LOS ANGELES • The Ultimate Fighting Championship (UFC) announced a new deal with ESPN on Tuesday, and the terms suggest the demand for sports is not slowing any time soon.
The five-year agreement is with ESPN+, the new digital streaming service, and it covers about a third of the promotion's events.
At US$150 million (S$201 million) a year, according to a person familiar with the deal, this portion alone is more lucrative than the UFC's current all-encompassing contract with 21st Century Fox Inc., which expires at the end of this year.
In sports and media, this sale has been seen as an early indication of how the decline of traditional cable and the arrival of digital streaming services would affect the market for content. As of now, it looks like the shifting landscape will produce more money, not less.
"We've gone beyond the pay TV-only era," said sports media consultant Lee Berke.
"We now have all these players, from ESPN+ to Bleacher Report, Amazon to Verizon and AT&T, all bidding for rights, and you've got a relatively fixed amount of content.
"It's Econ 101. There's fixed supply and increased demand. Naturally, rights are going to go up."
The deal also sheds light on how sports properties may make the most of their content by breaking it into pieces.
During negotiations with Fox over the last year, the UFC was seeking at least US$300 million a year. Fox was unwilling to pay much more than US$200 million a year.
Instead, the UFC cut off a piece for ESPN's new, US$5-a-month digital streaming service. The deal grants ESPN+ exclusive access to 15 events a year, plus non-live content and the UFC's archives.
It will also put the UFC alongside other ESPN+ content like the National Hockey League, Major League Baseball, golf's PGA Tour and college sports.
Meanwhile, the UFC is free to negotiate with other partners for the rest of its live rights. These include 12 pay-per-view events, 12 pay-per-view preliminary events (being offered separately in this round of talks) and about 15 other events per year, according to chief operating officer Lawrence Epstein.
Fox may still acquire a smaller set of rights, according to people with knowledge of the negotiations. Industry experts say the UFC stands to eclipse US$300 million when all the rights have been sold.
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