"We have the long-term rights in most countries to major sporting events and we [intend to] use sports as a battering ram and a lead offering in all our pay TV operations." - Rupert Murdoch’s speech to shareholders in 1996
As we approach tomorrow's UFC debut on Fox, much if not all of the discussion within the MMA community is about what the deal means for the Ultimate Fighting Championship. But where does Fox fit into the discussion? What does this landmark deal mean to them? What does it say about Fox that they made this deal in the first place?
The reality is this: sports content has been one of the if not primary ways Fox has asserted itself as television network force. Fox may have just as much a name for The Simpsons as it does sports, but it was not cartoons or entertainment program that turned a fledgling network into one of the most dominant television brands today.
Fox's decision to partner with UFC should be viewed as part of their existing strategy of using sports as a means of catapulting the network forward. At Fox, it's formula is sports + innovation + risk + asset building = new heights.
Since 1993 when Fox outbid CBS for television rights to air NFL games, this informal policy has been in place. That year, Fox spent 49 percent more than CBS had paid the previous four year: $395 million per year totaling $1.58 billion for a four-year deal.
At the time, Fox came under attack and scrutiny for what was perceived over payment. Critics wondered how Fox planned to make their money back in an era when many television networks were losing money on rights packages for sports. But generating revenue in the first iteration of the deal wasn't the goal. Murdoch himself admitted they had overpaid, but has done so intentionally. "It was an asset play for Fox," Fox Sports Chairman David Hill told the New York Times in 1994. "Fox in those days wasn’t even secondary or tertiary. We just tried to make the network work."
In an interview with the Harvard Business Review, Tracy Dolgin, former president of Fox Sports Networks, explained Murdoch's and Hill's gamble: "When Murdoch looked at the NFL, he didn’t look at it as ‘how much am I going to make in ad sales revenue versus how much am I going to pay for the rights fees and production costs?’ He wanted to get stations to defect to Fox."
In 1993, most Fox affiliates were UHF (ultra high frequency) versus the more bedrock VHF (very high frequency) stations. This is important because the Federal Communications Commission originally created 12 channels for television broadcasting, numbered 2 through 13. These were the VHF stations. But with the growth in television, the FCC then created 70 more channels (14 through 83) that were known as UHF.
Fox's goal was to get every cable channel in America to carry them and football was the only product they could rely on to get them the market penetration they were looking for.
So while Fox did not make money on their early NFL deal, that wasn't the aim, anyway.
"The genius of Murdoch was to look at the decision to get the NFL based on the big picture, as opposed to looking at it based on how it would perform economically on a stand-alone basis so he was able to make a substantially higher bid than competitors. We never thought we were going to get NFL rights because we only had the low quality UHF stations, but we did and that changed media and sports history."
Since coming to Fox, innovations to the way the viewer sees the program have been numerous. None have been more successful than the Fox Box, an onscreen graphic that shows scores, time, down and more.
Not every Fox venture into sports has been successful. Major League Baseball has been a positive partner for Fox, but perhaps more instructive for UFC are Fox's attempts at airing hockey and Nascar, two niche sports with dedicated fan bases but lacking in larger mainstream appeal. Nascar and Fox have had a mutually beneficial relationship, but the television giant couldn't replicate the NFL magic with the NHL game. In both cases, Fox sought to be the leading television destination for sports fans in an increasingly fragmented market.
Fox paid $155 million for a four-year deal from 1994 to 1998. That was double what ESPN paid for the previous four years. The logic for getting involved in the NHL space may sound eerily familiar to MMA fans. Chase Carey, now Deputy Chairman of News Corporation but previously Fox Television Chairman, believed the was the NHL could be grown and hadn't had enough television exposure.
Moreover, the NHL saw what Fox did with the NFL and wanted in on the action. "Hockey saw what Fox did with the NFL and they wanted us to market their sport to the mainstream," Dolgin told The Harvard Business Review. "We did the same thing for hockey that we did for the NFL. We conducted this huge marketing campaign, tried to make stars out of their players, did crazy promotions, made the puck glow, etc. Everyone thought we were crazy."
But the promotion and innovation never worked (the Glow Puck, unlike the Fox Box, never caught on). After the relationship failed to move hockey any further along (a blame Fox lays at the feet of non-competitive Stanley Cup finals), Fox didn't even bid for rights after their initial deal expired in 1998. Fox actually tried again in 2011 to get the NHL back on their network, but gave up after a bidding war between Comcast and ESPN.
Nascar, however, found Fox to be the cure for precisely what ailed them.
Nascar's problem was consistency. On one week they'd air an event on X network. The next week it'd be on Y network. What they needed was the ability for one place to be able to promote their events for a period of fixed time. The first step was a three-year process of buying back the rights from the various tracks that owned them. Then came the television pitches, which were essentially different groupings of races together in contrasting packages.
In 1999, Fox and Nascar reached an agreement where Fox earned, among other things, the first half of that year's season. The result? Rating skyrocketed, so much so that the growth is more than any other sport has ever experienced in a single year. Fox eventually re-purposed their Glow Puck technology to help viewers keep track of different cars. It also introduced the scoring banner to live events, different camera angles and louder audio. Since the beginning of the partnership, Fox has earned 13 Emmy awards for their production of the racing events.
That brings us tomorrow's date with destiny. For Fox, the need is clear. UFC adds an interesting niche to their sports programming portfolio. They create more 'must see live' content. And they bring more males 18 to 34 years old, a very difficult market to attract. As Sports Business Journal John Ourand told MMA Nation, in an age of iPods, Xboxs and the Internet, advertisers have found it increasingly difficult to market to this demographic. The UFC will ideally be able to deliver them to Fox in droves, helping not only big Fox, but their cable network FX by siphoning the audience to their male-friendly comedy shows and original dramas.
The engagement with UFC is a continuation of the policy of experiment and innovate at Fox. That's true even when it necessitates flying by the seat of one's pants. As Hill noted on Wednesday media conference call, there is no blueprint for airing MMA on television. At least not UFC-level MMA. That the sport has aired before in ultimately unsuccessful bids hardly creates a road map.
But that's beside the point. The UFC is very much uncharted territory even for sports programming. Live fights, both boxing and MMA, have aired on network television, but not as part of a branded company that carried any real visibility. And what ailed the NHL or Nascar is not the situation the UFC faces headed into tomorrow's watershed moment. Unlike Nascar, UFC has been on a platform consistently (Spike TV). UFC might need brand revitalization as did the NHL, but few who watched the NHL on Fox had never seen hockey before. There really is no other analogous effort to borrow or mirror. Fox is on it's own.
Impressively, Fox's clever hand of innovation has already begun. 'The Ultimate Fighter' will begin airing live on FX in 2012, a move that will provide a much-needed injection of energy to the show's format. Weigh-ins, overseas fights and shoulder programming will turn Fuel into a UFC destination. For tomorrow's program, though, it's not particularly clear what Fox can or will do. There is little time in the hour-long broadcast and UFC is notoriously stingy with production controls.
Tomorrow, though, shouldn't be viewed solely in terms of the UFC's interests. The coverage should also be framed around and viewed through the context of Fox's designs. For all of the talk about the UFC's coming out party, this event has the classic Fox trimmings and signatures: experimentation, innovation, and asset building.
Just like in 1993 when Fox bought the rights to NFL games, Fox is incorporating the 'same game, new attitude' by delivering MMA in a new way to new audiences. And just like 1993, there are no guarantees of success. But if Fox is about anything, it's the use of sports as a network driver to reach new audiences and achieve great heights. So, just as it was in 1993, it's once more unto the breach.
UFC is Fox's 2011 battering ram. Here goes nothing.