World Wrestling Entertainment announced the second quarter subscriber numbers for its WWE Network streaming service today, and they're not good. Just 667,000 people signed up for the service in the first quarter of 2014, but that was roughly on pace for the service to have 1 million subscribers by the end of the year. (Initially, the WWE saidit would need to find 1.4 million subscribers to replace the lost revenue from pay-per-view events, but it revised that number downward to a flat million.) In the second quarter, however, just 33,000 new subscribers signed up, bringing the number to 700,000 and raising serious doubts that the WWE Network can get to 1 million subscribers by December 31.
This problem is compounded by the fact that those who signed up for the service when it first launched and were locked into an initial six-month subscription can begin cancelling their subscriptions next month. The primary reason to get a WWE Network subscription, at least in terms of saving money as a wrestling fan, is so one doesn't have to pay $45 to $60 every month for a pay-per-view. At just $10 per month, the Network could provide substantial savings to the diehards. But SummerSlam, the last truly major pay-per-view event of the year, is coming next month, and there's no guarantee those subscribers will keep their subscriptions going once it's done.
And, if you follow the train of logic far enough, all of this explains why you don't get standalone HBO Go. It's all about how difficult it is for any one of these companies to extract themselves from the relationships they have with cable companies. But give me a second to tell you why.
What is the WWE Network?
Basically, the WWE Network is a giant Netflix-like site dedicated just to professional wrestling. There are over 100,000 hours of content in the WWE's vaults, and while the Network launched with just 1,000 of those digitized, it will eventually add all of that content to the service (assuming it stays operational long enough to do so). The WWE wants to eventually add all of this content and make it easily searchable by wrestler or event or whatever you might want. Plus, it adds every new episode of WWE Raw and Smackdown around a month after air, as well as the pay-per-view events as they happen. And it has a fair amount of original programming.
Well, that sounds just spiffy. Why is it in trouble?
Again, subscriber numbers have fallen far short of what the WWE had hoped for, and they could start to plummet in the next quarter. At the same time, I haven't found the user experience on the app to be as intuitive as it could be, creating a situation where it can be hard to figure out what to watch, unless you know exactly what you want. (This is a problem all streaming services face from time to time, but the Network lacks a way to easily surf from program to program, particularly for those who aren't so tech-savvy or those who aren't already wrestling diehards.)
All of this comes atop other bad news for the WWE, including brutal renegotiations for TV rights with USA, the cable network that has aired Raw for the past several years, and a layoff of 7 percent of the company's workforce. And that's to say nothing of the creative malaise many of the company's programs are stuck in, thanks to the departure and injury, respectively, of relatively new stars C.M. Punk and Daniel Bryan.
Does the WWE have a plan?
Yeah. In the immediate future, it's going to rush the Network out internationally, and hope overseas sales can make up for domestic shortfalls. It also always has pay-per-view money and cash from any cable deals it cuts. And Raw is still routinely one of the top shows on basic cable. The WWE is a massive, profitable corporation, run by Vince McMahon, a man who turned it from a minor player into a sensation. It has room to screw up for a few quarters. But only a few. (Also, the company's stock rebounded, almost paradoxically, after the announcement of the second quarter numbers.)
A wrestling-themed streaming service? Why did anyone think this was a good idea in the first place?
The WWE actually surprised quite a few people when it announced that the "WWE Network" would be a streaming service, and not the long rumored cable channel the name might lead you to believe it would be. But if the WWE can make the Network work, it makes a lot of sense for the company's bottom line. Those subscription fees go directly into the WWE's coffers, and they don't have to pass through any cable middlemen.
Plus, the Network might have been a gamble, but it wasn't as much of one as it would have been even two years ago. One of the open questions of TV's evolution from something consumed on your television at a set time every week into something consumed anytime, anywhere, is just how things like reality shows and live sports, which essentially need to be watched live, will be handled in the new television order. Since the WWE contains elements of both reality TV and sports, it made for a valuable canary in the coal mine, particularly when compared to, say, ESPN's half-hearted efforts in the same arena.
There was also the matter of the WWE's audience, which skews young and male, two demographics that are more likely to want to watch things on streaming (but, also, tellingly, two demographics that have less expendable income in this post-Great Recession world). And though finding 1 to 1.4 million subscribers was always going to be a tall order for the service, Raw regularly attracts a viewership over 4 million, so it's not as if potential subscribers didn't exist.
But the problem the WWE Network ran into is the problem these sorts of endeavors are always running into, and the reason HBO is so reticent to launch HBO Go as its own thing: virtually everybody in the entertainment industry has deep-rooted ties to cable companies.
Okay, seriously, tell me how HBO Go fits into all of this
It might seem to people who watch most of their TV on the Internet like the vast majority of people are watching their TV on streaming or on DVR, but for the most part, television is still consumed live. The percentage of the audience watching live TV goes up or down based on the type of program it is, but for something like the WWE, the number is quite high (since so much of what makes the program work is watching it in the moment). In essence, the WWE, like every other content provider out there, found itself caught between the new business model that it knew was coming and the old one where it still makes the vast bulk of its money. By racing too quickly toward the new model, it may have isolated the cable networks that air it (and can be bypassed if you subscribe to the Network), hence the brutal rights negotiations.
HBO is basically in the same boat. Though it's taking steps into making more of its programming available to more people more of the time, it still makes almost all of its money off of subscription fees that are factored into subscribers' cable bills. HBO, in essence, needs cable companies to offer it to their subscribers for almost all of its business model to work. HBO Go is a great add-on in this situation, but as the WWE Network shows, it's very, very hard to find enough subscribers to such a specifically tailored streaming service to make it at all profitable, to say nothing of the levels of profit HBO needs to make a show like Game of Thrones or even a smaller-budget show like Girls or John Oliver's talk show.
For as much as we denizens of the Internet might not like it to be so, the old media system remains wildly profitable, if less profitable than it once was. The system will crumble eventually, but it's unlikely to do so any time soon. And that can leave content providers caught between a rock and a hard place. Just ask Vince McMahon.