What do Reed Hastings, Shantanu Narayen and Vince McMahon all have in common? Yes, they’re all CEOs of highly successful companies (Netflix, Adobe Systems and World Wrestling Entertainment – better known as WWE), but there’s something else. They are all staking a large portion of their companies’ futures on recurring revenue.
You’re already familiar with how Netflix changed the video world by driving the home video market from a pay-per-rental model to an as-much-as-you-can-watch model for millions of consumers. You’ve seen how Adobe changed the software world last year with the shift to fully cloud-based subscription services. Get ready now for a smackdown in the entertainment industry, as WWE bypasses the cable television providers and announces its own 24×7 online streaming video subscription.
Of the many announcements coming out of last week’s Consumer Electronics Show (CES) in Las Vegas, this is one you may have missed (although given the hype machine that is WWE, they’ll be disappointed to know that anyone missed their announcement). Having spent a few years in the broadcast industry before moving on to a career in recurring revenue, I find this development fascinating.
There had always been an audience for professional wrestling, but before Vince McMahon came along, it was a fringe audience. McMahon turned the spectacle of large sweaty men body-slamming one another and hitting each other with metal folding chairs into a larger than life melodrama. Personalities like Hulk Hogan and Andre the Giant captured the attention of mainstream audiences by the millions.
McMahon has always been a bit ahead of the curve. His ability to tap into the burgeoning cable television industry to build the WWF brand in the early 1980’s has become a case study in marketing and media schools. McMahon was also on the leading edge at capitalizing on addressable cable box technology in the late 80’s to create pay-per-view events. Not all of his business ventures have been successful (remember the XFL? – me neither), but he has always been an innovator. Which brings us to the WWE Network.
In one sense, WWE will be following in the footsteps of several major sports enterprises in providing streaming video services on a subscription-basis. Major League Baseball, the NHL and the NBA all provide streaming video subscriptions. Each of those services originated and are still available as cable premium packages. Each major sport also has its own dedicated cable channels.
What makes WWE unique is that it has decided to depart from this tried and true sports formula. Rather than starting a dedicated cable channel or premium service, which had been rumored for several years, WWE has decided to skip cable altogether. WWE Network will make its debut in February as a streaming only service costing $10 per month, available through browsers, iOS and Android apps, streaming TV boxes like Roku, and Playstation and Xbox game consoles.
WWE will continue to air programming on the USA, Syfy and Ion cable networks, and those episodes will be available as replays on the WWE Network along with exclusive original programming. The big bonus is that the $10 monthly subscription will also include live and on-demand access to WWE’s 12 annual pay-per-view events which currently cost cable subscribers $40-$50 each.
Bypassing cable is a bold move, but one that will likely be a win-win for WWE and its fans. WWE gets to bypass the myriad of cable providers across the country, dramatically simplifying its business and distribution models by eliminating a complicated layer of channel partners. Most of WWE’s young male target audience is connected and probably more likely to purchase an online service than a premium cable package. WWE fans will get more programming, on demand, on their preferred devices, and at a lower cost.
Given the often contentious relationships between cable providers and their content providers, the WWE Network is an experiment that will be closely watched in the entertainment industry. If WWE Network proves successful, the cable and content industries could be in for a disruptive shift in business models. Call it an Attitude Adjustment*.
- For the uninitiated, an Attitude Adjustment is wrestler John Cena’s signature move. Google it.
– Bob Harden – Aria Systems
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