WWE is celebrating the first anniversary of its WWE Network, a streaming service that was a big gamble for the company but is starting to pay off.
Within the first 11 months, the company signed up more than 1 million subscribers who are paying $9.99 a month to access WWE’s monthly pay-per-views, a library that includes years of episodes of TV shows like “Raw” and “SmackDown,” online only franchises like “NXT,” and a growing slate of original series.
Getting there wasn’t easy. The company was hit by criticism that it would hurt its bottomline with the service, considering it was previously charging around $50 or more for each of its 12 PPVs, including “WrestleMania,” through cable and satellite providers. WWE also was one of the first major entertainment players to go directly to its fanbase with an over-the-top offering, the sort ofproduct that the NFL, HBO and CBS has also launched or plan to as a way to appeal to cord-cutters. Disney also has discussed similar plans for ESPN.
One year later, WWE’s executives have some takeaways from their network’s launch on Feb. 24, 2014 — lessons that could benefit other players looking to enter the OTT streaming business.
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1. Don’t be afraid of the long, dark hallway.
In a reference to a line the late David Carr wrote in a New York Times column, WWE notes a playbook didn’t exist for its plans to go direct-to-consumer with the WWE Network, but that it didn’t need to be afraid to try something new.
“We kept being told how hard it is for incumbents to innovate because they make so much money in their current business models,” George Barrios, WWE’s chief strategy and financial officer, told Variety. “For any legacy business under the threat of disruption, the challenge is to get from one room with all the profit to another room where so many innovators are setting up shop. For us, what really crystallized (the decision to launch the network) was the courage you need to stick to your convictions and push through. That’s what makes people successful: the willingness and ability to navigate the scary hallway.”
2. Content distribution is a balancing act.
While the concept of going direct-to-consumer may put more financial control — and ownership — into the hands of a content producer, companies still need partners to launch a successful service, while keeping its existing distribution deals in mind, WWE stressed. “Direct-to-consumer is the future but you can’t sacrifice your existing deals,” said Michelle Wilson, WWE’s chief revenue and marketing officer.
“Direct-to-consumer should not come at the expense of other models,” Wilson added. “We are very keen on making sure our content that goes (to NBCU’s USA Network and Syfy, for example) delivers a certain value. We enjoy our partnership with NBCU. We nurture that partnership very delicately.”
The same is true for WWE’s existing PPV partners, where there are still fans that want to buy the events, like “WrestleMania,” on cable and satellite. “We worked hard to maintain those relationships so (fans) still have the choice to buy on pay-per-view platforms,” Wilson said.
The network launched on around a dozen platforms, and is available on Samsung and Sony smart TVs, Microsoft’s Xbox videogame consoles, Sony’s PlayStation gaming devices, Amazon Fire TV, Apple TV, and Roku boxes. It’s now on 13 total.
“We’re going to continue to be very aggressive and be wherever people are,” Wilson said. But in some countries where the WWE Network has rolled out, WWE didn’t have a choice but to remain with traditional platforms. In Canada, the WWE Network is offered via Rogers Communications. In the Middle East, it’s available through pay-TV service OSN. “We didn’t approach this as OTT is the only model,” Wilson said.
WWE also needed to be nimble when it comes to pricing the service.
A six-month commitment for the first subscribers ended up being changed to a per-month structure when fans objected. But in order to sign up even more subscribers, WWE found it needed to get the service in front of more viewers — and did so by giving away the network for free, during periods when PPVs were being offered.
“Sampling and free is the best marketing tool there is,” Wilson said. “It wasn’t an easy conversation to have with (WWE chairman Vince McMahon). To tell him we need to give away a pay-per-view took some convincing. But just because we talk about (the network), doesn’t mean the fans know what it is. Fans don’t necessarily understand what it is or how it works.”
3. Direct-to-consumer doesn’t mean you go it alone.
While WWE invested heavily in technology to launch the network, it also partnered with Major League Baseball Advanced Media to do much of the heavy lifting.
“You’re better off being an integrator than a builder,” Barrios said of the move. “Over-the-top has the connotation that you’re doing it all on your own, but you need to integrate best of breed partners to help you do what you need to do to support (the distribution) of video all around the world.” While some companies are still evaluating that approach, “Our learning is just because you partner, it’s still your product and your consumers,” Barrios said.
4. Know your audience.
WWE has spent the past year combing over usage data, and has been surprised at how some of its fans use the service. VOD usage has been higher than it expected, for example, with the company having expected most subscribers to want to watch the live streams of its PPVs, considering live sporting events typically attract most sports fans. Live is still king, but two-thirds of usage is for VOD programming, WWE said.
“WWE tends to live in both worlds,” Barrios said — live sports and VOD-friendly TV programming. The company launched with 1,500 hours of video in its library, but now has over 3,000.
Mobile usage also has been high, with 36% of its users accessing the network on tablets and smartphones, something that will dictate future programming being shorter.
“That was an aha moment for us,” Wilson said. “A lot of our fans aren’t going to watch a three-hour pay-per-view if they’re watching on their phones in between their breaks at work. Short form content will play a larger role. I don’t think we would have known that going into this.”
In the past, WWE couldn’t get much data from its cable and satellite providers selling its PPVs. “All of our partnerships in the past have been at arm’s length,” Wilson said. “Now we have all the data.”
That info, like knowing that 90% of its subscribers watch WWE Network programming at least once a week — and what that video is — enabled WWE to build teams and infrastructure that informs the decisions the company needs to make to grow the service.
“We’re still testing and learning,” said Barrios, who doesn’t ignore the company’s critics. “When you’re building transformative initiatives, everything’s in the public eye. That’s just part of doing it in the public domain. You just don’t turn the switch on and have people subscribe. It’s a lot of hard work.”
So far so good. In addition to signing up 1 million subscribers and expanding the network’s reach around the world, the service isn’t cannibalizing its flagship shows on USA and Syfy, with ratings for the shows having increased last year. Its YouTube viewership also is up 60%.
Naturally what helped with launching the network was also having the support of WWE’s chairman Vince McMahon, who was willing to risk losing millions in order to hopefully recoup that and more with a streaming service it could own entirely. McMahon has made risky bets in the past, including the launch of the XFL football league.
“We needed someone like Vince to say, ‘We’re going to do this,'” said Wilson.
The WWE Network was originally developed in 2010 as a traditional cable channel, but when new digital platforms provided an opportunity for WWE to launch its own streaming service, in the summer of 2013, “We knew the direction we needed to go was as a direct-to-consumer network,” Wilson said.
Up next are plans to develop new original shows.
“We have an aggressive slate when it comes to new original series,” Wilson said, and the company is said to be looking at expanding its animation lineup after “Slam City” performed well. Other ideas include talk shows and series from outside partners the way it produces reality show “Total Divas,” for E!, with Bunim/Murray Prods.
Much of it “won’t be in the ring, but it will appeal to our fanbase,” Wilson said.
