The Ultimate Fighting Championship, acquired in 2016 by Endeavor (then WME-IMG) for the hefty sum of $4B, is approaching the end of its seven-year TV deal with Fox, which expires in December.

As Endeavor looks for a new package for the once-high-flying circuit, the process goes to the heart of one of the thorniest and most complex parts of the media business: sports rights.

As with many other televised sports, ratings for the mixed-martial-arts circuit on the Fox broadcast network and sports cable network FS1 have been losing ground. In 2017, UFC bouts on Fox plunged nearly 22% to a bit more than 2M viewers on average. Fights on FS1 dropped nearly 18% to an average of 795,412 viewers. Those patterns have largely held in the early going of 2018. So the question is, where does that leave the circuit and Endeavor as it pursues a new TV rights deal?

UFC

Proponents would say the sport still has extraordinary reach to elusive young male viewers (the same motivation for ESPN and Showtime to flood the linear airwaves with boxing lately). Even a hobbled ratings performer, they argue, can still outdo more untested scripted properties vulnerable to time-shifting. Those younger male viewers may also be more comfortable than other members of the TV tribe if the rights shifted from traditional linear to a digital streaming player.

For 21st Century Fox, the prospect of a renewal also comes at a time of great uncertainty given the pending acquisition by Disney of most of its assets. Knowing it would need reliable programming on Fox given the imminent departure of the pipeline-filling production studio, the broadcast network opted to pay a handsome $3 billion over five years for rights to NFL Thursday Night Football despite its ratings declines.

For the UFC, one major drag on ratings has been a changing of the talent guard. Three of the biggest draws of this decade — Conor McGregor, Ronda Rousey and Brock Lesnar — have all left the ring. McGregor opted for an ultra-rich payday fighting a boxing match against Floyd Mayweather last spring and may not be allowed back into the UFC. Rousey, who was on a Dwayne Johnson-esque trajectory moving toward acting, was stunned with knockouts in successive fights and decamped for the WWE. Lesnar, 40, also moved to the WWE and then tested positive for a performance-enhancing drug, leaving his status in question. Daniel Cormier remains an active UFC headliner, but at age 38 has begun to talk of retirement. “The systemic problem they can’t get around is that as soon as someone crosses over, they get knocked out,” one veteran sports dealmaker says. “It’s as if, every 18 months, LeBron James retired and the NBA had to introduce a brand new star to the viewers at home.”

Brothers Frank and Lorenzo Fertitta bought the UFC, which was founded in 1993, for just $3 million in 2001. They soon turned it into a 21st century sports phenomenon. As boxing faded from the spotlight and its audience aged, UFC presented a brash, social-media-ready alternative that was seen as more legit than pro wrestling but also more raucous and unpredictable than many other sports on the dial. In 2011, Fox climbed aboard, inking a TV deal that has averaged around $120 million a year.

The circuit was propelled by the steady hikes in sports rights, which progressed for years before OTT services and skinny bundles started throwing a wrench into viewership and valuations a couple of years ago. Despite the many avenues for content, in 2018 sports media rights grew at nearly 5% in the aggregate, according to PwC, surpassing ticket, concession and merchandise revenue from live venues. “It’s going to continue to do that,” said Mike Keenan, head of PwC’s sports practice. “It’s the original reality TV. Broadcast networks see a lot of value in that.”

Endeavor, Fox and the UFC all hope that sentiment prevails, though none would go on the record to discuss their plans given the sensitivity of the talks. As with the NFL or other sports leagues whose ratings are faltering, the linear TV trajectory should not be confused with overall financial performance. Endeavor has a more global footprint than the Las Vegas-based Fertittas and has made international deals and sought to boost licensing, sponsorship and distribution prospects. Modelo came aboard as a sponsor and Monster Energy renewed its commitment.

Already, it was reported last November — and multiple industry sources confirmed to Deadline — that Fox has tested the waters by suggesting a re-up at $200 million a year. That would be higher than the current level of $165 million but far short of the $450M annual TV rights target that the Fertittas had in their offer book when they were shopping the UFC a couple of years ago.

If Fox doesn’t decide to sweeten that low bid, who else might step up? NBCUniversal has no love lost for UFC President Dana White, who had reached a tentative deal with NBC seven years ago, only to go across town to Fox and laud its deal at the time as “the pinnacle.”

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ESPN, which also powers the sports programming on broadcast sibling ABC, committed to deals of up to 20 years with many college sports conferences and have placed a big bet on another ring sport, boxing. (One incentive for ESPN may be its new stand-alone ESPN Plus OTT service, which needs exclusive, top-line sports to drive subscriptions.) Viacom owns a similar MMA league, Bellator, and has aired fights on Spike, now Paramount Network. Showtime and CBS, which may soon be Viacom’s corporate siblings again, have other sports priorities and are not seen as likely suitors. Turner, an aggressive sports player and backer of emerging youth draws like eSports, is neutralized by parent Time Warner’s involvement in the Dept. of Justice lawsuit against AT&T. Until that case is resolved, Turner can’t write a check worth $1B or more to reel in a brand-new sport.

One scenario that in some ways could suit the upstart UFC would be a purely digital deal, even one without a linear anchor, as has been rumored to happen for the major sports leagues when their billion-dollar packages come up for renewal in the coming years. YouTube last month made history by snagging exclusive streaming rights to a new L.A. team in Major League Soccer. Among the four major sports, Twitter, Amazon and Yahoo have streamed NFL games and Verizon has set non-exclusive mobile deals with the NBA and NFL. Amazon also is understood to have made a major push for the Thursday night games, but the league opted for Fox given the disparity (for now) between the penetration of the broadcast network and that of Amazon. And deep-pocketed tech giants YouTube and Verizon are also looking to buy major sports real estate.

It isn’t inconceivable for “New Fox” to reconfigure its offerings and devise a direct-to-consumer solution for the hard-core UFC faithful. (The UFC’s existing OTT service, Fight Pass, has about 400,000 subscribers, up from 330,000 when Endeavor bought the circuit.) Should Fox stay in the mix, “The biggest question to me is, can Fox figure out a way to get this product to people through an alternate delivery system?” said Dennis Deninger, a professor at the Newhouse School at Syracuse who spent 25 years as an exec at ESPN. “They have to repackage the package.”

But an all-digital deal, in the view of one veteran packager, “would take the UFC, something that battled so hard to be considered mainstream, back to niche status. That would be a major step backward.” PwC’s Keenan counters that Verizon and the NFL dialed up the digital quotient in their recent streaming deal, which blurs the line between linear and digital. “If you are allowing your customer to consume your product anywhere, anyhow, that’s not a bad thing,” he reasons.

The value proposition isn’t what it once was for the UFC, some believe. Like the NFL, whose ratings have dipped, the brutal consequences and mentality of the sport isn’t a permanent hook; to some, it has become a turnoff.

“Everyone now knows that the bloom is off the rose,” a major sports rights stakeholder told Deadline. “It has become a lesser, watered-down product and there is an array of other options for viewers, especially the core UFC demo.”