Yesterday's announcement that ESPN had signed a new deal with Major League Baseball worth roughly $5.6 billion (approx. $700 million a year) resulted in many in the MMA world, both fans and media, mentioning what a steal the UFC deal is for Fox.
One example was a Mike Chiappetta tweet stating "ESPN just signed a deal to broadcast MLB, 8 years, $5.6 billion. And it's not even exclusive. UFC on FOX rights a bargain by comparison."
Now, I don't mean to single out Mike as he was far from the only person making similar statements, and I understand the point he was trying to make. But, I think it's important to examine the circumstances that make an exclusive deal with the UFC (which was reported to be for $90 million a year) worth about 13% as much as a non-exclusive MLB deal.
ESPN Did Overpay for the Deal, But Did It for a Reason
It's important to note right off the bat that nothing has happened in the past few years in terms of ratings to cause a jump from $306 mil/year in the old ESPN deal to the new $700 mil/year. Weekly ratings still fluctuate based on the teams involved in the games ESPN airs.
But what there is, is competition.
MLB has deals with ESPN, Fox and Turner, not to mention the myriad of local coverage deals for individual teams. But, more importantly than the existing deals, is the fact that NBC Sports is attempting to become a player. When NBC launched Versus, it was with the goal of creating a network that could provide competition for ESPN. Pretty much everything at Versus was bungled and the network felt less than premier.
With the name change to NBC Sports, the network is re-positioning itself once again. But they need major content, not just schedule fillers like the rumored World Series of MMA deal would provide. It's been well known that the network intends on getting an MLB deal, and they probably still will. But ESPN ate up a lot of programming with their deal and blocked the impact of such a move. Yes, they overpaid, but they did it to hamper possible competition.
This isn't a situation the UFC really has. Their demands to control production and a lack of interest in getting in the fight game from most other networks mean that Fox is only bidding with the UFC, not against competitors.
That is why it blows my mind when Fox, FX and Fuel ratings come out and people say things like "ratings don't matter" or "it's more important where it ranked than what the overall viewership number was." If the UFC can establish themselves as top-tier programming that draws a large and consistent audience, they can get other networks potentially interested down the road when the Fox deal ends. Once networks are bidding against each other for UFC programming, the amount of money the UFC will make off of that deal will skyrocket. As TV deals become worth more money, THAT is the point at which you talk about moving away from the PPV model.
MLB Provides ESPN With Valuable Weekly Programming
Throughout the entire MLB season, games can be watched on ESPN on Mondays, Wednesdays and, most importantly, Sundays. The Sunday game provides a bit of marquee programming every week which means it doesn't have the obligation that the UFC has to blow everyone away the few times it holds major events on Fox or FX. From a quick look through ratings info, it looks like the last 10 weeks of Sunday Night Baseball are averaging 2,108,000 viewers per week with a high of a little over 3,000,000 and a low of a little over 1,700,000.
Those aren't mindblowing numbers by any means, but they are steady, easy to broadcast programming that can be shown every week with direct appeal to at least two markets and to general MLB fans. It's not the "big event night" type programming of the UFC and it's not trailing the numbers that the UFC's last two efforts on Fox have brought in anyway.
The Kind Of Sponsors Matter
MLB's big name official sponsors: Anheuser-Busch, Bank of America, Bayer, Captain Morgan, Citi, Firestone, Frito-Lay, Gatorade, General Motors, Intel, Holiday Inn, MasterCard, Nike, Pepsi, Scotts, Sprint, State Farm, U.S. Army
UFC's big name sponsors: Anheuser-Busch, Harley Davidson, SafeAuto, Corn Nuts
The type of companies that are working with a sporting organization are the type of companies that will buy advertising for that organization's broadcasts. Major sporting leagues like MLB, NFL or NBA have marquee sponsors that will spend significant advertising dollars. That's of value to a network.
And even Anheuser-Busch has had to issue a statement that the UFC needs to monitor their fighter behavior or they "will act," which means a threat of losing out on a big sponsor. That fighter behavior and Dana White's sometimes...less than desirable public behavior isn't always an attractive thing when it comes time for companies to associate themselves with the UFC brand.
And there is, of course, the fact that there is a natural limit to the appeal, both to the public and to sponsors, of two men fighting inside a cage.
Ultimately, the takeaway here should be that the UFC and MLB deals can be compared for a quick realization that Fox didn't really get "a steal." They paid what the market dictated for the current deal to get a handful of shows that haven't yet proven to draw consistent "major event" ratings, had no other networks banging down the door to get them and don't have an immediate relationship with a long list of marquee advertisers.
The UFC is in a tough spot in the coming years as they can't cut from the PPV model under their existing TV deal, so they need to keep their biggest fights on PPV. But they should be aiming to do the biggest ratings possible on their TV shows to increase their appeal and hopefully drive up the market when this deal expires. They can't yet abandon the PPV model as so many suggest but they also can't treat Fox shows like they're second rate going forward. These are tricky waters and we'll have to see exactly how the UFC manages to navigate them.