As we predicted last week, the new WWE network, which completely bypasses the cable providers, did not go unnoticed by the powers that be. The WWE Network is a Netlfix-style service coupled with the live feed of a linear cable channel–the first such creation to launch exclusively on the Internet. The rub for cable companies is that WWE’s Pay-Per-View programming is included at no extra charge to consumers. Traditional PPV would run a viewer from $55 to $70 for each of the 12 monthly WWE events, with fees normally split 50/50 between the WWE and the cable networks. Given the roughly 200,000 to 400,000 buys each broadcast represents, you can see the substantial revenue that’s at stake here. Worst case scenario, the satellite and cable companies stand do lose a cool $15 mill a month.
Allegedly, DirecTV, a major distributor of Pay-Per-View events, has already expressed its displeasure, and have likely been making threats to drop WWE programming. WWE Chairman Vince McMahon doesn’t think that would be in its best interest:
“I think it’d be foolish for them not to want to carry the pay-per-view anymore,” McMahon said. “It’s found money for them.”
However, bypassing the cable and satellite companies was not necessarily an easy choice for WWE to make, which had offers on the table:
McMahon said WWE had deals ready to go with major distributors for a network that would have generated fees of 20 cents per month (about 2-3 times what Comedy Central receives), per subscriber.
“I said, much to the chagrin of my staff, I’m not going to sign it,” McMahon said.
“This gives us control of our destiny and a better user interface,” added Michelle Wilson, WWE’s chief revenue and marketing officer. “We think this is the future.”
The WWE estimates that it will be able to sign up 1-2 million subscribers worldwide in the first year, which will effectively double its current income. Anyone still getting the pay-per-view events through traditional means will be gravy for WWE. If you’re a cable operator, however, you are still looking at losing millions of dollars in revenue every month on the WWE alone. Even worse, WWE’s success will almost certainly catch the attention of other old faithful revenue streams like UFC, or even HBO, who many begin eyeing the exit door in favor of keeping all the revenue.
McMahon has a track record of being the first to jump headfirst out of the plane feeling confident that his parachute is going to open. Thus far, though he’s had to pull the emergency chute a few times, he’s always landed on his feet and stronger for it. We’ll see if he can change the world one last time before he retires.