Paramount's UFC deal shows that CEO David Ellison 'is here to play', Puck's Matt Belloni

Key Concepts

• Live sports rights deals
• Streaming service subscriber growth
• Linear TV vs. streaming strategy
• Mergers and acquisitions in the media industry
• Content investment
• Reach and monetization
• Perception of unbiased news

UFC Rights Deal and Paramount Global

• Deal Details: Paramount Global secured a 7-year, $7.7 billion rights deal for all UFC matches. This includes both numbered fight nights (major events, ~13 per year) and broader fight nights (~30 per year).
• Platform: The fights will air on Paramount Plus, with the big fights also airing on CBS.
• Significance: This deal is a major coup for UFC and a signal that David Ellison is serious about competing in the media landscape. The deal is worth $1.1 billion annually.

Making Money in Sports Rights

• Challenge: Sports rights are expensive, making it difficult to recoup costs through subscribers and advertising alone.
• Ellison's Strategy: Ellison aims to use UFC to significantly grow Paramount Plus subscribers (targeting 90-100 million in the next few years).
• Subscriber Growth: Paramount+ currently has 77 million subscribers.

CBS Linear TV Component

• Reach: CBS provides significant reach for UFC, which was once considered a fringe sport.
• Monetization Balance: The challenge is balancing reach on CBS with driving subscriptions to Paramount Plus.
• Advertising vs. Subscriptions: CBS wants to sell advertising against marquee matchups, but also needs exclusive content on Paramount Plus to incentivize subscriptions.

The State of CBS

• Profitability: CBS remains profitable and is the number one rated broadcast network.
• Linear vs. Streaming: The strategy is to leverage linear channels for profit and reach while investing in streaming.
• CBS News: Ellison visited CBS News and plans to bring in an ombudsman to promote transparency and the impression of unbiased news.
• Key Properties: CBS still has major properties like NFL, golf, and 60 Minutes, which attract millions of viewers.

Potential Mergers and Acquisitions

• Speculation: There's speculation about a potential merger between Warner Bros. Discovery's studio and streaming assets with Paramount.
• Alternative Strategy: Ellison may choose to invest in content and rights independently, negating the need for a Warner Bros. Discovery merger.
• Peacock and Max: Peacock (Comcast) and Max (Warner Bros. Discovery) are also potential targets for consolidation.
• Scale: Ellison wants scale in streaming, which Paramount currently lacks.
• Control: The key question is whether the Roberts family (Comcast) and Warner Bros. Discovery are willing to relinquish control of their streaming services.

Conclusion

The media industry is in a state of flux, with live sports rights playing a crucial role in driving subscriber growth for streaming services. David Ellison's acquisition of UFC rights signals a commitment to competing in this space. The future may involve mergers and acquisitions to achieve greater scale in streaming, but control remains a key consideration. The strategy for CBS involves leveraging its linear channels for profit while transitioning investment to Paramount Plus.