WWE Network: Cable vs Netflix

[STFU Donnie]

WWE CFO George Barrios continues to hype the coming WWE Network. Now maybe I'm too much of a cynic, but I see the WWE network as nothing more than another Wall Street shell game.

On Wall Street, the guiding principle for stocks is growth. Companies are ultimately judged on performance and meeting projections, but analysts who largely drive the price per share's performance each quarter with their projected buy/sell recommendations are all competing with each other. The competition between them drives each analyst to try and scoop the other, which in turn leads to speculation and prognostication about the potential for companies to grow. This is where CEO's start tap dancing. They need to sell Wall Street on the idea that they have a plan that will lead to a financial windfall and minus such grandiose plans, that price per share will drop precipitously as analysts en mass will predict a decline and make a sell recommendation.

Just look at Facebook since going public in May of last year. Despite acknowledging that even though users and incomes were rising, Facebook was facing the point of deceleration in 2011, the investment banks who handled their IPO settled on a price of $38 a share. But very quickly, Wall Street turned it's back of Facebook, precisely because they saw no room for massive growth. It didn't matter that Facebook had strong profits all that mattered was Wall Street decided those profits were unlikely to grow. Fast forward to today and Facebook is trading in the $23 range. On Wall Street it's not enough to simply make a profit. Companies have to always have "plans" to make even more.

I think that is what WWE Network truly is, just a mirage in the distance that WWE dangles for analysts and shareholders. That's not to say it never comes to fruition, but the form in which it ultimately emerges is way up in the air. Maybe WWE network does become a real cable channel like ESPN and USA and is either part of basic cable or included as part of some premium package...but I doubt it.

Personally I think a WWE Network is a loser and all the "plans" I've heard seem both misguided and outdated. If Vince put me in charge of WWE Network, I would either develop from scratch or buy one of these fledgling/failing Netflix competitors and use their platform to create a digital content delivery system for WWE original programming and their vast library. Using the Netflix model, WWE can still charge a $10-$15 subscriber fee and by uploading their library, WWE is utilizing their library to it's maximum capacity. On a regular cable channel, WWE might focus on WWE and WCW's libraries and those interested in JCP, AWA, Mid South, ECW, etc will be disappointed and unlikely to continue paying every month in hopes that what they want to watch will eventually make the schedule. Using the Netflix model negates this risk and ensures subscriber contentment. Theoretically, like Netflix, you can add original programming, be that reality shows or minor PPV's. Maybe eventually all WWE programming is delivered through the new digital platform. Who knows. The point is basic cable TV is over-saturated and it's business model (commercial/sponsor funded) is becoming outdated. WWE would be wise to catch the wave of the future, rather than jumping on the cresting wave of the past.

So does anybody think we will ever see a WWE network and if so, what will it look like?

 

[I_Like_All_Wrestling]

I don't see how them pretending they're going to create a network will be valuable to their stock. True stock value is based on actual results and not potential. That's why Facebook stock fell so hard. If they keep investing resources and time into creating a fictional network, all it's going to do is increase costs and bring in no money. They would not results on Wall St. this way, at least not in the long term.

What Netflix competitor do you suggest WWE buying? It seems like it might be cheap for them to simply build their own or create a paid channel with YouTube (which they declined). I've actually been wondering if WWE could work with Netflix and create an offshoot digital only network. Maybe be $4.99 as a standalone WWE streaming service only or $1.99 if you opt for WWE and Netflix together. I can't see them charging MORE than Netflix unless that included PPVs though. Why would I pay $8 for Netflix and then $15 for archived wrestling footage? That's too high.

Ideally, what WWE would want is for cable channel to just bundle it into their sports programming packages. This way they get paid but don't have to explicitly sell the network to fans.

 

[STFU Donnie]

I don't see how them pretending they're going to create a network will be valuable to their stock. True stock value is based on actual results and not potential. That's why Facebook stock fell so hard. If they keep investing resources and time into creating a fictional network, all it's going to do is increase costs and bring in no money. They would not results on Wall St. this way, at least not in the long term.

What Netflix competitor do you suggest WWE buying? It seems like it might be cheap for them to simply build their own or create a paid channel with YouTube (which they declined). I've actually been wondering if WWE could work with Netflix and create an offshoot digital only network. Maybe be $4.99 as a standalone WWE streaming service only or $1.99 if you opt for WWE and Netflix together. I can't see them charging MORE than Netflix unless that included PPVs though. Why would I pay $8 for Netflix and then $15 for archived wrestling footage? That's too high.

Ideally, what WWE would want is for cable channel to just bundle it into their sports programming packages. This way they get paid but don't have to explicitly sell the network to fans.

All due respect, but you don't know how Wall Street and global markets work. I'm a Series 7 and 65 licensed financial adviser. For Facebook to plummet as they did almost instantaneously as soon as they were put on the market, according to you, they would have needed to LOSE money. How else could the initial valuation be so HUGELY different from where the price per share was just a week after coming on the market? That's not even remotely what happened. What they did was not have a big plan to show Wall Street that they were primed to make even more money. You need to understand that analysts are making recommendations to investment advisers who then place their clients in stocks that are primed to grow astronomically. That's how investors and their advisers make money. There are many value investors, but they are either the very cautious (who see little to no return) or the very wealthy for whom 1% growth mean millions and billions of dollars and they don't invest in IPOs by and large and their focus is Fortune 500 companies that are firmly established. Growth investors drive the market on speculation.

If stock were valued based solely on performance analysts would be so much smaller in importance than they are and the HUGE options market would dry up. Wall Street is a big casino, driven by speculation and gamblers are always looking for an edge which in turn drives stocks up and down artificially.

Read even the most vapid overview of the 2008 crash and you will see the domino effect of expectations not being met and perceptions driving the economy off the cliff.

Also you're missing the point on the models. WWE could buy a Justin TV on the cheap as they have been decimated by the copyright crackdown. You buy a failed product on the cheap because a streaming platform that is already constructed is cheaper than hiring a whole new team to develop one from scratch.

As for money, they're already talking about a $12 price tag as a premium cable channel...so switching to a digital delivery system like Netflix changes nothing at all. WWE is already getting fans to drop $60 a months for single shows and $20 for DVD's. $10, $12, $15, or whatever WWE needs to charge to make it work for the library, original programming, and lesser PPV shows is a deal!!! And you've completely missed the point which is that commercial free, on demand, digital content delivery systems that can be accessed on a variety of platforms like Netflix is the future...cable TV is over-saturated and outdated as a profit making model.

What would Netflix gain from partnering with WWE, when they can simply pay to stream DVD titles...like they already do? What would WWE gain from continuing to be a content provider for another company...which is what they already have with NBC/Universal and could already do on NBC Universal's Hulu platform, which is a Netflix competitor...or didn't you know that? Wall street would not even roll their eyes over such a small deal.

I would advise you to not do an investing on your own if you think the stock market is a straight up buy and trade, based an facts and hard data. I promise you won't make any money and more than likely end up losing. You'll be buying high and selling low. Just keep your money in a saving's account.

 

[JoeyJoeJoe]

I don't see the value of a WWE network unless the cost to start up that network are fairly cheap. The reason: I just don't see THAT many subscribers who will be interested in historical content. When I look at the most successful cable channels, they are producing a steady stream of new content each year. The WWE is banking on the idea that people will want access to their library of older material on an ongoing monthly basis. What numbers have they ever floated out there for the user base? 100k subscribers? 200k subscribers?

 

[AttitudeAJM]

WWE has an abundance of material (video libraries as well as potential distribution deals) that can be extremely profitable. One of the major points that separates WWE from any other wrestling company in the world is that they've been able to diversify their money, not having to rely solely on PPV revenue. The move to a PG product is also a way to help them attract more advertisers.

The Network is the next logical step toward monetizing that library. I think any time they speak about the network it is still a bit vague since so many things are in flux. However, if they plan on relying heavily on material from their catalog as well as new broadcasts, they should have a chance at being just as successful as Outdoors Network.

 

[Kliq69]

Excellent topic Donnie. Have to spread the rep around before I can give any more.

I think your idea of WWE purchasing a digital platform makes a lot of sense in the short term, but would end up costing more in the long run. While it would take a team of developers and the necessary hardware to put together a proprietary digital broadcast medium, it would prevent the purchased source code from having to be completely audited and would allow a system to be designed specifically for wrestling products.

Whether it's Netlix, Hulu, JustinTV, or any other service, they have been designed for single television shows and movies. None of the established servers have the archive depth necessary to create a fully functional wrestling viewing experience.

If they started from scratch, not only could they archive every show episode by episode, they could archive shows based on timeline (WCW Jan98-Jan99, ECW 94-95) etc. This would allow continuity from the viewers perspective by allowing user specified "playlists" consisting of any of the footage from a designated period of time. Beyond that, they could archive each match on every piece of footage individually and allow wrestling fans to rate them. Imagine being able to pull up every single HBK or Flair match that WWE owns in their library.

The same thing could be done with storylines (rise and fall of the nWo, Austin/McMahon, etc), big events (watch wrestlemania I-XXIX in order, etc), and honestly if they were willing to invest on a big enough database could archive all the footage to be easily found at any time.

WWETV (or whatever the name is) could easily surpass Netflix based solely on the mass of their library. WWE owns footage from the 40s through today, and could easily update all new footage weekly from the shows currently being aired.

As far as pricing, I would think that having a tiered system would work the best. Both a monthly and yearly subscription, with different options.

Monthly
Archived footage only: $10 a month
Archived+ monthly ppvs: $30 a month ($50 for WM month)

Yearly
Archived footage only: $100 a year
Archived+ monthly ppvs: $300 a year (includes mania)

They could have their own "app" for the nexgen video game systems similar to netflix, pay whatever is necessary to get added to the bluray players and such that have netflix capabilities, tablets, smart phones, if there is a device that can broadcast video, WWE should try to get on it.

Cable/Satellite is dying, if/when the ala carte option becomes available it will kill off the current television model. Locking down their own service (similar to what NFL.com has done) is the only option that makes sense.

This service could easily be added to any "on-demand" platform worldwide (ie china where Shane is currently CEO of the largest "on-demand" service in that country and has a growth potential much higher than any cable or satellite channel has at the moment. They've already budgeted over $100 million for the network, it wouldn't cost much more than that to do a stand-alone digital video medium considering they have to pay nothing or next to nothing for the content being distributed. Imagine Netflix's profits if they didn't have to pay their content licensing fees.

 

[Jack-Hammer]

In the grand scheme of things, I don't expect big things out of the WWE Network. It's met with delay after delay after delay. The fact that WWE has managed to sell the "Total Divas" show to the E! Network, a show that was reportedly going to be on the WWE Network, indicates that the WWE Network is nowhere close to being a genuine reality. I read a little while back that WWE is also thinking of selling the WWE Legends House show, which was taped a few years ago I think, to another network.

I appreciate Vince's ambition but, frankly, I just don't think this is a feasible idea. I simply don't think that there's going to be enough people in the states who are going to want to pay an extra $15 or so, with cable & satellite bills already higher than Jessica Alba's ass, for a network started by a pro wrestling company. I think Vince ultimately wants WWE to be bigger than it can realistically become.

 

[scomvp316]

-From a stock perspective many investment firms have said the WWE balance sheet is horrible and within five years they will be drowning like most hedge funds did from 2009-2010
-You don't want to partner with Netflix seeing their deal with BestBuy has caused the company to circle around Chapter 12
-If VKM tries more for the casual fan this network will cause WWE to make drastic decisions for the future viability of the company
-WWE should try to buy UniversalHD and not negotiate with NBC but only negotiate with Comcast who owns NBC
-This network should have around 80% wrestling
-WWE should partner with Paramount or LGF to have a balance of movies and wrestling on this network

 

[JoeyJoeJoe]

I think Vince ultimately wants WWE to be bigger than it can realistically become.

I don't know if this is splitting hairs or not, but I think the WWE could become a lot bigger.

The problem is McMahon and his management, IMO. I think that he's reached the point that he's stuck between the old world of professional wrestling and the new world of entertainment, and both he and his executives might not be the right people to bring the company to the next level. I think back to some of McMahon's expansions: The WBF, the XFL, and even WWE films...these have been major failures that have exposed McMahon's desire to expand, while also showcasing his inability to create a sustainable business outside of his core wrestling business.

I think he's got the right idea, but I have to wonder if he's got the right people in place to enact them...if HE is the right person to enact his own vision (signs point to NO.) So it goes with WWE Network...it sounds like a great idea, and if WWE Studios was more successful, I'd say that he may be on to something. But I just don't see it happening right now.

 

[LSC]

What are you on about? WWE has already had an on demand service... I'm not sure if it's still going but it was about $10 a month. It was pure crap. They rotated stuff on there monthly. I remember it was being offered through comcast and other service providers. Your idea is outdated OP. It's what they already had before!

 

[Pedigree1]

No doubt the wwe is huge very huge. But the WWE netwrok im afraid is dead before it even had a chance to get launched. 10-15 dollars is a lot to ask for seeing as how Directv and cable is expensive all on its own. To put it nicely,there are not enough fans in the USA to make this channel a success. Yes i do want to watch the old Archives i do but not at the expense of an extra 15 dollars a month.

Vince is overstepping IMO. Yes,its a good idea but realistically no way can this happen. IF somehow they could make it affordable around 8-10 range then i think more people might give it a shot. Plus why pay when you can look up all the Old WWE stuff for free

 

[I_Like_All_Wrestling]

All due respect, but you don't know how Wall Street and global markets work. I'm a Series 7 and 65 licensed financial adviser. For Facebook to plummet as they did almost instantaneously as soon as they were put on the market, according to you, they would have needed to LOSE money. How else could the initial valuation be so HUGELY different from where the price per share was just a week after coming on the market? That's not even remotely what happened. What they did was not have a big plan to show Wall Street that they were primed to make even more money. You need to understand that analysts are making recommendations to investment advisers who then place their clients in stocks that are primed to grow astronomically. That's how investors and their advisers make money. There are many value investors, but they are either the very cautious (who see little to no return) or the very wealthy for whom 1% growth mean millions and billions of dollars and they don't invest in IPOs by and large and their focus is Fortune 500 companies that are firmly established. Growth investors drive the market on speculation.

If stock were valued based solely on performance analysts would be so much smaller in importance than they are and the HUGE options market would dry up. Wall Street is a big casino, driven by speculation and gamblers are always looking for an edge which in turn drives stocks up and down artificially.

Read even the most vapid overview of the 2008 crash and you will see the domino effect of expectations not being met and perceptions driving the economy off the cliff.

Also you're missing the point on the models. WWE could buy a Justin TV on the cheap as they have been decimated by the copyright crackdown. You buy a failed product on the cheap because a streaming platform that is already constructed is cheaper than hiring a whole new team to develop one from scratch.

As for money, they're already talking about a $12 price tag as a premium cable channel...so switching to a digital delivery system like Netflix changes nothing at all. WWE is already getting fans to drop $60 a months for single shows and $20 for DVD's. $10, $12, $15, or whatever WWE needs to charge to make it work for the library, original programming, and lesser PPV shows is a deal!!! And you've completely missed the point which is that commercial free, on demand, digital content delivery systems that can be accessed on a variety of platforms like Netflix is the future...cable TV is over-saturated and outdated as a profit making model.

What would Netflix gain from partnering with WWE, when they can simply pay to stream DVD titles...like they already do? What would WWE gain from continuing to be a content provider for another company...which is what they already have with NBC/Universal and could already do on NBC Universal's Hulu platform, which is a Netflix competitor...or didn't you know that? Wall street would not even roll their eyes over such a small deal.

I would advise you to not do an investing on your own if you think the stock market is a straight up buy and trade, based an facts and hard data. I promise you won't make any money and more than likely end up losing. You'll be buying high and selling low. Just keep your money in a saving's account.

I don't really know what you have to be so condescending in your reply. Facebook was valued high due to speculation, but there were pseudo-insider trading issues rumored, as well as trading issues, which the NASDAQ was just fined for. If you think that Wall Street analysts are riding high on WWE stock simply because of the illusion of a network, well, thank you for your advice, but I would advise others not to invest with you.

Now, on to the issue at hand. Yes, WWE could partner with Netflix, and you're right, they do with the DVDs/streaming. Yes, they could partner with Hulu, and in fact they do with full episodes of RAW, Smackdown and more). WWE could run a YouTube channel, and they do. WWE content is available on demand, just not their archived content or speculative original content. That's what would be on the network.

Like I said before, WWE wants an actual network where they can charge cable providers a fee, and that fee gets passed on to the consumer. That's how ESPN, CBS Sports, local team networks, and others work. If WWE can get into a sports bundle, that would be huge for them.

They could buy something like JustinTV, but that's more of a peer to peer streaming service rather than a content provider. They'd have to rebuild the backend for their needs. They'd need to buy something like Dailymotion or Metacafe.

A $15 WWE would be a flop.

 

[Brahma_Bull9]

1) I don't go to wrestlezone for stock advice. I think you need to relax on that a bit, not saying you are wrong, but I'd rather not read that lecture on here.

2) The WWE network I don't believe will ever happen. The reasoning is not my concern, the comparison I'm about to make, some will say it's comparing apples to oranges but in my eyes it isn't. I am a huge hip-hop fan, and I'm not talking that lil wayne, drake, 50 cent, meek mills, whoever shit. Not to take anything away from them but it's never been my thing. From the artists I follow, Bone Thugs, Z-ro and other kinda big people but kinda underground people. I have learned that at a certain point, when a project keeps getting pushed back and pushed back and pushed back. It's not going to happen. It sucks, but it is what it is. Whatever their reasoning is. I would love to offer one, or be able to speculate however TV has so many more things that can impact success and failure, but I would completely be talking out of my ass. All I know is I get that vibe, you know when you meet, talk, or see someone and you're not buying what they are selling. I'm at that point with WWE network.

3) Finally, just a little suggestion. It will probably get shot down, but if they have to or would charger 15 bucks a month for the network only one thing could make me buy it. I would love to have it, but I don't come from money and I don't have the money to waste on it. Before WWE network, theirs NFL and NBA network and Fox Soccer Channel I would rather spend the money on, maybe MSG (which should be free to all NY residents but fuck them). However, if the WWE would show PPV's for free on that network I would buy it. Think about it, it provides a motivation for people to buy it. It is less money per PPV purchase for the WWE but the PPVs no one buys would generate more money. As I said earlier though, TV has so many factors to it, especially owning a whole channel. A lot of stuff on WWE network would not cost a lot of money, showing old matches and shows. However, if their plan is to develop new TV shows and waste money this would not be a good idea.