Just over a year ago, WWE signed a five-year deal reportedly worth more than $1 billion with NBCUniversal to make Peacock the exclusive streaming home of WWE Network content in the U.S. WWE Network spent the previous seven years operating as a standalone, direct-to-consumer (D2C) over-the-top streaming platform. WWE CFO Frank Riddick stated on the company’s recent Q4 earnings call that the Peacock tie-up has been favorable from an economic perspective. Perhaps just as important, president Nick Khan indicated “more people are watching WWE premium live events [like WrestleMania, Summer Slam, Survivor Series and Royal Rumble] than ever before” (viewership of those tent-pole events is up 42%). Jockey Club CCO Charlie Boss says WWE’s successful shift towards an L2B (licensing-to-business) approach is evidence that the D2C model is not for every sports league and property—at least not as a primary distribution strategy. “The art of media rights strategy is all about balancing reach and revenue. For many rights owners, wide distribution drives other parts of their business, like sponsorship, ecommerce or betting.”
JWS’ Take: Leagues and sports properties have spent a lot of time over the last half-decade developing D2C streaming strategy. Their fascination revolves to a large degree around fan/consumer research and data. Daniel Cohen (SVP, global media rights consulting, Octagon) said he “hears from leagues all over the world that [they find it] important to own the D2C relationship and the currency of fan data,” which “can be used to unlock newfound revenues, retain existing fans’ engagement and grow new fandom.”
Linear bandwidth limitations have also driven rights owners to explore a D2C strategy. “Broadcasters may not be offering up all of your content. So, if you have additional programming available, a D2C product that can serve super fans all of your programming may make sense,” Cohen said.
The desire to reach cord cutters, cord nevers and the next generation of fans has also pushed leagues to reconsider their approach. “Not all broadcasters are offering the same kinds of [D2C] streaming options,” Cohen noted. For example, “Fox came out with their programming guide for the Men’s basketball [conference] championships. None of [the games] are AVOD broadcast on Tubi. Fox has chosen to offer up the Fox Sports app, which you can only get through your authenticated cable subscription, as their only streaming option,” he said.
But the leagues and sports properties who have ventured into the space in recent years learned that putting forth a quality D2C product and keeping the viewing experience ahead of the curve is not easy. “It is expensive. It requires a lot of human capital, and the technology moves so fast,” Cohen said.
WWE was the first sports-related property to introduce an OTT platform, and the company’s early success is credited with helping to spawn the industry wide push towards D2C. But when WWE introduced WWE Network at CES 2014, the standalone streaming service had few peers (Netflix and Hulu were really the only competition). That has changed over the last seven years. Streaming has become highly competitive, with some of the world’s largest companies chasing market share (see: Amazon, Apple). Recognizing it did not make sense strategically to commit the technical and financial investments needed to compete on an ongoing basis, WWE chose to pivot and license WWE Network programming to Peacock. As reported last month, Disney+ Hotstar is the new home of WWE Network in Indonesia, and WWE has said more of these types of deals can be expected in the future.
Other sports properties seem to have arrived at a similar conclusion. No tier-one or -two sports property has taken its primary product D2C since WWE (contractual obligations—or limitations—have also been a factor). That includes the NFL. While there has been plenty of speculation as to where the league’s Sunday Ticket package will end up, no one is suggesting the NFL app is a viable destination. That’s because costs aside, there is simply no way the league could monetize the product in a way that would offset the guaranteed compensation another distributor will pay for it.
There is a strong argument that at the current time the content licensing business is better than the D2C business. While the fragmented, competitive streaming space makes it difficult for a standalone league app to succeed, the ongoing battle for survival among traditional broadcasters has created a sellers’ (or in this case, content licensors’) market. Companies are willing to pay a premium for live sports programming right now, even if it means absorbing short-term losses.
Licensing content to a bigger platform may also give the sports property the greatest chance to grow its audience and develop the next generation of fans. When WWE signed its deal with Peacock, WWE Network had 1.1 million U.S. subscribers. Khan stated on the recent earnings call that more the three times that number have watched WWE programming on Peacock (3.5 million). Cohen explained, “When you put [WWE content] into a streaming product that has a bundle of content in and of itself, you may benefit from a rising tide lifts all ships scenario. There is more traffic coming into Peacock [and trickling down to WWE programming] than there would be if WWE Network was a standalone. Once WWE Net hit 1.5 million subs, it appeared to plateau.”
WWE’s deal with Peacock expires in 2026. If the company’s goal is to put its best content in front of the largest audience possible, then unless Peacock closes the gap, leaving the NBCUniversal subsidiary for Netflix, Amazon, Disney+ or HBO Max (all services with larger sub bases) at that time would seemingly make sense. WWE’s proven ability to convert fans into subs should spark plenty of interest on the other side.
To be clear, the decision to license content does not necessarily preclude a sports property from having its own streaming service (as it does in WWE’s case). D2C is not a catch-all term. There are almost limitless iterations of what a league offering could look like (i.e. it does not necessarily need to have the live games or marquee events but could feature talking head/debate shows and docuseries). Cohen says any property with a rabid fan base should have a D2C strategy, one based on its own arc of development, human capacity, funding and goals (think: consumer data, revenue, audience development).