WWE, UFC get more negotiating leverage on media deals

Networks and streaming services need to get ready for a media rights smackdown.

World Wrestling Entertainment is due to negotiate new media deals this year, a process made all the more interesting by its planned combination with UFC to form a publicly traded new company controlled by Ari Emanuel’s Endeavor Group. Endeavor expects the WWE-UFC merger to be completed in the second half of this year.

The merger will not only make WWE a heavyweight in these conversations. UFC should also benefit ahead of 2025, when its U.S. media rights deals come up, including with Disney’s ESPN.

The agreement, announced on Monday, comes after WWE had been on the sale block in the last few months. The process transpired ahead of negotiations for WWE’s domestic media rights deals for two key parts of its programming: Raw and Smackdown, which are on NBCUniversal’s USA Network and Fox Corp‘s broadcast network, respectively.

Current WWE CEO Nick Khan told CNBC last week that WrestleMania weekend, which just took place in Los Angeles, would lead into rights discussions ahead of the 2024 expiration. “We’re optimistic,” Khan said last week, noting NBC and Fox were both “terrific” partners.

WWE’s media partners have been preparing for the high-stakes talks, too.

“From a rights point of view, we’re focused on their rights renewal. We’re ready, we haven’t engaged with them on the rights yet. We’re ready to engage with them when they’re ready. But ultimately, our appetite for renewal depends on what happens with the rest of our sports portfolio,” Fox CEO Lachlan Murdoch said at a recent conference.

Sports organizations have seen media rights valuations step up in recent years. Even with the number of cable-TV bundle subscribers declining, live sports still gets the highest ratings on TV.

Plus, with streaming services trying to bulk up on anything that will make their subscriptions a must for consumers, they’ve entered the mix too, hungry for sports rights.

The NFL locked in 11-year media rights contracts across media companies including NBC, CBS, Fox and ESPN, which included the right to simulcast games on streaming services. Amazon’s Prime Video became the exclusive home of Thursday Night Football. Meanwhile, the NBA is likely to lean toward streaming partnerships in its next round of rights negotiations, while MLB, NHL and other sports properties have inked streaming deals.

Even when WWE shuttered its own streaming service, it licensed all of that content, including WrestleMania, to Comcast‘s Peacock, which won’t be on the table this year.

“I think everything is up for grabs with these media rights deals. There’s a wide range of opportunities of what can be done and where these properties can end up,” said sports media consultant Lee Berke of WWE, UFC, and pretty much any other sports league.

Besides their massive popularity, WWE and UFC also have some of the most-seasoned entertainment and sports rights negotiators sitting on their side of the table.

Khan, who will become WWE president after the merger closes, joined the wrestling company in 2020 after previously serving as the co-head of television at Creative Artists Agency. During his time with CAA, he had formed a relationship with McMahon during a recent round of TV rights negotiations for WWE.

Endeavor’s Emanuel and Mark Shapiro have sat at many negotiation tables.

“With Endeavor, given their skill set, particularly through IMG, negotiating sports rights deals, it’ll provide a value added to WWE and their negotiating process,” said Eric Handler, senior media and entertainment analyst at Roth Capital Partners. Agencies IMG and WME merged in 2014 to create powerhouse Endeavor. It will also work for UFC negotiations, he noted.

Emanuel touted Endeavor’s experience with sports deals well before the WWE deal.

“Internationally, one of our last deals we did for the UFC in the UK, there were six bidders for our rights. So – and we’re up over 100% and our IMG Media business is doing very, very well,” he said in Endeavor’s most recent earnings call. “So the demand for live sports and those rights broadcast is in high demand.”

Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.