UFC 229: Payout Perspective

October 9, 2018

Welcome to another edition of Payout Perspective.  This time it was one of the biggest events in company history with UFC 229 at the T-Mobile Arena in Las Vegas.

Khabib submits Conor, brawl ensues

You’ve likely read all about the post-fight brawl.  Despite MMA fan that like to downplay the incident, this was not how you showcase your product to the millions of fans that watched the fight.  Rather than be professional, both sides were not.  Conor’s antics prior to the night, and Khabib’s during it were both wrong.  It was a disgrace to the sport and overshadowed the dominant performance by Khabib.

At this point, the Nevada Athletic Commission will have to suspend and fine Khabib for some time to make it look like an authority.  With that being said, it’s clear that the UFC will take no action despite its ability to do something about it.  The UFC has maintained its alibi of hiding behind the regulation of a commission to do its bidding when it comes to these types of disciplinary issues.  It is clear that if they wanted, they could terminate Khabib’s contract.  Dana White stated that any fighter from Khabib’s corner would no longer fight in the UFC.  But what about Khabib?

Conor is to blame as well.  His antics have helped put him in the stratosphere of earners in combat sports and brought millions of dollars to Zuffa.  As a result, he’s been allowed to do anything without repercussions.

The whole scenario points to a suspension for Khabib and being stripped of his lightweight title.  We should have Conor face Tony Ferguson for the title and/or Diaz/Poirier winner facing Ferguson with the loser facing Conor.

Ferguson returns to stop Showtime

Tony Ferguson stopped Anthony Pettis in a blood-splattering fight that showed El Cucuy is back.  Both fighters had their moments and the movements in the fight were out of the ordinary and extraordinary.  Ferguson used a somersault to get out of the way of Pettis and Showtime used capoeira moves in attacking and defending.  Pettis was sliced by one of Ferguson’s strikes and was bleeding like a pro wrestler.  He did damage Ferguson as well.  In the end it was the relentless Ferguson that earned the victory as Pettis could not continue due to a broken hand.

Attendance, Gate and Bonuses

The event set a record for an MMA event in Nevada with 20,034 for a gate of $17.2 million.  It eclipsed UFC 200 held at the same venue.  The gate for UFC 229 fell short of the company record of $17.7 million for the UFC’s debut at MSG at UFC 205.

According to SeatGeek, a standing room only seat for UFC 229 went for over $400, with the get-in price at $1,234.  Again, it was second to only UFC 205’s get in price.

The bonuses went to Ferguson and Pettis for Fight of the Night, Derrick Lewis and Aspen Ladd for Performances of the Night.  Each drew the standard $50,000 bonus.

Payouts

The payouts were highlighted by Conor McGregor’s $3 million purse followed by Khabib’s $2 million.  But, the NAC has held up Khabib’s payout pending an investigation in the post-fight brawl.  While it has issued the check to McGregor, it’s held Khabib’s pay pending an investigation

The rest of the payouts can be found here.

Promotion of the Fight

Conor McGregor did not do a “world tour” for this fight which would have probably brought even more interest to the event.  He did promote when needed such as their first press conference.

The press conference which was held between Conor-Khabib prior to fight week was done without an audience but was shown in Times Square.  It was also on ESPN which had to use its censor liberally due to all of the profanity.  Conor’s late arrivals at the presser and ceremonial weigh-ins really put stress on the networks to deal with stretching out the time.  With more losses, networks will get tired of this habit.

ESPN did air the UFC Countdown show on its network in addition to it airing on FS1.

Dana White appeared on Jimmy Kimmel’s show to promote the fight.  Conor McGregor made an appearance on Conan O’Brien’s show and shared Proper 12 with his Irish counterpart.

In addition, there were multiple radio ads in addition to the television commercials.  Most of which highlighted the infamous Brooklyn bus attack.

Sponsorships

There were some new sponsors for this event including Conor McGregor’s Proper 12 Irish Whiskey and San Manuel Casino.  The latter sponsor is based out of Highland, California and was shown during the ceremonial weigh-ins.

One of the newest UFC sponsors, Portable Protein Pack aka P3, appeared on the front paneling of the UFC/Reebok shorts.  We may see more of this with existing official sponsors having secondary opportunities on fight gear.

In addition, Air Asia made a significant splash in its sponsorship activation which included stewardesses on stage with UFC Octagon girls during the ceremonial weigh-ins and with signage in the red corner of the Octagon to match the company’s branded color.

It was reported by Ariel Helwani that Conor McGregor signed a lucrative deal with Monster Energy which was said to be in the millions.

EA announced a new edition of its UFC3 video game featuring Conor McGregor.  EA conducted a fight simulation in which Conor McGregor KO’d Khabib in the 3rd round.

In the octagon, Toyo Tires, Harley Davidson, Bud Light, Nemiroff, Motel6, MetroPCS, P3, CircleK, Modelo, Air Asia, UFC3’s Notorious Edition, Autozone and the return of the Walking Dead and Monster Energy held the center. It was clear that there were more sponsors than ever before within the Octano on its corners and canvas.  Harley Davidson had the fighter prep point.

Ratings

The UFC Prelims on FS1 drew 1.3M viewers on Saturday.  The prefight telecast on FS1 drew 373,000 viewers.  The prefight show matched the one from UFC 223.  The 222-prefight show was the highest-rated this year with 431,000.

Odds and Ends

I wrote about the UFC brawl in depth and how the promotion of the fight allowed for this to happen.  The UFC faces a lot of fallout (good and bad) from the event.  Khabib and Conor are facing NAC sanctions for their actions and at least two fighters from Khabib’s team will likely be expelled from the UFC and from fighting in Nevada.  For a promotion that is looking to grow the sport and find blue-chip sponsors, one has to ask whether UFC 229’s brawl was good or ad for business.

Conor went after Khabib’s manager, Ali Abdelaziz, a controversial MMA manager that has been linked to terrorist groups if you believe McGregor and some journalists writing on the subject.  Despite these alleged ties, it seems that a majority of MMA fighters trust Abdelaziz with their career.  During the fight, Abdelaziz and members from both camps stayed in the back as the UFC tried to prevent what happened Saturday from happening.

The internet searches for this event were huge.  On Friday, UFC 229 drew over 2M google searches.  McGregor-Khabib drew over 2M searches as well.

Conor McGregor drew over 5M google searches on Saturday.  Derrick Lewis drew over 200,000 and Michelle Waterson drew over 100,000 searches.  “McGregor Fight” drew over 1 million google searches on Sunday.

Derrick Lewis’ post-fight interview was an all-time classic and was one of the reasons he drew as many google searches.  He took off his pants, said Donald Trump called him and told him to be Alexander Volkov.

Khabib appeared at the post-fight press conference and indicated he received congratulations from Vladimir Putin.

Matt Damon turned down the opportunity to be on Saturday Night Live to go to UFC 229.  There were many other celebrities drawn to this event as well and the aftermath had everyone on social media talking about it.

Internal numbers for Internet purchases of the event were up over 60% from Mayweather-McGregor according to Dave Meltzer.  This would be an indicator (although maybe not the strongest) the buy rate surged past the record of 1.6M PPV buys.  White indicated that it did not reach 3 million but was over 2 million.

The UFC received a ton of mainstream coverage due to post-fight brawl.  But, does this tarnish their image or encourage the promotion to try more of this?

Conclusion

Dana White touted that based on the viewership of Embedded episodes and YouTubes views compared with McGregor-Mayweather, the PPV would break the UFC record and it appears he will be right.  Despite the lack of expanded promotion of the event, its clear that the UFC hit all of the trigger points to garner the casual fans to buy the event.  The controversy is whether it was right to include footage of the bus attack or allow McGregor to continue personal attacks on Khabib’s religion, family and friends.  But, the PPV buy rate will likely go over 2 million (say 2.2 million) buys and show that marketing the bus attack footage helped more than it hurt.  There will be a rematch and you can believe that they will show the post-fight melee.

ESPN and Top Rank Boxing extend media deal

August 3, 2018

ESPN and Top Rank have extended their agreement through 2025 which will have 54 boxing events across ESPN outlets.

According to multiple reports, shoulder programming was key to the extension which started last summer.  The hope was that the additional should programming would help raise the profile of the boxers.

Dan Rafael of ESPN notes that Top Rank and ESPN signed a four-year deal which commenced in August 2017.  It was amended in April to coincide with the launch of the ESPN+ streaming service.  The new deal will continue to air live on ESPN in prime time as well as on ESPN+.

Payout Perspective:

It’s an interesting deal that should help Top Rank and ESPN’s new OTT platform.  Already, we’ve seen Manny Pacquiao fight on ESPN+ and it’s likely we’ll get additional programming featuring boxers from the Top Rank promotion.  What does that mean for HBO?  How will Showtime respond?  The boxing landscape seems to be changing.

Golden Boy inks deal to air fights on Facebook Watch

July 6, 2018

Earlier this week Golden Boy Promotions and Facebook announced a deal in which fights will be streamed on the social media platform in another move toward sports content online.

According to ESPN, the deal will have a minimum of five fight cards and will be free on the Facebook Watch page in the U.S. and globally on the Golden Boy Promotions’ Facebook Watch page.

Oscar De La Hoya praised the deal as it brings his fighters to “the intersection of live sports mega-casting and ultimate fan engagement.”

Main Events Promotions will also work with Golden Boy in putting together events on the series.

The first card takes place on August 11th.

Payout Perspective:

The deal is another notch for Facebook Watch as it carries Professional Fighters’ League Prelim matches on its channel.  The prize jewel of the platform is its Wednesday afternoon MLB games in which it is the only telecast for the game (not even regional telecasts air the game).  The Golden Boy deal will aid the content for Facebook.  It will be interesting to see if this spreads the Golden Boy stable thin as it has an existing agreement with ESPN.  The content will help with brand visibility as the fights will be free for anyone with wifi use and a Facebook account.

UFC announces new digital deal with Disney’s ESPN+

May 8, 2018

The UFC has announced a media rights deal with the new direct-to-consumer ESPN+ platform.  According to the Sports Business Journal, ESPN will pay $150 million per year over 5 years.  The deal is limited to the UFC’s digital package and begins in 2019.

Notably, Amazon Prime recently announced a deal with the UFC to carry its PPVs.  The new deal with ESPN will carry 10-15 UFC events exclusively on ESPN+.

The SBJ story notes that the television rights fee is not imminent although Fox Sports and NBC Sports have been in talks with the company.

Per the press release supporting this announcement Dana White stated, “I couldn’t be more excited to partner with The Walt Disney Company and ESPN on an agreement that will continue to grow our sport. UFC has always done deals with the right partners at the right time and this one is no exception. We will now have the ability to deliver fights to our young fan base wherever they are and whenever they want it. This deal is a home run for ESPN and UFC.”

The press release also states:

“With more than 280 million fans around the world, UFC boasts the youngest fan base among major professional sports organizations in the US with a median age of 40 and an audience comprising 40% millennials.”

The lineup of UFC content available to ESPN+ subscribers will include:

  • Exclusive, all new-seasons of “Dana White’s Contender Series” beginning in June 2019
  • A new original, all-access series produced by IMG Original Content
  • Exclusive pre- and post-event shows for all 15 “UFC on ESPN+ Fight Nights”
  • Non-exclusive access to UFC’s full archive of programming, including historic events, classic bouts, and original programming
  • Additional UFC-branded content, including “UFC Countdown” shows, press conferences, weigh-ins, and pre-and post-shows

It was just announced that Dana White’s Contender Series will have a second season starting this June.  The announcement today confirms a third season starting next June.

Payout Perspective:

The deal is worth an estimated $750 million over the course of the 5 years.  The announcement appears to envelope UFC Fight Pass into the new ESPN platform although the release states ESPN+ users will have “non-exclusive” access to the fight library.  So, this may mean the Fight Pass will remain on although subscriptions will likely diminish greatly.  A recent article stated that the UFC’s current digital platform had approximately 400,000 subscribers.  This is a good deal for ESPN as it adds more content to its new platform.  For the UFC, one must speculate that this may be a good deal to license its digital content and then find another suitor for its TV rights deal.  You can also view this as bad if you think they could not do an overarching deal for all of its media assets.  You have to think that Amazon was a suitor for the digital service and/or overall media package but ESPN+ likely offered more.

As for TV rights, the note by SBJ that nothing is imminent may be viewed in a lot of ways as in that the UFC is waiting for what it wants or…the UFC is waiting for what it wants.

Endeavor purchases NeuLion for $250 million

March 26, 2018

Endeavor has purchased NeuLion for a reported $250 million in cash.  NeuLion provides digital video broadcasts of sporting and entertainment events and has been involved in UFC and boxing matches including last year’s Mayweather-McGregor PPV.

The deal calls for Endeavor to pay $0.84 per share of NeuLion outstanding common stock.  The deal is expected to close in the first quarter of 2018 pending regulatory approval and other closing conditions.  Once the deal is final, NeuLion will become Endeavor’s privately held subsidiary.

According to the Sports Business Journal, NeuLion has experienced “pressure on revenue from the loss” of the NHL as a digital media partner.

Payout Perspective:

NeuLion came under fire during the Mayweather-McGregor PPV as global streams for the fight were not working, or experienced bad streaming.  Class-action lawsuits arose against Showtime, the UFC and NeuLion.  However, it appears that most of those lawsuits have been settled.  The purchase of NeuLion allows for the UFC to utilize its technology and revamp its direct-to-consumer model.  Daniel Cohen, Octagon Media Rights Consulting Senior VP noted that UFC Fight Pass is at more than 400,000 subscribers and is seeking an increase in its media-rights.

Amazon to stream UFC PPVs

February 28, 2018

Amazon is picking up the rights to UFC PPVs according to a report from the Sports Business Journal.  Terms and length of the deal were not disclosed ahead of a formal announcement later this morning.  The company will stream UFC 222 this Saturday for a priced of $64.99 HD.

As with UFC.tv, the PPV will be available for purchasers for 24 hours on Amazon.

The UFC is shopping its media rights and the Amazon deal indicates it is willing to split its properties into digital and television.  The UFC’s current deal with Fox is reported to be $120 million per year and $160 million in the last year.  Fox has made an initial offer to the UFC for $200 million annually.  The UFC claimed to want $450 per year over 10 years.

The move reflects Amazon’s continued move into sports rights.  Last year, it obtained the right to stream NFL Thursday night games.  It also is bidding for Premier League streaming rights.

Payout Perspective:

Digital streaming rights is competitive as Amazon is competing with YouTube and Facebook for rights to digital events.  Obtaining rights to the UFC likely means the end to sales of its PPV on its own site (or at least a significant loss in sales).  With many people cutting the cord, streaming rights are becoming more valuable to a core audience.  Still, the key to the next UFC television deal will be finding a partner that will be willing to improve on Fox’s initial offer of $200 million.

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?

Report: Fox offer in $200M range for UFC media rights

November 27, 2017

John Ourand of the Sports Business Journal reports that Fox has made an initial offer to the UFC in the $200 million range.  This is far less than the predicted $450 million forecasted by the previous UFC regime.

The offer was also confirmed by Darren Rovell.

In its pitch to potential buyers, the UFC stated that its media rights revenue would be $450 million with its next deal.

The current deal ends next year.  It yields an average of $115 million per year over the course of the 7-year pact.  Per the Sports Business Journal, it is seeking a 10-year deal which would place its ask at $4.5 billion overall.

The UFC and Fox had an exclusive negotiating period of 3 months prior to the promotion going on the open market to solicit other buyers.  Although the two could not come to an agreement within that window, it seemed almost expected as the new owners of the UFC would like to see what market it might have for it.

WME-IMG paid $4 billion for the UFC promotion in July 2016.

Payout Perspective:

The $200 million is a modest boost from its $115 million rights fee.  It’s not clear whether this includes any digital rights and/or any changes in its broadcast terms.  One might expect this to be an opening and see what WME-IMG might be able to do about getting other bidders for its rights.  The $450 million figure seems like an aspiration and we are not sure if the new owners believed this to be a reality.  WME-IMG are savvy negotiators and even though the initial bid is low, one might expect once other entities get in on the bidding, the price to increase.

As of now, no takers for UFC’s new media right deal

November 20, 2017

The Sports Business Journal reports the UFC’s current state of negotiating a new media rights package once its deal with FOX is up.  Currently, the new asking price of $450M per year is a stiff increase that is not garnering a lot of interest at this point.

The current deal with FOX is worth $120 million per year (with it jumping to $160 million for the last year) for the 7 year deal which ends at the end of 2018.  The UFC is looking to increase its rights fee to $450 million per year.  Traditional media companies appear to be weary of the hefty ask.

The article notes that it has had meetings with online companies Amazon and Oath.  There has been speculation that the next media rights deal could include a digital only platform which would be unprecedented.

SBJ notes that with the WWE’s media rights deal coming up in the fall of 2019, the market and bargaining leverage might be hindered for the UFC.  WWE has met with Fox earlier this summer as part of the pro wrestling company’s road show with various networks “to show the power of its programming.”  The WWE’s deal with NBC in 2017 is estimated at $180 million.

Payout Perspective:

With the WWE’s media rights deal up around the same time as the UFC, re-upping with Fox may be tougher than expected.  Although the two companies differ in entertainment products, Fox could see the WWE as a suitable replacement (with better TV ratings) for its FS1 network if the UFC asks for too much.  The unknown factor is the possibility of taking its media rights to a digital only platform.  While this may seem unlikely, the UFC has been a company willing to take risks.  The new ownership may be risk averse but if it cannot secure a deal in the neighborhood of its asking price from a traditional media company, it may look to other alternatives.

White suggests possibility of digital platform for next media deal

October 26, 2017

Could the UFC be moving toward a digital platform for its next media rights deal?  Dana White intimated the notion recently on a podcast with the Wall Street Journal.

The discussion was based on the belief that younger people watch content on phones and tablets rather than on television.  Also cited, was the eroding ratings of networks including ESPN.  The network is building its own digital network in 2018 which will include Top Rank Boxing.   White predicts digital platforms as the wave of the future.  Thus, there is a possibility that the next deal may not include a network.

There is also the possibility of splitting up the rights to include network, cable and digital.

Currently, UFC Fight Pass serves as a supplement to UFC fans.  Similar to the WWE’s Network, it rectnly started a 24/7 model which plays content constantly instead of the user choosing what they want to watch.  The digital platform includes an extensive library of past events and other organizations as well as its own events on Fight Pass.

Payout Perspective:

One of the key things pointed out during the interview was that the UFC produces its own events.  But, it was discussed that the next rights deal, the UFC would relax this custom and allow the rights holder some latitude with the partnership.  Perhaps White is just advocating for digital platforms to step up in the media rights bid by championing it over network or cable.  The UFC has been at the forefront of innovative trends and if digital overtakes traditional platforms, especially with the younger demographic, we might see a serious push for digital content.

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