Punching Up

How OTT services are scoring wins against pay-per-view with ring-sports viewers
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Heavyweight champion Anthony Joshua showed why he’s among boxing’s best pound-for-pound fighters when he scored a devastating seventh-round knockout of contender Alexander Povetkin in their big title bout on Sept. 22.

Streaming service DAZN’s first major event was the Sept. 22 heavyweight fight between champion Anthony Joshua (l.) and Alexander Povetkin.

Streaming service DAZN’s first major event was the Sept. 22 heavyweight fight between champion Anthony Joshua (l.) and Alexander Povetkin.

This past Saturday (Sept. 29) Bellator MMA was set to make history as its welterweight champion, Rory MacDonald, vied to become the company’s first mixed martial artist ever to hold concurrent titles by defeating middleweight champion Gegard Mousasi in the main event of Bellator 206.

In the past, fight fans would have had to pay more than $50 or more each to watch the Joshua-Povetkin boxing match or Bellator 206 on pay-per-view. Instead, both events were streamed by DAZN, a new direct-to-consumer service, as part of the $9.99-per-month subscription.

The New Contenders

The recent arrival of DAZN and other OTT sports services such as ESPN+ are threatening to land a body blow to the traditional distribution model for high-profile boxing and MMA fights. Industry observers said basic and premium cable networks and the pay-per-view industry will have to make room for upstart OTT services in a crowded combat-sports distribution ring.

The new distribution dynamic seems to have already knocked out one traditional TV distributor: HBO said last Thursday (Sept. 27) that it will no longer televise live boxing matches after 45 years. On reason is that the sport is “now widely available on a host of networks and streaming services … from an entertainment point of view, it’s not unique.” HBO’s last live boxing telecast is scheduled for Oct. 27.

“Television platforms and windows change many times over history, and, if streaming economics and the number of fans that are willing to watch via streaming is strong enough, then anything is possible,” Mark Taffet, former head of HBO pay-per-view and current president of the upstart MMA Pro League, said. “That’s not to say that television is a dinosaur, but there are now a plethora of choices and the younger generation wants multiple devices available simultaneously, so those needs have to be met … you have to give consumers what they want.”

OTT entertainment services such as Netflix, Hulu and Amazon’s Prime Video have significantly altered how viewers watch television, challenging traditional TV networks for top talent, content and engagement. But direct-to-consumer services created to serve the sports fan in general, and the fight fan in particular, have had a slower walk to the ring.

For the past three decades, premium services such as HBO and Showtime — along with the PPV event category — have televised most of the biggest and most lucrative boxing and mixed martial arts events. Combat sports fans have been conditioned to dish out significant dollars for these cards, generating millions of dollars for fight promoters and fighters.

That dynamic shifted somewhat with the April launch of subscription digital service ESPN+. The $4.99-per-month service promises more than 10,000 live sports events.

ESPN+ also said early on it would cater to the combat sports fan by offering quality, competitive and appealing boxing and MMA events. To that end, this past May the network reached a groundbreaking five-year, $1.5 billion deal with MMA event leader UFC, in which ESPN and ESPN+ will offer 42 live MMA events, with 20 streaming exclusively on ESPN+.

ESPN president Jimmy Pitaro said UFC provides ESPN+ with content that will appeal to young viewers who are already streaming UFC highlights and information. “We’re excited about the current state of the UFC, but we’re also more excited about its future crop of fighters and what’s coming up for the organization,” he said.

Combining ESPN’s broad reach with the big-event nature of PPV and the new, multiscreen SVOD from ESPN+ gives UFC the perfect combination of screens to reach its fan base, chief operating officer Lawrence Epstein said.

“We think it’s great for the overall combat sports industry — it gives consumers the ability to consume high-quality content the way they want to consume it,” he said. “We also feel like combat sports have a very significant advantage in the OTT space because our content is so viewable on phones and on iPads — it’s not a football, soccer or hockey game, but rather two athletes competing against each other, and it translates really well to a smaller screen.”

In August, ESPN doubled down on its combat sports strategy by reaching an exclusive, seven-year TV agreement with boxing promotion company Top Rank to feature 24 live fight cards and 12 exclusive primetime events on ESPN+.

Prior to the deal, ESPN and Top Rank turned heads with an exclusive stream of the July 14 Manny Pacquiao-Lucas Matthysse welterweight championship fight. In previous years, that fight — in which the 39-year-old Pacquiao defeated Matthysse to capture the title — would have been offered on PPV. Instead, the fight was part of the upstart streaming service’s lineup of sports content that could be viewed by fight fans for far less than it would have sold for on PPV.

Getting Inventive

“Anybody in the content business has to be inventive and flexible in how you look at content on your platform,” Top Rank president Todd duBoef said. “There are some wonderful behaviors to the DTC [direct-to-consumer] platform that are not so evident, including flexibility of schedule.”

TV sports consultant Lee Berke said new OTT players like ESPN+ would likely challenge the PPV industry where they could for high-profile fights in an effort to build up a subscription base. Indeed, ESPN+ late last month reported that it had already reached the 1 million subscriber mark.

“Essentially, OTT is PPV under another guise,” Berke said. “When you’re looking for mass audiences, by default sports is the only thing that remains. There’s such a crying need for content on these other platforms to create those mass audiences, and sports is increasingly the only game in town for making that happen.”

While TV rights to the major pro sports leagues won’t be available until after 2020, Taffet said rights held by new and established companies offering boxing and MMA content are available.

“Boxing and MMA have a lot of rights unaccounted for, so as a result they are low-hanging fruit for new platform distributors,” said Taffet, president of the recently launched MMA Pro League — which streams its content on the upstart FloCombat streaming service. “I believe boxing and MMA will continue to be recipients of the influx of programming money because the rights are available, and live sports is one of the most attractive vehicles for the new digital and social platforms.”

The appeal and potential of offering live combat sports programming to the emerging digital platform convinced United Kingdom-based digital sports company Perform Group to create a U.S.-based OTT service dedicated specifically to boxing and mixed martial arts. The Sept. 15 launch of the $9.99 per month subscription VOD service DAZN (pronounced The Zone) has already altered the combat sports distribution marketplace.

DAZN has secured distribution deals for at least 70 exclusive live boxing and MMA events scheduled over the next year. The company shocked the boxing world by acquiring rights to the Sept. 22 Joshua-Povetkin heavyweight championship fight — Joshua’s previous fights aired on Showtime in the U.S. — as well as its multiyear agreement with Bellator for the MMA’s marquee fight cards.

“We feel the U.S. fight fans have been robbed for too long,” DAZN senior vice president of North America operations Joseph Markowski said. “You pay for a premium service as part of your cable service and then have to pay on top of that a fee for pay-per-view when a premium fight comes to market, and we feel that’s a terrible value proposition for fans.”

While Markowski wouldn’t provide early subscriber numbers for DAZN, he said the company feels good about building a significant subscriber base. “We’re initially positioning ourselves as a must-have for fight fans, and we’re really excited to start engaging with that fan base.”

Certainly, the PPV industry is watching the these new OTT services closely as they compete for access to the best fights in both sports.

“The promoters have said that they still believe in the PPV platform, and it’s truly the way to generate the most amount of revenue from a ring sports event on a given night,” In Demand senior vice president of programming and business development Mark Boccardi said. “Is there a concern that someone comes in and starts to throw around ridiculous money to get exclusive rights to a fight? Sure, but that concern has always been there. We take comfort in the promoters telling us that they continue to believe in the platform, and based on the number of holds that we have for [PPV] dates for the rest of the year and into the first six months of next year, I don’t think that will change.”

Boxing events alone generated nearly 7 million buys in 2017, translating to more than $500 million in revenue. Pay TV distributors typically got about 45% of that cash, making it an important revenue source for them.

Indeed, HBO on Sept. 15 distributed 2018’s biggest PPV boxing event to date, the Canelo Alvarez-Gennady Golovkin middleweight championship rematch. While buys for the fight were not available at press time — industry observers say the fight is pacing slightly below the 1 million PPV buys generated by the first Alvarez-Golovkin fight last November — it will finish among the top revenue-generating PPV events of the year.

One event that might eclipse Alvarez-Golovkin’s performance is the Oct. 6 UFC 229, which will feature Conor McGregor’s return to the octagon for the first time since 2016. McGregor’s last PPV appearance was Showtime's 2017 mega-event boxing match against Floyd Mayweather that drew 4.3 million buys — second only to the 4.6 million generated by Showtime & HBO PPV's 2015 Mayweather-Manny Pacquiao fight. UFC’s Epstein said early indicators put the PPV performance of UFC 229 in the neighborhood of Mayweather-McGregor, but he would not predict a final buy figure.

“The event has already captured the attention of everybody in the world, and all indications are that it will break all UFC [PPV] records,” he said. “This is a textbook example of the type of big event we want to do via the PPV distribution platform. Now the question is how close we can get to Mayweather-McGregor.”

Showtime will also step into the PPV boxing ring on Dec. 1 when it distributes the Deontay Wilder-Tyson Fury heavyweight championship fight. 

MMA outfit Bellator though, will serve up less PPV events in the aftermath of its recently signed a “nine-figure” multiyear distribution deal with DAZN. That agreement calls for DAZN to carry 22 Bellator events, seven of which will be exclusive to DAZN and the rest to be shared with the Paramount Network, which has aired Bellator events since 2013.

“Effectively, they have taken us out of the PPV business for the most part,” Bellator president Scott Coker said. “We’re allowed to do PPV and it’s not out of the question, but in DAZN we have a partner that really wants this content and wants to be in the combat sports business. They made us a deal that was good for us, and they wanted the big fights that we would have put on PPV.”

OTT services such as ESPN+, DAZN, FITE TV and FloSports are just discovering live sports, and it’s unclear if they can defeat traditional TV distribution outlets for the biggest boxing and MMA events.

“Technology is changing at an ever-increasing pace, and you have to be ahead of it to be successful,” Taffet said. “Right now, combat sports are the big beneficiaries of that technology change.”

For more about HBO's decision to stop live telecasts of boxing matches, read R. Thomas Umstead's Q&A with EVP Peter Nelson at multichannel.com/Oct1.

Heavyweight champion Anthony Joshua showed why he’s among boxing’s best pound-for-pound fighters when he scored a devastating seventh-round knockout of contender Alexander Povetkin in their big title bout on Sept. 22.

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