More on UFC Television Distribution

Dave Meltzer of the Wrestling Observer goes into further detail regarding the UFC’s television distribution, including the signed deal with Versus and how talks have ostensibly broken down with ESPN.

The UFC insisted on the non-exclusivity aspect in its new Spike contract, largely to be able to negotiate with ESPN. Talks with ESPN heated up after ESPN officials were blown away by UFC 100 and ordered all of its talk shows to start covering UFC and Brock Lesnar as major figures. At one point the deal was close enough that there was a name for the proposed television show, but it fell apart.

 

The two major hold-ups in UFC making deals with either a premium station like HBO, or a network like CBS, both of which they had talks with, have been control of the production and financial. The UFC attitude is that they know what type of show the audience wants, and is not going to sign a contract to have people present UFC in a different manner. The second is that even the lowest numbers a UFC show will do on a live American PPV is about 350,000 buys, which generated well over $7 million in revenue, and that’s a Quinton Jackson vs. Keith Jardine level main event. Right now, no network is going to come close to that type of money. There is the argument that some network exposure is good because the downside of always being on PPV is that you cater to your fans who pay, but kids growing up aren’t growing up with the sport and you aren’t building a future. That’s been one of the drawbacks of boxing, where the big fights are making more money than ever, but among kids and teenagers, boxing is largely a disconnect except that Floyd Mayweather Jr. and Manny Pacquiao are well known sports stars.

 

What makes this deal interesting is that UFC is going on a low-rated station that would not give them added distribution, but are likely getting a strong money offer from a station trying to use the programming to put the station on the map, just as Versus did with the NHL. The entire purchase of WEC and setting it up as a new separate promotion from UFC stemmed from UFC’s original contract with Spike that prohibited UFC from airing on a rival station. When WEC was close to a deal with the IFL, UFC headed off the deal by making the deal and having to create a new promotion because Spike wouldn’t allow them at the time to go on a second network.

Payout Perspective:

When Dana talks about “getting the right deal,” he’s not just alluding to production control or rights fees, but also corollary content. The success of the UFC’s events depend upon awareness and interest that can only be built through this supplementary programming, and that’s why a partnership with ESPN looks so darn good on paper. The art of story telling – generating awareness and interest in the human aspect of sports – is what ESPN does best. Thus, it’s not enough for ESPN just to broadcast an event 2-3 times per year, and throw the highlights on Sportscenter.

The right deal involving ESPN would mean the UFC gets the support it needs from ESPN’s existing television line-up (PTI, Sportscenter, Around the Horn, etc.), some additional help from MMA Live and Countdown-type shows, and the full use of the ESPN touchpoint network (internet, radio, etc.). That’s what’s most important for the long term.

Then, and only then, is it a matter of securing production control and compromising on the rights fee. The issue of the rights fee is interesting, because exactly as Meltzer points out the UFC doesn’t want to lose out on the typical cut that they’d receive from a PPV. However, you’ve got to question whether this stance is conducive to the long-term health of the sport.

Business is very much about being in the right place, with the right opportunity, and at the right time. MMA may or may not have a limited window of opportunity to strike while the iron is hot and make a lasting impression on a generation of youth that will go on to support the sport for 20-30 years. This begs a set of questions:

1. Does the UFC gamble that the window will remain open for another few years until it can secure enough negotiating leverage to get the perfect deal?

2. Or, does the UFC compromise on the rights fee with the idea of using ESPN as a vehicle to increase its value (and hence, its negotiating leverage) in the future?

However, the issue of the UFC is still very much an issue of image for ESPN. Of course, ESPN would broadcast a few UFC events every year for next to nothing (and without any commitment to support the product). But if the network is talking about making a serious investment of time and money in a partnership with the UFC, it has got to consider the brand fit.

Might the image of the Disney-owned ESPN – the world’s most respeced sports authority – be compromised by showing UFC? That’s the question, and if ESPN execs remain split on the issue, then it may just be the case that they’re not prepared to offer the support that the UFC needs to make this “the right deal.”

And, in that case, you can’t fault Dana or the UFC for not signing on the dotted line just yet. The UFC may have no choice, but to go out and gain some more negotiating leverage – to gain more legitimacy – before coming back and being able to obtain some concessions from ESPN in the deal.