UFC: Media Rights Deal Key to Success in WME-IMG Era
Don’t be fooled by talk of honor, respect, testing one’s limits, or a pristine competition to determine the greatest of all martial arts or the greatest fighter. MMA is a sport, but the UFC, the pinnacle of that sport, is a business. The almighty dollar is what matters in the end – and in the next few years, the financial side of the sport will matter more than ever. Especially for the UFC.
When WME-IMG purchased the UFC from Zuffa this past Summer for an amount north of four billion dollars, it was clear that revenue streams would need to expand. One of the keys to the sale was EBITDA: earnings before interest, taxes, depreciation and amortization.
In pursuing loans for the purchase of the promotion, totaling about $1.8 billion, an EBITDA of 300 million dollars was presented, according to a Wall Street Journal article on the sale published last month. The only problem is, that EBITDA number included “add backs” to the tune of $130 million. $48 million of that amount was slated to come from “future revenue from TV and media licensing contracts,” again according to the WSJ.
The media licensing portion of that is key. The UFC’s current deal with FOX runs through 2018. Prior to that, the network has an exclusive window to negotiate a new deal. Afterwards, the gloves come off, and a full scale bidding war could commence. Make no mistake — it’s this media rights deal in the key North American market that will define the success or failure of the WME-IMG era.
According to a new report in the Sports Business Journal, the UFC’s new ownership is looking for more than just a small bump in revenue from its broadcast partner(s), but potentially a four-fold increase over a possible ten years. Now, before you dismiss that number out of hand, consider this: despite ratings that have more or less flatlined when the names McGregor and Rousey aren’t involved (those two always give a big boost to prelim shows on FOX Sports 1), live sporting events are of greater importance to networks than ever.
Why? Because more and more viewers in North America are cutting the cord, and getting their television fix through streaming services like Netflix and Amazon. Live sport, however, is the one area that hasn’t followed the trend to online. Sure, there are plenty of options online — the UFC’s own Fight Pass is one — but thus far, they have complemented traditional network coverage rather than replaced it.
So with declining overall viewership, networks may want to pay a little more to hold on to the last stronghold of traditional television. That’s something WME-IMG were no doubt aware of when they signed off on the deal to purchase the UFC. After all, as the SBJ points out, Ari Emanuel, the company’s co-CEO, helped negotiate the existing UFC deal with FOX as a consultant back in 2011. When the exclusive window for a new deal opens up later in 2017, you can expect him to be right back at the table. The key number? $450 million. Annually. Over potentially a ten year term.
That would be up from $115 million annually under the current Fox deal.
Want your voice heard? Join the Cage Pages team!
If you want to take a close look at the numbers, well have at it. Just examining the “big” network this year, UFC on FOX 21 back in August produced the lowest rating in the history of the event series. That was 1.983 million viewers overnight (numbers are generally adjusted later to include DVR views, which boosted the event to just over 2 million viewers). Just a month prior, however, the Holly Holm-led UFC on FOX 20 averaged 2.975 million viewers, a Summer record. UFC on FOX 18 and 19, earlier in the year, both pulled in north of 2.5 million viewers in the Nielsens, per MMAPayout.
More from Cage Pages
Compare that to 2015, where not a single UFC on FOX event did less than 2.5 million viewers. Yet the news isn’t all bad: the UFC 200 and 196 prelims on FOX Sports 1 had some of the highest ratings in the cable network’s history. UFC 205 did a healthy 1.8 million viewers for the prelims as well.
In short, there’s still plenty of eyeballs on the Octagon, be it on FOX or FOX Sports 1. The question is, does FOX believe there’s $450 million worth of them?
For WME-IMG, the success of the next TV deal means the success (or failure) of the entire UFC experiment. PPV sales, something pretty much exclusive to North America, are unlikely to expand in the next year or two, what with Ronda Rousey talking about retirement, and Conor McGregor stepping away, at least temporarily, as he starts a family.
As much as a star factory as the UFC can be, there’s no heir apparent to either of those two names at the moment, and WME-IMG appear to have bungled a potential deal for the return of welterweight legend and instant draw Georges St. Pierre.
Interestingly, per the SBJ piece, the biggest news may be that the UFC is looking to offload the cost of production. Historically, the promotion has produced all UFC events themselves, but apparently, WME-IMG will be looking to have its network partner produce shows (and thus incur related costs) under the next deal. The broadcast network (FOX or otherwise, depending on how negotiations play out) might also have more say in who appears on cards, including PPVs. The logic there? The network having a say on who’s on the PPV might allow them to pick fighters they feel will cause a trickle-down effect and draw eyeballs to the prelim fights.
The big question is, will FOX — or anyone else, from ESPN to NBC or elsewhere — be willing to pay up? Or will the networks hold out, forcing WME-IMG and the promotion to re-up for less? Keep in mind that if the media rights deal isn’t a big win, revenue will have to come from elsewhere, and ownership has already made it clear that cost cutting and cleaning house is not something they’re shy about. With that in mind, consider this deal key to how the WME-IMG era will play out.
This article originally appeared on 
