What should the UFC expect in negotiating the next media deal?

February 22, 2018

Earlier this week, Deadline.com posted a story asking whether the UFC could still attain a TV deal to their liking despite less-than-stellar ratings.

Notably, in the article it reveals that UFC Fight Pass has 400,000 subscribers for its digital service.  Previously, the number has never been posted publicly.  The article notes that prior to Endeavor’s purchase it had 330,000 subscribers.  Thus, for whatever reason you might attribute, it has increased since the new ownership took over.

The UFC indicated last spring that it would be looking for an annual TV rights fee of $450 million per year which is a huge increase from the $165 million per year average of its current 7-year deal.  Reports have Fox offering $200 million per year to renew with the network.  This would be significantly lower than anticipated by the company.

But, the overarching issue with the UFC is that due to the number of cards it produces, ratings are decreasing.  Gone are the days of anticipating a big PPV event as there are ones every month (now at an increase of $65 per event).  If PPVs are not to you liking, the UFC has events almost every weekend on FS1 and an occasional event on UFC Fight Pass.  The glut of events are necessary to fulfill its obligations with its network partners and fighters but the lack of stars is a glaring issue.

Gone are the Brock Lesnar, Ronda Rousey or Conor McGregor.  Even the current champions such as Stipe Miocic and Daniel Cormier do not garner PPV buys as a Conor McGregor PPV.  Notably, this past Sunday’s UFC Fight Night peaked halfway through the telecast for Sage Northcutt.  The chiseled 21-year-old is a polarizing figure in the UFC as he’s commanded pay higher than his peers despite not being as skilled.  But, clearly, his look and “aw schucks” persona attracts a casual fan base that other fighters do not.

Despite the ratings stagnation, Deadline.com, notes that this should not be confused with money issues:

As with the NFL or other sports leagues whose ratings are faltering, the linear TV trajectory should not be confused with overall financial performance. Endeavor has a more global footprint than the Las Vegas-based Fertittas and has made international deals and sought to boost licensing, sponsorship and distribution prospects. Modelo came aboard as a sponsor and Monster Energy renewed its commitment.

Yet, with the announcement by Dana White that he is starting Zuffa Boxing, the question of whether the UFC has peaked is a natural question.  While boxing was thought to be dead several years ago, it has regained a foothold.  Recently, Brin-Jonathan Butler wrote a piece indicating that its boxing that may save the UFC’s doldrums as opposed to their positions several years ago.

Via Deadline.com

“Everyone now knows that the bloom is off the rose,” a major sports rights stakeholder told Deadline. “It has become a lesser, watered-down product and there is an array of other options for viewers, especially the core UFC demo.”

The question is how will the UFC adapt to the changing landscape.  While it still draws in a healthy share of the young male demo, that demo that started with the company in the 2000s is getting older.  Butler cites a Sports Business Journal article from last June which shows that the UFC has had the biggest change in viewership in the median age of its base between 2006-2016.  The increase saw it go from 34 years of age to 49 years of age.  Remember, median is not the average age.  Boxing’s median age is also 49.

Can it roll with the punches like boxing?

One of the suggestions made in the article is to evaluate a possible digital deal even without a network tie.  Twitter, Amazon, YouTube and Yahoo have been linked to the streaming of sporting events.  With the success of the NFL streaming on a digital platform, the possibility for the UFC to go strictly digital is out there.  But, as pointed out in the article, this might seem as a slight for the company and a demotion from the deals secured by other major sports organizations.  One question posed by a Syracuse professor and former ESPN exec is if Fox re-ups with the UFC, can it “repackage the package.”  This would infer that distribution would occur differently than it presently is with the current TV package.

With Fox securing Thursday Night Football earlier this year for more than $3 billion, one has to wonder if there’s anything left in the budget for the UFC.  There is Turner Network Television, but with an antitrust case ongoing over its merger with Time Warner, any deal may have to wait.  NBC Universal might be an option and so might ESPN.  With a new streaming service rolling out later this year, it might be an option.  But, its unlikely the UFC  will want to be OTT only and will it need to envelope its current digital network into a deal.

Payout Perspective:

Maybe Zuffa was projecting the worth of its worth or wishful thinking but it would seem as though $450 million deal it had touted in an Sports Business Journal feature this past November may not come to fruition.  It’s clear that the traction for a deal is waning considering its ratings and meager PPV buy rates for 2017. Certainly, Mayweather-McGregor was stellar, but if you look at the pure UFC product, it took a step back in ratings and PPVs.  Of course, they are still making money and with the sponsorship deals and popularity overseas there is still room to grow.  But, will networks see the same value?

One Response to “What should the UFC expect in negotiating the next media deal?”

  1. Jesse on February 24th, 2018 12:13 AM

    the deal should be good

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