Is the UFC really worth $450 million a year in TV rights fees?

The UFC’s new owners have a dollar figure in mind for the company’s next TV deal, according to a new report. And, as expected, that number dwarfs what the UFC is currently getting from FOX.

A report from SportsBusiness Journal puts the UFC’s “magic number” at $450 million a year in media rights fees. That’s slightly more than triple what FOX Sports will pay the UFC in 2016, and nearly quadruple the average annual fee for the seven-year deal.

Whether or not the UFC’s new owners will actually get that much when the current FOX Sports deal expires in 2018 is difficult to predict, but it’s worth asking why the organization thinks a nearly fourfold increase is even remotely possible.

For starters, there’s the timing. As MMAjunkie reported in October, a UFC investor presentation was bullish on the potential for a major increase in rights fees based in part on the “scarcity of meaningful sports rights” (check out the details in the above video). Live sports programming is often seen as one of the few DVR-proof commodities for TV channels, and the most valuable sports properties are all currently locked into longterm deals.

The UFC’s current deal expires three years before the MLB, PGA and NHL all come on the market in 2021. The NFL follows suit in 2022, with the NBA locked up until 2025. For networks looking to secure a new sports property that might ward off cord-cutting trends, the UFC is the first available option.

That’s a good way to heat up the bidding process, but does it add up to a nearly 300 percent increase? Such a bump would be nearly double the NHL’s most recent rights fee increase, and nearly triple the increase that the MLB nabbed with its last deal.

To determine what the UFC might fetch in a bidding war, it helps to consider what it means to its current TV partner, which has an exclusive renewal negotiation period beginning in late 2017.

When it comes to TV ratings, the UFC brings in nowhere near as many viewers as other major sports. Even amid a much-publicized ratings slide, FOX can still count on an NFL game on the network bringing in roughly 10 times as many viewers as recent UFC on FOX events (though FOX also pays an average of $1.1 billion a year for rights to games in one NFL conference – about 10 times what it pays to be the exclusive TV partner of the UFC).

Still, the UFC and its associated programming have consistently been some of the highest-rated programming on FS1, which has struggled to find its foothold since its 2013 launch. Unlike other major sports, the UFC, with its year-round events schedule and other associated programming, can consistently deliver a dependable core audience.

And if there’s strength to be found in the UFC’s relatively low viewer numbers, maybe it’s that. The UFC’s audience tends to be younger than that of most other sports, and it’s also fairly fanatical. As UFC programming has bounced from Spike to VERSUS to FUEL to FS1 over the years, ratings figures suggest that the people who love the sport of MMA will follow it almost anywhere on the cable-TV spectrum.

That’s significant not only for FOX Sports, but also for other potential bidders. As the SBJ story notes, one possible suitor is Turner Sports, whose parent company is in the process of a sale to AT&T, which may look to something like the UFC due to its ability to be “leveraged across all the assets.”

According to SBJ: “Turner executives like the idea of putting UFC on truTV, which skews younger than Turner’s other channels; operating the UFC’s over-the-top service; and having the AT&T-owned DirecTV closely involved with the UFC’s pay-per-view business. The timing, though, is tricky, and nobody knows whether AT&T’s purchase will win federal approval.”

That brings up another aspect of the UFC’s appeal to possible bidders. As the television landscape continues to change, networks have to start thinking beyond just traditional broadcast deals. What the UFC offers is a young, loyal audience that’s accustomed to paying for content, both through conventional PPV and via an online streaming service.

But that UFC model isn’t without its drawbacks. For instance, UFC on FOX ratings numbers dipped in 2016, while UFC PPV sales reportedly broke records. Any potential network suitor has to wonder whether it will ever stand a chance of getting the UFC’s best stuff, or if it will be asked to pay upwards of $450 million a year for the leftovers the UFC can’t sell at premium prices.

That, too, might be an aspect of the UFC’s current model due for change under new ownership.

According to SBJ, the UFC may be looking to give up control of its broadcasts, shifting the production and the associated costs to its TV partner under a new deal. The report also claims that “media executives believe any winning bidder will have more of a say in what matches will be part of the UFC’s pay-per-view events,” with the potential for negotiating for a share in the UFC’s PPV revenue.

One major upside for a TV partner is likely the same as what lured WME-IMG. Gaining exclusive rights to the UFC is more than just getting a piece of a sports property, the way various networks do with the NFL. Instead, it’s a lot more like gaining control over an entire sport – and one with a young, committed audience that will find it anywhere you put it.

For more on the UFC’s upcoming schedule, check out the UFC Rumors section of the site.