Formula 1, WWE and UFC are potential targets for acquisition of streaming services.
(LR) Ireland’s Conor McGregor punches lightweight Dustin Poirier during UFC 257 at the Etihad Arena at UFC Fight Island on January 23, 2021 in Abu Dhabi, United Arab Emirates.
Chris Unger | UFC | Getty Images
In 2016, before the Ultimate Fighting Championship was sold for $4 billion to what would become the Endeavor Group, the mixed martial arts league nearly took over Disney for a bit more.
Disney and the UFC have agreed broad terms for a deal in which the entertainment giant will acquire the combat sports company for about $4.3 billion, according to people familiar with the matter.
Disney, which owns most of ESPN’s sports broadcasting network, has been mulling over the idea of buying sports leagues for years, one source said. Then-Disney CEO Bob Iger was a model for brilliant intellectual property acquisitions, buying Pixar, Lucasfilm and Marvel.
Iger eventually ended his deal with the UFC. He felt the UFC’s bloody and violent brand didn’t mesh well with the family-friendly Disney, said the people, who asked not to be named because the talks were private. A spokesperson for Disney did not immediately comment.
Two years later ESPN Disney paid $1.5 billion for the UFC’s television rights in a five-year deal. This deal immediately increased the value of the UFC to $7 billion., according to UFC CEO Dana White. ESPN+ Disney also signed a deal for $150 million a year broadcast UFC fights under an agreement that expires in 2025.
If ESPN renews the rights to the UFC, Disney will pay far more licensing fees than the $4.3 billion it would have paid in 2016. Paying for the rights to popular sports broadcasts continue to grow rapidly as they provide advertisers with a unique live viewing experience and attract a relatively large audience.
This calculation has made professional sports and entertainment leagues such as the UFC, NASCAR, Formula One and WWE potentially attractive targets for streaming companies as it is a way to control the ever-increasing fees for valuable live broadcasting rights that still generate advertising dollars.
“Disney would make a lot more sense buying the UFC than spending so much money on a license,” said LightShed analyst Rich Greenfield. “Now the costs are going up. Owning a league makes a lot of sense.”
While it’s rare for anything to come up for sale, the streaming era has likely made sports leagues more attractive to acquire as rivals look for exclusive content to gain a competitive edge. Owning a league, rather than relying on multiple-year license renewals that lead to recurring bidding wars, can strengthen branding and reduce subscriber churn.
Mercedes AMG Petronas Motorsport driver Lewis Hamilton (44) of Great Britain celebrates winning the 2019 FIA Formula 1 World Championship after the US Grand Prix at the Circuit of the Americas on November 3, 2019 in Austin, Texas.
Ken Murray | Sports wire icon | Getty Images
While Disney has been ditching the UFC image, it’s easy to imagine WWE or Formula One-branded rollercoasters and theme parks for the media companies that own them. Amazon has clear links to products. Netflix may use its own IP for its nascent video game division.
Formula 1, WWE and UFC are language-independent entities with global appeal. Formula 1 in particular prides itself on being an international sport with races all over the world. Last week, the league announced the addition of a third US Grand Prix in Las Vegas starting in 2023.
This could tip the balance for streaming services that need global subscriber growth like Netflix and Disney to keep investors happy.
“Streaming companies are global,” said Sean Bratches, former managing director of commercial operations for Formula One. He created and oversaw the production of Drive to Survive, a popular Netflix documentary series that details full seasons of Formula One. “If you are a sport like F1, one of your main strategic goals is to expand your media rights worldwide.”
There are no known talks to acquire Formula One, UFC or WWE.
While buying sports and entertainment leagues can be an attractive target for big streamers, there just aren’t many of them. The major professional sports leagues – the National Football League, Major League Baseball, the National Basketball Association – are not real buyouts. This leaves a hodgepodge of smaller leagues that may or may not be sold at a given time.
Chairman of World Wrestling Entertainment Inc. Vince McMahon (left) and wrestler Triple H enter the ring during WWE Monday Night Raw at the Thomas & Mack Center on August 24, 2009
Ethan Miller | Getty Images Entertainment | Getty Images
WWE, which has a market capitalization of $4.6 billion, stands out as a potential takeover candidate because it is a public company with an aging controlling shareholder. Vince McMahon owns has over 80% of the votes and is 76 years old. At some point, he and his family will have to decide whether to keep control of the company or sell it to the highest bidder. McMahon’s daughter, Stephanie, also works for the company as a brand director.
“We are open for business,” said Nick Khan, President of WWE. said last month on The Ringer’s “The Town” podcast.
The buyer could be an outdated media company such as Disney, Fox, Paramount Global, or NBCUniversal Comcast, which last year signed a five-year contract with WWE worth over $1 billion. be the exclusive home of WWE for direct consumers.
“If you look at what NBCU/Comcast needs, and I think that’s a factual statement, they don’t have the intellectual property that some other companies have,” Khan said. “I think they look at us as an organization that has a lot of intellectual property. Many of them have not been used. Now we have to properly monetize it and show the community what exactly we have.”
NBCUniversal declined to comment.
If a potential buyer does make an offer to McMahon, it could be before the company’s next renewal, likely to be announced in mid-2023. Perhaps that’s when McMahon will have to make the decision to strike another multi-year deal or sell.
While Disney and NBCUniversal own theme parks, big tech companies Apple and Amazon have also become potential interested parties in acquiring sports and entertainment intellectual property. Both signed multi-year contracts for broadcast MLB games on their streaming services. Amazon has also acquired exclusive rights to Thursday Night Football starting this season. Even Netflix, which has so far stayed away from sports broadcasts, is open to buying F1 rights after the Drive to Survive documentary series. became a worldwide hitco-CEO Reed Hastings said last year.
While Disney has proven it can use and expand on existing Marvel and Lucasfilm intellectual property, creating new characters is a different set of skills, WWE’s Khan said. It’s unclear if a streaming service or major entertainment organization will have the same skill set as McMahon.
The Undertaker (top) and Brock Lesnar wrestle during Wrestlemania XXX at the Mercedes-Benz Super Dome in New Orleans on Sunday, April 6, 2014.
Content from smaller sports companies can also get lost on a large streaming service that can’t show everything to its users. While Star Wars and Marvel spin-offs often get the highest ratings on Disney+, other intellectual property can get lost in the mix. The McMahons will have to decide if WWE can expand its universe as part of a larger company, or if it risks losing cash without family attention.
Buying a small sports league may not interest a major streamer enough to make a multibillion-dollar acquisition, said Bratches, a former Formula One executive who also worked for ESPN for 27 years.
Liberty Media, controlled by billionaire John Malone, acquired Formula One for $4.4 billion in 2016. Liberty has spent the past five plus years investing in Formula One and generating income by pitting various media companies against each other through global rights sharing and auctioning of licensing rights. .
This business model will disappear if the league is owned by a single media party. Any seller who cares about the future of what they’re selling would like to be sure of the overall health of the streaming service they’re buying, Bratches said. If consumers are dissatisfied with a streaming service and the company solely owns the league, viewership can suffer regardless of the quality of the league.
“It’s nice to have that kind of real estate, but that doesn’t mean you’re buying the NFL,” Bratches said. “Not enough content to move the needle.”
Disclosure: NBCUniversal Comcast is the parent company of CNBC.
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