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Will ESPN or Fox Sports buy UFC or WWE to survive on cable?

By Zach Arnold | September 26, 2017

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The financial collapse of ESPN is a direct result of escalating television contracts with the NFL, NBA, and college football. ESPN builds shoulder programming around these television properties that they rent but do not maintain a piece of ownership in.

Fox Sports is in the same boat. It has a very close relationship with UFC but does not own a piece of the company. It has not created its own sports properties. It rents programming from the major sports leagues.

With Amazon, Netflix, Twitter, Facebook, and other technology companies racing to outbid the big boys for content deals, content ownership means the difference between survival and life support.

ESPN skeptic Clay Travis recently noted a business dispute between ESPN/Disney and Altice, the new owners of Cablevision and Suddenlink. ESPN is fighting to stay on Cablevision in the New York market. With cord cutting and cord shaving, the price of keeping ESPN on everyone’s monthly cable bill is becoming burdensome. A significant amount of cable customers would prefer a skinny bundle without ESPN. This has pushed Disney into forming their own OTT (over the top) platform in 2018 for ESPN. The flaw with this platform is that ESPN cannot air all of its cable programming on this channel due to various contractual obligations.

Twitter has rights to NFL games. Amazon is aiming for British rights to Premier League contests. Tech companies want to get into the distribution game, especially if they can offload the production costs to the leagues producing the content or to a third party to minimize financial risk.

UFC is currently negotiating with Fox Sports. It is very likely that this marriage will continue because Fox Sports 1’s future would be vulnerable with cable/satellite providers if FS1 wasn’t the primary home of UFC content.

UFC has reportedly requested a significant increase in rights fees. If Fox Sports agrees to a new rights deal, they will be substantially increasing their costs to rent programming. If UFC gets their rights fees extended, is the trade-off giving up a piece of ownership to Fox?

Clay Travis argues that ESPN and Fox Sports will need to start purchasing programming vehicles in order to survive the changing media landscape:

“[ESPN’s] ratings are already collapsing. They don’t produce original content that people care about and they’re in the process of having to wildly overpay or lose the rights that they do have. In the years ahead, ESPN is a shell of a company. They are dead. I believe that Amazon and Facebook and Apple and some of these companies actually decide to come in. That they’ll make a massive impact.

“Here’s the other thing. Why would anybody buy ESPN? They have a distribution model that’s rapidly collapsing and they don’t actually own anything. If I were in the business right now, what I would be trying to do is buy up the UFC. If I were Fox, I would have bought the UFC so we don’t have to rent it forever. I would go buy the WWE.”

One of the great mysteries about Fox Sports is why they didn’t build Fox Sports 1 around a sports league or company that they had ownership in. Most cable sports networks in America have built around programming such as professional wrestling. It was the template that Spike TV ultimately used to build UFC into the juggernaut it is now.

If Clay Travis is right about ESPN needing to buy UFC or WWE in order to survive, will Disney convince shareholders it’s the right path for survival? If you buy UFC, you’re buying a high-risk business that would require keeping Dana White around. Plus, Disney ownership of UFC would be harder to maintain if the Ali Act eventually gets amended to cover Mixed Martial Arts.

The more solid argument for a Disney target acquisition would be WWE. WWE is a medium-to-high risk industry but it is also an industry with a built-in streaming platform that has 1.5 million subscribers. It’s the kind of acquisition that works both on tradition cable television and online. WWE is in the cat bird’s seat.

Topics: Media, Pro-Wrestling, UFC, WWE, Zach Arnold | 1 Comment » | Permalink | Trackback |

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