“Santa Claus didn’t come for [the Royal Rumble].” – Vince McMahon

Six months from turning 70, Vince McMahon’s voice is as gruff as ever, only adding to his macho swagger.

WWE’s CEO opened the conference call talking only briefly, as usual, mostly about the WWE Network, before handing off to CFO George Barrios. Like any WWE performer, Barrios recited at-length from a script.

Q4 2014 was a redeeming quarter for WWE. The stock market agreed and ran up the value of its shares by 27% over the two days following the report.

Over 1 million people are subscribed to the WWE Network. By WrestleMania, all of Canada should have access to the Network as a linear premium channel. It will also be offered to 3-4 million customers in the Middle East and North Africa as a premium channel.

The company is in pretty good shape financially. Despite cannibalizing pay-per-view, disappointing news about TV rights fees over the spring, and earlier doubts about the WWE Network, they generated more revenue in 2014 ($542.6M) than in 2013 ($508.0M). In hindsight, they jumped the gun on the WWE Network, putting too many eggs in that basket too fast. But now with over 1 million subscribers before WrestleMania, the Network seems viable, though it will probably be years before they recover the lost revenue had they made a more gradual shift from PPV to Over-The-Top.

In my previous article on the topic, I underestimated the success of the free November campaign. Following Q3’s report that the Network gained only a net 32,000 subscriptions from July 1 to September 30, WWE offered the entire month of November free for new sign-ups. The campaign attracted 242,000 trial subscriptions, about 169,000 of which were still attached as paying subscriptions in January.

One analyst on the call, Laura Martin of Needham & Company — who earlier needed it confirmed that WrestleMania would be streamed on the WWE Network — came back in queue to ask a question specifically to Vince whether he thought the #CancelWWENetwork Twitter trend raised awareness about WWE Network or whether “people actually listen to these super fans and they disconnect WWE for a week or two until WrestleMania”.

[The #CancelWWENetwork Twitter trend] is good for WWE. It created controversy. That was a gesture by some –  a vocal minority – in terms of not liking the creative. Santa Claus didn’t come for that pay-per-view. And so that’s really what that was for them. But it’s like someone who watches our television show, and things of that nature, and the babyface – as we call them – does not win, and they say, “Well, I’m never going to watch this ever again.” Well, I know that person’s going to be glued to the television next week. It’s the same here. We saw no decline whatsoever in any of that. It created controversy and that’s really good for us.Vince McMahon, Q4 2014 Conference Call (2/12/2015), 39:38

This glimpse into Vince’s mind epitomizes WWE’s relationship today with its most loyal fans.

Vince seems to be saying it’s just part of the proven creative process that some pay-per-views are going to leave fans unhappy, because the heels have to get their heat so the audience wants to see the babyfaces get their comeuppance.

Only that doesn’t fit the description of Royal Rumble 2015.

Even so, a babyface merely losing a big match on a pay-per-view never would have provoked the sort of response this year’s Rumble did when Roman Reigns — a babyface, not a heel — won the Royal Rumble. Reigns was rejected as he was being shoved down fans’ throats as Vince’s hand-picked new top star.

Fans’ threats to cancel WWE Network subscriptions or to “never watch again” are indeed empty threats from the most loyal followers of Vince’s product: “the vocal minority”. But as F4W’s Todd Martin argued it’s that same vocal minority who would tout WWE if they were satisfied. It’s the same vocal minority who would recommend the product to lapsed fans or non-fans when they perceive it’s good, and who will bury it to those people when they’re dissatisfied.

If the above quote is something Vince truly believes, then he doesn’t understand the subtlety of the modern dynamic between WWE and its fans.

We are well within an era where there’s an extra dimension to fan response. Many fans are aware of the creative direction. Many were aware Reigns was Vince’s chosen one. Meanwhile fans have been told they’re the authors. “We listen to the people,” Vince said to Steve Austin in his interview on the Network. But WWE too often doesn’t push the talents who get over; they push the talents who satisfy Vince’s ideals of what a top star should be like. Meanwhile WWE performance indicators have been mostly flat for several years.

“But if WWE satisfied their hardcore fans, then they would simultaneously turn off the masses.”

“But hardcore fans are too fickle to ever be satisfied.”

A look at WWE’s developmental brand, NXT, refutes both of those accusations.

NXT is overwhelmingly praised by hardcore fans. And Paul Levesque, in his diplomacy, takes care to let you know NXT is geared for hardcores. But many aspects of NXT, which aren’t exemplified in main roster programming, would get over with the masses as well, because NXT is merely a good example of what a modern creative vision for WWE should be.

Notice I am not saying the NXT product with its current roster would outperform, business-wise, the established stars of main roster WWE. I am saying that NXT’s creative vision, where wins, losses and titles are important, where there’s a set of characters who appeal to a variety of demographics, where new characters are given an adequate chance to succeed rather than given start-and-stop pushes, where there’s a division of women’s wrestlers who are promoted seriously in a less bigoted manner, and where decision-makers give performers opportunities based on the reactions of the audience rather than based on the decision-makers’ ideals about what a star should be, is a creative vision that would have wider appeal to the masses as well as hardcores and would translate into better TV ratings, live event revenue, merchandise sales and Network subscriptions.

Is it any surprise then when Levesque doesn’t have much of an answer when asked what Vince thinks when he watches NXT?

Well, getting [Vince]  to sit down and watch anything [laughter] is, is a difficult—I’ve never actually sat down with him to watch [NXT]. I do know that he’s seen it. I do know that he watches it, obviously, and usually he has it on in the background, uh, as I’m sure he will probably tomorrow night [for NXT Takeover Rival] while he’s working ‘til 11 or 12 at night before he goes down to the gym to train, because that’s just the kind of guy he is.Paul Levesque, NXT Conference Call (2/10/2015), 40:39

What’s most offensive about Vince’s comments on “the vocal minority” is it seems any negative response this sector of fans generates can be chalked up by Vince as good heat. Even if it wasn’t expected, even if it harms word-of-mouth, even if it causes WWE creative to change course.

Let’s just assume those hardcore fans are totally wrong. Assume that listening the hardcores would steer WWE totally in the wrong direction. Vince at least could’ve given the “that’s the great thing about WWE — everyone has a voice” defense they use with John Cena while still spinning the backlash positively. Instead he shrugged off his most committed audience’s furor and painted those fans as so addicted the product that it doesn’t matter what they think. His explanation was indicative of the lack of respect and ease with which Vince dismisses his most ardent fans.

Barrios fielded all other questions from the analysts during Q&A. Some important questions were asked, many of which Barrios declined to answer in his finest corporatese. But there were a few interesting points:

  • Barrios expects WrestleMania to be carried on traditional pay-per-view by In Demand, meaning it’ll be available to order on most cable systems.
  • They have no great answer on how to avoid post-WrestleMania Network cancellations (“churn”) other than to “deliver incredible value in content”.
  • Revenues from those ads you sometimes see on the WWE Network are “minimus,” which is Barrios’ Latin euphemism for “really small”.
  • Barrios referred to “in-field” research WWE has done to better understand the Network’s potential market. It’s important to remember this is the same company that believes there are 100 million broadband homes with at least one WWE fan in it, a point Barrios cited again in this Q&A.
  • Barrios claims 12 to 14 million people in the US view some form of WWE programming each week. That number seems dubious though, even with generous math: 4M (Raw) + 3M (SmackDown) + 1.25M (Total Divas) + 1M (if every WWE Network sub was used weekly, which is not the case) = 9.25M. I can only guess Barrios is counting YouTube videos as “programming”.

There were a number of other questions that could have been asked that were not.

1. Has WWE signed a deal with the Tap Out clothing brand?

According to the Wrestling Observer Newsletter the deal is done. What’s the hold up in announcing it? If the Observer report is true, what are terms of the deal and what does it mean for business going forward? It’s curious that none of the analysts, (all of whom presumably have a stake in the company) asked about this, maybe because they just weren’t aware of it, which I’m afraid speaks to their level of research on the company.

2. Which executives are involved in making decisions about WWE Network content and about how the app itself is presented?

EVP Paul Levesque looked silly when he urged his Twitter followers to look up Buddy Rogers on WWE Network when there are in fact no Rogers matches to watch there. With the Network so crucial to their future, it’s unclear who’s involved in its leadership. How involved are Lou Schwartz, Lisa Lee Fox and Vince McMahon?

3. Who in the company has a background in OTT services? Furthermore, how much is WWE concentrating on recruiting those with have a successful background in OTT?

Many of the members of WWE’s Board of Directors have a background as television executives. The company seems entrenched in connections to the television industry, understandably. The shortcomings of the Network (the 6-month commitment gaff, lack of anticipation of international customers subscribing via VPN, search feature, late addition of resume play and watch list functions, the sometimes useless 24/7 linear feed, “Recommendations” section that is the same for all users, general disorganization of content) remind you that this is a company that built its worldwide success on TV. Now it’s hinging its success on a new form of media it has far less experience with.

4. In addition to broadband capabilities, how important do you think it is for WWE Network adoption that potential subscribers own an OTT-capable television?

It’s one thing to be able to watch the WWE Network on a mobile device or a computer, but I would think people want to watch WWE live events on a television like they do with the traditional pay-per-view experience. Not having the ability to play the WWE on a TV might explain some of the aversion to this new media. Partnering with a company like Roku and offering, say, a rebate on their device for any new subscriber would be beneficial to both parties.

5. Your social media metrics are impressive, but is there any concrete plan on how to monetize those audiences?

The longer they tout these numbers without an inkling of a plan for monetization the more these numbers seem meaningless. Though it’s important to engage people through new media, the increase in these metrics may speak more to the success of YouTube, Twitter and Facebook than they do WWE.

6. In Paul Levesque’s interview with Steve Austin on the WWE Network, Levesque alluded to the demographics for the Network skewing to young adult males, the most ardent fans. Will you confirm that?

If what Levesque said was true, isn’t it funny that Vince can be so dismissive of the strongest demographic for the all-important Network subscriber base?

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