The new BT Sport deal: precursor of the post-Zuffa world?

The UFC recently renewed its TV deal with BT Sport- the first major media rights deal to come to light since the WME-IMG sale,…

By: Phil Mackenzie | 7 years ago
The new BT Sport deal: precursor of the post-Zuffa world?
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The UFC recently renewed its TV deal with BT Sport– the first major media rights deal to come to light since the WME-IMG sale, securing its broadcasting rights across the UK and Ireland. Phil Mackenzie talks to Callum McCarthy of about the deal in light of what it means for the UFC’s recent purchase and how it will generate value for its new owners

So, just to get it started, can you give us a brief rundown of who you are and what you do?

My name is Callum McCarthy and I’m a reporter for TV Sports Markets, a sports industry newsletter about broadcast rights and nothing else. Our job is to pick apart broadcast deals, find out how much they’re worth and how long they run for, as well as digging into the process of how those rights were sold.

Could you give an overview of what the global market for those broadcast rights looks like? There’s been some indications that companies like Fox Sports and ESPN have been cutting costs. Is the market still as hot it was?

The market is definitely still as hot as it was, but rights-holders (like the UFC) are having to get creative when selling their content to broadcasters to keep securing big increases in price. Mammoth 20-year deals are being done in the US because broadcasters are frightened of a future without top-level sport on their channel. Along with the news, sport is the only kind of programming that has to be watched live and that’s incredibly important for advertisers – they know you skip the adverts when you record a show. Pay-television is definitely more important than commercial channels when it comes to media rights revenue.

Rights-holders can also split their content across multiple broadcasters to try and maximise its value. This works well for big properties like the Premier League or the NFL, where demand is high.

You also have sports OTT offerings creeping into various markets. The Perform Group are buying up a lot of world-class sport in Germany and Japan with the hope of creating a Netflix-style one-stop-shop for sport in each country. That’s something we’re all keeping an eye on.

This represents the first major TV deal for the UFC since the WME-IMG sale was announced, and TV fees are a large part (perhaps the largest) of what the buyout hinged upon in the first place. Essentially, there are three major media revenue streams available to the UFC: Of the first two, pay-per-views are too unreliable, and Fight Pass is too small. The money-maker of the deal is in the TV rights.

So, can we can put our finger in the air, and maybe get a feel from this deal about how UFC deals will go in future? I know we can’t get exact numbers, but from what I’m hearing BT is now paying substantially more for the rights.

It’s impossible to say whether a deal in the UK & Ireland can be a litmus test for future deals in the US and Brazil because those markets are so different, but the UFC has earned more than double the amount they were previously getting per annum from BT.

And yes, you’re absolutely right about IMG seeing a lot of potential in future income from media rights. They’re one of the two biggest media-rights agencies in the world and have a wealth of experience and expertise in selling to broadcasters. They’ll have a very good idea how much they can get out of the US market after the Fox deal expires in 2018 (hint: It’ll be an eyewatering amount of money), and they might well look at moving away from the pay-per-view business to get the most out of that deal.

That said, you want to keep your stars on PPV if you can. PPV generally works best as a once-every-so-often proposition in the fight business, reserved for special events and fighters that have reached or are approaching stardom. I know BT are working on that capability to capitalise on Conor and Michael while they’re hot, but we’ll see whether that gets put into place any time soon.

Can you maybe give a bit of an overview of what the UK market looks like for our foreign readers? The major cable and terrestrial players?

At the top of the operator food chain you have Sky. They have a triple-play right now (TV, broadband and landline) and are developing a mobile network to go live at the end of the year. They’re the kings of the UK pay-television market and have the biggest and most popular sports channels in the market. Next up you have Virgin Media with their quad-play (TV, broadband, mobile and landline). They own no channels – they’re just a platform. Sky Sports and BT Sport, the two main UK pay-television broadcasters, are available on both platforms.

BT have their own IPTV pay-television service but doesn’t have anywhere near as many subscribers. You can’t get all the Sky Sports channels on it and it just isn’t on the level of its two main rivals.

Sports channel-wise, it’s all about Sky and BT. Those two bouquets of channels have pretty much everything worth watching, with the exception of tennis grand slams on Eurosport. As for terrestrial (i.e. free) players, the BBC, ITV, Channel 4 and Channel 5 remain the biggest free-to-air channels in the market. The BBC’s budget for sport has been slashed, so they’re consolidating their portfolio to the sport they really need – Premier League highlights, Wimbledon, and huge sporting events like the Olympics and international football tournaments. ITV have a deal for all of England’s matches outside of major tournaments and not a lot else, while Channel 4 broadcast half of the Formula 1 season and not a lot else.

It’s a pretty streamlined market and our competition authority is fairly strong. It’s ensured Sky hasn’t been able to completely corner the market and, as a result, the UFC is able to leverage competition between BT and Sky to get the money it deserves.

Let’s talk about how MMA and the UFC specifically is consumed in the UK and what it means for the product- GMT is 5 hours ahead of Eastern Time. The average card is watched with a main start time of 3am. That’s… almost uniquely awful? If the draw of sports is the live experience, how has the UFC managed to renegotiate for good terms with such an inconvenient live product?

Yeah, staying up until 6am to watch Tyron Woodley starch Robbie Lawler is no way to live your life. I am told this on a weekly basis by friends, parents, bosses… you name it. That said, there is something special about the all-nighter that goes with it. You can throw parties around an event and, even when you’re sat there alone with a pizza at 4am, you can dredge up some smug hipster satisfaction knowing you’re one of the only crazy people in the country staying awake for Jake Ellenberger.

It’s only tens of thousands of us living that life, however. The live audience for Conor vs. Nate peaked at about 350,000, which is really impressive for 5am. But most Fight Nights and PPVs starting at 3am will average between 30,000 and 50,000 viewers. More often than not, there are larger live UK audiences for MLS than the UFC.

As for how the UFC got around this problem, they gave BT everything they’d missed out on in their previous deal? The original contract was signed before Fight Pass came into existence, so a lot of events – many of them in great timezones for a UK audience – fell outside of BT’s deal. All the Fight Pass exclusives and European events had to be bought separately, which BT wasn’t too happy about. This time around, BT will get everything included. Ratings for UFC London in 2014 – that one where Jimi Manuwa got mauled – averaged 550,000 live viewers on Channel 5. They’ll be hoping the ratings from events in Europe will make their spend worthwhile.

There was also the spectre of competition from Sky, which the UFC leveraged to get a higher price. There was a stalemate between BT and the UFC as originally they couldn’t agree on a price. Sky certainly took a closer look at acquiring UFC rights this time around and will probably make a bigger bid once BT’s deal expires at the end of 2018.

The Premier League is pulling down record amounts of revenue in foreign broadcasting fees, notably far more than any foreign league, even though British footballers are demonstrably no good. Is it an underrated part of the UFC’s appeal that it’s English language?

Only 35% of players in the Premier League are from the UK. True to form, we’ve taken the best everyone else has to offer and claimed it as our own. We should probably do that with Alistair Overeem, too.

Also true to form, we expect anything we watch to be English-language. If it isn’t, it wouldn’t be aired on UK television. I’d also hesitate to call the UFC solely English-language – they’ve had a Spanish track for as long as I can remember and a number of nations now have their own commentary teams. This is something to watch for post-IMG takeover: The globalisation of the product. IMG have paid $4bn for the company, but I’d be willing to bet they’ll invest a lot more over the coming years to take the UFC into markets where it’s currently struggling to break through. They’ll tailor the product accordingly in those markets – a bad dub track won’t cut it anywhere these days.

According to Simon Head of The Sun:

“Under the new Premier League rights deals that come into effect this season, BT Sport has rights to 36 Saturday Premier League matches, with 28 of them at the 5:30pm timeslot, which would provide a perfect platform from which to promote UFC events later that evening.”

Do you think we’ll be seeing more focus on the UFC from BT?

This deal was negotiated by the UFC’s EMEA team, but I know Dana and Lorenzo have had a personal hand in ensuring the UFC’s deal in the UK is going to ensure the growth of the sport and the product. BT would never have got these rights if they didn’t make the UFC feel comfortable knowing it’ll get the support it needs, especially given the dreadful timezones of most events.

Over the past year the UFC has featured heavily in all of BT Sport’s marketing. They’re pushing it as the sport of social media, millennials and just about anything else associated with what’s happening now and in the near future. It’s something the UFC seem to be very pleased with, but BT know they need to push the UFC if they want to make any kind of return on it. The UFC is a fantastic marketing tool with a halo effect unlike any other sports property at the moment, but it’ll be a bad deal for BT if they don’t use everything at their disposal to get bums on sofas at 3am.

The UFC has been investing in Fight Pass – we’ve seen visible recent improvements in both the UI and search, and the quality of fights on the platform. Are there two prongs to developing Fight Pass? I.e. its not simply building a revenue stream, but a powerful negotiating tool in and of itself when it comes to TV rights?

It’ll be very useful in markets where there’s no competition. BT were always favourite to take the rights in the UK, but without Sky popping up with a last-minute bid the UFC would have ended up with a few million pounds less per-year than otherwise. The flip side to that? They probably would have held some events back for Fight Pass in the UK and tried to make up their money that way instead.

It’s a great tool for the UFC to ensure they get the right amount of money for the right amount of content. If they’re being lowballed by a broadcaster they can always beef up Fight Pass with content they’ve held back from a broadcast deal and market it heavily on a fight-by-fight basis in that country. They did a great job in London for Bisping vs. Silva – that was on Fight Pass only in the UK and there were billboards all over the London Underground. It really got people talking.

Aside from Fight Pass, they can always sell individual events to free-to-air broadcasters to maximise exposure and sponsorship income. The UFC are very crafty when it comes to getting what they want from broadcaster, but if they can’t get the right money and support from a broadcaster they’ve given themselves one more option to fall back on.

So just to wrap up, do you have any final predictions or interesting markers to look for in the development of sports media in general or the UFC in particular?

Sports media is definitely shifting towards social media and OTT platforms. Young whippersnappers like myself are far less likely to watch linear television and rights-holders are well aware of this. It’s why Twitter has been able to do live-streaming deals with the NFL, NHL and MLB. To the UFC’s credit, they were the first major sports property to exploit social media as a broadcasting platform. Their Facebook preliminary card was before its time and, in hindsight, might have been an idea worth sticking with.

In the near future, I don’t foresee the UFC switching to a digital-first strategy like the WWE, but IMG will make sure it’s ready to adapt to changes in each market. Sports broadcasting in China is being quickly dominated by digital players since the broadcast sector was deregulated, and that’s going to be IMG’s greatest challenge in the immediacy. There’s a lot of money to be made from Chinese platforms desperate to acquire blue-chip properties. A good deal there will help the UFC in its battle with ONE FC for Asia.

In my opinion, making the UFC less US-centric will push mixed martial arts into the mainstream in Europe, Asia and Latin America, and IMG are the company to oversee that. Fighters like McGregor, Bisping and Gustafsson are such huge draws in their home countries that it almost feels like a wasted opportunity when they fight in Vegas. The UFC used their Brazilian stars perfectly by promoting them in their home country and they got a huge broadcast deal with Globo as a result.

The English and Irish are experts in taking over foreign lands for sporting events, but if they only had to travel down the road to see Conor or Michael defend a world title in a historic stadium like Croke Park or Old Trafford… I really can’t imagine what those cities would look like during fight week. No one would go to work. Mixed martial arts would forever be etched into that city’s sporting identity and BT would be a very, very happy broadcaster.

Similarly, Joanna Jedrzejczyk and Karolina Kowalciewicz could draw a ridiculous audience in Poland with the right undercard. Big events like that leave a legacy, both culturally and financially, and I hope we see many, many more of them.

Thanks so much for taking the time!

You can find Callum on Twitter at @clmmcrthy

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Phil Mackenzie
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