Last January, WWE announced it was switching distribution from pay-per view to an over-the-top service, but has been wrestling unsuccessfully to reach the 1 million subscribers it believed it needed to make a profit.
Yesterday, the entertainment company said it added more than 269,000 new subscribers — an increase of 37% — in the fourth quarter, after a dismal 31,000 adds in Q3, just 3,000 of them in the United States.
That influx of new fans online since it deployed in February turned the stock from a dud to a stud in trading Tuesday, as it shot up nearly 20% (it’s come down about 6% today).
So, what happened?
The company attributes the subscriber gain to a free trial it’s been offering to its $9.99 a month network, strong growth in the United Kingdom and the addition of the Royal Rumble – its big U.K. event – to the online lineup. In October, WWE said the trial would give customers a chance to “explore thousands of hours of video-on-demand content.
“Our research combined with best practices in digital subscription businesses affirms our belief that a simple, single price plan will help us continue to grow WWE Network’s subscriber base,” Michelle Wilson, WWE’s chief revenue & marketing officer said at the time.
But, a more likely driver of the subscriber surge is the WWE’s decision to spur online subscriptions by dropping its requirement that subscribers commit to six-month deals.
Instead, WWE began offering a no-commitment, cancel-anytime deal for the $9.99 subscription, making it available on a month-to-month plan, a la Netflix and Hulu Plus.
That model has generally been regarded as a more attractive one for Millennials wary of being tied to annual subscriptions they might lose interest in, and, it’s a case in point that shows publishers may need to evolve their model to be successful. In WWE’s case, it had content it believed was well regarded.
WWE said its data has consistently shown viewers have been happy with the product, saying that, on average, close to 90% of subscribers access WWE Network at least once per week, 99% access WWE Network at least once per month and 86% of subscribers were “satisfied” with WWE Network.
The problem apparently wasn’t in what was being streamed, but the business model WWE chose to launch with.
Three months ago, WWE Chief Strategy Officer George Barrios told the New York Post that “we love the over-the-top model. It’s a great business model for us.”
Will the love continue?
Last quarter, WWE beat on earnings, but missed revenue forecasts, reporting a net loss of $5.9 million, or 8 cents per share, compared to net income of $2.4 million, or 3 cents per share a year ago.
It’s expected to release Q4 earnings Feb. 12 before the market opens.