Friday, August 19, 2011

UFC/FOX TV Deal Analysis

The UFC and FOX had a major press conference yesterday to announce their new television contract. According to Sports Business Daily and ESPN the deal is for seven years and 90 million dollars. Dana White announced that the first "UFC on FOX" live event is scheduled for November 12, 2011. The deal calls for four major UFC events on FOX network television a year, a long with six "UFC Fight Night" events on FX cable television. Also, "The Ultimate Fighter" reality TV series will be on FX on Friday nights starting in 2012 and will be live instead of Spike's condensed six weeks of filming. Included is the agreement to have some Prelim fights and other UFC related broadcasts ("UFC Countdown", "UFC Primetime", "UFC Unleashed", "Best of Pride" etc.) on FX and Fuel TV.

Now that I have given you the contractual basics, I want to look at why this deal happened and its affect not just on Mixed Martial Arts but on the Professional Sports landscape. As someone who has worked in different areas of media (broadcast and print) I want to break this down for everyone in a unique way.

FOX has been looking to boost their ratings for the last few years. Popular shows such as "24" and "The Shield" are no longer on the air and even "Rescue Me" is coming to an end on FX. Loosing such staple programming has been weakness for FOX because they have not been able to introduce much program to replace these popular programs. Also, the loss of traction by programs in the ratings such as "Bones" and "House" has put FOX in the odd position of trying to keep up in many head to head matchups with the seasonal programming on CBS and ABC. In fact, there have been weeks in which some of the popular USA network shows have beat out FOX and FX programming in the ratings. In recent years networks have leaned on their sports programming not just for revenue and ratings but for promotion of their regular television programming. This is something CBS has been very successful with during NFL and college basketball seasons. FOX usually gets some boost from NFL season promotions but there has been mixed reviews from MLB and NASCAR broadcasts. Part of the problem with those two sports is that with baseball there is no consistency for the viewer in broadcast times (some weeks its 1pm ET, other weeks it 3 or 4pm ET) while NASCAR is considered a "niche" mainstream sport whose viewing demographics are limited in terms of age, gender, and financial class.

When FOX lost to NBC in recent bids for Olympic coverage, they knew they needed to gain a new televised sports franchise to grab ahold of. UFC expiring contracts with Spike TV and Versus the perfect opportunity for FOX to gain access to the 18-36 year old male demographic was there for the taking. Average age of viewership for other sports programming is at least ten years older in age and those viewing customers are more set in their ways in terms of products they buy and the kinds of programming they will watch on TV. The younger, the better in the media world since many young people are still flexible in terms of what is new whether the product is a television show or beverage FOX had a history already in place with the UFC: UFC 37.5 was broadcast on FOX Sports' "Best Damn Sports Show Period" and was the first mixed martial arts event broadcast on cable television. During the Early 2000's, FSN's "Best Damn Sports Show Period" frequently covered MMA fighters from PRIDE, UFC, and IFL. But since the early to mid 2000's UFC average viewership has almost tripled and in 2011 the time was now for FOX to get ahold of viewership that was being under served.

Consider this: in 2011 UFC Prelim live broadcasts on Spike TV averaged 1,467,000 viewers per showing and on ION Television the average viewership was 771,000. Now that may sound small, but it is actually very significant because both Spike and ION did little promoting of these Prelim broadcasts and neither channel had the big name parent company to help promote any of their daily or special programming. The UFC was generating viewership for programs such the Prelim Live fights, "Best of Pride", "UFC Countdown" and others shows basically through Twitter, Facebook, their website, and email newsletters. By broadcast media standards that is very weak promotion and to get those kinds of numbers means that there is vast unlocked potential in viewership on cable and network television for UFC programming. Also realize that "UFC on Versus 5" gained an average viewership of 779,000 and the peak was near a million during the Hardy versus Lytle main event fight. They got this number on a traditionally poor television viewing night (Sunday) in the middle of the second worst time of year for ratings (Summer time) on a channel that is available in about 30 percent FEWER homes in North American than FX or Spike TV.

So this deal is a major win programming wise and viewership wise for FOX. For the UFC this is their big time step into competing with the other major professional sports organizations on Network Television. Unlike the CBS ventures with Elite XC and Strikeforce, the UFC has a very deep roster of excellent MMA talent and mainstream recognizable fighters. Also, Joe Rogan outside of MMA is still well-known for his stints on the TV comedy series "Friends" and his time hosting the reality show "Fear Factor". Being the top organization in a sports field also has the perks of being able to say that your champions and top-level athletes are the very best in the world.

The UFC though will suffer the same network television growing pains of other "non-team sport" organizations such as NASCAR and PGA because their potential is only as good as the stars who shine on the big stage. Golf has suffered tremendously in the ratings without Tiger Woods and with seven straight Major Championships won by first time Major winners the casual fans have no clue who is who and have no incentive to watch. NASCAR's two biggest names, Dale Earnhardt Jr. and Jeff Gordon, have not been big winners over the last few years and the same guy has won the last five straight overall Championships and Jimmie Johnson has typically done so in undramatic fashion. What the UFC has going for them that these other sports do not is they have more than a couple major big names and have numerous other rising stars that can be promoted and built up.

Also, the timing of this announcement was perfect because FOX played UFC promos (commercials that promote programming) a few times during the Eagles-Steelers Preseason showdown and they can spend the rest of the Pre season leading into the NFL regular season promoting the November 12th UFC on FOX event. This is significant because the NFL is the top sport with crossover viewership for MMA. Surveys show that NFL viewers are the most likely to watch MMA than any other Professional Sports fan and according to a Twitter study 61 percent of UFC fans also follow NFL players and reporters on twitter also.

Lastly, this is big for Mixed Martial Arts financially. Once Spike TV and Versus no longer have rights to UFC or WEC programming then those channels are free to pursue other MMA organizations. Bellator could easily move from MTV2 to Spike TV or Versus and fill the slots where the UFC had been without the networks skipping a beat. TJ Tompson of ProElite MMA has talked about making a deal with a TV network once the organization gets more events set up. The UFC being broadcast on the big stage opens broadcasting opportunities for other orgnanizations just like the NFL's popularity has opened up financial and television opportunities for other football organizations such as AFL (Arena Football League), CFL (Canadian Football League), LFL (Lingerie Football League), and the upstart USFL (United States Football League) that had limited success in the 1980's. And with more television exposure there are more marketing and promotional opportunities for MMA fighters. Remember the old days when was a major fighter sponsor? Now we have Budweiser and Bud Light commercials with Anderson Silva and Jon Jones. The next step is for Verizon or AT&T to sponsor the UFC instead of Boost Mobile or have Nike expand their clothing lines to MMA.

The future is now for all of MMA. The mainstream media cannot just ignore it anymore as a rogue activity and it's not like the movie "Bloodsport" with fights occurring in underground tournaments with "go for the kill" calls. These are athletes who have real training backgrounds and compete to make a living. They are no less athletes than the pros who compete in the NFL, NBA, MLB, or NHL. The UFC has done promotion and broadcasting by themselves for years, now they have a major network standing by their side. Like the Bud Light commercial says, "Here we go!"

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