UFC and ESPN: An All-In Partnership

It’s a very rare thing for a mixed martial arts event to deliver back-to-back “Fight of the Year” candidates in the main and co-main event, but UFC 236 did just that. Israel Adesanya edged out Kelvin Gastelum in a war that will be regarded as one of the greatest middleweight fights of all time, and Dustin Poirier beat Max Holloway in a five-round brawl that led to a combined 359 significant strikes landed -- the second most in Ultimate Fighting Championship history. It was everything a fight fan could ask for, and most likely converted some of the more casual viewers into full-on followers of the sport.

How many people actually paid to see those performances, however, is the real question. Lost in the fanfare of two phenomenal fights, UFC 236 ushered in a new era of UFC pay-per-views being exclusively for purchase through ESPN’s streaming service, ESPN+. Building off of their original partnership, the global MMA powerhouse and the sports broadcasting network revealed the joint venture in a surprise announcement in March for undisclosed financial terms. The new arrangement extends the UFC’s current broadcast rights deal with ESPN from five years to seven, and also includes a provision to keep Dana White on as UFC President for its duration.

For the UFC, the shift in distribution is part of a long-term plan to increase financial stability. As average PPV buy rates have declined over the years, the promotion has been heavily dependent on crossover stars and grudge matches to buoy it’s yearly pay-per-view purchase totals, an income stream that once made up an estimated 45% of total company revenue. Although the original contract with ESPN secured guaranteed money for the organization, the new distribution deal calls for ESPN to pay an upfront licensing fee to the UFC, which reports state could end up being financially equivalent to around 500,000 buys per event. If that is indeed the case, it takes the pressure off of the UFC to produce cards that consistently entice the casual viewer and limits the leverage superstars like Conor McGregor can use against the company based on their drawing power.

In regard to ESPN, the deal comes with considerably more risk. Having lost 15 million subscribers over the past 7 years and owing billions in guaranteed sports rights payments, the Disney-owned affiliate is attempting to pivot by making ESPN+ profitable as fast as it possibly can. While it was revealed that the streaming service is expected to operate at an annual loss of $650 million for both 2019 and 2020, Disney expects ESPN+ to reach profitability in 2023 and have 8 to 12 million subscribers by 2024 with the help of core offerings which include UFC programming. Considering UFC pay-per-views without superstar headliners tend to top out around 350,000 total buys and only 20 percent of UFC 229’s 2.4 million buys were purchased online, however, the onus is on ESPN to market the events in a way that dramatically boosts viewership and helps meet the subscriber forecasts.

The agreement also tethers ESPN, the UFC and their respective holding companies together more tightly than ever before. With Disney+ set to launch this November and rumors of Endeavor going public at the end of the year, the partnership between the UFC and ESPN is likely to be carefully scrutinized by investors and Wall Street analysts in the coming months. If profits continue to rise all around than the possibilities could be endless -- an animated Disney UFC movie, perhaps? -- but if ESPN ends up with disappointing numbers for UFC events, the relationship could go sour fast.

Only time will tell if the new strategy pays off for either company, or how consumers will adapt to the change. With a myriad of social media complaints about ordering UFC 236 and multiple ways to watch the fights illegally, the numbers from the April 12 card will be very revealing, if they’re disclosed at all. One thing is for sure though -- you can expect UFC 236 highlights to be added to the SportsCenter opening any day now.