UFC Deal Is All About FX Sub Fees for News Corp.

Martial arts fights on Fox garner attention, but rights package is really fueled by cable network’s battle with operators

Last October, UFC Chief Dana White told B&C he
would get a broadcast TV deal in 2011, and sure enough his
new pact with News Corp. puts the mixed martial arts outfit on
Fox. And that handful of fights per year got much of the attention and
subsequent media coverage from a splashy announcement in Los Angeles
last week on the network’s lot.

But for News Corp., this deal
wasn’t at all about a few Saturday
nights per year on the Fox broadcast
network. Instead, the company
is betting the UFC rights
package will help with a major
corporate initiative: FX punching
and kicking its way to the top of
the cable rankings in terms of both
ratings and, especially, revenue.

Cable networks are already driving
profits for News Corp., but
Chief Operating Officer Chase Carey
believes the division has much
untapped potential, particularly at
FX, whose license fees are scrawny
compared to its older rivals. In
fact, FX’s relatively modest sub fees
have been a big source of attention
within the company recently.

SNL Kagan estimates that cable, satellite and telco distributors pay 44
cents per sub per month for FX, well behind its general entertainment
cable network peers. TNT gets $1.16, USA gets 60 cents and TBS gets 57
cents. And the timing won’t hurt, as News Corp. is facing an upcoming
negotiation with DirecTV for its channels.

Carey is a big believer in live sports, and for good reason. Basketball and
baseball prop up ratings at Turner’s TNT and TBS. And the WWE pumps
millions of viewers per week into USA, the top-rated cable network.

Adding live sports—be it college football, UFC, or, perhaps next
season, NFL football, if News Corp. can land a much sought-after new
package of games being shopped—is a sound strategy, according to
Derek Baine, analyst at SNL Kagan.

“On the recent News Corp. conference call, they were talking about
big license-fee increases for FX,” says Baine, who notes FX’s ratings
“have grown pretty dramatically recently. I think adding sports will
capture the attention of cable operators.”

“The truth of the matter is, if you want to be a full-service network in
basic cable and you want to be relevant to that audience, you need to be
in the sports business,” says well-regarded FX Networks President John
Landgraf, who was recently rewarded with a new three-year contract.

FX’s entertainment lineup already attracts more young male viewers
than its general entertainment competitors, and Landgraf notes an 80%
overlap between UFC watchers
and FX viewers.

Of course, live sports is not
cheap. News Corp. is reportedly
paying at least $100 million per
year for seven years for UFC programming
to air on Fuel and Fox
Deportes as well as Fox and FX.

“What you see is News Corp.
really significantly investing in
the channel, between the rampup
in original programming and
marketing and the simultaneous
ramp-up in acquired programming
between Two and a Half Men
and movies, and now the simultaneous
ramp-up in sports programming,”
says Landgraf.

Using sports to strengthen
FX is probably a more economical
strategy for News Corp. than
trying to start a cable sports network of its own, a move the company
has often discussed internally.

And Landgraf says he would rather turn to sports than reality television
to boost ratings. “I never wanted to go in that direction with
FX,” he says.

The bottom line is Landgraf thinks UFC will help the network in
upcoming carriage negotiations. “First and foremost, it’s going to help
us with the audience, and I think the audience is ultimately your leverage
with the cable operators,” he says.

FX has been using the slogan “There Is No Box” to describe how its
programming doesn’t fit into the typical TV mold. Landgraf says he had
been wondering whether it was time to freshen that up, but didn’t think
he needed to rebrand. “‘There Is No Octagon’ will not be coming to our
channel anytime soon,” he says.

E-mail comments to jlafayette@nbmedia.com
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