Breaking down the UFC, ESPN+ deal

ESPN recently launched ESPN+ and is making moves to make sure their digital offering has compelling content. One of their first major moves was announcing that ESPN+ is set to 10-15 exclusive UFC events. The deal is for five years at $150 million per year. Let’s break down what the deal means for both UFC and ESPN.

More Content for ESPN+

Because ESPN’s digital offering is attempting to not cannibalize its linear television content it created questions about what would actually be on ESPN+. The worldwide leader started off with a bang with an exclusive 30 for 30 focused on Bob Knight. Now they are building around live content. ESPN+ already has some MLB games and other live content. This is different. ESPN already had a relationship and content rights to MLB games. This is the first ESPN+ partnership where ESPN did not have previous rights agreements with their new partner.

What it means for ESPN

ESPN is now going to create more content around UFC. They have to do so to try and sell their ESPN+ product. It’s going to be a challenging promotion. ESPN+ is additive to ESPN. People already complain about high cable bills. One of the reasons for those high cable bills is subscription fees. ESPN carries the highest subscription fee. The incremental increase ESPN+ will see from UFC fans won’t be enough to make ESPN+ a total success. But, ESPN (traditional) is still going to have to promote UFC even though the fights will be exclusively on ESPN+. That means this bid only makes sense if ESPN also bids for UFC’s traditional television rights that are currently held by FOX, but expiring shortly.

ESPN painted itself into a bit of a corner. They’ll be dedicating time building the UFC brand on their digital platform to get more subscribers, but the bigger bang for their buck would be getting UFC rights on television as well. There are rumors that they are considering a joint-bid with FOX for UFC’s broadcast rights. It seems like they have to now.

What happens with UFC Fight Pass?

UFC Fight Pass was UFC’s direct-to-consumer digital offering. There’s some good news there for ESPN because it means UFC fans are already comfortable with digital distribution platforms. It could be bad news for Fight Pass plans.

It’s important to note that this is all conjecture at this point, but Fight Pass could be moving to the bottom of the line when it comes to fight quality and events. The hierarchy in terms of big-name fights has to be the following: pay-per-view, broadcast partner, ESPN+, Fight Pass. The deal would make no sense for the broadcast or digital partner otherwise. There’s been some criticism of the quality of fights on FOX since UFC moved away from a strictly PPV model anyway. Now there’s another distributor involved. That distributor will be promoting their new product and the UFC heavily now. They are going to want assurances that they get important fights rather than UFC keeping specific fights in-house.

What the deal means for UFC

Their first step should be finding bidders for the broadcast rights. Endeavor didn’t pay $4 billion dollars for the UFC to see the television rights come in at a low number. There’s been some worry in the industry that the projections for television rights during the bidding process may not hit. That would not be good since those rights were expected to increase dramatically.

But this is a good thing for UFC. ESPN still has the eye of the casual viewer. By simply garnering more ESPN coverage, it should increase UFC’s profile even more. It’s akin to free marketing. ESPN wants UFC to succeed because ESPN was ESPN+ to succeed. Therefore ESPN will cover UFC closer than it ever has before to make sure people are aware of all the fights. That will hopefully convert more viewers to ESPN+ customers and would create more MMA fans. UFC then hopes those fans want to attend an event or by a PPV.

UFC does need to figure out what to do with Fight Pass. They do need to figure out the challenges of a constantly overturning roster. They need to figure out what is going on with Conor McGregor. If that relationship is beyond repair, they need to put the full force of their marketing around creating new stars. UFC has been a bit cyclical due to the time it takes to build up fighters and their personas. A fighter needs win multiple matches before they really have name recognition. That takes time. ESPN will help with that because of the increased exposure but fighters can disappear quickly. Look what happened with Ronda Rousey. The ESPN deal should allow them to introduce star fighters more quickly.

MMA interest still has room to grow in the U.S.. That’s good news for both UFC and ESPN. Now they need to figure out the best way to attack the market. We’ll see if the ESPN+ deal is the ticket to new growth.

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