UFC Contract Squabbles, Underwhelming PPV Card Unrelated to Endeavor’s Financial Troubles
Much has been made about Endeavor’s heavy debt load ($4.6 billion in long-term debt, $7.2 billion in total liabilities) and the revenue losses suffered by Ari Emanuel’s company as a result of Coronavirus-forced event cancelations (S&P Global projected revenue from their events business would tumble by “mid-teens” percent this year). The sports & entertainment conglomerate's cash flow problems (see: the additional $260 million term loan they took out in May) and the UFC's decision to press on during a global pandemic has sparked speculation within the fight sports community that the parent company's financial troubles have begun to trickle down and negatively impact the mixed martial arts promotion. Henry Cejudo’s sudden retirement (the 2 division champion’s coach has since suggested Triple-C would return if the UFC added “another 0 to his paycheck” indicating the fighter may be angling more money), a contract impasse that has light heavyweight champion Jon ‘Bones’ Jones threatening to vacate his title and a less than star-studded UFC 250 card have all seemed to help fuel the incorrect narrative.
Our Take: Endeavor’s well-documented financial troubles have had absolutely no impact on the business of the UFC. While Emanuel and Co. own a controlling stake in the MMA outfit (51%), the economics of the 2 business are very different (which explains why the UFC hasn't faced the same pressures) and corporate expenses are paid out of completely separate pockets. Look no further than the mass layoffs that took place at the Hollywood based firm in May to substantiate that claim. As Dana White has said publicly, "none of [his] people" have been laid off, furloughed or issued a pay cut since the COVID outbreak landed on U.S. shores.
The UFC's public contract negotiations with Jon Jones (or Henry Cejudo for that matter) should not be viewed any differently than any other contract squabble between athlete and organization. Dana White and Co. simply do not believe the economics of a Jones PPV warrant his asking price. Bones is certainly a big star within the sport (White calls him the GOAT), but he’s not the mainstream draw Conor McGregor is (according to Tapology, McGregor has drawn 1 million buys 6x, Jones' career high is 860,000). The UFC’s hesitancy to pay his asking price has far less to do with the company’s financial position than it does with the ROI - or lack thereof - to be gained.
One of the reasons the UFC business is on more stable ground than their parent co. is the $750 million in guaranteed broadcast revenues they'll earn in 2020 - as long as they deliver 42 events to ESPN. It’s reasonable to suggest that fulfilling their contractual obligations is among the company’s top priorities (particularly when one considers they’re going to lose more than $100 million in gate revenues without fans in attendance), but it’s inaccurate to suggest that the lack of household names on the UFC 250 card is the result of a conscious effort by the company to save money. UFC 249 was from top to bottom among the best PPVs the promotion has ever put on (it was also the second most viewed PPV since the UFC went exclusively to ESPN+ in April '19). The limitations fighters face (think: injuries, recovery time) create ebbs and flows in card quality. It’s simply not possible to schedule mega-cards every time out.
While refusing to meet Jones’ demands is nothing more than a business decision for the UFC, it reasons that ESPN would like to see the two sides come to an agreement. Their deal with the fight league is largely about driving and retaining ESPN+ subscriptions and the sport’s biggest stars are the main drivers of those subs. Of course, that doesn’t mean the Disney subsidiary is about to tell Dana White how to run his operation. Ultimately, the UFC pays its fighters and books the cards as they see fit - no different than any other league partner. Of course, after receiving Jacksonville vs. Tennessee one too many times ESPN is reportedly pushing to include flex scheduling in their next MNF deal with the NFL.
Perhaps a bigger reason for why ESPN would be unlikely to involve themselves in fighter negotiations or balk at the matchups chosen for a given PPV is their holistic approach to the partnership. The WWL isn’t evaluating the relationship on an event by event basis (so there’s no reason to worry about a single fighter or card). They see the UFC as cornerstone programming within the ESPN+ lineup and believe the promotion's events have been instrumental to the platform's growth (the service is up to 7.9 million subs as of the most recent Disney earnings call).
It's worth mentioning that the UFC has also performed well for ESPN on linear television. Their May 13th and May 16th Fight Nights ranked as the two most-viewed live sporting events on television since the sports world came to a grinding halt on March 11th.
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