The rapid advancement of technology over the last decade has basically thrown the entire world of movie distribution into upheaval, so much so that it hasn’t looked like any of the confusion regarding the best way for movie studios to make money off their content libraries is going to get cleared up anytime soon.
Back in the 80s and 90s things were easy. Your movie played in theaters for a while, it left theaters, and then it got put out on home video. With the advent of mobile devices, high speed data connections, streaming HD video, and all-you-can-eat subscription services, however, that simple model has been subverted. Now we’re living in a world where video stores are dead, DVD sales are plummeting, advertisers can’t rely on viewers watching TV shows as they first air, and it’s left all of the content creators out there scratching their heads, trying to figure out how they’re going to keep making money off of all the entertainment they’ve built their businesses creating.
Well, everyone has been scratching their heads except for evil genius/Chairman and CEO of World Wrestling Entertainment, Vince McMahon, it seems. With the announcement of his company’s new content platform/subscription service, the WWE Network, he just may have come up with the right mix of intangibles to keep selling backbreakers and eye gouges to wrestling fans from here until the end of time. And he may have provided a business model that can keep all of the big media companies profitable in the process.
All of the nitty-gritty details of this new network can be found here at the WWE site, but the gist of the whole deal is that the pro-graps company has started a new subscription service that costs $9.99 a month, that can be accessed either through their website or their various WWE apps on various iOS, Android, Kindle, Roku, and video game console-type devices, and that will include a lineup of original programs, an on-demand library of basically every big wrestling event every wrestling company ever has done, and, most importantly, the ability to watch every monthly Pay Per View event the company produces live, at no further cost.
The reason the inclusion of all their new PPV events is the most important part of this package is that it gives a whole lot of people incentive to try the new service out. WWE is a company who has lived and died by their PPV buys for a lot of years now, to the point where everything they create is supposed to basically serve as enticement to get viewers to shell out for that next big PPV. In recent years their PPV buys have been drying up though, and one has to imagine that has more than a little bit to do with WWE and other fighting sport events now getting up to the $50 and $60 range to view. Who can afford that? You can buy a ticket to basically any live sporting event and be there in person for prices like that.
WWE could have very easily had this new service just include all past PPVs, with the new ones being added after users wait out a grace period following their initial airing. They could have easily done that, and they probably would have convinced a lot of their hardcore fans to sign up, which would have been an additional source of revenue for the company. But by including every big event as it airs in this deal, they’ve basically given everyone who’s ever casually bought one or two wrestling events a year incentive to sign up for this service, incentive great enough that it could create a critical mass of subscribers massive enough to completely change the economic model they’ve been subsisting on for decades.
Now imagine if this same model was adopted by the big media companies that own all of the other entertainment we watch. Right now these conglomerates are able to make money off of the movies they produce through whatever dwindling disc sales they have left, VOD purchases and rentals of their content where someone like Apple or a cable company is taking a big bite out of the profit, or rights deals with subscription services like Netflix and Amazon Prime, where they’re likely only making pennies every time one of their products gets viewed. And for people making TV shows, it’s even worse. Networks are still relying on selling ads during their broadcasts to make money, and the companies purchasing those ads have to be increasingly aware that nobody is watching the content live and sitting through their ads anymore.
Consumers like Netflix because it’s incredibly convenient and it comes with a reasonable price tag. The studios have always bristled at how much Netflix’s all-you-can-eat model devalues the content they provide for it though, which is why the rights deals that the two entities make are always so complex and so impermanent. These days it seems that no more than a few months can go by without the Internet becoming awash with articles panicking about all of the content that’s getting ready to drop off of Netflix. That’s a reality that’s not going to change anytime soon. And HULU Plus is even worse. It’s pretty cool that it’s a service most of the TV networks have gone in together on, so that you can digitally watch much of the TV content you like all in one place, but it’s also a service that still has huge holes in their available content due to the owners being weary of making deals, it’s a service that’s trying to stay financially afloat by making its users sit through ads even though they’ve already paid for a subscription, and it’s a service that’s been looking for a new owner basically since the first day it was formed. A lot of these problems would be avoided if the big media companies would create new services that followed the WWE Network model.
If the few big conglomerates that have gobbled everything up (let’s say, Disney, Viacom, Fox, NBCUniversal, Time Warner, Sony… are we missing any?) each launched their own content network, and each charged users $10 a month (or whatever reality dictated as being affordable for consumers but profitable for providers) to access all of the new content that they produce and the libraries of everything they own, it would give consumers the affordable and convenient option they desire, it would allow the studios to keep the bulk of the profits their material produces, it would get rid of the problem of content constantly dropping off of services like Netflix, and it would go a long way toward figuring out how everyone can keep making money by producing TV shows. Suddenly the focus would be off of pleasing advertisers and would be put more on creating content the public would be willing to pay for – you know, the HBO model that Netflix has adopted in a bid to stay relevant once the studios start putting the hammer down on content rights.
Of course, in order for these services to change the way the entertainment industry makes money fundamentally, they would each have to gain a large enough subscriber base to become profitable, and in order to do that they would have to give consumers some sort of incentive to sign up. Which means they would have to give something up, much like how WWE is giving up those 200,000 a month or so $50 PPV purchases in order to collect $10 a month subscriptions that will hopefully be purchased by a whole lot more than 200,000 people. In this case that would probably mean adding new movies to their on demand libraries as soon as they leave theaters, and forgoing a lot of the revenue that currently comes from the digital rentals and purchases they get from things like the iTunes store, the Google Play store, and Amazon.
Just how many subscribers it would take to make up for all of that lost revenue is impossible for someone in our position to say, so it’s hard to determine how long it’s going to take for the big media companies to stop making deals with subscription services like Netflix and stop making deals with the various cable and satellite companies to carry their TV channels, but there are a few indisputable facts out there that prove something is going to have to give eventually. People are sick of paying over $100 a month for these bundled cable subscriptions, and eventually all of the new technology at our disposal is going to somehow, someway kill that old model of doing business. Advertisers are getting sick of paying top dollar for TV ads that are becoming easier and easier to not watch, and TV networks are either going to have to come up with some new way to make money on TV series or stop producing so many shows.
With content owners wanting to keep control over the things they own and consumers demanding affordable, instant access to the content they want to consume, it’s not hard to see that the WWE model of doing business could soon be one that a whole lot more businesses start trying to immitate. After the WWE Network launches on February 24, chances are there are going to be a ton of curious eyes on the financial numbers the company starts to produce for investors. If this gamble that they’re making pays off big, we could all be getting a new way of consuming our favorite entertainment sooner rather than later. If they fall on their faces, chances are we’re going to be stuck with our outrageous cable bills and the meager offerings of Netflix’s streaming service for quite a bit longer.
Let’s say this model does take off though – in reality you would have to stack up three or so of these services in order to have an acceptable amount of things to watch (which would still beat the price of the outrageous cable bills we pay now), so which ones would you go for? Perhaps the Disney one, which could include all of the movies Disney has made, all of the Marvel Studios and Lucasfilm stuff, all of the shows that have been on ABC, and even all of the sports content that ESPN creates? Maybe the Viacom one, which could theoretically offer up all of Paramount’s movies, all of the shows that have been on CBS, and all of the stuff from the various cable channels they own like Nickelodeon, Spike TV, and MTV? Surely the Time Warner one would be a must-purchase, seeing as they would offer up all of the movies that Warner Bros. produces as well as all of the original shows being made by HBO.
And as for fledgling content creators like Netflix, what sort of deals would they have to strike in order to survive in an entertainment industry that was suddenly built around this model? There’s still a lot of uncertainty surrounding how the future of entertainment distribution is going to look, but at least we now have a direction that things could very well start moving in, and it came from the creator of the Vince McMahon Kiss My Ass Club, of all places.