Believe in the WWE Network.

In the days leading up to WWE’s announcement of 667,000 WWE Network subscribers, stock in the company was at an all-time high. Over $30 a share was the peak and though many analysts were saying the company was over-valued (some saying as much as double), the time between the launch of the WWEN and WrestleMania 30 saw the numbers climb with no end in sight. Things looked better than good; they looked great for the folks at Titan Towers.

Then they announced 667,000 subscribers and suddenly the sky was falling.

Internal reports were that WWE was hoping for closer to 800-900,000, while uninformed commentators assumed the company would meet their goal of one million subscribers barely over a month after launch. Stocks fell sharply after the announcement and have only now—a month later—begun to level off at about $20 a share.

This isn’t about the stock market, however. Stocks fluctuate wildly at the slightest hint of good or bad news. They over-inflate at the mere promise of good things to come, and then fall far too low when the fake estimations fail to come true in reality. Stocks are a very poor way to judge the health of a company (though they are, unfortunately, the laziest way). If you want to try and guess how a company is going to fare in the months and years to come, you need to zoom out and look at the bigger picture.

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WWE’s Pay-Per-View business has been trending downward ever since the end of the Attitude Era. In fact it was 2001 that started the decline, coinciding with the end of the Monday Night Wars, a Stone Cold heel turn and Rock departure that left a babyface void in the spring, the failed InVasion storyline, and the impossible task of having to follow the year 2000 (the company’s most financially successful ever).

The days of hitting 500,000 buys on a May PPV were numbered in 2001, and by 2013 they were history. In fact, even reliable money-making shows like Royal Rumble and SummerSlam had begun taking a significant hit in the buyrate department. 2013’s Royal Rumble and Elimination Chamber had the benefit of The Rock challenging for and then defending his WWE Championship; those shows did 580,000 and 240,000 buys. A year prior the numbers were a little more grounded: 443,000 and 178,000.

A simple browse through Wikipedia shows the downward trend, with almost every PPV entry noting not only the number of buys the show received, but also the fact that said number is “down from the previous year’s event.” Every now and then there would be a blip on the radar, such as Extreme Rules 2012 or SummerSlam 2012 (Brock Lesnar’s first main events after returning from UFC), but those are aberrations, not the norm.

Though the WWE Network had been in the development stage for years, and was actually scheduled to launch a year earlier, the fact is the company could not have afforded to wait even one more year to debut their latest big-risk venture. Buyrates in late 2013 (before the Network was even announced) feel sharply with some shows hitting their lowest total ever. Survivor Series was a disaster with only 177,000 buys (only 94,000 in the US) and Battleground was even worse with only 114,000 buys (81,000 domestic).

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Internally, there was much anxiety about the approaching WrestleMania 30. The past three events had done over 1,000,000 buys thanks in large part to the presence of The Rock. WrestleMania 27 was only hosted by the A-list celebrity/future WWE HOFer, but the show did over a million buys despite having the weakest WrestleMania card in over a decade. The next two shows—main-evented by Rock/Cena—did well past a million buys, despite being largely underwhelming events. With dwindling 2013 numbers and a Rock-less WrestleMania on the horizon, the WWE bet big on their WWE Network because they had no other choice. If they could have gotten away with not putting their PPV’s on the service, they would have. Doing so was an act of desperation, not fan-service.

Consider that the buyrates for WrestleMania 25 and 26 were in the sub-million range, despite featuring an anniversary show and the retirement of Shawn Michaels. WrestleMania 25 did 900,000 and 26 did a little over 800,000. What would WrestleMania 30 have looked like without the $9.99 incentive? Imagine the number had the planned Batista v Orton match occurred.

WARNING: STATISTICAL ANALYSIS INCOMING

With the network in place, assumptions were that WrestleMania would pull in about 250,000 US buys and 350,000 international buys. Instead, the buyrate for WrestleMania 30 came in at nearly 400,000 in the US alone. International numbers have yet to be given but assuming they hit the lowball average of 350,000, that puts them at 750,000; only 100,000 off of WrestleMania 26. Without the network it would be a poor number, but not a disastrous one.

With the network’s subscription total of 667,000, that 750,000 buyrate balloons all the way to 1,417,000. Even keeping things within the US, 667,000 is a higher domestic buyrate than had by WrestleMania’s 2, 4, 6-13, 19, 21-22, 25-27. That’s half of all WrestleMania’s and that’s ONLY accounting for the WWEN subscribers.  Adding in the US buys and that 667,000 becomes about 1,067,000. That’s more US viewers than any other WrestleMania (almost 100,000 more than the second highest—WrestleMania 17).

That’s an astronomical number and though there’s no way to accurately determine how many of the WWEN’s 667,000 would have spent $60 to order the show it’s fair to assume the percentage is not over half. In fact, I would take an educated guess that WrestleMania 30, with everything happening as it did (Bryan’s push, Batista’s heel turn, etc) EXCEPT for the $9.99 network, would have pulled in about 900,000 buys (on par with WrestleMania 25). Assuming that 350,000 of that is international, that leaves 550,000 US buyers.

That would mean a full 100,000 additional US buyers watched WrestleMania 30 that otherwise would not have (or would have illegally). 100,000 US buyers is more than the buyrates of  2013’s Night of Champions, Battleground and Survivor Series.  In other words, it’s a significant number.

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Moving past WrestleMania and you have the 11 other PPV events that had been losing steam over the years. Reports are that WWE subscribed some 250,000 people in the first week of the network’s launch. Since then, they added about 60,000 people a week until the week of WrestleMania when they apparently had another surge. Doing the math that means they went from about 250,000 subscribers on March 3rd to about 490,000 subscribers on March 31st. In the final week they added about 25,000 a day.

The buyrate gap between WrestleMania and the April/early May PPV that follows varies over the years, but a general number is that it drops about 80%. Let’s assume that the 25,000 subscribers a day drops 80%. That would mean about 5,000 people a day signed up for the WWE Network between WrestleMania and Sunday’s Extreme Rules. That’s about 150,000 more people subscribed, on the high end. On the low end, you’d take 80% of 60,000 a month and that would net you only 12,000 additional subscribers between WrestleMania 30 and Extreme Rules. The first number is probably too high and the second is probably too low (especially since there was a lot of worry before WrestleMania that the Network stream would crap out on viewers, when in fact it was nearly-perfect all night).

Let’s take a lowball number and say the Network added 25,000 additional subscribers by the time Extreme Rules kicked off. That would mean about 692,000 people tuned in to watch Extreme Rules. Now also consider that Dish Network, DirecTV and AT&T U-Verse dropped support for the event and you’re looking at very few actual PPV buyers. 692,000 is about all they’re going to get. But that’s 692,000 viewers! That’s more viewers than have EVER seen a non-WrestleMania show. That’s basically the COMBINED viewership of every PPV from Night of Champions 2013-TLC 2013. And that’s JUST accounting for US buys. International buys are good for about 50,000 extra.

More people viewing the Network means more word of mouth spreading about the quality of it (and even though there’s a lot of content still to come, the quality is exceptional). More word of mouth means the potential to reach lapsed fans who don’t follow the current product. Remember that their corporate-approved goal is for 1mm subscribers (in order to break even financially) by the time WrestleMania 31 rolls around. WWE is going to reach their 1 million subscriber mark on the day they launch in international markets (late 2014). By the time WrestleMania 31 rolls around they will exceed the number to the point where they start making serious money.

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I’ll have another article later this week about what WWE can do to improve the Network and reach potential customers, but just looking at the hard numbers and adding in some reasonable expectations and assumptions, it’s not hard to see why the WWE Network has potential to be the game changing product Vince McMahon hoped it would be when he announced it.

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