By Zach Arnold | June 9, 2011
Yesterday’s report by The New York Times about UFC considering buying a ‘controlling’ ownership share of Comcast/NBC cable/satellite channel G4 raised a lot of eyebrows. With Spike TV paying UFC a reported $170M USD/year for television rights, UFC leaving Spike TV would be a huge business move on Zuffa’s part.
Without being privy to any ’state secrets’ regarding the potential business deal, I can only go on what has been reported and what the possible thinking is behind such a decision. So, with that stated, let’s look at what it could mean.
A turnkey operation
UFC has wanted to have their own cable channel for the last couple of years. They had one of two options — either create one from scratch with a broadcasting partner/investor (like Comcast or Time Warner) or buy out an existing television network and try to re-brand said network. In other words, a turnkey operation (similar to putting the key in the ignition and starting your car).
Buying a controlling interest in the G4 TV network would be a mix of both scenarios. Comcast/NBC is the owner and G4 is, for all intents and purposes, a turnkey operation for UFC should they make the move. UFC already has a deal with Comcast for PPV distribution and for Versus, so the move on paper makes a lot of logistical sense.
Put it into perspective with other major sports-based networks. The Yankees generate hundreds of millions of dollars with the YES Network. The Mets have SNY. The Los Angeles Lakers are working with Time Warner Cable to build their platform. Major sports franchises having ownership of a television as part of their business portfolio can be a cash cow. It can invite and attract business investment from a lot of different movers-and-shakers if done correctly. UFC having a television network would allow them to really proclaim ownership of the sport of Mixed Martial Arts and rewrite history for good. The idea of buying into G4 for UFC sounds great because you would have powerful & connected business resources working with you to try to get the channel on all cable & satellite platforms. Right now, G4 is a network that is on pay tiers for most television platforms in the States. Not a lot of people watch the channel.
What’s at stake
By buying into a turnkey TV station that is connected to Comcast/NBC, the hope is that UFC would be able to use all of those resources along with their Facebook, Twitter, & misc. media platforms to get the word out to watch their shows on Versus and on G4. In other words, create enough fan demand to carriers to pick up the G4 network and go from there.
This is a very risky, bold strategy on the part of the UFC if they pull the trigger on the deal and move away from Spike TV. Truth be told, it’s very hard to see how UFC is able to make $170M USD/year from having their own television network as opposed to staying with Spike TV. It’s a lot of money to put on the line, especially for a channel that is not a PPV channel. PPV right now is the core part of UFC’s business model and having a great television rights deal to not only bring in revenue but also bring in exposure to sell PPVs is huge. By putting up money to get a turnkey TV operation in order to spend lots of resources building it up to be your platform, it is going to end up being a resource hog for Zuffa.
The history of sports-based networks is very mixed. WWE’s channel has not panned out the way many thought it would. Comcast has ties with MLB TV, but it’s going to take a while to see how that experiment turns out. NBA TV was largely a failure and was saved by Turner in purchase. The NFL Network has been OK but is still not on a lot of basic cable tiers. If mainstream sports like football, basketball, and baseball struggle with their own channels, then UFC cannot expect an easy ride here in terms of success.
So, what makes YES successful? For a lot of people, the Yankees are baseball. YES also carries the Nets and other TV games for big professional sports teams. UFC is not in the league of the Yankees and it’s not in the league of the major pro-sports leagues in terms of interest. This is a niche sport and likely will remain so for a long time to come. Furthermore, for a UFC channel to work, they would probably need to promote other sports on the network (boxing, kickboxing, etc.) As we’ve seen in recent and past history with the UFC, they only have their heart set on promoting their own brand and not the brand of anyone else no matter how money there truly is to be made.
History is also against UFC in making this turnkey operation work. It is going to cost some cash, even at a cut-rate deal, for Zuffa to buy a controlling interest in the G4 network. Plus, let’s face it: Zuffa is in the MMA business. They are not in the television business as far as having stuffy suits who have spent their lives running TV networks. Yes, if Comcast/NBC still has a minority share in G4, UFC can allow those suits to hang around. With that said, if Comcast/NBC hasn’t been able to make G4 work so far, what makes you think UFC will automatically be able to do so? I’m not suggesting that UFC buying a controlling stake in G4 is the equivalent of Vince McMahon & the XFL or Vince and the WWE restaurant in Times Square, but Zuffa would be a fish out of water here in terms of running a television platform.
It is curious, I should point out, that Dana White has been gung ho about streaming fights on XBox, Roku, Facebook, internet PPV, so and so forth, and now we’re talking about them focusing on a pretty traditional media model here.
Why leaving Spike would be an example of being too clever by half
As we’ve seen during the rise of the UFC, Zuffa’s business behavior in terms of the competition is often rabidly paranoid. If there is any inkling of squashing or buying out a competitor, they will do so. If there’s any chance of snuffing out oxygen for a lower-level organization to use for breathing room, it gets done.
Which is why UFC leaving Spike TV in order for such an uphill challenge like re-branding a turnkey network is a really bad idea.
Whether you believed in his gamble or not, Bjorn Rebney took a fleeting chance with his multi-year Bellator deal on MTV2. MTV2 is a lousy demographic and platform for Bellator to be on and everyone knows it. So, why would he be so desperate to sign such a deal? Because of the possibility that we are currently discussing with UFC leaving Spike.
Bellator, right now, is not a PPV threat for the UFC. Therefore, it’s gone largely under the radar for Zuffa. However, should UFC leave Spike TV, it leaves the door wide open for Bellator to grab that television deal. Spike would be able to pay less money per year in rights fees and Bellator would be able to do the one thing for survival that it needs — attract new outside capital to make the finances work. If you’re a money mark wanting to put money up for the joy ride, are you going to put up cash for a no-name league on MTV2 or are you going to put up cash for a league that’s going places (in your mind) by being on Spike? You know the answer to that.
The demographics for Bellator on Spike would be perfect. I understand what the mentality would be for Zuffa if they saw Spike promoting Bellator. It would be the same mentality that WWE has right now about TNA on Spike, which is that TNA is a loser promotion that can’t sell a show and can’t sell any PPV buys in their life. However, can UFC really say the same thing about Bellator? Bellator shows may be ‘the B-league’ as UFC fans online like to call them, but the shows themselves are largely well-produced and ‘hit’ more often than ‘miss.’ It’s a suitable product, there’s nothing horribly offensive about it. It’s an acceptable replacement for UFC. They’re not in the same league, but Bellator looks fine and comes at a much cheaper price tag for rights fees.
Furthermore, Bellator upgrading from MTV2 to Spike would allow them to build up more stars and eventually make the move to PPV. That would be the ultimate goal, which is to make good money on Spike and make occasionally solid money on PPV. Being a respectable, profitable #2 right now in the MMA space would be great. Most importantly, it would give fighters, agents, fans, and insiders who dread the idea of a one-bodied entity some hope. Some hope of fresh faces, of different production, of fighters getting a chance for exposure when they might be buried underneath Zuffa cards despite winning fights. If MMA is all about star power, Bellator on Spike TV would give fighters a real opportunity for exposure.
I’m not here to suggest that Bellator would draw the same ratings as UFC on Spike — far from it. But what if Bellator drew a 0.7, maybe even a 1.0 rating? That’s a hell of a lot better than what they’re doing on MTV2 right now. And as we’ve learned with UFC before on different platforms, having the right television network with the right demographic makes all the difference in the world. Which is why I think UFC going all-in with NBC/Comcast is a gamble. UFC has ran a few shows on Versus and the Versus demos are not as forgiving as the Spike TV demos. Jon Jones drew a 0.87 rating against Vladimir Matyushenko on the network. Yes, Versus is a sports channel, but it may never have the same kind of demographic that Spike does that appeals to MMA fans.
That’s the big risk here with UFC. If you shift everything to Versus and to G4, will you get the same amount of eyeballs and cash as you would on Spike TV? Not only that, but would you get the right eyeballs on those two networks to drive as many customers to PPV as you currently are doing on Spike?
UFC trying to make G4 into a successful business operation certainly would be a hell of a story. However, there’s just a lot of reasons to be skeptical that everything would fall into the right places to make it work. Zuffa has a lot of smart & brilliant marketing suits at their offices, so you have to be willing to give them some benefit of the doubt in regards to whether or not this could work out.
One final thought — if the talk of UFC leaving Spike to buy a controlling interest in G4 is a bluff by Zuffa to get Spike TV to acquiesce at the bargaining table, I would totally call the bluff if I was Spike and tell Zuffa, ‘vaya con dios.’
New York regulation struggles continue
‘Vaya con dios’ may have been the words said by New York politicians on Wednesday when they tabled potential MMA legislation.
There’s a report that UFC is going to send officials to Albany to try to change some minds. It’s not going to happen. Until Silver is gone from power, the chances of legislation getting passed are small. Right now, UFC is not ready for prime time when it comes to battling the New York political wars. They’ve been behind the curve from the start and no matter how much money they’ve put into the battle, nothing has worked.
UFC is going to have to be on their A-game politically just to get the state politicians to even continue the push for legislation. The more time passes by, the more ammunition the critics (like Silver & Reilly) will use to stop regulation dead in its tracks.
So, when does Joe Rogan start calling the New York politicians ‘
CuntyMcFuckFaces‘ on future UFC broadcasts?