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| The N.F.L. Has Seen the Future, and It Is WWE Wrestling | The N.F.L. Has Seen the Future, and It Is WWE Wrestling |
| (about 1 hour later) | |
| On Sunday night, WWE, the publicly traded company that operates professional wrestling, put on WrestleMania 32, which is essentially its Super Bowl. (Actually, WWE never uses the phrase “professional wrestling,” preferring “sports entertainment.”) | On Sunday night, WWE, the publicly traded company that operates professional wrestling, put on WrestleMania 32, which is essentially its Super Bowl. (Actually, WWE never uses the phrase “professional wrestling,” preferring “sports entertainment.”) |
| A four-hour-plus extravaganza, WrestleMania 32 culminated with a title match that pitted Roman Reigns against Paul Levesque, a.k.a. “Triple H,” a villain turned fan favorite who is also a top WWE executive and is married to Stephanie McMahon, the daughter of Vince McMahon, WWE’s billionaire chief executive. Although Triple H controlled the match most of the way, he lost the world championship after his wife leapt into the ring, which flustered him, allowing Reigns to win. Boos rained down as the victor hoisted his championship belt. | A four-hour-plus extravaganza, WrestleMania 32 culminated with a title match that pitted Roman Reigns against Paul Levesque, a.k.a. “Triple H,” a villain turned fan favorite who is also a top WWE executive and is married to Stephanie McMahon, the daughter of Vince McMahon, WWE’s billionaire chief executive. Although Triple H controlled the match most of the way, he lost the world championship after his wife leapt into the ring, which flustered him, allowing Reigns to win. Boos rained down as the victor hoisted his championship belt. |
| Although professional wrestling does not exactly qualify as a real sport, nearly 102,000 fans showed up at AT&T Stadium in Arlington, Tex., to watch WrestleMania 32, which grossed a record $17.3 million from the live event alone. Tens of thousands of additional fans paid $59.95 to watch on pay-per-view television. Many more watched it on a streaming app called WWE Network, which costs subscribers $9.99 a month. | Although professional wrestling does not exactly qualify as a real sport, nearly 102,000 fans showed up at AT&T Stadium in Arlington, Tex., to watch WrestleMania 32, which grossed a record $17.3 million from the live event alone. Tens of thousands of additional fans paid $59.95 to watch on pay-per-view television. Many more watched it on a streaming app called WWE Network, which costs subscribers $9.99 a month. |
| In mid-February, during its quarterly earnings call, the company announced that the WWE Network had 1.22 million subscribers. After WrestleMania 32, that number jumped to 1.82 million. Although some of those subscribers will fall away — the WWE Network offers a monthlong free trial to potential customers, some of whom undoubtedly signed up just to watch WrestleMania for free — that is still nearly a 50 percent increase in six weeks. | In mid-February, during its quarterly earnings call, the company announced that the WWE Network had 1.22 million subscribers. After WrestleMania 32, that number jumped to 1.82 million. Although some of those subscribers will fall away — the WWE Network offers a monthlong free trial to potential customers, some of whom undoubtedly signed up just to watch WrestleMania for free — that is still nearly a 50 percent increase in six weeks. |
| What got me thinking about WWE’s business model was the news earlier this week that the N.F.L. had sold the streaming rights for 10 Thursday night games to Twitter for a reported $15 million. At first glance, Twitter is an odd choice. It has about a fifth the number of users as Facebook and, unlike Facebook, it is struggling to find ways to increase profitability. What’s more, the reported $15 million Twitter is paying for the games — which will also be shown on NFL Network and either CBS or NBC, depending on the game — is loose change for the N.F.L., with its multibillion television contracts and estimated $13 billion in annual leaguewide revenue. | What got me thinking about WWE’s business model was the news earlier this week that the N.F.L. had sold the streaming rights for 10 Thursday night games to Twitter for a reported $15 million. At first glance, Twitter is an odd choice. It has about a fifth the number of users as Facebook and, unlike Facebook, it is struggling to find ways to increase profitability. What’s more, the reported $15 million Twitter is paying for the games — which will also be shown on NFL Network and either CBS or NBC, depending on the game — is loose change for the N.F.L., with its multibillion television contracts and estimated $13 billion in annual leaguewide revenue. |
| But strategically at least, what the N.F.L. is doing is not all that different from what WWE has done with its digital app. With more and more people watching movies and television shows that are streamed to a digital device rather than shown via traditional platforms like cable and satellite, the N.F.L. is preparing for the day when the same is true for live sports. | But strategically at least, what the N.F.L. is doing is not all that different from what WWE has done with its digital app. With more and more people watching movies and television shows that are streamed to a digital device rather than shown via traditional platforms like cable and satellite, the N.F.L. is preparing for the day when the same is true for live sports. |
| Right now, live sports are the single most important reason the transition from traditional television to online streaming isn’t happening even faster. There are advertisers who will air commercials only during live events, which mostly means sports; they know that many viewers will avoid ads by seeking out their favorite shows on an on-demand streaming service. And there are many viewers whose desire to watch sports is the only thing keeping them from cutting the cord. | Right now, live sports are the single most important reason the transition from traditional television to online streaming isn’t happening even faster. There are advertisers who will air commercials only during live events, which mostly means sports; they know that many viewers will avoid ads by seeking out their favorite shows on an on-demand streaming service. And there are many viewers whose desire to watch sports is the only thing keeping them from cutting the cord. |
| But the N.F.L. isn’t in the business of propping up traditional television’s business model; it’s in the business of getting people to watch football games. And when the day comes that most of them prefer to have those games streamed, well, the N.F.L. wants to be ready. | But the N.F.L. isn’t in the business of propping up traditional television’s business model; it’s in the business of getting people to watch football games. And when the day comes that most of them prefer to have those games streamed, well, the N.F.L. wants to be ready. |
| WWE started its own streaming business in 2014. For more than two decades, its television home has been USA Network, which airs its flagship show, “Raw,” every Monday night. (A second show, “Smackdown,” runs on Thursday nights.) USA, which is owned by NBC Universal, is one of the top-rated cable networks, in no small part because “Raw” is among the top-rated cable shows. The programming WWE doesn’t air on USA — premium content like WrestleMania — has historically consisted of pay-per-view events. | WWE started its own streaming business in 2014. For more than two decades, its television home has been USA Network, which airs its flagship show, “Raw,” every Monday night. (A second show, “Smackdown,” runs on Thursday nights.) USA, which is owned by NBC Universal, is one of the top-rated cable networks, in no small part because “Raw” is among the top-rated cable shows. The programming WWE doesn’t air on USA — premium content like WrestleMania — has historically consisted of pay-per-view events. |
| Around 2011, WWE started thinking about starting its own HBO-style cable channel, according to George Barrios, the company’s chief strategy and financial officer. (Barrios went to WWE from The New York Times Company, where he was the treasurer.) But by 2013, WWE executives had done research showing that wrestling fans — most of whom are not wealthy — were big users of broadband, watching shows from streaming services like Netflix and Hulu considerably more often than most people. They were also voracious watchers of YouTube. (Barrios said the WWE gets more YouTube views for its short-form content, such as highlights, than any other sports channel.) So the company decided to abandon the cable channel idea and develop a streaming service instead. | Around 2011, WWE started thinking about starting its own HBO-style cable channel, according to George Barrios, the company’s chief strategy and financial officer. (Barrios went to WWE from The New York Times Company, where he was the treasurer.) But by 2013, WWE executives had done research showing that wrestling fans — most of whom are not wealthy — were big users of broadband, watching shows from streaming services like Netflix and Hulu considerably more often than most people. They were also voracious watchers of YouTube. (Barrios said the WWE gets more YouTube views for its short-form content, such as highlights, than any other sports channel.) So the company decided to abandon the cable channel idea and develop a streaming service instead. |
| “We thought if this is where our consumers are going, we needed to be there as well,” Barrios said. Streaming has undeniable advantages over traditional television. The subscribers belong to WWE, not to a cable company, so it can market to them more directly. It can sell WWE clothing and paraphernalia directly from its app. The WWE Network allows it to monetize its popular archives. And it gets steady, monthly checks from its subscribers, rather than having to count on less-reliable pay-per-view revenue. | “We thought if this is where our consumers are going, we needed to be there as well,” Barrios said. Streaming has undeniable advantages over traditional television. The subscribers belong to WWE, not to a cable company, so it can market to them more directly. It can sell WWE clothing and paraphernalia directly from its app. The WWE Network allows it to monetize its popular archives. And it gets steady, monthly checks from its subscribers, rather than having to count on less-reliable pay-per-view revenue. |
| “They thought they needed one million subscribers to make it work,” said Brandon Ross, an analyst who covers the stock for BTIG, an investment firm. “For them, it was a no-brainer.” The WWE Network hit the million mark in 2015. WWE still offers its premium events on pay per view — so as not to lose fans who don’t yet have broadband — but that income stream is declining as more wrestling fans turn to the WWE Network. | “They thought they needed one million subscribers to make it work,” said Brandon Ross, an analyst who covers the stock for BTIG, an investment firm. “For them, it was a no-brainer.” The WWE Network hit the million mark in 2015. WWE still offers its premium events on pay per view — so as not to lose fans who don’t yet have broadband — but that income stream is declining as more wrestling fans turn to the WWE Network. |
| What you won’t find on the WWE Network is either “Raw” or “Smackdown,” which remain on USA. But that doesn’t mean that USA executives aren’t nervous. In May 2014, a few months after the launch of its new streaming service, WWE signed a new rights deal with the cable network that was considerably lower than expected. Clearly, the lower amount was due to USA’s fears that streaming would cut into its ratings. Wall Street panicked, and WWE’s stock dropped almost 50 percent in a day. Though the stock eventually recovered, McMahon lost his billionaire status for awhile. | What you won’t find on the WWE Network is either “Raw” or “Smackdown,” which remain on USA. But that doesn’t mean that USA executives aren’t nervous. In May 2014, a few months after the launch of its new streaming service, WWE signed a new rights deal with the cable network that was considerably lower than expected. Clearly, the lower amount was due to USA’s fears that streaming would cut into its ratings. Wall Street panicked, and WWE’s stock dropped almost 50 percent in a day. Though the stock eventually recovered, McMahon lost his billionaire status for awhile. |
| Today, “Raw” and “Smackdown” have a combined viewership of well over 10 million. That’s still a lot higher than the WWE Network’s 1.82 million subscribers. And WWE’s television rights remain its largest single source of revenue. But the ratings for “Raw” are down somewhat — as are the ratings for the entire USA Network — and if the WWE Network continues to gain subscribers at the pace it is on, it’s worth wondering how long WWE will remain committed to a cable network whose profits are dependent on an eroding business model. | Today, “Raw” and “Smackdown” have a combined viewership of well over 10 million. That’s still a lot higher than the WWE Network’s 1.82 million subscribers. And WWE’s television rights remain its largest single source of revenue. But the ratings for “Raw” are down somewhat — as are the ratings for the entire USA Network — and if the WWE Network continues to gain subscribers at the pace it is on, it’s worth wondering how long WWE will remain committed to a cable network whose profits are dependent on an eroding business model. |
| If I were an executive at CBS, NBC, Fox or ESPN, I would be nervous, too. The N.F.L.-Twitter deal might not look like much in financial terms, but it offers the N.F.L. a cheap and easy chance to experiment with putting football games online in a way that is untethered to a television network or a cable or satellite subscription. Over time, that can’t possibly lead anyplace good for the networks. | If I were an executive at CBS, NBC, Fox or ESPN, I would be nervous, too. The N.F.L.-Twitter deal might not look like much in financial terms, but it offers the N.F.L. a cheap and easy chance to experiment with putting football games online in a way that is untethered to a television network or a cable or satellite subscription. Over time, that can’t possibly lead anyplace good for the networks. |
| Indeed, Twitter got the deal over other Internet companies — some of which offered more money — precisely because it was willing to let the N.F.L. do pretty much anything it wants as it tries to work out a business model for streaming. | Indeed, Twitter got the deal over other Internet companies — some of which offered more money — precisely because it was willing to let the N.F.L. do pretty much anything it wants as it tries to work out a business model for streaming. |
| For the N.F.L., Twitter offers a young, sports-minded audience (the Twittersphere lights up during major sports events); a way to reach football fans, and potential fans, internationally; and a chance to lure the many millennials who refuse to subscribe to cable even if it means missing pro football. As for Twitter, the N.F.L. allows the company to offer something no other social media service can claim, which it needs as it tries to reinvigorate its stalled subscriber base. Having professional football will increase user engagement; one can easily imagine people watching the game and tweeting on the same screen. And it will give the company the chance to rethink how it generates advertising, which it desperately needs to do. For both parties, the deal makes sense. | For the N.F.L., Twitter offers a young, sports-minded audience (the Twittersphere lights up during major sports events); a way to reach football fans, and potential fans, internationally; and a chance to lure the many millennials who refuse to subscribe to cable even if it means missing pro football. As for Twitter, the N.F.L. allows the company to offer something no other social media service can claim, which it needs as it tries to reinvigorate its stalled subscriber base. Having professional football will increase user engagement; one can easily imagine people watching the game and tweeting on the same screen. And it will give the company the chance to rethink how it generates advertising, which it desperately needs to do. For both parties, the deal makes sense. |
| “The N.F.L. has a long history of finding the next wannabe,” said Jay Rosenstein, a former executive at CBS Sports who now consults for Headline Media, a television talent and programming company. By that he means the N.F.L. finds entities yearning to carry pro football, and turns that desire into money. | |
| The NFL added “Monday Night Football” for ABC (now on its corporate sibling ESPN), brought in Fox for Sunday afternoons, created “Sunday Night Football” for ESPN (NBC now televises that package of games), moved games to Thursday night for its own network (which are now also shown on CBS and NBC), and sold its “Sunday ticket” package to DirecTV. The N.F.L. is looking to streaming for the next wannabe. | |
| Rosenstein noted that all the N.F.L.’s major television deals would be up for grabs at the end of this decade and the beginning of the next. Is it possible that a big Internet player, like Amazon, whose $100 billion-plus in annual revenue dwarfs that of, say, CBS ($13.9 billion last year), could decide to outbid one of the television networks for exclusive rights to one of the N.F.L.’s packages of games? It is. | Rosenstein noted that all the N.F.L.’s major television deals would be up for grabs at the end of this decade and the beginning of the next. Is it possible that a big Internet player, like Amazon, whose $100 billion-plus in annual revenue dwarfs that of, say, CBS ($13.9 billion last year), could decide to outbid one of the television networks for exclusive rights to one of the N.F.L.’s packages of games? It is. |
| As the N.F.L. gets savvier about streaming games thanks to its Twitter experience, could it decide to create its own subscription-only digital app for another package of games? It could. HBO now has a streaming app that viewers can pay for without needing a cable subscription. Why couldn’t the N.F.L. do the same thing? It’s not going to happen next week, or even next year, but if I were a betting man, I’d say it will happen someday. If its fans eventually abandon old-fashioned television, so will the N.F.L. | As the N.F.L. gets savvier about streaming games thanks to its Twitter experience, could it decide to create its own subscription-only digital app for another package of games? It could. HBO now has a streaming app that viewers can pay for without needing a cable subscription. Why couldn’t the N.F.L. do the same thing? It’s not going to happen next week, or even next year, but if I were a betting man, I’d say it will happen someday. If its fans eventually abandon old-fashioned television, so will the N.F.L. |
| “Sports is what keeps people coming to television,” said Ross, the securities analyst. | “Sports is what keeps people coming to television,” said Ross, the securities analyst. |
| Until it doesn’t. | Until it doesn’t. |