UFC Holdings LLC

Although revenue risk is lessened over the next several years, a potential intermediate-term risk factor for UFC may be that the new agreement creates a hurdle for viewership habits among fans who do not currently subscribe to ESPN+, such as having to adjust to an unfamiliar platform. Viewers of PPV bouts would need to subscribe to ESPN+ over the duration of the current contract, compared to previously when fans could purchase PPV bouts a la carte through a variety of cable subscriptions. The new agreement could reduce PPV purchases if some fans do not become ESPN+ subscribers. The stable outlook reflects our expectation that total lease- and preferred stock-adjusted debt to EBITDA will improve to the high-6x area by fiscal

...UFC's domestic media rights agreement with ESPN will likely reduce operating variability over time. UFC and ESPN signed a media rights agreement in May 2018, which was further expanded in March 2019 to include pay-per-view (PPV) events and a longer contract maturity. In return for fixed media rights fees, UFC exclusively distributes its PPV and non-PPV bouts through ESPN linear and ESPN+ in the U.S. UFC and ESPN also extended the duration of the media rights agreement they reached in May 2018 to seven years from five years. As a result, UFC estimates that about 70% of total 2019 pro forma revenue will be contractually fixed, compared with less than 40% previously. We believe this agreement will partially mitigate key business risks, such as the unforeseen need to cancel or postpone events because of fighter injuries and the popularity cycle of athletes, by replacing volatile revenue from UFC's event-driven PPV business model with a fixed-fee, contractually recurring revenue stream and providing...

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