Rumors of Pay-Per-View’s Death Were Greatly Exaggerated

When I came on board in 2009, one of my responsibilities that Vince [McMahon] gave me was running our infamous pay-per-view business… I came from the NBA, I came from the world of tennis where the vernacular, even a business model of pay-per-view didn’t exist, so of course when I was given the responsibility to run pay-per-view, I’m like, “What is pay-per-view? I don’t even know how it works.” And so the very first pay-per-view I ordered was Royal Rumble in 2009, and I said, “Well, people pay $55 or $60 for this.” And it’s almost a good thing that I didn’t have too much knowledge about what the traditional business model was for WWE. 

Michelle Wilson, Needham & Company’s 2018 Emerging Technology Conference, May 10, 2018

In that talk at the Needham Conference in 2018, former WWE co-president Michelle Wilson described the strategy behind launching the WWE Network, which deliberately disrupted the company’s “infamous” pay-per-view business.

Consider that pay-per-views, which are WWE’s most premium content, the events that everything builds to, where matches that are hyped on TV happen. Multiple millions of people are watching Raw and Smackdown weekly in the U.S., many millions more outside of the U.S. But only a few hundred thousand bought most pay-per-views. Wrestlemania each year did about a million pay per views. B-level pay-per-views were doing about 200,000. So the number of people buying PPVs was many times less than the number of people watching weekly TV shows on cable.

WWE had many millions of people watching TV every week, so how could they get more of those people to get in on the PPV transaction, to get in on that high-value content, to see those payoffs, to see the big matches?

Pay-per-views were the company’s most valuable but the least consumed content. Maybe the reason why people weren’t consuming the PPVs as much was because of the price point. Pay-per-views, at least in the U.S. were priced at $50, then $55 or $65, so maybe there was a way WWE could get people to consume all of the PPVs, if the price was lowered and tied to a recurring subscription.

So for us it was like a light bulb went off. It was like, “Well, if that’s the future, maybe that’s the path that we should be going down now.” … There was literally no playbook for what we were doing other than Netflix and Hulu, which were video companies that started in that business. They weren’t transforming a legacy pay-per-view business. They weren’t in the linear television business. So for us, we were really going into uncharted territory. There were no other companies we could really look at and say, “Hey, this is how they did it, this is who they partnered with, this is what you’re going to have to be prepared for.” There was none of that. So it was George myself, our team, and Vince, really trying to figure out where to go. So I would say not having that, not knowing what to do, so the very first things were all of the conversations for any companies who are trying to launch now: 1. What is the value proposition?  2. What content will go there? 3. How are you going to price it? 

Michelle Wilson, Needham & Company’s 2018 Emerging Technology Conference, May 10, 2018

Thus the WWE Network was born — at least the WWE Network that we ended up knowing, the idea that for $10 a month, you get library content, all sorts of secondary programming, along with the pay-per-view. Even in the Wrestlemania month, it’s $10 a month.

I bring this up now again because we’ve learned from the latest Wrestling Observer Newsletter that early estimates for AEW’s recent Double or Nothing event suggest the pay-per-view sold over 100,000 buys, possibly on par with last year’s event. AEW pay-per-views so far have done around 100,000 buys. That number isn’t that high by WWE’s pre-Network scale, but for a non-WWE company, that’s the most any wrestling promotion has done on pay-per-view since the end of World Championship Wrestling in 2001.

Each AEW pay-per-view so far has had a $50 price point. This supports the idea that, with the benefit of hindsight, in 2014 when the WWE Network was launched, pay-per-view was not dead. Pay-per-view is still very lucrative for UFC. Pay-per-view is still very lucrative for major boxing events. And considering the immense cost of launching the WWE Network, pay-per-view is probably still the optimal way to monetize peak wrestling events.

As much as it would perpetuate many anecdotes about how people are dissatisfied with the change, it would be in the interest of the industry overall, not just WWE, if WWE took most of its pay-per-view events, or at least the biggest ones, off of the WWE Network sooner rather than later and put them back onto an ala carte type offering where those events are sold for at least $50. 

Doing so would make WWE even more profitable. Even without PPVs, the Network would still maintain some sort of subscriber base, probably in the hundreds of thousands, who will keep WWE for the library if nothing else. The move would create some customer upheaval, but profits generated from paper pay-per-view would probably makeup for that cost. In fact WWE’s case, moving back to pay-per-view will probably be done while still avoiding the risk of inconsistent PPV sales, since the company can likely complete a deal where they sell the broadcast rights to a major streaming service, which then sells the events to the consumer or monetizes the events in some other way, whether that’s Peacock or ESPN Plus or some other major streaming player.

As the most influential company in the wrestling marketplace, such a move by WWE would be good for the rest of the industry. It would reintroduce the expectation in the wrestling marketplace that peak events are worth a standalone price of $50 or more.

The sooner that happens, the easier it will be for other players in the industry, the easier it will be for other players in the industry to create events that are sustainable and profitable. It’s been more difficult because WWE for the last six years has thought the consumer base that major events are worth at most $10. The cost, again, will be that some people will refuse to enter into a different kind of transaction, but the benefits likely outweigh that cost.

WWE Investor Presentation, December 2014, p. 21.
Full deck

The WWE Network experiment actually could’ve worked out fine if the service would’ve attracted three to four million subscribers, which is what WWE projected as they were rolling out the Network in 2014. If the Network had three or four million subscribers, the proposition would’ve been considerably more profitable than the pay-per-view model. And within a few years, the start-up costs would’ve been covered, and the company would be in a more profitable situation as it concerns the fork in the road between subscription streaming and PPV.

The Network proposition made some sense. Consider other streaming services, Netflix and numerous other major streaming players that have emerged in the last couple of years. Many of those attracted tens of millions of subscribers. Netflix has over 180 million subscribers today. In 2013, Netflix had 41 million subscribers. So surely it stood to reason the WWE Network could capture a small percentage of those.

So we did a lot of research and what the research told us was that while a traditional ad-supported network might be logical, our WWE fans at the time wre consuming five times as much content on digital platforms. They were on YouTube, they were Netflix subscribers, there were Hulu subscribers. And in 2012, that was pretty unheard of. But they were five times more likely to be consuming content that way.

Michelle Wilson, Needham & Company’s 2018 Emerging Technology Conference, May 10, 2018

Michelle Wilson noted they found WWE fans tended to be the kinds of people who were more likely to subscribe to video streaming services like Netflix and Hulu.

This all would have worked out fine if pro wrestling would’ve functioned more like normal, mainstream entertainment. But as much as those in WWE have messaged it as such, wrestling is not just entertainment in the way that movies and TV shows on Netflix and Hulu are. Pro-wrestling is more like a sport, not just in terms of its creative possibility, but in how it can function economically. Pro-wrestling functions economically as this strange medium that overlaps a space between scripted entertainment, yes, but also live sports. And there is nothing else in the world like it.

Part of the lesson the WWE Network should teach us is that if we overly analogize wrestling to be entertainment and don’t account for the ways in which it functions in society and economics like a sport, the results may not turn out the way you expect them to. And those three to four million subscribers who we expected to subscribe to the WWE Network may never show up. And they didn’t. And they’re not going to.

This article was based on a recent episode of Wrestlenomics Radio.