Despite a rocky start by Wall Street standards, World Wrestling Entertainment (NYSE:WWE) turned a profit in the second quarter of 2015, just a year and a half into its new subscription business model. Not only did the company earn a profit for the second straight quarter, but WWE earned more from subscription income than it did in annual pay-per-view revenue in any calendar year through 2014. Pretty impressive.
WWE launched its new subscription site, the WWE Network, in February 2014, replacing its pay-per-view income with subscription dollars. Rather than paying $45 to $60 for a pay-per-view fight, subscribers could watch streaming video online 24/7 for just $9.99 a month.Prior to the most recent quarter ended June 30, WWE had been steadily adding subscribers, but scaring off investors. In March, we reported that the WWE Network had record views for Wrestlemania 31, the highest grossing live event in WWE’s history, and a 77% conversion rate from free viewers to paid ones. Shortly thereafter, however, WWE stock plummeted 15%.Since then, WWE has rebounded, turning a profit in the second quarter of 2015. Here’s a quick look at the highlights:
- Total subscribers increased to 1.2 million, a 75% increase from Q2 2014.
- Average paid subscribers increased 31% from Q1 2015.
- WWE Network has approximately 217,000 international subscribers.
- WWE had net income of $5.1 million, or $0.07 per share, compared to a net loss of $14.5, or $0.19 per share, in Q2 2014.
- WWE’s weekly TV audience includes 5 million unique viewers for shows like Tough Enough and Total Divas.
- WWE had more than 440 million video views on Facebook during Q2.
- WWE surpassed more than 500 million social media followers across all global platforms.
In a press release, WWE Chairman and CEO Vince McMahon, commented on the company’s position at the end of the second quarter.”The performance of WWE Network demonstrates our ability to transform our legacy pay-per-view business into a global subscription business with high growth potential. We have made meaningful progress executing our key strategic initiatives, including the achievement of significant international growth and increased engagement across our digital and social media platforms.”Chief Strategy and Financial Officer George Barrios added, “Our strong earnings growth was driven primarily by the expansion of WWE Network subscribers, the escalation of our television rights fees as well as strong sales of our franchise video game. The ramp-up of WWE Network subscribers, while exhibiting a seasonal pattern, continued to show strong year-over-year growth. Our success in developing WWE Network, maximizing our television rights fees and driving revenue growth from our global markets reinforces our long-term potential.”Insider Take:What can we say? The numbers don’t lie. WWE seems to have pulled it off. Despite a rocky start by Wall Street standards, WWE found a way to provide unique, 24/7 programming to an eager audience, successfully replacing its pay-per-view income with subscription revenue.Why has it been so successful? There are a lot of factors that play into this, but much of it is that WWE knows its audience well. WWE has provided original programming that can’t be seen elsewhere, it has expanded globally, and when subscriber growth was slower than desired, it offered free months of shows several times to entice viewers to give the WWE Network a try. It paid attention to its viewers and subscribers, and it adapted quickly.Despite its faux fights and curious entertainment value, WWE is a very serious company with some serious business skills.
