As we complete five months of the ESPN era with UFC, when evaluating the new era, there is one sure thing and one thing a little more questionable.
The sure thing is that from a pure short-term business standpoint, this was the greatest deal the company has ever signed. The $300 million annual rights fee number for televising or streaming every show except the pay-per-view main cards should lead to the UFC’s most profitable period in its existence.
When you kick in ESPN’s guaranteeing UFC a strong level of pay-per-view revenue by taking that business exclusively in the U.S. to ESPN+, it only makes the business more stable. Stable profitable business, and being pretty much guaranteed that will be the case through 2025, is what Wall Street would want out of the company. The pay-per-view deal was great for UFC on the surface, but even better because it makes the business more attractive in the business world, as Endeavor, the parent company, is about to go public.
Television ratings themselves have been largely good. In the early months of the year, largely due to fortunate timing of coming after strong college basketball games, the UFC had three shows that did more than 1.3 million viewers. With less favorable lead-ins, numbers haven’t of late come close to that figure. But when th eUFC is on television, the ESPN numbers are higher than shows with a similar level of talent were doing on FS 1.
But there is far less television. Over the course of the year, far less people will be watching UFC events. For casual fans who won’t pay extra for a subscription service, the UFC offers less hours, and most of those hours are fights with lesser-known fighters.
The biggest questions on the ESPN deal are not economic, or about what’s best for revenue over the next 6 1/2 years. The questions are more about making a new generation of fans.
ESPN made the decision to use the UFC as more key programming to build ESPN+ than to garner ratings for ESPN. ESPN+ itself has went from one million subscribers in September, a few months before UFC became key programming, to two million the first week of February.
The question becomes how effective it is to build a new fan base when so much of the content is behind a pay wall. Granted, that argument regarding the UFC has been around since the beginning of time, since the UFC’s biggest fights were always on pay-per-view at premium prices. And the UFC grew tremendously during the early Spike years when you had seemingly around-the-clock repeat programming, but the idea of almost weekly Saturday night live shows weren’t a thing.
Then, with FS 1, you had programming most weekends, with five hours most Saturday’s, unless it was pay-per-view week. And even then, you had two hours.
The question becomes how much exposure does the product lose each week when most complete shows are streamed on a service and not televised. It’s the difference between the attempt to make this brand a mainstream sport or be satisfied at being a profitable niche sport.
This isn’t as much an issue to the Hardcore fan base. ESPN+’s $4.99 price point per month is hardly a high price given the hours of content a UFC fan would get. But it’s still in about two million homes at this point where the rank-and-file shows when most of the mainstream sports audience that watches ESPN is not subscribed to that service.
The move of pay-per-views off television to similar priced events as they had been on television, but only available through ESPN+, for the short-term, has seen numbers down greatly from the level they were at. The UFC isn’t suffering because they essentially get a monthly guarantee which means every month ESPN is paying the UFC the price of a strong pay-per-view. The economic pressure to make big deals for the real drawing cards is no longer there.
But with that number guaranteed, and not having to be “earned” by direct pay-per-view sales, it has changed the value of people like Conor McGregor and Brock Lesnar. McGregor has talked all year about fighting but no deal is official. Lesnar is said to be retired, even if he interestingly enough, has never said such a thing. The monthly guarantee means that for UFC itself, the Rose Namajunas vs. Jessica Andrade will make UFC similar money to what they would make with the bigger drawing stars headlining, which removes the incentive to pay much higher purse numbers to the previous difference makers. But those difference makes fighting is what grows the popularity of the sport and makes it mainstream sports talk.
Another key aspect of this deal is the television support of ESPN, which is the home for sports fans. ESPN treats the UFC as more important. That type of exposure creates the idea the big fights are major sporting events. That’s if the UFC can deliver those big fights.
What will be most interesting to watch over the next few years is a comparison of how the UFC grows, or constricts, with that of Vince McMahon’s new XFL football league. From a broadcasting standpoint, likely by necessity rather than choice, is taking the exact opposite strategy. Premiere Boxing, which actually spent money to buy its way on television at first on a number of stations, took a similar approach to try and make boxing mainstream.
When the XFL opens in January, the league is getting no television rights money. It’s a lock they’ll lose significant money for the next three years. But every game will be on television, with games on FOX, ABC, ESPN and FS 1.
Granted, these are two very different products and second-tier pro football leagues have historically failed. If given the options of the two deals, nobody running a business would ever choose the XFL option over the UFC option. The XFL looks to have no way of making money in its first three years, and the UFC seems to have no way of losing money over an even longer time period.
But in building a new fan base, the long game, the XFL will be available to far more people. If you’re looking at growing popularity and making a new generation of fans, the UFC’s situation looks problematic.
In an ever-changing technological landscape, following these two opposite approaches will be most interesting.