dry up over the coming months and migrate to the WWE Network.
As other sites -- from MLB.com to Hulu -- have proven that passionate viewers will happily pay for high-quality, exclusive content, WWE is hoping that its changing model will provide a more predictable and growing revenue source. And the PPV model could be shaken up a bit. It's exciting for wrestling fans but it will also be worth keeping an eye on this new business model going into the future and to see who will follow suit.
Fool contributor Jonathan Keane has no position in any stocks mentioned. 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.