By Zach Arnold | July 10, 2016
The long-rumored sale for UFC has finally happened. Lorenzo Fertitta and the Fertitta family is cashing out. Dana White will remain as the public face of the company. Joe Rogan is likely out as well. The price tag of sale is estimated to be $4 billion dollars. The Fertittas always win. Onto the NFL and Las Vegas next.
As for what it means to new ownership, the television landscape UFC encounters is a far different one than the landscape UFC cashed in on years ago with super agent Ari Emanuel. Emanuel helped the UFC land on Fox and now he’s part of William Morris which has taken over ownership of UFC.
There are two major stories of interest that will impact the future of UFC on American television.
UFC is the only program that consistently draws six-figure ratings on Fox Sports
According to a recent report from Awful Announcing, the UFC is the only program that consistently draws six-figure ratings on the fledgling Fox Sports 1 channel.
Chael Sonnen started out with a bang on Fox Sports 1 and ever since then it’s only been the UFC that has drawn good ratings on the network. Fox Sports poached away Debate King Jamie Horowitz from ESPN and has pushed talk format with Katie Nolan, Clay Travis, Colin Cowherd & Jason Whitlock, and now the new duo of Skip Bayless & Shannon Sharpe. Bayless may be the first non-UFC personality to crack six-figures consistently on Fox Sports but that remains to be seen. Nobody else has been able to accomplish this.
This is both remarkable and scary. UFC fans obviously had little trouble finding Fox Sports. It’s the rest of the network that is a mess. The network has shifted more towards live programming in an attempt to attract more consistent viewers. Copa America viewership was great. The problem is that the live TV audiences are not carrying over to Fox’s shoulder programming. Fox shifted away from Sportscenter-type shows and has now moved to Embrace Debate in order to bring internet flame wars to television. Fox Sports banked on Colin Cowherd’s interview with Donald Trump a few months ago drawing eyeballs and instead they got 81,000 viewers. A Trump speech on a Youtube live streaming channel gets that same number.
Which means UFC is *the* cornerstone for Fox Sports 1 and will remain the cornerstone. Fox needs UFC for its survival to remain on cable & satellite packages if it wants any shot of getting carriage fees. Deals are coming up soon for both Fox and UFC. They need each other badly right now.
The other problem is that UFC is running out of competitive alternatives to Fox Sports 1.
ESPN is shedding households at a scary rate and lost nearly 500,000 households in one month
In a sports weekend full of drama and activity, one story flew under the radar that will carry far more importance than any NBA Summer League game or UFC PPV.
According to Nielsen, ESPN lost over 450,000 TV households in the last month. ESPN still is in 89 million US TV households but the trajectory of their household numbers is declining. Losing 450,000 households in a month is not simply a decline — it’s a five-alarm fire.
Youtube is now expected to get into the sports media landscape by streaming their own sports programming. ESPN has desperately tried to capture cord-cutters through their ESPN App and Sling TV but is losing the overall war. Awful Announcing cites a report claiming that ESPN will try to go Over the Top but without access to NFL or MLB content. What’s the point?
ESPN’s financial model is based entirely on rights fees from cable subscribers regardless of how good or bad their ratings are. They make at least $6 a month from each cable subscriber. $72 a year. Losing a million households in a year equals a loss of more than $70 million USD. If ESPN loses more than a million households in a year, the long-term financial prospects are brutal. If ESPN lost three million households a year, the losses would be over $210 million USD yearly. There is no amount of production cutting that Bristol could do to save costs. They’ve already done their blood letting. They’ve created a preposterous imbalance of paying “talent” like Stephen A. Smith $3 million a year while paying interns on the cheap. At some point, something has to give.
Thanks to ESPN’s profligate spending on the NBA, the NBA salary cap is exploding and marginal basketball players are getting huge contracts because NBA owners thought that installing “max deals” with a salary cap would keep mega-stars from mega-bucks. Instead, ESPN is paying out the ass to keep the NBA and guys like Tim Mozgov are the ones cashing in. Only in America.
The long and the short of it is that ESPN, despite Disney ownership, is suffering from a depressing long-term prognosis. It still makes a lot of money but the gravy train is going to come to an end. It means the golden age of sports league getting monster TV contracts is over. ESPN ditched their boxing series in order to take Al Haymon’s money for an awful televised product. ESPN wants in on UFC but is no longer in a position of strength when compared to Fox Sports. Fox Sports is on a murder-suicide pact with ESPN and will spend Murdoch mad money to keep the UFC.
The next shoe to drop is Disney ownership of ESPN. Do not be surprised if Disney sells ESPN soon.
Conclusion: The sale of the UFC to Ari Emanuel’s enterprise combined with ESPN’s declining fortunes makes Fox Sports largely a lock to retain the television rights to UFC programming.