UFC Cuts Cords (and Satellite Providers), Now Exclusive to ESPN+

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The UFC, cognizant of the “amount of [linear television] subs dropping every year”, have agreed to a deal with ESPN that will make the company’s OTT service the exclusive broadcast partner of the promotion’s PPV events. The agreement will give (effective April 13) ESPN+ the rights (in the U.S.) to carry the promotions 12 annual tentpole cards through 2025 – in addition to the 20 Fight Night shows they’re already contracted to air. Moving forward, fans who wish to watch the UFC’s biggest stars (ESPN and Fight Pass will continue to show prelims and early prelims, respectively) will need to subscribe to ESPN+. That monthly subscription won’t include access to the actual PPV shows – fans will still need to purchase each of the 12 events individually, but ESPN plans to discount UFC PPV’s from $64.99 (current price) to $59.99 to offset the monthly fee ($4.99). Financial terms of the deal between the UFC and ESPN have not been disclosed.

Howie Long-Short: Just 3 months after getting into the UFC business, ESPN/ESPN+ is now the exclusive home for the mixed martial arts promotion. It didn’t take long for the company to realize “that it can use the UFC to bring ESPN+ subscribers into the big tent.” ESPN+ drew 568,000 new subscribers within 48 hours of its first UFC event.

The OTT service’s total audience is now “closer to 3 million”, but former HBO Sports President Ross Greenburg (Ross Greenburg Productions) believes that upcoming UFC PPV events will continue to drive new subs. “You can’t assume that every single UFC fan bought that first fight and those that did remain subscribers (fans could cancel within 30 days without charge). Plus, there are different fan bases for different fighters, often tied to ethnicity; the ESPN+ subscriber base will continue to grow every time they have a UFC card.” Of course, getting fans into the tent is just half the battle; once there, ESPN+ must work to retain them. 12 tentpole events and quality ancillary content should help.

The deal with ESPN relinquishes much of the upside that the UFC would experience “if another Rousey or McGregor, a big PPV draw, arrived”, but I think taking the guaranteed pay day – one likely “worth hundreds of millions of dollars” – is a wise decision. Selling UFC PPV’s is a risky business proposition. Every fighter is just one fight away from losing their invincibility (see: Rousey) and the biggest stars now make enough money that they don’t “need” (i.e. getting punched in the face becomes less attractive) to fight once they achieve superstar status (see: Lesnar). The promotion can also get “stuck” with a fighter who continues to win, but fails to move the needle with fans (see: Stipe Miocic), which can crush PPV sales figures for multiple events.

From a cost standpoint, the move to ESPN+ is a wash for fans and subscribers will get a host of additional content for their inconvenience, so it’s clear deal’s only real loser is are the cable, satellite and telco TV operators. Ross told me that the UFC’s move away from the “normal distribution channels” is going to have a major impact on iN DEMAND and DirecTV. PPV is an important part of their yearly revenue streams”; “it could be” the death knull to those businesses.

Fan Marino: UFC President Dana White has attributed 2018’s disappointing PPV buy figures to cord cutting saying, “it’s scary the amount of subs dropping every year” – so the move away from linear distribution to a digital platform aligns with his narrative. The move is also logical for the purpose of driving interest in the promotion. By partnering with ESPN+, White and Co. pick up the support of the ESPN marketing machine. The UFC has drawn twice as many viewers to ESPN as it did for comparable programming on FS1 last year. With the help of the ESPN megaphone, it’s not unreasonable to believe the promotion could regularly post events with 1 million PPV buys in 2019.

One might assume the UFC’s decision to abandon the traditional PPV model for an OTT streaming service would hurt PPV sales figures in the short-term (i.e. until OTT becomes more prevalent), but Ross says fight fans “don’t care where they watch the fight” and those that would have bought from a linear or satellite distributor will buy from ESPN+.

Promotion: ESPN+ is offering a one-year subscription (worth $50) + 1 PPV event (worth $60) for just $80 (valid only for new subs).

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Author: John Wall Street

At the intersection of sports & finance.

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