Prime Time: Details on MMA's Looming Network TV Debut & What It Says About the State of the Industry

November 29, 2007

At this point it appears that MMA on network television may be a matter of when not if. Dave Meltzer provided an update on CBS and NBC’s ongoing talks about entering the MMA space in the November 26th issue of the Wrestling Observer Newsletter. The most significant news is that CBS’s discussions with the UFC began prior to the writer’s strike and the deal is not dependent on the outcome of the strike. NBC’s interest is directly attributable to and contingent upon the strike.

UFC 80 on 1/19 as a taped prime time special is apparently the targeted CBS premier. Talks between CBS and the UFC originally stalled because of the UFC’s insistence on certain details. We can only speculate if these were the same demands about production control that ultimately sunk the HBO deal. CBS then approached a couple of other groups, including EliteXC, about a live special. That presumably pressured the UFC back to the table and last week the two entities were reportedly close to deal.

NBC’s interest in the space originated with Rick Dinmore, an executive at NBC, who originally suggested MMA to NBC President Ben Silverman. Silverman then commissioned a full study of the space. Advertisers were approached and responded positively to being involved with the sport. The company then approached the UFC, but quickly moved on after hearing that they were involved in negotiations with CBS.

NBC is specifically interested in MMA as a replacement in the Saturday night 11:30PM time slot that will be vacated by Saturday Night Live if the writer’s strike continues, although prime time specials are also a possibility. Meltzer confirmed that the network had meetings with M-1 and EliteXC. Based on Jay Larkin’s recent comments to Eddie Goldman, it also appears to be a safe bet that the IFL has at least had preliminary discussion with NBC and/or CBS.

NBC is reportedly unwilling to pay rights fees, instead offering half the advertising inventory and the prestige and exposure of NBC in return. When the subject came up in an interview with Eddie Goldman, IFL CEO Jay Larkin said:

“The writer’s strike has caused a scramble for non-scripted material in television. Unfortunately, people have been giving away this MMA product for so long that it’s very difficult to put on the brakes and say it’s no longer free, we have to get some of these costs covered. From the IFL’s perspective, there’s an song that goes if I can’t sell it, I’ll keep sitting on it before I give it away. Going forward we have to stop giving this product away. It has enormous value, its an enormous asset, the library is an enormous asset. We have to start getting an appropriate license fee arrangement with whoever uses this show.”

Of course the reality of the situation is that in a crowed market place, if NBC insists on offering advertising inventory only, some promotion will accept the deal with visions of national exposure leading to a breakthrough dancing in their heads. “There’s always somebody out there willing to say, well they’re not going to be on your network for free, but I’ll be ok your network for free, and that devalues the entire industry,” said Larkin. However, without rights fees and the staff to aggressively market the ad space, signing a deal with NBC will likely be a money loser in the short term.

The hope would be that the exposure would pay off down the road, which is probably a worthwhile gamble but is far from a certainty. Some inside the industry question whether anyone outside of the UFC, perhaps even including the UFC, can draw the kind of ratings necessary to satisfy the major networks. As Meltzer points out, while a 2.0 rating is outstanding on Spike, it would be considered disappointing on CBS even on Saturday night which is traditionally the lowest rated night of the week.

While the UFC’s potential deal with CBS is not dependent on the strike it will obviously still play a large role in the negotiations. The longer the strike continues, the greater the UFC’s bargaining power. The quicker the strike settles, the more leverage CBS has.

It is also interesting to consider what effect the UFC’s year to date business might have on the negotiations. With the declining ratings of the Ultimate Fighter and the company’s core pay-per-view business down “meaningfully” according to this week’s S&P report, the UFC’s position isn’t as strong as it was even two months ago. At that time profit margins were down, but that could be attributed to aggressive international expansion and largely overlooked because of the company’s growing domestic pay-per-view business (up 35% from 2006 in the first two quarters).

Since then the company has faced a series of high profile setbacks including the collapse of negotiations with HBO, Randy Couture’s resignation, and a string of weak pay-per-view shows, combined with a run of bad luck with injuries and upsets that have conspired to rob the company of some of the momentum it had coming into the year. The result is that the company could use a public victory in the worse way, especially in the form of a deal with CBS which would represent the kind of major mainstream breakthrough the company both craves and needs to continues to grow its business.

Furthermore, the UFC’s explosive growth can’t be underestimated as a key growth driver. Momentum is self-perpetuating and the company has benefited tremendously from the mainstream media exposure that has resulted from its perceived momentum. That puts the UFC in a potentially delicate situation. If the media stopped seeing the sport as the next big thing it could become a self-fulfilling prophecy.

This is not to understate the company’s position. Despite a lot of things going wrong, many of which were completely out of the company’s control, Zuffa’s business is still only flat to slightly down compared to it’s monster 2006. On the whole it looks like they’ve done a good job of largely consolidating last year’s gains, but 2008 will be an important year. For a fledgling industry like MMA, a bad year could wipe out a significant part of the gains of the last six years.

It is clear that MMA/UFC, and at this point its clear that the terms are virtually interchangeable since no one else has any significant traction in the industry, has cooled off this year, especially late. This isn’t surprising since the entertainment sector as a whole would be expected to slow as the economy on the whole slows down in addition to the previously noted factors. In the long term I don’t think the UFC has anything to worry about, but its the kind of period that carries the risk of setting back the company’s ultimate breakthrough a couple of years if things spiral which is a real risk in such an unpredictable business.

2008 continues to shape up as a very important year for the MMA industry. I continue to believe that the UFC will face continued growing pains next year (here and here for more), but it will also be interesting, and important in evaluating the long term prospects of the industry, to see if a legitimate competitor is able to emerge from the pack currently chasing the UFC.

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