WWE streaming shake-up highlights challenges for niche services

Smaller online-video services aimed at narrow audiences are being swallowed by larger ones or shutting down, a sign that the streaming market is consolidating around a few big players -- just as cable TV did decades ago.

The latest example came this week when Peacock, the new streaming service from Comcast Corp.’s NBCUniversal division, bought long-term online rights to the WWE Network and its wrestling shows. As part of the deal, the current WWE online service will be shut down in the U.S.

“The challenge was growing it from where we are,” Nick Khan, president of World Wrestling Entertainment Inc., said in an interview. “It’s tough to get people who aren’t fans to sample a product when you have to subscribe to see it.”

Going forward, Peacock will offer WWE’s pay-per-view events, including WrestleMania and SummerSlam, as well as shows, documentaries and archive footage.

Launched in 2014, WWE Network was a pioneer in online video, convincing nearly 2 million fans of the sport to pay $9.99 a month. But over the past two years, the company hit a ceiling and subscribers have fallen from their peak.

A tie-up with NBC makes sense, given WWE’s long history of offering its programming on that company’s USA cable network. Media giants like Comcast, Walt Disney Co. and AT&T Inc.’s WarnerMedia are all building their own streaming services and are hungry for fresh programming to attract subscribers.

“In a world where all the media behemoths have pivoted to streaming, I think history will show it was a brilliant move to partner with them,” Khan said.

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There are still hundreds of online video services out there catering to nearly every passion. Some have found ways to keep growing. CuriosityStream, for example, says it has 13 million subscribers who pay for its documentary shows. That’s double from a year ago. The Criterion Collection, a library for movie buffs, launched on a stand-alone basis after its online partner FilmStruck shut down in November 2018, and now offers some pictures on HBO Max as well.

But WWE’s deal with NBCUniversal is a sign that streaming will start to “bundle” like cable TV, with smaller services unable to reach new audiences on their own and selling to larger ones, analysts say.

“WWE won’t be the last media company that will abandon its endeavors to become simply ‘an arms dealer’ as part of a re-bundling,” said Brandon Ross, an analyst at LightShed Partners LLC.

Michael Nathanson, an analyst at MoffettNathanson LLC, said WWE’s deal with NBC shows that online video has become “a scale business for only a few companies to make money.”

‘Makes Sense’

“If you can sell your content to someone else and generate a better return on investment in a long-term deal, that makes sense,” Nathanson said.

Selling the rights, as WWE did, certainly beats shutting down completely. In recent years, several streaming businesses -- including FilmStruck, the Korean service DramaFever and the comedy outlet Seeso -- have closed. One of the highest-profile startups, the short-form video service Quibi, collapsed after just a few months and agreed to sell its programming to Roku Inc., the largest U.S. supplier of set-top boxes used for streaming.

Evan Shapiro, who was the head of Seeso, predicts more consolidation. Through deals, big media companies “get subscribers without having to wait,” he said, “and the smaller streamers make a big profit without having to slog it out.”

WWE’s decision may have come down to simple math. The company charged a monthly subscription fee of $9.99. That’s about $144 million in revenue a year from its approximately 1.2 million U.S. subscribers. NBC is paying far more -- about $200 million annually over five years, according to the Wall Street Journal -- to include the wrestling channel on Peacock.

The deal is only for the U.S. market, meaning WWE will still collect fees from its roughly 400,000 international subscribers. And the additional costs of marketing or retaining customers now fall to NBC, boosting WWE’s profits.

It’s a modern version of how the cable industry evolved decades ago.

“In the olden days, TV networks would get acquired for a price per subscriber,” Shapiro said. “We are back there again.”

By Gerry Smith