Last week ESPN fired a ton of staff, including on-air personalities and journalists. Who cares, right? ESPN doesn’t do much in terms of MMA coverage (at least compared to other sports), so what does that have to do with us? Well, according to the wise sage Dave Meltzer of MMAFighting, ESPN’s troubles could impact the UFC further down the line, especially since the UFC’s broadcast contract with FOX is up next year and the UFC’s new owners were hoping for a bidding war between FOX and ESPN over the new contract.
Essentially, ESPN is cutting back because too many people have “cut the cord” and turned to TV options that don’t force them to purchase costly subscriptions to ESPN channels. This has lead to falling revenues, which has lead to layoffs. The big question, then, is what that will mean when it comes time for the UFC to demand, say, $450 million from whomever wants to be their broadcast partner? If ESPN’s upper limit bid is capped around $250 million, that means the bean counters at FOX get to take the piece of paper with the $450 million price tag on it, blow their noses into it, and throw it into a wastepaper basket.
And that’s bad for WME-IMG, who shelled out $4.2 billion for the UFC, and was counting on that bidding war to earn back some of their investment.
Read the rest of kernels of knowledge Meltzer put down. It’s worth it.
But whether WME-IMG made a wise investment in the long run has nothing to do with what the company has always been reliant on, which is creating big stars and big fights, and selling them directly to the customers on pay-per-view. While that is still important, WME-IMG was banking on the idea that, like the major sports, the UFC will be carried by getting a major increase in domestic television rights.
The UFC’s exclusive deal with FOX, which expires at the end of next year, is believed to peak at less than $150 million per year. WME-IMG bought in based on the idea that in the current landscape, it could garner a huge increase, like the other major sports have gotten. The key in getting that $150 million figure to $250 million, or even $400 million, the latter figure that was being bandied out for the next contract at the time of the sale, is multiple bidders.
Aside from FOX, ESPN would be on paper the best fit to bid. ESPN and FS 1 are rivals, and the UFC is one of FS 1’s strongest consistent properties.
The ESPN cutbacks last week, were a victim of people moving away from cable or ordering cable in smaller bundles that don’t necessarily include all of the major stations. ESPN has gone from 101 million homes at its peak to 87.4 million, which means everything when its primary revenue stream is the amount of money the cable and satellite distributors pay them per customer that gets the channel.