When the clock strikes Midnight, the UFC will exit its exclusive negotiating window with ESPN and enter the open market for its domestic rights.
It has been no secret that this window was going to close, nor a guarded detail of the many suitors expected to sit down with TKO brass with hopes of finding access to the UFC and its young male core.
The ESPN deal kicked off at the start of 2019, providing the UFC a window on its linear channels while also licensing its pay-per-view content to ESPN+ to build that platform.
There is no disputing that the UFC was among the most important pillars for ESPN’s direct-to-consumer strategy, providing big events on the platform. After ESPN+ launched, the service posted a subscriber count of 3.5 million by the end of its first year, with that figure jumping to nearly seven million in the first quarter of 2020, which included Conor McGregor’s first fight on the platform.
The pandemic only accelerated its digital growth with a continual uptick in subscribers, peaking with 26 million subs by the end of 2023 before stalling in that neighborhood over the past sixteen months.
UFC represents the most enticing sports rights up for grabs in an industry where the NFL, NBA, MLB, and NCAA rights are wrapped up for years, and Formula 1 is the only other free agent with rights coming up.
But there’s been an interesting shift in UFC’s identity over the past decade through Dana White’s explicit endorsement and promotion of Donald Trump and his administration. The infusion of politics accelerated during a pandemic where White doubled down, saw the re-election of Trump, and played host to a captive audience, its right-leaning fandom making the UFC an influential force at the highest level of government and a direct pipeline to Trump’s audience.
Many sports and entertainment vehicles have been reticent to attach themselves to either political party for fear of backlash among their fanbase. UFC has been the opposite, running toward the Trump administration and being rewarded, entering the political zeitgeist and showing no sign of public revolt with packed arenas, record gates, and poised for the largest television/streaming deal in its history.
For the UFC, it’s a stamp of legitimacy from the most powerful political leader, and in return, Trump capped off a tumultuous week of economic upheaval by appearing at the Kaseya Center in Miami to a hero’s welcome and PR victory tour.
As important, the merger with WWE and combining some of the largest media figures in the space to tackle the negotiations. At the helm is Ari Emanuel, flanked by Mark Shapiro, and with the likes of Nick Khan and his deal-making prowess, there are few entities better equipped to extract every last dollar in this upcoming set of talks.
The average annual value of ESPN’s current deal for the UFC rights is $450 million, with reports that TKO is eyeing ten figures per year, rather than nine. It comes as the state of media continues to go through a tailspin and leaves a massive question regarding the impact of the economy and fears of a possible recession. Most vulnerable are traditional broadcast and cable entities with a heavy reliance on advertising and marketing, areas that would be the first to be slashed by companies fearing a recession. The ace in the hole is that UFC is likely to have multiple bidders, including Netflix and Amazon, who are far less reliant on such risks affecting traditional media outlets.
This past Saturday, after UFC 314, reporter Mike Bohn asked Dana White about the forthcoming negotiations, and while very complimentary toward ESPN, he outlined a world where the UFC could see its programming dispersed among multiple broadcasters or streamers.
No one expects ESPN to maintain the entire rights package, but the question becomes what elements of the UFC’s programming will attract the most interest? Its pay-per-views are the premium real estate and are a massive part of the ESPN+ package for its subscribers.
The UFC has had the best of both worlds, maintaining its ability to sell pay-per-views while eliminating the risk with a monthly licensing fee for each show that ESPN+ pays regardless of how big (or small) the pay-per-view lineup is. Fans have absorbed constant price hikes since the launch of ESPN+, both for the monthly subscription fee and the cost of an individual pay-per-view and making UFC one of the priciest sports to follow as a consumer.
Coupled with the price hikes has been a consistent outrage from its U.S. customers of myriad streaming and ordering problems on the platform. This appeared to hit a boiling point in March when the UFC 313 pay-per-view was marred by so many technical problems that ESPN just had to post the show for free to all ESPN+ subscribers.
John Ourand of Puck wrote about those issues in his Puck newsletter this week, “Just one month ago, following ESPN+’s gaffe-filled stream of a pay-per-view UFC event, relations between the league and its broadcast partner coarsened, right as the exclusive window to negotiate a new rights deal was set to expire. But the mood was decidedly chummier after Saturday night’s MAGA-infused pay-per-view event in Miami….I’m told that the two parties are motivated to stay in business together beyond December, when the current deal concludes”, and cited a recent meeting between ESPN head Jimmy Pitaro and Mark Shapiro.
Last week, LightShed analyst Brandon Ross appeared on Pollock & Thurston and indicated that he had underestimated Amazon’s commitment to building out its pay-per-view structure and thus, makes the shipping giant a major player to watch.
Netflix is nearly a given to take a long look at the viability of UFC joining WWE on the platform and already dealing with the TKO infrastructure. However, Netflix is not building any type of pay-per-view tier but rather, is growing its ad business with a high focus on live event programming.
It is hard to envision Netflix being a weekly stop for Fight Night events as the streamer has always leaned towards “big event” programming with a reticence to dive into traditional sports programming, differentiating WWE as “storytelling” and an amalgamation of sports and storytelling.
From this picture, you can imagine that the pay-per-view content is going to be a “want” from all suitors, but can the package be divided in such a way? Is there the same desire for Fight Nights, Ultimate Fighter, Contender Series, and other “outside the box” programming beyond the premium pay-per-views? Perhaps that programming outside of the proverbial box is the yet-to-be named TKO Boxing vehicle, backed by Turki Alalshikh with Dana White and Nick Khan at the helm and entering the marketplace just as ESPN has ceased its relations with Bob Arum’s Top Rank Boxing.
ESPN is in a much different reality than it was at the start of this deal with the UFC. Cable subscribers have plummeted over this period, and while ESPN+ was the “new toy” in 2019, the next toy is its direct-to-consumer platform, ESPN Flagship, to appeal to the cord cutters and cord nevers that still want a direct line to their sports programming. There is a giant incentive for ESPN to dress up its digital schedule with as much “can’t miss” programming as possible, with Mark Shapiro publicly theorizing the notion of UFC’s pay-per-views becoming part of ESPN’s Flagship if the right price can be met.
It’s not hard to imagine a world where UFC gets out of the pay-per-view business because its premium content is valued to the degree that any of these streamers could overpay and eliminate the $80 fee instead of a monthly subscription rate, just as WWE did over a decade ago and continued with Peacock. But it’s also unprecedented for a distributor to go that route and try and place the toothpaste back in the tube and revert to pay-per-view down the road when its rights come due again.
The wild card player in this game of poker is WBD with its emerging Max platform. The option comes with positives and negatives from the UFC’s standpoint. With WBD losing the NBA rights, there is a windfall of available capital to bid on rights while also needing supplementary programming to maintain its core viewers and retain its all-important transmission fees. While Max cannot currently host pay-per-view content, that is only a matter of time until it becomes viable with AEW pay-per-views set to run on that platform with a charge attached. TNT & TBS do not have the promotional muscle of ESPN and the same level of resources to promote their pay-per-views, and it’s hard to imagine splitting rights between the competing cable properties. Added to the WBD mix is the political dynamic of UFC & AEW being two of its core sports properties, and undoubtedly, it would want the ability for the promotions to cross-promote with each other, and it seems a nearly impossible needle to thread for obvious reasons.
In the history of sports leagues increasing their rights, the story has come down to multiple bidders, ones willing to spend aggressively to grow their piece of the pie, and cable simply wanting to mitigate loss with the acknowledgement that churn has to be expected.
UFC stands in a great position despite concerns of how its rank-and-file pay-per-views are performing, the loss of generational stars, and an unsteady economy. In the absence of larger sports rights on the table, UFC stands poised for a major upgrade and a near certainty that its rights will be spread across platforms with the maximization of revenue as its core objective.
The window is about to close, and the talks are now open.
