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Winner, loser on UFC's groundbreaking pay-per-view deal

It was only a few months ago when television advertising with the famous boxing ring announcer Michael Buffer and Canelo Alvarez of Sports' leading North American drawing card talked about DAZN's $ 9.99 prize and how it would be about death -perspective.

Given that the UFC generated an estimated 5,515,000 pay-per-view purchases in 2018, which generated approximately $ 185 million for the promotion, including the biggest show in the company's history in October, the The idea that pay-per-view was almost dead somewhere seemed ridiculous.

And to a certain extent the new deal announced on Monday with ESPN + and UFC seems to guarantee that nothing like this will happen until 2025. But the announcement was still a seismic shift in the industry. The big winner in this deal seems to be the UFC, which, by receiving a guaranteed flat fee from ESPN +, is insured against future declines in the pay-per-view approach or inability to draw new key points about the draw dispose of current stars like Conor McGregor or Jon Jones.

Although the exact lump sum was not published, industry insiders have indicated that the number is in line with UFC's salary payments in recent years. A second component of the deal is that the UFC will see an increase in this revenue as revenue rises above this average. The biggest losers are the pay-per-view industry for television, especially in the areas of successor, DirecTV and Dish Network. The three companies that dominated the pay-per-view industry for decades are now dead, with the exception of some boxing shows with secondary draw, and wrestling fans who have not signed up for cheaper streaming services. event business.

Sports Business Journal's John Ourand reported that the deal was triggered by the DirecTV / UFC negotiations after deals with all three companies expired at the end of the year. DirecTV did not market any UFC 234 at all, and until a few days before the show, he did not even plan to carry it until both sides had agreed to a last-minute deal just for the show. This was continued earlier this month by UFC 235.

But with the deal, all three are immediately cut off, as only subscribers to ESPN + can order the show in the US, which begins on April 1

3 in UFC 236 in Atlanta.

According to Ourand, the UFC urged to change the turnover split from 50/50 to 65/35. Theoretically, the UFC's position was stronger than ever: stars like Alvarez and Gennady Golovkin were drawn from the pay-per-view area by DAZN's huge guarantees. The UFC regularly provided monthly monthly events to pay-per-view TV companies that were not impacted by streaming at a much lower price, as was the case with World Wrestling Entertainment since 2014, and prices were previously $ 60. Dollars his monthly streaming package, which costs $ 9.99 per month.

DirecTV would not move away from the 50/50 split. Ourand also reported that UFC and InDemand, which handles the pay-per-view business for Americans with traditional cable television providers such as Comcast and Verizon, have come to a new deal. UFC had not yet signed the contract. The new deal is for the US only. Pay-per-view is mostly ordered via cable companies in Canada and Australia.

For UFC fans who have adapted to streaming, the change is small. The pay-per-view price has dropped from $ 64.95 to $ 59.95, but ESPN + is a $ 4.99 monthly service, which makes the difference. In the past, the streaming pay-per-view process has significantly more transmission problems than television. Even recently, when the UFC has offered pay-per-views through various streaming methods as well as through television, the split is typically 75 percent or more to arrange the shows on traditional television.

There are some people who do this easily With televisions that can not order shows on the internet, dealing with TV shows is more enjoyable, and there are people in rural areas who do not have enough power to enjoy this kind of live Events, although this number is likely to fade. However, with the WWE example, there were still about 20 percent of the previous pay-per-view orders ordered by television broadcasters for $ 59.95 until the company prepayed its pay-per-view figures Over a year no longer reported regular shows and $ 74.95 for WrestleManias, instead of the monthly fee of $ 9.99 for the streaming service.

Since the UFC will be available exclusively on ESPN + and only for subscribers to the service, and not at a significantly lower price percentage, which has continued to order pay-per-views, it will not be served. On the other hand, these losses may be overcome as ESPN, with its high spending on rights, has a strong economic incentive to market the shows more than ever before. In the US, there is probably not a single unit that can increase the potential value of a live sports event like ESPN by giving it credibility and importance as a major sporting event because of its reach.

Nevertheless, ESPN assumes the risk of an UFC Future shows do not deliver the numbers they've made in the past. And the pay-per-view pattern of recent years is far less consistent than in the past. UFC fans are more willing to skip a show if the line-up is not interesting. However, when there is a big main event, they make more numbers than ever, as most of the biggest UFC shows in history since 2016 prove.

Pay-per-view is such a big source of revenue for UFC The biggest source of revenue until the recent overtaking of television fees has created an uncomfortable feeling. Endeavor was heavily indebted for $ 4 billion in UFC's purchase price. The volatility of the pay-per-view Feast-or-Famine business was a problem. Moreover, this business has relied more than ever on the biggest stars.

By achieving a guaranteed cash transaction in this area, the companies that helped to finance the purchase of the UFC become more comfortable. In addition, when Endeavor goes public, the stock market will consider a guaranteed monthly income far more favorable than unpredictable and highly volatile returns. It's unclear what this means for the best UFC fighters who had pay-per-view points in their finals. If no television component is available for pay-per-view, it will result in a decline – and the unknown, how much – that means lower bonuses.

In addition, the income of big shows throughout the year guaranteed to hurt the leverage of a McGregor or a Jones. They will still have the leverage to cut deals, because ESPN + wants them to fight as much as possible, considering how much they pay for big shows. However, the lever will not be nearly as big as in recent years. It's less important for UFC, a show like UFC 237, with a major event Rose Namajuna's. Jessica Andrade, which is unlikely to do well under the current nature of the business. Now the main income from this show would be guaranteed.

It also creates a situation in which the UFC no longer needs this kind of draws, nor are they significantly injured when stars leave the sport and are not replaced by equivalent stars.

"Essentially, this deal eliminates the inherent risk of monthly PPVs," ​​said one industry source. "Some PPVs do not break records (Conor) and others because major events are canceled This deal eliminates the risk / unpredictability of this model. Now ESPN can market the hell out of these PPVs and drive sales. "

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