UFC’s new PPV split could be worth $65 million a year

(Update: Sports Business Journal report was premature. Get the latest here.)

In a move that looks to be worth in the range of $65 million per year in straight PPV profits, the UFC used its leverage of being the last man standing in the television PPV arena to negotiate a better deal.

Traditionally, UFC PPVs would have a 50/50 revenue split between the promotion and the cable and dish providers. At first when UFC got back on PPV in 2001 it was closer to 40/60 in favor of the providers, but as UFC gained more and more popularity, they were able to get the figure to 50/50.

According to an article recently in the Sports Business Journal on the UFC, the company was able to negotiate a new deal with cable companies and satellite providers that will give them closer to a 70/30 split.

The ability to make that deal is because boxing’s biggest active draw, Canelo Alvarez, has left PPV to be a DAZN exclusive, and there is nobody else on the horizon in that sport who does major PPV business. It is possible Floyd Mayweather could cash in again with Manny Pacquiao in 2019, but over the long haul, it appears the streaming providers like DAZN are offering so much guaranteed money that boxing on PPV will wane.

The WWE is still on PPV, but for the most part, its PPV business is somewhat insignificant because all of its major shows are put on its WWE Network streaming service at a fraction of the cost. The WWE no longer reports its numbers, but in the U.S., they were falling below 25,000 buys on most shows and WrestleMania may be the only show to hit 100,000, if it even does that.

UFC 229, headlined by Conor McGregor vs. Khabib Nurmagomedov doing an estimated 480,000 buys on iPPV (a worldwide number and not just North America) on a show that was available for the same price on regular television PPV. It showed the UFC had leverage to just bypass the PPV companies, perhaps take a short-term hit, but eventually when it educated its audience toward streaming rather than television, it would likely get most of its hardcore base, and retain higher profit margins per buy, since they didn’t have nearly as a high a percentage split with carriers.

If we estimate 5,475,000 PPV buys for UFC this year, and that 15 percent, which is a generous estimate, would be Internet purchases, and a $70 price point on average, UFC’s PPV business through satellite and cable companies would gross them about $163 million on the current 50/50 split. If we estimate a 70/30 split on Internet orders, that’s another $40 million from Internet purchases, or $203 million.

If we take the same numbers next year, but with a 70/30 split across the board, that comes out to $268 million, or an increase of $65 million in what is likely almost pure profit unless they negotiate up people’s pay-per-view points. PPV points in standard contracts is based on numbers of buys, not revenue, so an increase in revenue for the same number of buys is still pure profit.

Part of the deal would likely insure that the UFC doesn’t move away from the traditional PPV model as part of the cut concession.

The UFC had been doing about 75 percent profit on its PPV shows based on information obtained during the sale in 2016.