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By Zach Arnold | April 7, 2014
WWE Network, supported by MLB Advanced Media, announces this AM it has garnered 667,287 subscribers in six wks since launch.
— Eric Fisher (@EricFisherSBJ) April 7, 2014
Don’t discount this as a huge night for WWE Network and over-the-top services. No streaming issues throughout WrestleMania. Big success.
— Awful Announcing (@awfulannouncing) April 7, 2014
The real launch of the WWE Network happened on Sunday night with Wrestlemania. While cable/satellite providers offered Wrestlemania for purchase, last night’s event was the beginning of the end for WWE on PPV. The IPTV WWE Network channel is officially 100% the place to go to watch their paid content. Instead of $60 a PPV, they’re asking $60 for a six month subscription to their IPTV channel. With Amazon Fire TV now competing with Apple TV, XBox, Roku, and Google USB sticks for IPTV supremacy, surely the fuddy duddy days of demand for over-the-air TV broadcasts and plunking $60 down to watch big fights on PPV is dead.
Channeling my inner Lee Corso… not so fast, my friend.
There is no question that there is a place for IPTV in today’s television landscape. The “zero TV” factor. 5% of households are “zero TV” consumers but at least 10% of households are still reliant on over-the-air television only. That number would be even larger if many of the cord cutters discovered what OTA looks like today versus a decade ago.
There is a rush to view IPTV as a primary rather than supplemental form of television viewing and I think that’s a mistake. For sure, there is rapid acceleration when it comes to segmentation of paid television viewing. And cable/satellite remains the 800 pound elephant in the room. The price of cable continues to escalate because the carriage fees are rising. As long as there’s no a la carte option for customers, that’s gravy for the cable companies & their lobbyists that have a stranglehold over Washington D.C. After signing a new monster TV rights deal with CBS & Turner Sports, the NCAA finds more and more of their March Madness games on cable. Including the semi-finals on Saturday night, which featured the “neutral” commentating crew on TBS and the homer-ific Teamcasts on TNT & TruTV. But take note of the following:
Yesterday's Final 4 produced cable TV's two most viewed college basketball games. Combined TBS/TNT/truTV ratings down from last year on CBS.
— John Ourand (@Ourand_SBJ) April 6, 2014
The concept that the role of over-the-air television is dead, especially with sports programming, is a falsehood that needs to be challenged on the merits. Americans may love their cable but they don’t love their rising cable bills. Cord cutting is what led to the increase in demand for IPTV in the first place. So, obviously cord-cutting combined with IPTV & other subscription platforms has accelerated the segmentation of television as we know it today. OTA viewership still exists, especially in Hispanic households who make up a quarter of the viewership pie. The NFL is living proof that the power of over-the-air broadcasts, combined with the ESPN cable deal, is as lucrative of a sports business model as you can find in the States. If the cable companies are losing TV customers due to cord cutting, how are those same companies maintaining record revenues? By cashing in on the internet bandwidth they’re selling to customers, which has much better profit margins than selling traditional TV packages (at this point in time).
Just because corporations and content providers are becoming better suited at monetizing IPTV doesn’t mean that traditional forms of media distribution are dead. There’s just more choice now in the marketplace. You may not watch over-the-air television with an antenna but chances are you know someone who does, especially if they live in a bigger media market where there are tens, if not hundreds, of stations available for free.
But what about PPV? The WWE is running away from PPV with their new IPTV business model. The reality is they had no choice but to make this move because they cooked their golden goose. They popularized PPV and made billions of dollars on the platform alongside the cable & satellite providers. But the WWE’s inability to draw on PPV isn’t because PPV is dead. It’s because WWE sucks at convincing people to pay $60 to watch their product on PPV. WWE has reached the point where they have to convince a lot of fans to pay $60 for six months of IPTV subscription in order to make up for every $60 PPV buy they’ve lost. At least they have a hook to reel you in… that is if you want to watch Brock Lesnar beat The Undertaker and end his winning streak:
Those grown men crying in the crowd after the Undertaker lost made my night. Wrestling fans are a gift that just keep giving.
— Jonathan Snowden (@mmaencyclopedia) April 7, 2014
What about the UFC? The UFC is heading down this same path given how many shows they are running on Fox & Fight Pass. But as last December’s PPV with Anderson Silva vs. Chris Weidman II and Ronda Rousey vs. Miesha Tate II proved, they can draw a healthy PPV buy rate in today’s marketplace as long as they promote fights that people care about and will pay to watch.
There seems to be a growing reflexive nature amongst the biggest backers of the WWE Network to proclaim the death of PPV when there isn’t any reason to plan for a funeral in the first place.
Recently, we talked about this very issue a few weeks ago with our old friend Mauro Ranallo on Fight Opinion Radio. You didn’t listen to the interview? Shame on you. Check out our RSS feed and subscribe to Fight Opinion Radio. Our shows are 30 minutes for each edition. No time wasting here. During our interview with Mauro, we talked about the future of PPV in regards to Showtime and HBO with boxing and Mixed Martial Arts. If you have our radio show downloaded, you can listen to the interview at the 23 minute time mark.
Here’s Mauro in his own words on the future of PPV in the next 10 years and how WWE & UFC’s IPTV adventures fit into the marketplace:
“It is about the stars. It’s about the promotion of the stars, the presentation. It’s sports but it is entertainment more and more especially with the way the technology’s evolving. I don’t know what the PPV model’s going to look like in 10 years. I think it’s a good thing what the WWE is attempting in trying to serve its audience. I know and I think it’s going to be much less casual revenue but the steady pay that comes in, it’s $60 bucks for six months you got to commit to the six month cycle, so if you’re getting $120 instead of the $600 you’re paying for PPV usually, then that’s great.
“I think just like the UFC, though, you need the stars! And I mean GSP is gone. Anderson Silva’s injured. Right now, Ronda Rousey who, you know, I loved calling her fights in Strikeforce and knew she had the “it factor” but if she’s the biggest star in the UFC… that’s an interesting conundrum that they face in many ways because you need people to want to pay to watch the fights and when you’re giving a lot of stuff away on Fox and now with these Fight Pass cards, it does water down the issue when it comes to the PPV draws.
“And for boxing, well, what happens after Floyd Mayweather’s done? He’s not going to be around forever. But I think with the fan base, the Hispanic fan base especially, when we have people in the pipeline like a Leo Santa Cruz and others, it’s really what’s driving boxing right now. So, for me, as long as there’s a Latino superstar, then I think you can definitely continue to do big business on PPV. But it is an interesting time. I’m all for giving fans the opportunity to see the action when they want to. Even for myself, I’m watching more and more when I’m in the airport or on the road I’ll watch UFC on my iPad or, you know, the iPhone. So, it’s not where you’re watching it when they want to watch it (appointment viewing). You can watch whenever you want.
“So, I think it’s a very interesting time. I know it’s going to continue to shift. I don’t know how successful the WWE Network is going to be from a financial basis but the WWE is taking a big risk and Vince McMahon’s always had that foresight and the balls to do this kind of thing. I wonder where the rest will follow but, for me, PPV is… you’ve got to be a star. A star that transcends the sport and right now boxing is on a bit of a upswing. Last year, boxing had one of its best years in 25 years and that’s not me talking, that’s Hall-of-Famer Al Bernstein. So, in continuing to march forward, if we continue to put the product out there the fans will continue to buy it.”
Earlier in the article, I mentioned that WWE needs to convince a lot of their fans to pony up $60 for six month subscriptions to the WWE Network in order to make up for all of their lost PPV revenue. But what about the significant cut of the action that cable & satellite providers received for selling PPVs in the first place? That’s often the biggest selling point discussed when touting the brilliance of the WWE shifting to their own IPTV platform. It’s also the same reason why cable & satellite providers will be as motivated as ever to keep PPV alive. PPV means a boatload of money for big cable & big satellite. Consolidation is happening in a hurry. Comcast and NBC isn’t going to sit around and watch all the money from PPV disappear. There’s too much at stake. They need big fights to rake in the fees. If it means decreasing their cut from PPVs slightly in order to keep HBO & Showtime on board, then so be it. The same with UFC.
What about the fans? I’m still a big believer that fans who want to watch big fights want to watch them live and see it as appointment viewing. Sports programming is valued so heavily because it’s seen as appointment viewing and “DVR proof” to whatever extent TV is DVR-proof these days. WWE knows this. This is why they’ve been touting their pitches to networks for RAW & Smackdown as sports programming first and entertainment programming second.
The reason WWE, and UFC to a lesser extent, is seeing less returns on PPV is because they’re giving away the store on cable & the internet. There’s so much content being pumped out by both companies now. It’s no longer special. The WWE has glimpses of hope occasionally but they are wildly inconsistent and disdainful of their fan base. Big fights still sell. Big fights still sell well on PPV. As long as you establish that you have a premium product that cannot be accessed on a basic cable channel or “free TV,’ then you can still attract customers on PPV. Maybe this feeling will no longer exist in 20 years. But I suspect it will still exist and be as big of a revenue stream as ever for both content providers & distributors.
I would be remiss if I didn’t two political factors that could impact the future of IPTV services:
1) What happens if the FCC decides that they want to squeeze operations like the WWE Network or UFC Fight Pass due to the strain those services are putting on internet resources managed by giant media players?
With the appropriate legal arguments, the FCC not only has the authority to tell broadband providers they can’t block or discriminate against traffic on their networks — that is, to enforce Net neutrality — but it also has the authority to regulate broadband rates, as well as regulate pricing for all services connected to the Internet, from streaming video services like Netflix to Internet-based home surveillance services. It might even give the FCC authority to insert itself into copyright disputes.
If governmental agencies cost content providers extra money in regulatory expenses to run their business operations… guess who that cost is going to be passed down to? The customer.
2) What happens if multiple countries get involved in the fight over ICANN and decide to flex their muscle on what the future of the Internet looks like and how it operates?
These two hot-button issues are problems that are completely out of the control of the content providers who are shifting their resources towards IPTV. The content makers will be at the mercy of politicians. If you think the argument to get rid of FCC involvement in regulating over-the-air is loud…
By the way, we’ll be talking about this topic in-depth on the next edition of Fight Opinion Radio. There’s a lot to discuss regarding the future of HBO & Showtime boxing events on PPV and where they fit into the IPTV landscape. We’ll talk about this on the next edition of Fight Opinion Radio on Tuesday. Our guest for the program will be none other than Jimmy Lennon Jr. Seriously. I think it will be a show that all fight fans will want to listen to.