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Inside the $1.5 Billion Deal Between ESPN and the UFC starting January 19th

The Agreement reached between ESPN and the Ultimate Fighting Championship (UFC) could possibly be one of the most shrewd yet paradoxical deals in recent memory for professional sports: can a sporting league that continues to fight for greater viewership and more acceptance into “mainstream” sports viewing accomplish these goals by actually cutting back on the amount of time it’s being broadcasted on television?  Here’s a look inside the $1.5 Billion Deal Between ESPN and the UFC starting January 19th.

The proverbial nuts and bolts of the deal are straightforward: ESPN will pay the UFC a $1.5 billion sum to broadcast the latter’s events over a five-year span, starting on January 19th. Those broadcasts included 30 UFC Fight Night Events — each of which consist 12 bouts — including ten main cards on ESPN’s family of television networks. ESPN will also air preliminary bouts before 12 pay-per-view events, starting next year.

The deal comes shortly after Fox Sports, which was previously the UFC’s exclusive rights partner since 2011, swooped in on the chance to land the rights to “SmackDown Live” of World Wrestling Entertainment (WWE). Fox and the WWE joined together on a five-year deal of their own worth north of $1 billion; their deal is also set to start in 2019.

The UFC doesn’t lament being jilted by Fox, as the $300 million per year they’ll receive from ESPN will help the UFC stabilize their annual profits (a figure that’s more than double than what they were receiving annually from Fox), without having to be so dependent on and reactive to pay-per-view event revenue. Further, the UFC faced declining viewership on for its events on Fox Sports, as the latter still struggles to capture viewership from the larger cable channels (especially ESPN), and interest in the UFC may have started to wane, after a period of rapid growth.  Some will argue this is due to the organization’s lack of “household-name” fighters which it can market, while others say it’s because of viewing saturation.

UFC President Dana White publicly lauded the deal, commenting how it took the UFC up yet another level, by partnering with the world leader in sports to further the UFC’s reach to new and potential consumers. But more importantly, in making this deal, White and the UFC are astutely positioned to capitalize on a growing trend around sports and television viewership overall, which also happens to be a critical focus for its new partner: the rise of “cord cutting” and online content streaming, and a decrease in general network or cable television viewership.

The fascinating wrinkle in this deal is the fact that, while the UFC will broadcast 30 events on ESPN’s family of networks, only 10 of those cards (plus the preliminary cards prior to pay-per-view events) will be aired on the channels which most people have as part of their cable television package. The remaining 20 events will be televised on ESPN+, the company’s new streaming app which will be available to consumers for $4.99 per month. That effectively means half of the UFC’s 42 events per year will be available on a streaming service which will require a subscription.

In April of 2018, ESPN announced the launch of ESPN+, making it ESPN’s first big push into digital subscriptions. While ESPN was very clear in distancing the launch of the service from the company’s well-publicized issue with losing subscriber revenue (largely in part to the “cord-cutting” movement), it’s rather obvious that ESPN’s declaration of ESPN+ being a “complementary and additive” service is really just a code word for trying to bring back younger and more tech-savvy sports fans who saw the folly in paying outlandish prices for cable television.

With the amount of money they’ll be paying to the UFC, ESPN has just as much of a vested interest in ensuring this new deal works out optimally for both sides. On ESPN+, they’ll do their best to broadcast countless hours of exclusive content, including behind the scenes looks at the fighters, promotional events and press conferences, and maybe even the UFC’s reality television competition “The Ultimate Fighter” (though the future of said broadcast is still undecided).

Meanwhile, to capitalize on this new channel of exposure, the UFC will do its best to fill the hours of airtime between fights and previously available content with new and original content. The UFC may make available a portion of the content library available to UFC subscribers through its online-streaming service, UFC Fight Pass. White stated that while the company will work hard to create new content for its ESPN+ broadcasts (in between fights), the ESPN+ service is only available in the US, so international viewers who want access to that content and/or fights will be able to access it through Fight Pass.

As popularity for sports like the NFL and MLB has continued to wane because of the former’s political turmoil and the latter’s appeal more to the “Baby Boomer” generation and overall lack of marketable stars, there is a swath of the sports-watching population available for capture — particularly the ones born after 1980, like the millennials and Generation Z, whose individual buyer personas generally include health & fitness, content streaming & binging, and constant attachment to streaming devices.

Thus, the UFC is taking a calculated risk through its deal with ESPN, albeit a highly strategic one. Over the last six years, ESPN has reportedly lost somewhere around 13 million subscribers but remains the king of sports broadcasting. The UFC was once valued around $4.4 billion, has arguably seen stagnation in their growth. Both entities are looking at their business models and likely telling themselves that if they continue to do the same things they’ve done in the past, they’ll continue to have the same results. Both companies need to find a way to reach their previous viewership totals, so working together makes plenty of sense.

So while the ESPN and UFC will do everything it can to market mixed martial arts to sports fans, it won’t be by making it more available through “traditional” media broadcasts. In today’s world, “binge-able” content, available anywhere, is king. Both companies are banking on the idea that, by the time this deal expires in 2023, consumption of streaming content will be even more mainstream… and so will mixed martial arts.

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