One of the more interesting issues that came up at yesterday’s UFC on Fox 3 press conference was the issue of the future of PPV and the UFC. MMA Junkie writes about Zuffa’s perspective on the issue and the possible future for the UFC.
The article addresses the changing landscape of technology and Zuffa’s current pay TV revenue model. Dana White acknowledges the evolution of the business model which may change over time. With the UFC-Fox agreement, there may be a time in the promotion where PPV revenue is not the main producer for company. The Fox deal so far has been a success and according to the article, a success with advertisers. Yet, there is a need to find other sources of revenue.
Via MMA Junkie:
…the UFC also needs other sources to feed the till, and it’s embraced other platforms to bolster revenue from TV and pay-per-view. The promotion’s online business sells fights through the UFC’s website and through online partners. It has yet to replace the revenue brought by pay-per-view. That could change, however.
Payout Perspective:
We have discussed in the past the potential for Zuffa to find alternative platforms to the current PPV model through showing its events on its own web site, Facebook, YouTube, XBox Live and even through your cell phone. It also has toyed with showing events in 3D in theatres. However, none of these have yet to replace the current structure. A portion of the reason the UFC would like to see its events on other platforms is that it could mean more of a cut of the revenue directly to the company rather than share it with PPV providers. Obviously, it may have to share revenue on other platforms (e.g. XBox Live) but the partnership structure could be more advantageous for the UFC.
In catering to a younger demographic, the options are available to the UFC. It has shown to be a company as an early adapter to new technology and willing to try new things for its fan base.
Why don’t they sell events through UFC.TV (which includes browser-based PPV, set top boxes like Roku, and Xbox 360) for less than the cost of a PPV purchased through a cable/satellite provider? Correct me if I’m wrong, but Zuffa receives 100% of the revenue from events purchased through UFC.TV. Is there a stipulation in Zuffa’s contract with iNDemand that prevents them from doing this? That might serve as a catalyst for the shift.
From what I remember reading, the PPV contract doesn’t allow them to undercut the prices for traditional ppv outlets.
Why not donate big to the Obama administration like Hollywood and the music industry did and have the governoutlander every person pay who’s eye balls watch a rasslin match pay $20 if your seen wearing a tap out shirt with a Mohawk. And since most kids 18-34 who are broke anyway probably watched past fights free on justintv well it be like they were given Dana back pay for all they have stolen from him
Good ol’ Joe, I always enjoy when you poke your head up from underneath that bridge 🙂
They need to partner with mobile phone companies asap. I want to see UFC on my T-Mo TV! Very little choice presently.
The UFC will, over time, transition from PPV to free TV/online media. That is the only way to achieve the kind of massive mainstream growth Zuffa desires.
But this will not happen overnight. Cable TV outlets are already feeling pressure as more and more subscribers opt out of the TV package, while retaining the High Speed Internet package. It will take a few years for the technology to become ubiquitous.
The entire Cable TV industry is changing as online TV on demand becomes the norm.
I predict the end of the current 7 year deal with Fox will be the key inflection point. The UFC has all this time to grow their business globally and cut deals with media outlets worldwide. For example, Brazil is potentially a major future revenue stream, as is much of Asia.
The UFC needs to grow their mainstream advertising appeal dramatically to replace lost PPV revenues.
In the US, there is still an education process going on. Since the UFC brand appeals to younger viewers, the total viewership should grow significantly over time. This should cause a virtuous cycle of adverstisers jumping on the band wagon as the demographics become more favorable.
So far, the UFC does not face significant competition, and is unlikely to face serious competition any time soon, which should assist them in achieving their growth goals sooner.
This past year or so, the fight cards have been excellent and exciting–with the various weight divisions gathering more depth–especially the HW division. So far, the UFC management has been able to strike a working balance on salaries for its fighters and the lack of competition has given fighters little negotiating room to bloat the balance sheet.
Judging by the recent UFC 144 event, the UFC is touching all the right bases to get into Asia. Various PR events such as donating money for sport to Saitama Japan, and sending GSP to a kindergarten and karate school in Japan, and the new champ Benson Henderson to Korea, and a Tai Kwondo school there–shows they have promotional and marketing savvy.
The bottom line is the brand will continue to grow, and will become mainstream over the next 5 years which will create the right economic envronment to transition completely to adverstising supported broadcasts instead of PPVs.
That said, it is possible that the UFC may retain a few PPV broadcasts for blockbuster cards.