The WWE (NYSE:WWE) Network has been a failure so far. The company has not reached its subscriber goals and despite a heavy marketing push during its television programs, appears unlikely to do so anytime soon.
This has caused the company to retool its plans, make massive budget cuts, and rethink its model. One of these changes is adding advertising to the $9.99 a month service. That's a big change because most subscription-based networks -- think HBO or Netflix (NASDAQ:NFLX) -- operate without ads. It's a major shift, but it may be part of a bigger strategy to move the network away from a purely digital over-the-top model and put it on an actual cable channel.
In the short-term, the company emailed subscribers to let them know about the ads and to downplay their significance.
The network has both a live feed and a large amount of on-demand programming. If you watch the feed, you'll see ads between shows and if you watch something from the archives a commercial will air before your show starts. It's similar to how YouTube operates, but YouTube does not cost $9.99 a month.
How badly is the network doing?
When WWE launched its network, it decided to offer its monthly pay-per-view events on the service. This, in theory, made the network a phenomenal deal for even casual fans. Since each PPV costs between $44.95-$59.95 (or more if you order in HD) then anyone who orders three in a year would be better off subscribing to the network.
To get the network for $9.99 per month, you must commit to if for six months. This was done to stop people from signing up to see a big PPV and then dropping their subscription. That makes the network a good deal -- for at least half the year -- for casual fans who would have spent $59.99 to order Wrestlemania, the biggest show of the year, through a traditional cable provider. The value proposition is clear to devout fans is clear.
On paper it makes sense, but in reality, WWE fans have balked. The last time the company reported a subscriber count at the end of July, it had just barely topped 700,000 -- only a slight gain on the 667,287 it reported in April -- the first time it gave a specific subscriber total since launch. Bear in mind, that only three months has passed between these reporting periods, so that number could be buoyed by users stuck in the six month commitment that don't intend on renewing their subscription.
While it's still early in the game, WWE has done a terrible job marketing the network, which has kept even some of its diehard fans away. Though the company has aggressively pushed the $9.99 a month price, it has not done a very clear job showing people that the network is not just for computers, tablets, and phones, it's also relatively easy to watch it on your TV through various set-top boxes, consoles, and other smart devices.
Why is WWE doing this?
Adding advertising may not be just a short-term effort to squeeze out a little more revenue, it may be a sign of a changing strategy. In Canada, WWE Network is not an over-the-top digital product. Instead, it's a subscription-based service offered through Rogers Communications that works in the fashion of a premium cable channel like HBO or Showtime. There are some on-demand archives (though not anywhere near as deep as the ones offered in the U.S. purely digital version), but the key draw is the actual channel.
Daniel Kline has no position in any stocks mentioned. He is a WWE Network subscriber. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. 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.
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