Now ESPN acquires UFC fights for linear channels in cord-cutting fightback
ESPN, the Walt Disney-owned sports broadcaster, is reported to have agreed a deal to broadcast the fights of UFC, the mixed martial arts promoter, on its linear channels, in addition to a five-year agreement, already announced, to stream matches via its new OTT streaming service, ESPN+.
Like the ESPN+ deal, the new agreement, also reported to be for five years, is said to be worth $150 million a year, meaning that UFC owner Endeavor (formerly WME-IMG) is in line to more than double the figure of just under $120 million a year that it has been receiving from Fox, UFC’s present US network home.
The two deals mean that Endeavor will bring in a total of $1.5 billion in media rights revenue to set against its $4-billion investment in UFC, in the next five years. Fox holds the UFC broadcast rights until the end of this year.
The two deals combined comprise live coverage of at least 30 fights a year, it is reported. The new deal is thought to include digital as well as linear TV rights.
Moreover, UFC will continue to broadcast its top fights via pay-per-view and its own Fight Pass OTT service.
Fox’s exclusive negotiating window to renew its deal expired in October and UFC and Endeavor were earlier reported to be seeking a new US TV rights deal (or deals) worth between $250 million and $300 million a year.
Under the terms of its expiring rights agreement, UFC has to pay for production costs itself, but it is understood that ESPN agreed to take on these costs from next year onwards for its ESPN+ deal, and that a similar agreement was being sought for the linear TV package of rights.
Hampered by falling cable subscriptions for ESPN, Disney’s launch of ESPN+ was aimed at tackling ‘cord-cutters’, namely those customers that have cancelled their linear television subscriptions in favour of receiving programmes via digital delivery methods.
The acquisition of high-profile UFC fights for ESPN’s linear channels will similarly be regarded as part of Disney’s fightback against the cord-cutting phenomenon, albeit Fox’s UFC ratings had been in decline in a move that was widely attributed to a dearth of star names to replace Conor McGregor, the Irish fighter who became UFC’s biggest name and cash cow.
Question marks were raised at the time of the $4-billion acquisition of UFC in 2016 over whether Endeavor/WME-IMG had overpaid, with the sale the subject of a warning from US Federal Reserve Bank supervisors, and Bloomberg reporting that the warning was issued because regulators were trying to rein in risky lending practices by Wall Street’s biggest banks that “push a company’s debt load to more than six times its earnings.”
However, Lawrence Epstein, UFC’s chief operating officer, told Sportcal in March: “Every single TV deal we’ve renewed since the close of the [Endeavor/WME-IMG] deal, we’ve increased from where we were, sometimes by many multiples.”
Asked what factors decide how UFC’s events are distributed between pay-per-view, its ‘Fight Pass’ subscription service and traditional linear television, Epstein said: “It might change in January 2019 [when the new US TV deal is due to kick in]; we’re in the middle of the renegotiation, and traditional broadcasters are thinking differently on how to distribute content. We now have 40 events per year, and 12 or 13 are on pay-per-view and the remainder on Fox or Fight Pass.
“It’s different from country to country, but right now the structure has evolved over time to meet the needs of pay-per-view and broadcast platforms, reserving a certain amount of content for Fight Pass.”
Revenue aside, Epstein said, pay-per-view and Fight Pass are important to UFC for the data they yield on those that sign up for the services.
He continued: “Viewing habits are changing; it’s a very dynamic space. You don’t know where the consumer will be in five years, so we’ve built our distribution strategies on all platforms. Now, we have the ability, as viewing habits change, to shift and connect on all platforms.”
McGregor helped the promoter achieve record sales in 2015, and himself accounted for over a quarter of the pay-per-view revenues from just two fights. However, McGregor's future in the sport remains in doubt after he was arrested for attacking a bus containing fighters at a press conference for UFC 223 at the Barclays Center in New York.
McGregor has not contested a UFC bout since November 2016, albeit he entered the boxing ring last year to compete in a high-profile fight against multiple world champion Floyd Mayweather. The Irishman later told reporters that he wanted UFC to make an attractive offer after his “billion-dollar fight” with Mayweather, which the US boxer won.
Asked in March how McGregor can be replaced in the meantime, Epstein said: “We’re not looking to replace him, but we’re always in the process of developing new talent and stars. At any one time we have 10 to 15 athletes, male and female, that we think can become as big.
“What you have to have for someone to reach stardom is a balance between success in the octagon and personality. Conor was very successful and has an incredible personality. People are interested in him driving cars or wearing watches. But you have to have both. Recently, there were a couple of stars on the rise and they lost. Now they have to build themselves back up.”
The loss of UFC rights is being regarded by some commentators as a heavy blow to Fox, which is reported to be set to compensate by switching its attention to World Wrestling Entertainment, the USA-based wrestling entertainment series.
WWE is said to be poised to sign a lucrative domestic rights agreement with Fox Sports, the cable and satellite broadcaster, from October 2019 onwards.
The deal for rights to WWE’s ‘Smackdown Live’ programme would be worth $205 million per year, topping $1 billion over the duration of the five-year agreement, according to various reports.
Rights to Smackdown Live and ‘Raw’ are currently held by Comcast’s NBCUniversal, which pays around $180 million per year.Sportcal