Formula 1, WWE and UFC are potential acquisition targets for streaming services

In 2016, before the মে 4 billion sale to the Ultimate Fighting Championship company that would become the Endeavor Group, the mixed martial arts league Disney almost scooped up to do a little more.

Disney and UFC negotiated the terms of a deal in which the entertainment giant would acquire the war sports company for about $ 4.3 billion, according to people familiar with the matter.

Disney, which owns most of the sports broadcast network ESPN, has been playing with the idea of ​​buying a sports league for years, one said. Bob Eger, then-Disney CEO, was the model executive for the acquisition of the brilliant intellectual property acquisition of Pixar, Lucasfilm and Marvel.

In the end, Igar canceled the UFC deal. He felt that the bloody and violent UFC brand did not mix with the family-friendly Disney, people said, who declined to be named because the discussion was private. A Disney spokesman did not immediately return calls seeking comment.

Two years later, Disney’s ESPN paid $ 1.5 billion for UFC TV rights in a five-year deal. According to UFC CEO Dana White, the deal immediately raised the value of the UFC to 7 billion. Disney’s ESPN + also signed a শেষ 150 million-a-year deal to stream UFC fights, ending in 2025.

If ESPN renews the UFC rights, Disney will pay much more in licensing fees than it would have paid $ 4.3 billion in 2016. Popular sports broadcasting rights fees continue to rise rapidly as they offer unique live viewing opportunities for advertisers and attract a relatively large audience.

This calculation has made professional sports and entertainment leagues such as UFC, NASCAR, Formula One, and WWE potential targets for streaming companies as a way to control the ever-increasing rights fee for valuable live programming that still commands advertising dollars.

“It would be much smarter to buy a Disney UFC than to spend so much on a license,” said Rich Greenfield, a lightshade analyst. “Costs are going up a lot now. It makes a lot of sense to own a league.”

Although it rarely comes to sell anything, the streaming era has probably made sports leagues a more desirable acquisition as rivals seek exclusive content for competitive advantage. Owning a league without relying on many years of license renewal can lead to repeated bidding wars, strengthen branding and reduce customer churn.

When Disney looks at the image of the UFC, it’s easy to imagine WWE or Formula One brand roller coasters and theme park rides for the media companies they own. There are clean merchandise tie-ins for Amazon. Netflix may use proprietary IP for its new video gaming segment.

Formula One, WWE and UFC all have language-independent features with worldwide application. Formula One, in particular, prides itself on being an international sport with races around the world. The league announced last week that it has added a third U.S. Grand Prix to Las Vegas starting in 2023.

It could give a scale tip for streaming services that need global customer growth, such as Netflix and Disney, to keep investors happy.

“Streaming companies are global,” said Shawn Braches, former managing director of commercial operations at Formula One. He has created and supervised “Drive to Survive”, a hit documentary on Netflix that gives a full account of Formula One season. “If you’re a game like F1, one of your primary strategic objectives is to improve your global media rights.”

There is no known discussion of achieving Formula One, UFC or WWE.

While buying sports and entertainment leagues can be an attractive goal for big streamers, many of them are not readily available. The National Football League, Major League Baseball, the National Basketball Association – the biggest professional sports leagues are not a potential target to buy. It leaves a hodgepodge of small leagues, which may or may not be for sale at a certain time.

WWE, with a market capitalization of 4.6 billion, stands as a potential takeover candidate because it is a publicly traded company with age-controlling shareholders. Vince McMahon owns more than 80% of the voting power and is 76 years old. At some point, he and his family will have to decide whether to control the company or sell to the highest bidder. McMahon’s daughter, Stephanie, works as the company’s chief brand officer.

“We’re open to business,” WWE President Nick Khan said in The Ringer’s “The Town” podcast last month.

A buyer could be a legacy media company, such as Disney, Fox, Paramount Global or Comcast’s NBCUniversal, which last year signed a বছরের 1 billion five-year deal with WWE to become the exclusive live-to-consumer home for WWE. .

“If you look at what NBCU / Comcast needs, and I think that’s a real statement, they don’t have the intellectual property that some other companies have,” Khan said. “I think they see us as an entity that has a lot of intellectual property. Much of it has not been put to good use. Now it’s up to us to properly monetize it and show the community exactly what we have.”

An NBCUniversal spokeswoman did not immediately return calls seeking comment.

If a potential acquirer makes an offer to McMahon, it could come before the company’s next rights renewal – probably announced in mid-2023. This is likely to be the case when McMahon decides to sign or sell another multi-year contract.

While Disney and NBC Universal have their own theme parks, big technology companies Apple and Amazon have also emerged as potentially interested parties in acquiring sports and entertainment IPs. Both have a multi-year contract to broadcast MLB games on their streaming services. Amazon also acquired the exclusive rights to Thursday night football, earlier this season. Even Netflix, which has so far stayed away from live sports, is open to buying Formula One rights after its documentary “Drive to Survive” became a worldwide hit, co-CEO Reed Hastings said last year.

While Disney has proven that it can exploit and expand existing intellectual property from Marvel and Lucasfilm, creating new characters is a different set of skills, said WWE’s Khan. It’s not clear if a streaming service or a large entertainment entity will set up the same skills as McMahon.

The content of a small sports company may be buried in a large streaming service that may not feature everything to its users. While Star Wars and Marvel spinoffs often get top billing on Disney +, other intellectual property may be lost in the exchange. McMahon will have to decide whether WWE can expand its universe as part of a larger company or risk losing cash without the family’s attention.

Streamer big enough to acquire a multibillion-dollar acquisition of a small sports league may not be interested, says Braches, a former Formula One executive who worked for ESPN for 27 years.

Liberty Media, controlled by billionaire John Malone, acquired Formula One for 4.4 billion in 2016. Liberty has been investing in F1 for over five years and has been generating revenue by splitting rights worldwide and auctioning off licensing rights to various media entities.

If you own a media party league, that business model will disappear. Any seller who thinks about the future of what they are selling will want to feel confident about the overall health of the acquiring streaming service, Braches says. If consumers are annoyed at a streaming service and that company exclusively owns a league, the number of viewers may suffer independently from the quality of the league.

“These are ‘very good’ features, but it’s not like you’re buying the NFL,” Braches said. “There is not enough material to move the needle.”

Disclosure: Comcast’s NBCUniversal is CNBC’s parent company.

See: Liberty Media announces Formula 1 Grand Prix in Las Vegas