LA Times: UFC TV rights go begging in test for Ari Emanuel
No buyer has stepped up to pay the $300 million to $400 million a year Endeavor wants, people close to the talks said.
The Ultimate Fighting Championship was founded in 1993, and sold for just $2 million in 2001 to casino magnates Lorenzo and Frank Fertitta, and their friend Dana White, who put the deal together. It sold in 2016 for $4 billion to WME-IMG (now Endeavor), the Ari Emmanuel-run talent agency. It was the largest sale of a sports property in history.
There was a widespread expectation that the new owners would take things to the next level. That hasn’t happened. While the company had it’s best financial year ever in 2017, and there were some tremendous improvements like the Performance Institute, it’s tough to point to a major change that was not already in the process when they acquired the company.
Another baffling question was how they were going to cover the note. A 6% return on $4 billion would be about $250 million per year. How to make 250 million profit on a 600 million gross is unknown. The key apparently was signing a radically better deal for US television rights. That however is apparently not going as expected.
The LA Times has the story.
No buyer has stepped up to pay the $300 million to $400 million a year Endeavor wants, people close to the talks said. 21st Century Fox Inc., which has the contract now, has expressed interest in keeping the rights, and Endeavor is waiting to see if the company will increase its estimated $200 million bid, said the people, who asked not to be identified discussing the negotiations.
The negotiations are a big test for sports rights owners, who have managed to squeeze higher and higher fees out of TV networks for years. In January, Fox Inc. agreed to pay a record $3 billion for five-year rights to broadcast Thursday night NFL games. CBS and NBC, which had the games previously, concluded they couldn’t make money at the old rates. Meanwhile, audiences for live sports continue to shrink, and the price for England’s Premiere League soccer fell in the latest auction.
“It’s unlucky timing,” said Michael Colangelo, assistant director of the Sports Business Institute at USC. “We see cord-cutters and people moving to digital. It’s a very weird time.”
Buying the UFC was Emanuel’s biggest investment in his bid to transform Endeavor from a talent agency representing stars like Matt Damon into a media colossus with live events, streaming services, athletes and models all over the world.
Sports rights analysts say the company isn’t dependent on one market to justify the purchase price. The sport has a large following overseas, especially in Brazil, and has scored significant increases in deals in the Middle East and Latin America.
At the moment, UFC lacks a star of the magnitude of Ronda Rousey or Conor McGregor, according to Colangelo, and has spread itself thin. The most appealing matches go on pay-per-view, leaving less for Fox. But the league should bounce back. “The UFC is a cyclical business,” he said.
Endeavor is talking to other suitors, including tech and phone companies and traditional TV players, the people said. Amazon.com Inc. bought non-exclusive rights to pay-per-view matches, and Emanuel could split the other rights between a technology company and a media company. Facebook Inc., YouTube and Twitter Inc. have all acquired sports rights in the past couple years.
Emanuel would prefer one big deal that includes TV, which still offers the largest live audiences, two of the people said. Major media companies are creating sports streaming services to complement their TV networks. Disney is about to introduce ESPN-plus, while Turner and Fox are exploring new ventures as well. CBS Corp. also launched an online sports service last month.
Turner chiefs John Martin and David Levy have told several people they are interested in UFC, but their ability to bid is partly hampered by an ongoing government challenge to AT&T Inc.’s acquisition of their parent company Time Warner Inc. ESPN declined to comment, though several people familiar with the company’s plans said it was bidding.
“Live events are at a premium in the new media industry, and the UFC has a lot of them,” said Lee Berke, a sports media consultant who has worked with more than 30 professional sports team. “Even with the struggles on some platforms, overall they’ll still do very well.”