The WWE Network's Bumpy Road

There’s no question that 2014 has been a disappointing year for World Wrestling Entertainment, Inc. WWE and its shareholders. After first going public in 1999 at $17 per share, WWE stock has drifted mostly sideways for the next 14 years while the S&P 500 has gained more than 60 percent.

All that seemed to be changing in the early weeks of 2014, as WWE stock skyrocketed from under $10 per share in late 2013 to more than $31 per share by mid-March of this year.

Why All The Excitement?

Certainly investors were excited about the potential size of WWE's imminent TV deal. However, the majority of the enthusiasm at the time was over the launch of the brand new WWE Network at the end of February.

Shortly after a disappointing TV deal was announced, the stock crashed to below $11 when the company revealed that it came up more than 300,000 subscribers short of its goal of one million network subscribers by WrestleMania weekend in early April.

"The problem with WWE is a fiscal one, it's not creative/leadership one," Rev. Emmanuel Lemelson told Benzinga's #PreMarket Prep on November 18. "Vince McMahon cannot do this forever, and if you look at the next generation, it doesn't look like they're getting prepped to run the show."

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One Disappointment After Another

Ever since missing its first one million subscriber mark, WWE has been releasing a continuous stream of disappointing news about network subscription numbers. WWE has estimated that the network will need at least 1.3 million subscribers just to compensate for lost pay-per-view revenue. More than seven months after its WrestleMania deadline passed, the network is likely still nowhere close to a million subscribers. The most up-to-date subscriber count from the company came in the Q3 earnings report. Through the end of September, the number stood at 731,000.

Perhaps even more disturbing than the low number is the low growth rate. The network added only 31,000 net subscribers over the quarter. If the network continues to add only 10,000 subscribers per month, it will take nearly five years to add enough subscribers just to replace lost pay-per-view revenue.

Is WWE Network A Good Value?

In theory, the WWE Network is a pretty good value for die-hard fans. With monthly pay-per-view events now available on the network and a monthly subscription costing only $9.99, fans that are used to paying $49.95 to $59.95 every month for pay-per-view viewing alone are getting quite a deal (and much more content) with the network. But these super-fans aren't the biggest problem for WWE. The problem is attracting a wider audience of subscribers.

Many fans certainly paid only for the "best" pay-per-view events, and the WWE rarely got a dime from these fans for content the rest of the year. To combat the temptation for customers to continually subscribe and unsubscribe on a month-to-month basis depending on the quality of that month’s pay-per-view event, WWE initially made a subscription to the network a six-month commitment. However, in a desperate attempt to lure more subscribers, WWE recently lifted the six-month commitment requirement and subscriptions are now done on a month-to-month basis for the same $9.99 price.

Lemelson in that interview questioned the leadership of George Barrios, WWE's chief financial officer. "He's been very ambiguous in those conference calls. He really has not presented a good story over the years, and not just on [WWE] Network."

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Aggressive Approach

To try and right the ship, WWE has also begun airing limited advertisements on the network to companies such as Take-Two Interactive, Sears Holdings, PepsiCo and Mattel Inc.

However, the most aggressive approach to date has been the recent announcement that new subscribers to the WWE Network will receive the entire month of November for free. This "free sample" approach may indicate that WWE is hoping that the network will be impressive enough to new subscribers that they will stick around after the free month.

Unfortunately, even the free month has been a bumpy one for WWE, as the network suffered a two-hour outage the night of November 12. WWE issued an apology to all subscribers.

The Future

Despite such high hopes, the WWE Network seems unlikely to succeed for the long-term in its current form unless some dramatic changes occur. One possibility for dramatic change would be altering the WWE Network's mode of distribution. Rather than maintaining the network as a stand-alone subscription service like Netflix, the network could be converted to a premium cable channel like Time Warner Inc's HBO or CBS Corporation's Showtime. This is the system WWE has been using for the network in Canada, and it seems to be working well so far in that market.

"I do believe that the company has great value, even if the [WWE] Network never realizes its subscriber goals, which it probably won't," Lemelson said.

One thing seems clear: The WWE is not scared to take an aggressive approach when it comes to the network, and more major changes could be coming soon.