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Straight Talk Consumer and Entertainment Services

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It’s been a frantic six weeks for combat sports rights, with five notable TV and streaming deals struck across boxing, mixed martial arts (MMA), and wrestling since mid-May. And while UFC and WWE clearly see the benefits of a networks + OTT approach, streaming service DAZN has disruptive plans for boxing's classic pay-per-view (PPV) model.

Starting with the most recent announcement, early July saw DAZN (pronounced Da-Zone), the global sports streamer owned by Perform Group, add the World Boxing Super Series to complete a trio of deals in the combat sports space. DAZN also agreed a multi-year deal in June with Bellator, an MMA promoter, to show 22 live events. That deal was reputedly in the nine-figure mark, and therefore trails the $1bn that DAZN spent in May to become the exclusive US broadcast partner for 30 fights from Matchroom Boxing USA.

Meanwhile, UFC, the most prominent MMA franchise, signed a $1.5bn five-year deal in May with ESPN, giving the latter full rights to UFC events – some on network television, but most on new streaming service ESPN+. UFC moves to ESPN from Fox, which was reportedly content to let UFC go because it in turn had bought five-year broadcast rights to some simulated combat sports: WWE's SmackDown, a weekly professional wrestling program, for $205m per year. That's one convoluted game of musical chairs, though it makes a change from being hit over the head by them.

WWE sets the standard

Of all the franchises involved, WWE seems in the best shape, with a clear and settled strategic model. That yearly haul from Fox remains a minority of its revenue – there's also another weekly wrestling show, Raw, which retains its place on NBCUniversal's USA Network and is deemed higher profile than SmackDown (a different roster of wrestlers appears for each brand). Fox will, of course, be keen to see this balance of power shift. But WWE also has the WWE Network, an OTT service combining linear streaming of its regular PPVs and a vast repository of on-demand matches from WWE and other wrestling promotions. Ovum estimates that WWE Network had 1.6 million subscribers in the US alone at the end of 2017.

UFC too has a streamer akin to the WWE Network: Fight Pass. But its deal with ESPN entails a major dilution of that offering, with ESPN+ apparently being able to show historic content as well as taking exclusive coverage of UFC's live events. With ESPN+ costing half the price of Fight Pass, it's difficult to see how the latter will continue to draw in subscribers.

What sets the WWE Network apart? The innate advantage of scripted fights – "sports entertainment" is its term for them. With more than a dozen PPVs on the WWE Network a year, fans can be guaranteed big names squaring off against each other every time, and – providing the storylines and athletes do their job – without any of the dreary action that can leave real-life combat sports fans feeling cheated of their outlay. The WWE Network can also take steps to boost its appeal in other countries by forefronting performers from those countries. Should a push into Japan be on the cards, for example, giving major roles to stars such as Shinsuke Nakamura or Asuka can't hurt. But it's interesting that even this major player still sees the great value of mainstream exposure; the effort required to bring in those 1.6 million US subscribers should not be underestimated, particularly when compared to striking a five-year deal with a broadcaster.

The decline and fall of the PPV

UFC and WWE share a model, then: using the networks both to guarantee large audiences for their popular regular content and to drive promotion of their PPVs. The networks benefit too, hence the fees involved – they receive regular, popular live programming that they can use as a compelling case to advertisers.

But increasingly, "pay-per-view" in the sense of a one-off transaction is a misnomer. It's still possible to pay $44.99 to a broadcaster for access to a big WWE event such as the forthcoming SummerSlam, but WWE's marketing illustrates that it would rather guarantee steady monthly fees on the WWE Network than have to persuade viewers of the quality of each individual event. Ovum's own forecast clearly shows which path is preferable.

Figure 1: The lure of PPVs wane as SVOD's star soars

The lure of PPVs

Source: Ovum

More than perhaps any other type of sport, boxing is associated with PPVs. For well-hyped bouts, they can be spectacularly lucrative: Showtime was able to charge a minimum of $89.95 to show the 2017 bout between Floyd Mayweather and Conor McGregor. But a combination of byzantine red tape (there are four different sanctioning organizations that recognize "world champions") and a relative dearth of big names means that major PPVs can be vanishingly rare. Which brings us to DAZN. Two boxing promotions have concluded that DAZN's streaming model will result in greater exposure and therefore subsidiary promotions. Both now have a healthy war chest that will sustain their businesses.

DAZN the disruptor

As Ovum reported from the Connected TV World Summit 2018, a form of peaceable coexistence between linear TV and OTT operators seems to be the state of play at the moment. Many of the above deals show exactly this trend, with a symbiosis between the two that benefits all parties.

But DAZN, the self-described "Netflix of sport," is the major exception, as its move into boxing is a disruptive play. Following the path of WWE, it is trying to convince the significant number of boxing fans willing to spend on a major bout that subscription represents a better-value proposition. Further adhering to WWE's model is Matchroom's guarantee of 16 major boxing cards per year rather than a haphazard schedule of superfights.

DAZN is currently operational in select countries in Western Europe, plus Japan and Canada. Its new boxing deals are a gateway into the US. The likes of Showtime and HBO, two major boxing PPV providers, will not feel that DAZN is in a coexistent state of mind, and every broadcaster reliant on sports rights to drive premiums will be watching DAZN's progress keenly. It is up to the old guard to fight back.

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