(LR) Ireland’s Conor McGregor punches Dustin Poirier lightly at the UFC 257 event at the Etihad Arena on UFC Fight Island on January 23, 2021 in Abu Dhabi, United Arab Emirates.
Chris Unger | UFC | Getty photos
In 2016, before the Ultimate Fighting Championship sold for $ 4 billion to a company that would become the Endeavor Group, the League of Mixed Martial Arts was almost raised by Disney for a little more.
Disney and the UFC had agreed on extensive contracts where the entertainment giant would buy the martial arts company for about 4.3 billion dollars, according to acquaintances.
Disney, which owns the majority of ESPN’s sports network, has been toying with the idea of buying sports leagues for years, one of them said. Bob Iger, then CEO of Disney, was the model director of great intellectual property acquisitions and bought Pixar, Lucasfilm and Marvel.
In the end, Iger rejected the UFC contract. He felt the bloody and violent UFC brand did not fit in with the family-friendly Disney, said the people who asked not to be named because the negotiations were private. A Disney spokesman did not immediately comment.
Two years later, Disney’s ESPN paid $ 1.5 billion for UFC television rights in a five-year contract. That deal immediately increased the value of the UFC to $ 7 billion, according to Dana White, the UFC’s CEO. Disney’s ESPN + also signed a $ 150 million contract a year to stream UFC fights in a deal that expires in 2025.
If ESPN renews its UFC rights, Disney will pay far more in licensing fees than the $ 4.3 billion it would have paid in 2016. Fees for popular sports broadcasts continue to rise rapidly as they offer unique opportunities to view directly for advertisers and draw relatively large audience.
This calculation has made professional sports and entertainment divisions such as the UFC, NASCAR, Formula 1 and WWE potentially attractive targets for streaming companies as a way of managing ever-increasing rights fees for valuable live programs that still require advertising dollars.
“Disney would have been much smarter to buy the UFC than to spend so much on licenses,” said LightShed expert Rich Greenfield. “Now the cost goes up a lot. Having a department makes a lot of sense.”
While it’s rare to get something for sale, the streaming season has probably made sports divisions a more sought-after acquisition target, with competitors looking for exclusive content for competitive advantage. Owning a department, rather than relying on a multi-year license renewal that leads to repeated bidding wars, can strengthen brands and reduce subscribers.
Mercedes AMG Petronas Motorsport driver Lewis Hamilton (44) from the UK celebrates the FIA World Championship in Formula 1 2019 after Formula 1 – the US Grand Prix race at the Circuit of The Americas on November 3, 2019 in Austin, Texas.
Ken Murray | Sportswire Icon | Getty photos
Although Disney has responded to the UFC’s image, it’s easy to envision WWE or Formula 1 roller coasters and amusement parks for media companies that own them. There are clear product links for Amazon. Netflix can use an IP address owned by its video game department.
Formula 1, WWE and UFC are all independent language with international appeal. Formula 1 in particular is proud to be an international sport, competing around the world. The league announced last week that it had added a third U.S. championship, in Las Vegas, starting in 2023.
It could weigh in on streaming services that need the global growth of subscribers, such as Netflix and Disney, to keep investors happy.
“Stream companies are international,” said Sean Bratches, former Formula One business executive. He created and oversaw the production of “Drive to Survive”, a popular Netflix documentary about all Formula One seasons. “If you are a sport like Formula 1, one of your main goals is to increase your media rights around the world.
No talks are known about the purchase of Formula 1, UFC or WWE.
While buying sports and recreation departments may be an attractive goal for the big players, there are simply not many of them available. The major professional sports leagues – National Football League, Major League Baseball, National Basketball Association – are not feasible acquisition targets. It leaves behind a group of smaller departments, which may or may not be for sale at any given time.
Chairman of World Wrestling Entertainment Inc. Vince McMahon (H) and wrestler Triple H appear in the ring at the WWE Monday Night Raw show at Thomas & Mack Center August 24, 2009
Ethan Miller | Getty Images Entertainment | Getty photos
WWE, which has a market capitalization of $ 4.6 billion, stands out as a potential takeover bid because it is a public company with an aging controlling shareholder. Vince McMahon holds more than 80% of the vote and is 76 years old. At some point, he and his family will have to decide whether to retain control of the company or sell it to the highest bidder. McMahon’s daughter, Stephanie, also works for the company as a brand manager.
“We’re open for business,” WWE President Nick Khan said last month in The Ringer’s broadcast.
The buyer could be an old media company, such as Disney, Fox, Paramount Global or Comcast’s NBCUniversal, which last year signed a five-year contract with WWE for more than $ 1 billion to be WWE’s private home for consumers.
“If you look at what NBCU / Comcast needs and I think this is a statement of fact, they do not have the intellectual property rights that some other companies have,” Khan said. “I think they see us as a whole that has a lot of intellectual property. A lot of it has not been exploited. Now it is up to us to generate revenue properly and show society exactly what we have.”
NBCUniversal declined to comment.
If a potential buyer makes an offer to McMahon, it could happen before the next renewal of the company’s rights – probably announced by mid-2023. That’s probably when McMahon may have to decide to sign another multi-year contract or sell.
While Disney and NBCUniversal have theme parks, big tech companies Apple and Amazon have also emerged as potential stakeholders in acquiring sports and entertainment IP. Both have signed multi-year contracts to broadcast MLB games on their streaming services. Amazon also bought an exclusive Thursday night football, starting this season. Even Netflix, which has so far stayed away from live sports, is open to buying Formula 1 rights after the worldwide “Drive to Survive” series aired, said CEO Reed Hastings last year.
While Disney has proven that it can utilize and expand existing intellectual property from Marvel and Lucasfilm, creating new characters is a different talent, Khan from WWE said. It is not clear that streaming services or large entertainment providers have the same capabilities as McMahon.
The Undertaker, the top and Brock Lesnar wrestle at Wrestlemania XXX at the Mercedes-Benz Super Dome in New Orleans on Sunday, April 6, 2014.
The content of smaller sports companies could also dig into a large streaming service that can not publish everything to its users. Although Star Wars and Marvel spins often receive high bills at Disney +, other intellectual property can be lost in the shuffle. The McMahons must decide whether WWE can expand its universe as part of a larger company or whether it risks losing its cache without the family’s attention.
Buying a smaller sports division might not be of enough interest to a big-time player to buy billions of dollars, said Bratches, the former chief executive of Formula One, who also worked for ESPN for 27 years.
Liberty Media, led by billionaire John Malone, bought Formula One for $ 4.4 billion in 2016. Liberty has spent the last five years investing in Formula One and earning a living by playing different media units from each other by splitting rights globally and offer licensing rights. .
That business model would disappear if one media party owned the league. Every salesperson who cares about the future of what he is selling would want to be assured of the overall health of the streaming service, Bratches said. If consumers are exposed to streaming services and that company owns a department only, the viewing could be harmed regardless of the quality of the department.
“These are nice to have assets, but it’s not like you’re buying the NFL,” said Bratches. “There is not enough material to move the needle.”
Disclosure: Comcast’s NBCUniversal is CNBC’s parent company.
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