The major professional sports leagues are expected to reap billions of additional revenue annually from legalized sports betting in the United States, through avenues such as media rights and sponsorships. The UFC is eyeing a boost as well as additional markets go live.
According to an amended IPO prospectus filed last week by the global media conglomerate Endeavor (formerly known as WME-IMG), which owns the UFC’s parent company Zuffa, sports betting represents a lucrative opportunity. Endeavor is set to have its IPO on Sept. 27, and it’s seeking to raise as much as $619 mm, which would value the company at roughly $7.6 billion.
Endeavor acquired the UFC in 2016 for $4 billion, and its stake in the MMA promotion could account for more than a quarter of the company’s total value, as Forbes noted.
The UFC deal followed the 2014 $2.2 billion acquisition of media, sports, and fashion leader IMG, under which Endeavor has waded into sports data. In November, Endeavor’s IMG Media business announced the launch of IMG Arena, which provides data and video for more than 45,000 sports events per year to sports betting platforms. IMG Arena has deals with the likes of the PGA Tour, Major League Soccer, and the National Hockey League. Endeavor is also an owner of EuroLeague basketball under a joint venture.
Separately, Disney’s ESPN in May 2018 acquired the UFC’s linear and digital U.S. media rights as part of a five-year $1.5 billion deal. The ESPN media deal was seen as a way to bring greater financial stability to the UFC, which historically relied heavily on revenues from a more volatile pay-per-view model.
Sports wagering opportunity
The California-based Endeavor acknowledged in the regulatory filing dated Sept. 16 that U.S. legal sports betting is still in its infancy in the wake of the 2018 U.S. Supreme Court ruling.
“If all 50 states legalize sports betting, it is estimated that the U.S. market could be worth up to $16 billion,” Endeavor said in the IPO prospectus. “This growth in sports betting is a global trend and we expect demand for sports data and video rights to grow as this industry expands.”
“Distributors will continue to place a premium on live sports context,” Endeavor added while noting that the global sports betting and lotteries industry generated $217 billion in 2018.
The UFC has had a robust relationship with the global betting industry over the last handful of years.
In July 2018, the UFC inked a betting partnership with Parimatch for the EMEA (Europe, Middle East, and Africa) region. The deal doesn’t include the UK or Ireland. In December, the UFC and PokerStars linked up. Though that deal was said to be for poker, The Stars Group, the parent of PokerStars, is heavily involved with sports betting under FOX Bet, formerly known as BetStars.
Prior to those deals, the UFC partnered with Tabcorp for sports betting in Australia. Two years prior to the deal involving the Aussie betting market, the UFC and DraftKings entered into a fantasy sports partnership. The UFC has also worked with Unibet.
ESPN, the UFC’s exclusive broadcaster partner, has a sports betting partnership with Caesars.
While the IPO prospectus doesn’t go into detail with regard to how the UFC could reap the benefits from its data for in-fight wagering, the opportunity is there.
Thirteen states in the U.S. currently have legal sports wagering, but only six are live with online/mobile betting platforms. In-fight betting relies on the internet.
Two states — Illinois and Tennessee—- legalized sports wagering this year with a requirement for “official” league data for in-game wagering, though regulations for both states haven’t been crafted yet.
To some extent, the UFC will have to deal with a recent partnership between MGM’s Roar Digital and the nation’s leading sports bar chain Buffalo Wild Wings. Under that partnership, the BetMGM app is the official betting platform for BWW. The brick-and-mortar locations are popular midwest hangouts for UFC broadcasts.
In-fight wagering might be a major piece to the puzzle for the UFC to grow viewership at a time when it’s struggling. While the deal with ESPN was a lucrative one, early numbers point to some problems, according to Forbes. To make matters trickier, the UFC’s fanbase might be aging. In 2016, the median age for a UFC viewer was 49, growing by an industry-worst 15 years from 2006.
Endeavor said in the regulatory filing that 40% of American UFC fans are millennials.
The demographics for sports wagering skew younger, so the UFC would do well to capitalize on business opportunities stemming from in-play wagering as more states adopt online/mobile options.