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WWE’s Chief Strategy and Financial Officer George Barrios spoke at the UBS Global Media and Communications Conference this week and gave some new insight on WWE’s plans for the upcoming WWE Network.
Despite the talk that the WWE Network will be an Internet-exclusive “over-the-top” service (similar to Netflix), Barrios said WWE is still considering going the traditional cable television route. Barrios said that when he spoke at the conference last year, the landscape for online streaming services was very different.
“I was here 12 months ago and people were asking me then and I said we just don’t see the data to say that it’s there yet, now we see the data there. It doesn’t mean we are going that way, but it is now a viable option.”
Barrios talked about the pros and cons of the over-the-top model, specifically noting that WWE would have to incur all of the associated costs, as opposed to sharing some of the costs with cable and satellite providers.
“If you go over-the-top you have significantly more costs, you have to do things like CDN costs, credit card fees, customer service. If you go traditional that essentially is covered up in the split that you are paying the MVPDs.”
“We continue to work with the MVPDs, see if we can knockout a deal in traditional distribution. If not, we have that option,” Barrios said. “We could do it at our own discretion. In either case the economics are differen… If you went down each line item they differ between traditional and over-the-top distribution. Pricing is different, splits are different, costs are different.”
He also credited Netflix with paving the way for a possible over-the-top WWE Network:
“One of the things that happened over the last 12 months has been happening for quite a while and we have been monitoring it for quite a while, is the consumption of long form video over-the-top and we all have Netflix to thank for this,” Barrios said.
“They have done the spade work of creating the environment and the consumption habit of consumers to watch long form video over-the-top. So this, earlier this year we said where two years ago we didn’t think there was enough of that happening to make a network viable over-the-top, we now believe it is viable over-the-top.”
As for how many subscribers WWE would need in order to break even (when charging subscribers a fee between $10-15 per month), Barrios said 1 million is the magic number.
One proposed feature for the WWE Network that we’ve covered here on the site is that WWE’s monthly pay-per-views would be included as part of the package. While this would obviously cannibalize one of WWE’s top revenue streams, he said that the revenue generated by the Network would more than exceed what they’re currently making from pay-per-views.
“Obviously a really successful network means the pay-per-view business slowly goes away and that number I gave you on the network, the incremental includes that cannibalization.
WWE pay-per-view prices have been steadily increasing over the years, and he acknowledged that they are “pretty expensive in today’s world where this is so much content out there.
The main reason that WWE is considering the over-the-top business model is that they’ve had a hard time selling cable & satellite providers on carrying the Network.
“We’ve been working at this for a while. We’ve been working with the MVPDs, the same pitch I just gave you here, let’s transform the pay-per-view business together, grow the business for both of us. Quite frankly it’s been a bit of a slog, having those discussions but we continue to have them.
For more on Barrios’ presentation, visit SeekingAlpha.com.
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