Looking At What UFC’s Deal With ESPN Means

Mixed martial arts is a cyclical business. The popularity of Conor McGregor and Ronda Rousey led the Ultimate Fighting Championship to record years in 2015 and 2016, and in their absence certain key metrics—pay-per-view buys and TV ratings to name two—have dropped off. Yet despite McGregor’s unclear status and Rousey exiting the sport, the UFC is healthier than it has ever been.

On Tuesday, UFC and ESPN announced a distribution agreement that will see 15 live events per year streamed live on the ESPN+ over-the-top subscription service. Among other content, ESPN+ will also become home to Dana White’s Contender Series, and UFC preview specials will also air on ESPN’s television networks. The UFC should enjoy more coverage from the leading sports network, particularly as ESPN+ will also offer UFC pay-per-views. Multiple outlets, including the Sports Business Journal, reported the economics of the deal at $150 million per year for five years.

It’s worth noting that when the UFC’s seven-year deal with Fox was reported in 2011 (which also happened to be a down year for the company), most reports pegged the average yearly payout at $100 million, which turned out to be a low number. According to UFC’s investor deck from 2016, the promotion is set to bring in $168 million this year from Fox. (The rights fees in the Fox agreement escalated each year, so if the reported $150 million figure from ESPN is accurate, it represents an increase in yearly rights fees for only a piece of UFC’s content.)

When Variety first reported on ESPN’s bid last month for an ESPN+ package, they pegged the number between $120-$180 million per year.

The ESPN+ deal is just a piece of the puzzle, as the UFC is still shopping for a new traditional television agreement, which should bring in a significantly higher rights fee. Several reports stated that Fox’s last offer during their exclusive negotiating period with UFC was $200 million. The recent Variety report noted Fox was still planning a bid of slightly more than $200 million per year, which means the idea of ESPN+ getting a different UFC package made no change in Fox’s perception of UFC’s value.

There also remains the possibility that another television network could drive up the price.

It appears that for the next several years, the UFC will be making an average of at least $350 per year between these two agreements. This comes during a cold period for the product when ratings are down, and after some believed Endeavor (UFC’s parent company) was foolish for believing they could nab perhaps as much as $400 million yearly for UFC’s television rights.

To put that $350 million number in perspective, that alone is more than UFC’s revenue (or any MMA promotion’s revenue for that matter) in any single year until 2010.

The new deals will greatly reduce any concerns about repaying the debt on the loans that were taken out by Endeavor (then WME-IMG) to purchase the promotion and ensure the promotion’s health for the next several years.

Multiple facets of the ESPN+ deal are still unclear.

Under previous ownership, the UFC had been adamant about retaining rights to the production of their television shows. Leading into these new negotiations, there were reports that UFC was open to dropping this sticking point, which would reduce their event costs.

The deal also leaves questions about UFC’s “Fight Pass” streaming service. Based on the press release announcing the deal, Fight Pass will stick around, but there was no indication of what new content could be expected on Fight Pass. Since the press release made no mention of the lower card preliminary fights streaming on ESPN+, they will most likely stay on Fight Pass. The fate of full live UFC events on Fight Pass is unclear.

This could mean it will soon become more expensive than ever to be a hardcore UFC fan in the United States. ESPN+ costs $4.99 per month, or a 12-month package for $49.99. UFC Fight Pass costs $9.99 per month, or a 12-month package for $95.88. Unless the UFC cuts back on its pay-per-view schedule, at $65 a pop (which doesn’t include any applicable taxes), fans would pay a total of $780 for 12 events. (Splitting each show between you and three friends, that’s still $195 per year, but let’s be honest, your friends aren’t coming over for Amanda Nunes vs. Raquel Pennington.)

That is up to $935.76 per year for access to each UFC bout, not including the cable subscription you’ll need to watch bouts on Fox Sports 1 or on their new TV partner’s channel. Although it’s not a perfect comparison (as certain games are blacked out live and they are different businesses), NBA League Pass costs $199.99 per year and an MLB.TV subscription costs $115.99 per year to follow those entire leagues.

With more splintering of content and more to pay for, the new agreement could lead to a worse experience for ardent followers of the sport. However, that’s easy to ignore when platforms are throwing money at you to create content for them. The UFC is entering its richest period in history, so the positives far outweigh that negative.

Dan Plunkett has covered MMA for 411Mania since 2008. You can reach him by email at >[email protected] and follow him on Twitter @Dan_Plunkett.

Source : https://411mania.com/mma/ufcs-deal-espn-mean/

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