Dana, HBO and The Deal Not Done

August 15, 2008

Cage Potato has an excerpt from this month’s Playboy, which features an interview with Dana White. Of note was Dana speaking about the failed HBO deal:

“I pulled the plug at the 23rd hour. HBO was pi**ed off… I would have had to sell out, literally. They would have owned the UFC… I took meetings with HBO’s boxing guys. I’ll tell you, if I had to hear one more time about how many fu**ing Emmys they had won, I was going to dive out the window. I said ‘You won a bunch of Emmys, but I’m kicking your a** on pay-per-view.”

The common mis-perception on the HBO deal was that the UFC and HBO clashed over control of the production and that is what killed the deal. That may have been a secondary issue, but is a dodge from the central economic issues that doomed the deal. Ultimately, the talks between HBO and the UFC were an exercise in futility. The two companies have competing economic models that are diametrically opposed to one another.

Dana has made the comment before that as much as he is in the fight business, he is in essence in the PPV business. Every decision that is made is centered around the idea of boosting PPV buys. In order to capture the lion’s share of the PPV revenue, the UFC does all of their production of the PPV’s in house. Under no circumstances is the UFC going to surrender a piece of their PPV haul. Therein lies the rub as it relates to making a deal with HBO.

From HBO’s perspective, there is no value added in putting the UFC on their network if they receive no piece of the back-end, in this case PPV $$$. Some might argue that it would add new viewers, but I don’t think that would be the case. HBO has reached a point of saturation, kind of like a cell phone: by this time in their life cycle, everyone that wants one already has one. HBO’s subscriber base is much the same, so adding the UFC would account for only marginal increases.

So where would the financial incentive come from for HBO to carry UFC? HBO would have to either host the UFC PPV’s on their own PPV arm or their would be no payoff to having them on the premium network. Whatever you are seeing on HBO, you can guarantee they are seeing significant back-end profits on it, like DVD sales (The Sopranos), syndication, and feature films (Sex and the City). For a HBO-UFC deal to make any sense it would have to be similar to the structure that HBO has with their boxing shows. They have cards on HBO to build the profile of the fighters, but the biggest fights are funneled to the PPV arm, HBO PPV. A deal that got the UFC on HBO without HBO seeing PPV profits would be decidedly one-sided in favor of the UFC.

Dana speaks of reneging at the 23rd hour, indicating that a deal may have been in place where HBO would have held a significant stake in the UFC. Such a deal would have passed the reins of the UFC from White and the Fertittas over to HBO. Any deal where the the Zuffa triumvirate ceded power to another entity had to be considered a longshot form that start.

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