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Rupert Murdoch is preparing to cash out Fox assets and UFC better respond fast
By Zach Arnold | December 5, 2017
Bulls make money, bears make money, and pigs get slaughtered. Old man Rupert Murdoch isn’t going to go to his grave getting slaughtered.
CNBC is reporting that final touches are being negotiated for a $60 billion USD Fox asset sale to Disney. The reasons for both parties to make such a monumental content deal are obvious.
But what does it mean for UFC? They have to get a new television contract soon and so far, media networks aren’t producing the kind of cash offers Ari Emanuel is supposedly looking for. Which is why I continue to say that Amazon is a Best of Breed long-term play for UFC in a content package-split. Best digital platform distributor and best at monetizing Fight Pass.
The future of Fox & ESPN in sports programming
Seven months ago, Fox Sports numbers guy/fixer Michael Mulvihill was gleeful about how much of a cash cow Regional Sports Networks were for Fox Sports. Mulvihill was also gleeful about the NFL being largely bulletproof in the new digital economy and how UFC was a great programming value because fights can combat the problem of “time poverty.”
Today, the NFL’s major network partners are taking a hit with sponsors and will either have to do make-goods or eat losses. Fox Sports is reportedly offering $200 million a year to UFC when Ari Emanuel wants $400-450 million a year. And now the vaunted RSN chain that Mulvihill said was a cash cow for Fox Sports is about to be sold to Disney/ESPN because Rupert Murdoch is bearish on sports due to rising rights fees.
Rupert Murdoch gets to cash out while he’s still flexing his financial muscle. As for Disney, they are about to load up their ESPN streaming service in 2018 with a massive buffet of sports programming rights thanks to acquiring Fox’s RSNs. ESPN is continuing to pay a premium to rent out sports programming. They need to get in the game of owning actual content. Some of the RSNs have sports team ownership. Can ESPN maintain long-term relationships with the RSNs (like the Yankees/YES)? If they can, they have a shot. If they can’t, they’re in trouble.
Disney acquiring all of the Fox RSNs is also a hedge if they end up losing Monday Night Football and need to replace the NFL with MLB or NHL content. It’s apples and oranges but the premium that ESPN has paid for the NFL has been rather costly.
The future of UFC
Fox Sports and UFC really need each other. It’s the right marriage. FS1 has no real purpose for existing without regular UFC content. UFC needs Fox Sports and its resources. However, we may be heading towards irreconcilable differences over issues such as production. Remember when Lorenzo Fertitta was criticized for wanting to keep UFC production in-house in order to maintain editorial control? Zuffa knows the product, so let them produce the product. Then came the chorus that Zuffa wasn’t a respectable sports league because they wouldn’t cede editorial or production control to a sports network. The Fox Sports deal arrived and a blended marriage of resources came about.
Now the major television players are looking to offload production costs. ESPN just fired 140 behind-the-scenes employees last week. Under Lorenzo’s ownership, UFC was happy to take on production. Under Ari Emanuel’s new ownership, UFC has reportedly being itching to offload production onto whoever their next television partner will be. If the marriage with Fox doesn’t survive, then a marriage with Amazon will require UFC to go back to in-house production. Amazon wants to stream, not produce a sports product. Amazon got the best of all worlds with NFL Thursday Night Football. If UFC wants to play with Amazon, UFC will have to go back to their production roots to make it work.
There are still too many positive reasons for the Fox Sports/UFC marriage to continue but don’t be surprised if Fox wants a new arrangement after cashing out a big chunk of their sporting assets.
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