WME-IMG Seeks TV Knockout as UFC Rights Talks Begin
After paying $4 billion for the MMA company in 2016, the sports-entertainment behemoth is seeking a big price increase for its rights package.
The UFC's new owners are about to step into the Octagon for what many expect to be a brutal TV rights negotiation.
WME-IMG, the sports and entertainment Goliath that bought the mixed martial arts franchise for an eye-popping $4 billion last year, needs to dramatically increase the fees paid to air fights in order to justify that lofty purchase price. Fox Sports now pays about $115 million annually to air UFC content across networks FS1 and FS2 as well as on Fox, though the biggest bouts remain available only on pay-per-view. WME-IMG co-CEOs Ari Emanuel and Patrick Whitesell, who negotiated UFC's deals with Fox when the organization was a client, are under pressure to extract a hefty rights increase as the clock begins July 1 on the network's three-month exclusive negotiating window.
While nowhere near the draw of the NFL or NASCAR, UFC programming is on par with college football, and it's typically the top-rated in its time period among young men. Reaching that millennial male demographic is one reason UFC has begun to overcome its stigma among media buyers long wary of MMA's bare knuckle (and sometimes bloody) violence, though not completely. Budweiser and Harley Davidson are UFC sponsors, but the franchise still does not have an automotive sponsor. Ford, which advertises across the Fox Sports portfolio, won't place ads in UFC programming.
Launched in 2013, FS1 and FS2 now have full slates of live sports and studio shows. But UFC content still makes up a significant chunk of each net's schedule; in 2016, UFC accounted for 34 percent of primetime programming minutes on FS1 and 24 percent on FS2. All told, FS1 aired a little more than 1,300 hours of UFC programming last year. UFC Fight Night had its best year ever on FS1 in 2016, averaging 948,000 viewers, as did UFC pay-per-view preliminaries, which averaged 1.1 million viewers. Fox Broadcasting airs several main card and preliminary fights a year; about 17 hours in total. The marquee Fox UFC Fight Night main cards averaged 2.7 million viewers, down 5 percent year-over-year.
"It's a tonnage buy for Fox," notes Frank Hawkins of sports and media consulting firm Scalar Media. "They would have to fill a lot of time if they don't renew it."
Of course, UFC will get a major dose of publicity with the Aug. 26 pay-per-view bout between its biggest star, Conor McGregor and undefeated boxing champ Floyd Mayweather Jr., who will emerge from retirement for the fight. McGregor, who has never fought a professional boxing match, is a five-to-one underdog. Win or lose, UFC will have the opportunity to expose its brand to potential new fans. Some analysts predict the McGregor-Mayweather fight could top Mayweather’s 2015 bought with Manny Pacquiao, which had a record-setting 4.6 million buys, adding up to about $455 million.
UFC's pay-per-view business will no doubt be a sticking point in negotiations (as will the franchise's OTT service, dubbed Fight Pass). Pay-per-view is a significant revenue driver for UFC but rights holders have grumbled about it so a new deal could give Fox or another buyer more influence in the pay-per-view schedule. Fight Pass is so far not significantly cannibalizing the linear TV audience, but it remains an area of concern at Fox, say sources.
Despite the UFC's momentum in recent years, the new negotiations come at a time when the cable bundle is under assault; worldwide sports leader ESPN has lost more than 10 million subscribers since 2011, a trend mirrored across the industry. And many sports executives are preaching fiscal responsibility amid untenable rights agreements; ESPN pays about $8 billion annually for its extensive suite of sports rights.
CBS Sports is unlikely to make a serious play for UFC, say numerous sources, and ESPN, which is circling a boxing deal with Bob Arum's Top Rank, also is doubtful. However, Turner and NBC Sports might bid. But Turner, which has made inroads with e-gaming, does not have a dedicated sports channel in need of a lot of inventory. Notes Hawkins: “I don’t see whey they’d pay much for [UFC]. I wouldn’t be surprised if they take a shot at it just to make Fox pay more. But I don’t think they’d be that serious about it. I don’t see this as the type of property that’s going to draw a robust bidding war.”
But there are conversations with digital players including Amazon, Facebook and Verizon, say sources. Amazon has made a major play for live sports rights, including a run at NBA League Pass and paying a reported $50 million to the NFL for the rights to stream ten Thursday Night Football games - games that are non-exclusive, since they will also continue to air on CBS and NBC.
When Lorenzo and Frank Fertitta III – who acquired rights to UFC in 2001 for $2 million – were peddling their stake in the company, many industry executives balked at the media rights valuation in the sales documents, which projected an aspirational annual rights haul of $400 million beginning in 2019. Fox Sports executives scoffed at such a rich price tag. And certainly, anything close to that would have to come via deals with multiple buyers, which is a distinct possibility.
"I think they thought that as soon as they got on the network with Fox behind them, the numbers were going to double or triple," says one veteran sports executive. "Well, they didn't. So I think this is going to be one of the more interesting negotiations in recent times. Expect fireworks in this one."
A version of this story first appeared in the June 21 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.