Formulation 1, WWE and UFC are potential acquisition targets for streaming providers

(L-R) Conor McGregor of Eire punches Dustin Poirier in a light-weight battle throughout the UFC 257 occasion inside Etihad Enviornment on UFC Battle Island on January 23, 2021 in Abu Dhabi, United Arab Emirates.

Chris Unger | UFC | Getty Photos

In 2016, earlier than Final Preventing Championship bought for $4 billion to the corporate that may grow to be Endeavor Group, the combined martial arts league was practically scooped up by Disney for a bit bit extra.

Disney and UFC had negotiated broad phrases of a deal through which the leisure large would purchase the fight sports activities firm for about $4.3 billion, based on individuals acquainted with the matter.

Disney, which owns the vast majority of sports activities broadcast community ESPN, has toyed with the thought of shopping for sports activities leagues for years, one of many individuals mentioned. Then-Disney CEO Bob Iger was the mannequin govt for good mental property acquisitions, shopping for Pixar, Lucasfilm and Marvel.

In the end, Iger nixed the UFC deal. He felt the bloody and violent UFC model did not mesh with household pleasant Disney, mentioned the individuals, who requested to not be named as a result of the negotiations have been personal. A Disney spokesperson did not instantly remark.

Two years later, Disney’s ESPN paid $1.5 billion for UFC TV rights in a five-year deal. That deal instantly elevated the worth of UFC to $7 billion, based on UFC CEO Dana White. Disney’s ESPN+ additionally signed a $150 million per yr deal to stream UFC fights in an settlement that runs out in 2025.

If ESPN renews UFC rights, Disney can pay way more in licensing charges than the $4.3 billion it might have paid in 2016. Standard sports activities broadcast rights charges proceed to rise quickly as they current distinctive dwell viewing alternatives for advertisers and draw comparatively massive audiences.

This calculus has made skilled sports activities and leisure leagues similar to UFC, NASCAR, Formulation One and WWE doubtlessly interesting targets for streaming corporations as a strategy to management ever-increasing rights charges for worthwhile dwell programming that also instructions promoting {dollars}.

“Disney would have been far smarter to purchase UFC than spend this a lot to license,” mentioned LightShed analyst Wealthy Greenfield. “Now the prices are going means up. Proudly owning a league makes a ton of sense.”

Whereas it is uncommon something comes up on the market, the streaming period has possible made sports activities leagues extra fascinating acquisition targets as rivals search for unique content material for aggressive benefit. Proudly owning a league, moderately than counting on multiyear license renewals that result in recurring bidding wars, can solidify branding and scale back subscriber churn.

Mercedes AMG Petronas Motorsport driver Lewis Hamilton (44) of Nice Britain celebrates clinching the 2019 FIA Formulation 1 World Championship following the F1 – U.S. Grand Prix race at Circuit of The Americas on November 3, 2019 in Austin, Texas.

Ken Murray | Icon Sportswire | Getty Photos

Whereas Disney balked at UFC’s picture, it is simple to examine WWE- or Formulation One-branded curler coasters and theme park rides for media corporations that personal them. There are clear merchandise tie-ins for Amazon. Netflix can use owned IP for its nascent video gaming division.

Formulation One, WWE and UFC are all language-independent properties with world attraction. Formulation One, particularly, prides itself on being a world sport, with races throughout the globe. The league introduced final week it has added a 3rd U.S. grand prix, in Las Vegas, starting in 2023.

That might tip the scales for streaming providers that want world subscriber progress, similar to Netflix and Disney, to maintain traders joyful.

“Streaming corporations are world,” mentioned Sean Bratches, former managing director of business operations for Formulation One. He created and oversaw the manufacturing of “Drive to Survive,” the hit Netflix docuseries that particulars full Formulation One seasons. “For those who’re a sport like F1, one in all your major strategic aims is to boost your around-the-world media rights.”

There aren’t any recognized talks to accumulate Formulation One, UFC or WWE.

Sparse stock

Whereas shopping for sports activities and leisure leagues may very well be interesting targets for the massive streamers, there merely aren’t lots of them accessible. The most important skilled sports activities leagues – the Nationwide Soccer League, Main League Baseball, the Nationwide Basketball Affiliation – aren’t possible buyout targets. That leaves a hodgepodge of smaller leagues, which can or is probably not on the market at a given time.

World Wrestling Leisure Inc. Chairman Vince McMahon (L) and wrestler Triple H seem within the ring throughout the WWE Monday Evening Uncooked present on the Thomas & Mack Middle August 24, 2009

Ethan Miller | Getty Photos Leisure | Getty Photos

WWE, which has a market capitalization of $4.6 billion, stands out as a possible takeover candidate as a result of it is a publicly traded firm with an growing older controlling shareholder. Vince McMahon owns greater than 80% of voting energy and is 76 years previous. Sooner or later, he and his household must resolve whether or not to maintain management of the corporate or promote it to the best bidder. McMahon’s daughter, Stephanie, additionally works on the firm as chief model officer.

“We’re open for enterprise,” Nick Khan, WWE’s president, mentioned final month on The Ringer’s “The City” podcast.

A purchaser may very well be a legacy media firm, similar to Disney, Fox, Paramount International or Comcast’s NBCUniversal, which final yr struck a five-year take care of WWE for greater than $1 billion to be the unique direct-to-consumer residence for WWE.

“For those who have a look at what does NBCU/Comcast want, and I feel it is a factual assertion, they do not have the mental property that another corporations have,” mentioned Khan. “I feel they have a look at us as an entity that has lots of mental property. A number of it has not been exploited it. Now it is as much as us to monetize it correctly and present the neighborhood precisely what we’ve got.”

NBCUniversal declined to remark.

If a possible acquirer does make McMahon a proposal, it might come earlier than the corporate’s subsequent rights renewal — more likely to be introduced in mid-2023. That is in all probability when McMahon might need to resolve to enroll one other multiyear deal or promote.

Whereas Disney and NBCUniversal personal theme parks, massive expertise corporations Apple and Amazon have additionally emerged as doubtlessly events to accumulate sports activities and leisure IP. Each have struck multiyear offers to broadcast MLB video games on their streaming providers. Amazon additionally acquired unique Thursday Evening Soccer rights, starting this season. Even Netflix, which has to this point stayed away from dwell sports activities, is open to purchasing Formulation One rights after its docuseries “Drive to Survive” broke out as a world hit, co-CEO Reed Hastings mentioned final yr.

Potential drawbacks

Whereas Disney proved it might exploit and develop present mental property from Marvel and Lucasfilm, creating new characters is a unique ability set, mentioned Khan of WWE. It is not clear {that a} streaming service or massive leisure entity would have the identical ability set as McMahon.

The Undertaker, high, and Brock Lesnar wrestle throughout Wrestlemania XXX on the Mercedes-Benz Tremendous Dome in New Orleans on Sunday, April 6, 2014.

AP

Smaller sports activities corporations’ content material additionally might get buried in a big streaming service that may’t function every little thing to its customers. Whereas Star Wars and Marvel spinoffs usually get high billing on Disney+, different mental property can get misplaced within the shuffle. The McMahons must resolve whether or not WWE can develop its universe as half of a bigger firm or if it dangers shedding cache with out the household’s consideration.

Shopping for a smaller sports activities league might not curiosity a big streamer sufficient to make a multibillion-dollar acquisition, mentioned Bratches, the previous Formulation One govt who additionally labored for ESPN for 27 years.

Liberty Media, managed by billionaire John Malone, acquired Formulation One for $4.4 billion in 2016. Liberty has spent the previous five-plus years investing in F1 and producing income by taking part in totally different media entities off one another by splitting rights globally and auctioning off licensing rights.

That enterprise mannequin would disappear if one media social gathering owns the league. Any vendor that cares about the way forward for what it is promoting would wish to really feel assured within the total well being of the buying streaming service, mentioned Bratches. If customers bitter on a streaming service, and that firm owns a league solely, viewership might undergo impartial of the standard of the league.

“These are ‘good to have’ properties, nevertheless it’s not such as you’re shopping for the NFL,” mentioned Bratches. “There’s not sufficient content material to maneuver the needle.”

Disclosure: Comcast’s NBCUniversal is the dad or mum firm of CNBC.

WATCH: Liberty Media broadcasts Formulation 1 grand prix in Las Vegas

Leave a Comment