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Components 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 in the course of the UFC 257 occasion inside Etihad Area on UFC Battle Island on January 23, 2021 in Abu Dhabi, United Arab Emirates.

Chris Unger | UFC | Getty Photographs

In 2016, earlier than Final Preventing Championship offered 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 wherein 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 nearly all 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 government for sensible mental property acquisitions, shopping for Pixar, Lucasfilm and Marvel.

Finally, 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 had been non-public. 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 immediately increased the value of UFC to $7 billion, based on UFC CEO Dana White. Disney’s ESPN+ also signed a $150 million per year 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 could have paid in 2016. Well-liked sports activities broadcast rights fees continue to rise rapidly as they current distinctive dwell viewing alternatives for advertisers and draw comparatively giant audiences.

This calculus has made skilled sports activities and leisure leagues equivalent to UFC, NASCAR, Components One and WWE probably interesting targets for streaming corporations as a strategy to management ever-increasing rights charges for helpful 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 probably 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 cut back subscriber churn.

Mercedes AMG Petronas Motorsport driver Lewis Hamilton (44) of Nice Britain celebrates clinching the 2019 FIA Components 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 Photographs

Whereas Disney balked at UFC’s picture, it is easy to ascertain WWE- or Components 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.

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

That would tip the scales for streaming providers that want international subscriber development, equivalent to Netflix and Disney, to maintain buyers completely happy.

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

There are not any identified talks to accumulate Components One, UFC or WWE.

Sparse stock

Whereas shopping for sports activities and leisure leagues could possibly be interesting targets for the massive streamers, there merely aren’t a lot of them out there. 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 will not be on the market at a given time.

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

Ethan Miller | Getty Photographs Leisure | Getty Photographs

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 outdated. In some unspecified time in the future, he and his household must resolve whether or not to maintain management of the corporate or promote it to the very 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, said last month on The Ringer’s “The City” podcast.

A purchaser could possibly be a legacy media firm, equivalent to Disney, Fox, Paramount Global or Comcast‘s NBCUniversal, which final 12 months struck a five-year deal with WWE for more than $1 billion to be the unique direct-to-consumer residence for WWE.

“When you 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 loads of mental property. Lots of it has not been exploited it. Now it is as much as us to monetize it correctly and present the group precisely what now we have.”

NBCUniversal declined to remark.

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

Whereas Disney and NBCUniversal personal theme parks, giant know-how corporations Apple and Amazon have additionally emerged as probably events to accumulate sports activities and leisure IP. Each have struck multiyear offers to broadcast MLB games on their streaming providers. Amazon also acquired unique Thursday Night time Soccer rights, starting this season. Even Netflix, which has up to now stayed away from dwell sports activities, is open to purchasing Components One rights after its docuseries “Drive to Survive” broke out as a global hit, co-CEO Reed Hastings said last year.

Potential drawbacks

Whereas Disney proved it may exploit and broaden present mental property from Marvel and Lucasfilm, creating new characters is a special ability set, mentioned Khan of WWE. It isn’t clear {that a} streaming service or giant 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 could get buried in a big streaming service that may’t function every thing to its customers. Whereas Star Wars and Marvel spinoffs typically get high billing on Disney+, different mental property can get misplaced within the shuffle. The McMahons must resolve whether or not WWE can broaden 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 could not curiosity a big streamer sufficient to make a multibillion-dollar acquisition, mentioned Bratches, the previous Components One government who additionally worked for ESPN for 27 years.

Liberty Media, managed by billionaire John Malone, acquired Components 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 celebration owns the league. Any vendor that cares about the way forward for what it is promoting would need 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 completely, viewership could endure unbiased 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 Components 1 grand prix in Las Vegas



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