Creating a New Ceiling

By Patrick Auger Feb 7, 2020
The ordering process for Ultimate Fighting Championship pay-per-views has changed: UFC 247 is only available on ESPN+ in the U.S.

Conor McGregor’s return to the Octagon in January was an oddity of sorts. The man who made his fortune by combining brash, over-the-top behavior with witty trash talk was quite reserved in the leadup to UFC 246, and there was a feeling in the air that the captivating charm the Irish superstar once held had lost some of its shine. When it came time for the door to close, however, McGregor left no doubt about his in-cage prowess, flatlining Donald Cerrone in just 40 seconds and proclaiming to the world in his post-fight interview that Ireland was “back on top.” UFC president Dana White said he was “blown away” by the 31-year-old’s performance, and that he would never question the Irish superstar’s decision to fight at 170 pounds again.

While the post-fight festivities certainly felt like a McGregor pay-per-view, there were still questions about how UFC 246 did from a business perspective. Ever since the Ultimate Fighting Championship reached an agreement with ESPN to be its exclusive pay-per-view provider, estimates surrounding PPV buys have gone the way of the dodo, with no real insight into audience appetite for any of the promotion’s numbered events. Although social media metrics appeared to indicate that UFC 246 would have done somewhere in the range of two million purchases in the pre-ESPN era, the card itself was extremely top-heavy, leaving many hardcore fans disappointed. Add in McGregor’s recent string of run-ins with the law, and there was a reason for the UFC and their partners to have concerns regarding what was meant to be the return of the sport’s biggest star.

Those worries were alleviated on Feb. 4, when ESPN parent company Disney held its first-quarter 2020 earnings call. According to the entertainment conglomerate, UFC 246 did somewhere in the range of one million pay-per-view buys and added around 500,000 new subscribers to ESPN+. The total number of subscribers for ESPN’s over-the-top streaming service jumped from 6.6 million paying customers at the end of the previous quarter to 7.6 million by Feb. 3, largely due to the event. Walt Disney Senior Vice President of Investor Relations Lowell Singer stated that Disney was especially happy with a number of partnerships regarding ESPN+, particularly the arrangement with the UFC.

Although it’s not the two million pay-per-view buys that some metrics indicated it might be, it’s still a resounding win for the promotion and its primary media broadcast partner. PPV purchases were expected to take a hit after moving behind the ESPN+ paywall, and UFC 246 was also the first event that featured a price increase since 2018, furthering speculation that the card’s buy rate would be less than ideal. With all these factors considered, one million buys for McGregor being the only real draw on the card is nothing at which to scoff. That’s even more true when you take into account that only 20 percent of the record-breaking 2.4 million PPV buys for UFC 229 were purchased through an online streaming option.

More importantly for ESPN, UFC 246 added a healthy number of subscribers to its streaming service. As the streaming wars continue to rage, UFC events are arguably the biggest offering that ESPN+ currently has to entice consumers. While the service has no doubt gained subscribers through bundle packages with Disney+ and Hulu, being able to demonstrate value by tracking consumer purchases to specific ESPN+ events is crucial for the company that calls itself the worldwide leader in sports as it makes the transition from cable television to online broadcasting.

The fact that Disney would reveal the UFC 246 buy rate on an earnings call demonstrates that it is extremely happy with how the event performed from a business perspective. McGregor is no doubt the biggest pay-per-view draw left in the business, so its unlikely PPV numbers from cards moving forward will exceed the one-million-consumer mark, unless another crossover star emerges from the UFC. Keeping this new purchase ceiling in mind, it would seem that either Disney is content with a lower buy rate than what was previously possible under the old PPV model for the moment—presumably while it grows ESPN+—or the deal between the UFC and ESPN has resulted in a pay-per-view revenue share that is far more favorable for the sports broadcasting company than previous agreements between the UFC and its PPV distributors. Regardless of which scenario is currently taking place behind the scenes, right now, the deal between the UFC and ESPN certainly appears to be a win-win.

Even though its partnership with the UFC was called out on the company’s first-quarter earnings call, Disney has far bigger concerns than whether or not UFC 246 hit the mark when it comes to its operations. The California-based entertainment goliath announced on the same Feb. 4 call with investors that its Disney+ streaming service hit 28.6 million subscribers since its launch last year—nearly four times the amount of ESPN+ consumers—and its integration of recently purchased 21st Century Fox assets is a high priority for the organization. With that said, we now have some insight into what PPV buy rates look like under the UFC-ESPN deal, which will be helpful for examining situations like this in the future. Advertisement

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