Online exclusives go hand-in-hand with global strategy

By Alexander Speirs

The turning point for the UFC's digital business came with a refocus of international strategy. Photo / Dean Purcell
The turning point for the UFC's digital business came with a refocus of international strategy. Photo / Dean Purcell

Digital disruption has been the talk of sports media for a while, but the problem for a long time was nobody could figure out how to make any money from it, says Marshall Zelaznik, chief content officer for the UFC.

"It used to be the opposite of the 80-20 rule - you'd spend 80 per cent of your time trying to figure out digital and it represented less than 20 per cent of your money. A lot less," Zelaznik says.

"But the last five years have been transformational in terms of what's happened for digital media. The migration of video watchers to the internet has given us real outlets to monetise our content and our digital business now represents a significant line item in the annual budget."

The turning point for the UFC's digital business came with a refocus of international strategy. The move to run foreign events in prime time for those local markets, instead of for the US, required a rejig in distribution.

"There was a realisation that we had to start really investing in our international markets, instead of in essence just taking our US events and hosting them internationally," Zelaznik says.

"We knew we could secure television deals for the majority of these events, but the real X-factor was what we were going to do in the United States " because FOX has exclusive television rights."

The result was UFC Fight Pass, a subscription-only online service, which gave the UFC the flexibility it needed to get around their deal with FOX to reach US consumers, while also opening a new stream of income.

The service, which costs US$12.99 a month, features exclusive live content and dedicated UFC programming, as well as access to the UFC's substantial archives.

With the UFC's first real foray into direct-to-consumer content delivery, incentivising membership was imperative. The promotion started with exclusive preliminary bouts on their major cards, only available through Fight Pass " moving big name fighters further down the bout order to attract new members.

That evolved into entire Fight Pass exclusive cards, including the aforementioned international cards " in addition to extra cards in the US.

"As we continue to add more and more content, the upside is enormous. At a low price point with high margins and very cost-effective delivery, it will be a very significant driver to the bottom line of the company.'

The true scale of the commitment the UFC is making to their proprietary platform was on full display this year when Anderson Silva " one of the company's biggest stars and a man who has not fought on anything except pay-per-view since his debut a decade earlier " headlined UFC London, a Fight Pass exclusive.

The significance of placing a fighter like Silva on Fight Pass isn't just that his fight was available exclusively online, but that the UFC are on the hook for the entirety of the multi-million-dollar purse he earns every time he steps in to the ring.

Generally, when Silva or fighters of his calibre and popularity fight, they do so on pay-per-view, with their compensation directly tied to the buy-rate of the card.

For his fight at UFC London, it's understood Silva earned an amount based on the average purse received over his last few fights " meaning the live gate of US$2 million would've struggled to cover Silva's contract, not to mention the 25 other fighters who also competed.

UFC chief executive Lorenzo Fertitta said: "We've made claims before that boxing never invested in the future and the reality is, you would never see a boxing promoter do something like this, because a deal like that doesn't make sense today.

"But a deal like that does make sense for the business over the next five to 10 years as we build that platform out."

In an effort to continue to grow the sport at the grass-roots level and improve the appeal of Fight Pass internationally, the UFC has been making deals with smaller organisations to broadcast their live events through the Fight Pass platform.

Fertitta revealed to the Weekend Herald that next year the UFC projected to have "35-40 exclusive live events with 10-11 different promoters around the world", as well as UFC events broadcast on the platform.

By selling direct to the consumer, the UFC is able to cut out the margins taken by pay-per-view distributors, which can reach as high as 50 per cent of the gross sale price.

But Zelaznik said not to expect any major changes in the UFC's approach to pay-per-views in the near future.

"The one thing that cannot be discounted with the traditional pay-per-view providers is their muscle and reach," said Zelaznik.

"As it stands, television is still the number one entertainment source in the home. We think we can have a foot in each business ... and we think we're pretty good at it."

- NZ Herald

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