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Still up in the air.
EARLY ADOPTER

Pro wrestling’s bold gambit that shocked Wall Street and changed the future of television

By John McDuling

Professional wrestling has been a surprisingly innovative part of the US media industry in recent decades.

World Wrestling Entertainment (WWE), the biggest company producing this outlandish form of highly scripted athletic entertainment, is now more than a year into one of the boldest experiments in television in recent memory. And with the pseudo-sport’s centerpiece event, WrestleMania, being held tonight in Santa Clara, California, today seems like a good time to assess how it has gone.

About a year ago, WWE decided to make pretty much all of its content available on the internet, through a streaming service called WWE Network, which costs $10 a month. “It’s a courageous and brilliant opportunity,” Jason Krebs, from Maker Studios told AdWeek at the time. “It’s going to work out really well for them.”

Investors disagreed. To say there were shocked by the brazen move would be an understatement. Remember, this time a year ago, big content providers like HBO and ESPN were still pretending they would never go “over the top”. And by letting consumers access its content on the internet (some of it on delay) WWE was putting its most lucrative revenue streams at risk.

The company subsequently announced a lower than expected (paywall) rights deal with NBC, which airs regular WWE shows each week on its cable channels. The market reaction was swift and brutal and the share price still hasn’t fully recovered.

WWE also seemed to be throwing away its lucrative pay per view business. Events like WrestleMania typically cost north of $50 to watch on cable. Now, in theory, a wrestling fan with internet access can simply subscribe to the WWE network in the given month of an event and if they want, cancel right after. Since WWE dropped a requirement for a six month commitment (paywall) for the online network last year, subscribers, like Netflix users, aren’t locked into ongoing contracts.

At the time of launch, WWE said it needed to attract 1.4 million subscribers to the new internet service to break even. Last quarter, it said it had surpassed 1 million subscribers, so it’s well along the way to achieving that goal. It could hit 1.5 million subscribers following WrestleMania, Macquarie Capital analyst James Clement says. The company has scheduled a press conference for Monday so you get the feeling it may have good news to share.

But Clement cautions that subscriber numbers could “drop precipitously” in subsequent months as consumers exercise their ability to walk away. “This has historically been a pretty seasonal business,” he tells Quartz. “They  [WWE] tend to catch a wave of popularity when the NFL SuperBowl finishes up and before baseball starts up.” WWE did not respond to an emailed request for comment for this story.

The WWE deserves credit for giving its fans what they want. And its experience has no doubt proved instructive for the likes of HBO, which will launch its first internet only service, HBO Now, through Apple, next month. But whether the network will remain in its current form for that much longer remains to be seen. Strong subscriber growth on Monday could prove too good to be true. “I’m wondering whether they underpriced this, and I suspect that over time they may experiment with different pricing options,” Clement says.