mma / Columns

Unpacking the New UFC-ESPN PPV Deal

March 25, 2019 | Posted by Dan Plunkett
UFC on ESPN+, UFC on ESPN 2

Twenty years ago, the UFC was fighting to get back on cable pay-per-view. The promotion had been an immediate hit on the medium, but political hysteria pushed cable companies to drop the UFC, ushering in a dark age for MMA in North America. Once generating as many as 286,000 pay-per-view sales, the UFC, only selling through satellite companies, now pulled in a fraction of the business. With no television money coming in, there was no prayer of profitability without cable pay-per-view. Unable to secure the blessing of the Nevada Athletic Commission, which would have been the vote of confidence that put cable companies at ease, owner Bob Meyrowitz had no option but to sell the promotion.

In January 2001, billionaires Frank and Lorenzo Fertitta scooped up the promotion for $2 million and instilled their friend Dana White at the helm. By July, the Nevada Athletic Commission unanimously approved sanctioning MMA. Two months later, the UFC was back on cable pay-per-view. It took years for it to regain its footing as a pay-per-view product, but once it did—thanks to The Ultimate Fighter and television presence on Spike TV—it changed the sport forever.

Now the sport has changed again. The UFC has evolved past the cable pay-per-view platform it once needed to exist.

On March 18, the UFC and ESPN announced that ESPN+, the over-the-top subscription streaming service that is already home to the bulk of UFC fights, is now the UFC’s exclusive pay-per-view provider in the United States. This January, the UFC and ESPN began a $300 million per year relationship for airing events on ESPN and ESPN+. The new agreement strengthens their bond and extends it through 2025.

Financial terms of the new deal were not disclosed. UFC COO Lawrence Epstein told MMA Fighting that ESPN was paying a license fee to the UFC, which would be separate from any pay-per-view revenue split agreed upon by ESPN and UFC. You can assume that UFC will come out ahead with this new deal compared to its previous structure (agreements to split revenue with various cable and satellite companies) barring a steep drop in sales.

One key aspect of the deal is that with ESPN having a significant vested interest in the performance of UFC pay-per-views, you can expect them to push the product even more than they have been. The UFC has already seen the benefits of the ESPN platform. Television viewership is up. Pay-per-view returns for their last event, featuring Jon Jones vs. Anthony Smith, were strong. UFC news is now prominently featured on ESPN platforms. That was before ESPN was seeing a direct return from UFC pay-per-views. (That isn’t technically true since ESPN had already been offering UFC pay-per-views, but with several other methods to purchase the show, sales were likely minor in the grand scheme of things.)

Whether or not an increased push on ESPN platforms will cause an uptick in sales is unclear. Even as streaming platforms have gained traction, the large majority of fight sales have come through traditional cable and satellite companies. According to estimates from MMA Fighting, only about 20% of sales for the Khabib Nurmagomedov vs. Conor McGregor mega-clash came through streaming pay-per-view. The UFC and ESPN must work to covert most of their customer base over to streaming pay-per-view. For many customers it will be an easy transition. For others—namely those without a high-speed internet connection or a device to stream the ESPN app on their television—that transition may prove more challenging and take time.

For ESPN, the deal ties back to their ESPN+ streaming service, which has been a major focal point since launching last April. As it’s currently structured, fans must subscribe to ESPN+ to have access to purchase UFC pay-per-views. For most, this isn’t a bad deal. ESPN+ costs $4.99 per month (or $49.99 for an annual subscription), and to even things out, ESPN reduced the price for UFC pay-per-views by $5 to $59.99. ESPN is currently offering a promotion to get a year of ESPN+ and one UFC pay-per-view for $79.99. The only fans hurt by the deal will be the aforementioned group without access to a high-speed internet connection or a device to stream the ESPN app on their television. It’s yet unclear how long fans buying events through ESPN+ will retain access to view the event down the line, so fans that liked to DVR events to watch again later may or may not be impacted.

Apart from ESPN, UFC, and the fans, the other group to consider is the UFC fighters. Any fighter that earns or has the opportunity to earn a portion of their income through a cut of pay-per-view sales is impacted by this deal, and perhaps not for the better. Perhaps a portion of the licensing fee ESPN is paying UFC might trickle down to the fighters, but it won’t be right away and if history is any indicator, it won’t be anything close to half. If this move hurts pay-per-view sales, even just initially, it’s going to hurt what those fighters bring home.

In theory, if the UFC is getting both a licensing fee and a split from ESPN, top fighters should be able to negotiate more favorable terms for their pay-per-view cut. This is especially the case if the UFC is now earning a better cut from ESPN than they had with cable and satellite providers, but there have been no reports on this facet of the deal. Because there is no real idea of the cards the UFC is holding with this new ESPN deal, it’s harder to negotiate against.

On the other hand, the new agreement is likely going to end up pumping more money into the sport, and if the increased push from ESPN ends up increasing sales, it could be a very good thing for fighters. The issue is the lack of transparency about the deal—although expected—makes it harder for fighters to know their position in negotiations and their overall value to the UFC.

Dan Plunkett has covered MMA for 411Mania since 2008. You can reach him by email at [email protected] and follow him on Twitter @Dan_Plunkett.

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ESPN, UFC, Dan Plunkett