WWE, which distributes its wrestling content globally, caused a stir when it launched a direct-to-consumer offering in February 2014 and made not only its best premium content like the Raw and SmackDown shows available inside a no-commitment monthly $9.99 subscription offering, but also all twelve of its annual live pay-per-view events that previously raised up to EUR 35 each. At Connected TV World Summit this week, Stefan Kastenmuller, VP and GM Europe for WWE.com, explained how the media owner made a bet that its digitally-savvy millennial audience would appreciate a Netflix-like proposition for its family-friendly sports entertainment programming, and how a direct-to-consumer offering alongside continued Pay TV distribution would grow WWE overall. He declared that the strategy is paying off, with subscription revenues from the direct-to-consumer WWE Network more than making up for any loss in PPV earnings.
Kastenmuller was speaking during the â€˜Broadband Sportsâ€™ session at the London conference. Challenged from the audience about the logic of including the PPV events inside the subscription, he said: â€œI cannot talk about detailed figures but overall, the bottom line is paying off for us because people are subscribing for much longer periods of time. Pay-per-view used to be a la carte; now people stay as subscribers to the network.â€
He confirmed that the live PPV events are the most watched content on WWE Network, which also includes a total of 9,000 hours of original programming each year and a library of 150,000 hours. In some countries where WWE Network is available, the PPV content is exclusive to the direct-to-consumer offering.
The subscription sign-ups have certainly been impressive. Within 42 days of launching, WEE Network had 667,000 subscribers. When the figure passed one million in late January, WWE claimed the service was the fastest-growing digital subscription service anywhere. In late March, after WrestleMania 31, which was broadcast worldwide on PPV and streamed globally on WWE Network, subscriptions hit 1.3 million. This became the most viewed WrestleMania in history, confirming that audiences, at the very least, are growing thanks to the new distribution strategy.
Wrestlemania 31 was an evening of wrestling contests and the climax to WrestleMania Week in Santa Clara, California, and Katenmuller revealed that twice as many hours of WWE programming was consumed during that week compared to the previous year. â€œThat all came down to the WWE Network offer,â€ he stated.
The subscriber growth has been partly driven by free promotions, most notably in November last year and again in February â€“ the latter attracting 201,000 trial subscribers. 154,000 of them converted to paying subscribers in March, a 77% conversion rate. George Barrios, WWE Chief Strategy & Financial Officer, admitted then that the company did not know whether it would enjoy sequential quarterly gains or see seasonal ups and downs but said the company was confident in the long-term growth trajectory.
His Chairman and CEO Vince McMahon said the 1.3 million count â€œreflects the successful execution of our strategy and puts us on the path to transformative growth through WWE Network.â€ He added: â€œWWE Network has the potential to drive significant economic returns.â€ Responding to questions about the strategy at Connected TV World Summit in London, Kastenmuller said: â€œThe success story is the subscriber growth; nobody thought we would reach one million in a year.â€
Kastenmuller stressed the importance of giving customers the option to opt-out after just one month, pointing to the success of one-month contracts on services like Netflix. â€œThat has worked very well for us,â€ he said. And he stressed how the decision to go direct-to-consumer was carefully researched and based upon the pro-digital behaviour of the WWE audience base, who were already multiscreening.
â€œOur fans are five times more likely to consume digital content compared to the average and they are twice as likely to subscribe to a service like Neflix or Hulu,â€ Kastenmuller noted. â€œOur core target group, the millennial generation, have also watched on-demand content most of their lives. We have seen extreme changes in video consumption behaviour in the target audience group we serve, driven by the proliferation of devices.â€
WWE Network is available across a whole range of multiscreen devices including streamer boxes, game consoles and smart TVs, and of course portable devices. More than one-third of WWE Networkâ€™s video streams are being consumed on mobile devices, both in the U.S. and globally (the direct-to-consumer service is available in 170 countries).
Kastenmuller characterized WWE Network as an incremental revenue opportunity, calling WWE a service with multiple access points. And it should be stressed that the direct-to-consumer offer does not replace traditional Pay TV partnerships, which are still being expanded. As an example, WWE and Rogers Communications in Canada signed a 10-year exclusive distribution agreement in July 2014 covering flagship programming and later expanding to the distribution of WWE Network as a premium linear channel.
In February Rogers then reached carriage agreements so the WWE Network linear channel will be available to Cogeco Cable Canada, Shaw and Shaw Direct, TELUS Optik TV and TELUS Satellite TV, and Videotron subscribers. This means that, like Rogers subscribers, customers on these traditional operator platforms will also have access to all the WWE pay per view events via WWE Network.
Earlier this month Sky Italia extended an existing partnership for a further five years to exclusively broadcast WWEâ€™s flagship programming, including WWE Raw, SmackDown, NXT, WWE Experience and WWE Main Event. Cielo, Sky Italiaâ€™s free-to-air channel that reaches 24 million homes, will air one-hour versions of WWE Raw and SmackDown weekly on Sundays. Sky Prima Fila will show the 12 WWE live pay-per-view specials including WrestleMania.
The MENA region provides a good example of how WWE is now combining traditional Pay TV distribution with the direct-to-consumer offering. OSN already had deals to show WWE programming like Raw and SmackDown as the exclusive Pay TV partner for the region and all the premium programming plus pay-per-views were available on OSN Sports 2 HD. The content was also available for authenticated TV Everywhere viewing through OSN Play.
Then in February this year the two companies announced the distribution of WWE Network as a premium linear channel, co-branded as â€˜OSN WWE Network HDâ€™. You can get multiscreen access to the new channel via OSN Play and direct-to-consumer through the WWE app, which itself is available on â€˜Go by OSNâ€™, the standalone Pay TV Lite service from OSN for the MENA region that targets the Internet generation and consumers who might have chosen piracy ahead of higher cost full Pay TV bouquets.
The Broadband Sports session at Connected TV World Summit investigated the market dynamics for broadband distribution of sports including the opportunity for sports rights holders online and how they can balance traditional distribution with efforts to segment markets more effectively.