When World Wrestling Entertainment Inc. (NYSE: WWE) reported second-quarter results this morning, the company was able to beat the consensus analyst estimate for an earnings per share loss of $0.20, posting a loss of $0.18 on total revenues of $156.3 million. The company also announced a cut of 7% in its staffing levels, representing about 60 of the company’s 850 people.

For some reason investors are seeing good news here, when the reality appears to be a very weak quarter with more on the way. The company added just 33,000 new subscribers to its WWE Network during the second quarter and now claims that it has 700,000 subscribers, well short of the 1 million it has said it needs to break even.

WWE kicked out a week’s free trial promotion at the beginning of July and is now preparing to roll-out the network programming to virtually any country that is connected to the Internet beginning next month. That would be fine except there’s little indication that the rest of the world is clamoring for pro wrestling.

There could be more pain in store for WWE as it cannibalizes its pay-per-view business in favor of its video-on-demand and network business. Pay-per-view buys were down by nearly 500,000 in the second-quarter and the average paid per event was down 6% to $22.51. A subscription to the WWE Network costs $9.99 a month and a subscriber has been required to pay for a six-month subscription to offset the lower cost relative to the pay-per-view cost.

The company is facing the same problem that a single media company like The New York Times Co. (NYSE: NYT) faces: how do you adjust to a revenue model that is slowing decimating traditional sales? WWE hopes that the bargain pricing will spread to a much larger audience, but so far, at least, the evidence has not supported this hope.

Shares are up on the staff cuts and lower-than-expected loss, trading at $12.46, up about 3%, in a 52-week range of $9.62 to $31.98.

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