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, securing its broadcasting rights across the UK and Ireland. Phil Mackenzie talks to Callum McCarthy of sportbusiness.com 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 …

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