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Paramount (Nasdaq: PSKY) has taken a major leap forward in its battle to compete in the sports streaming wars after sealing a $7.7 billion agreement for an exclusive rights deal as the sole U.S. broadcaster of the Ultimate Fighting Championship (UFC).

In what amounts to a seven-year deal, Paramount will stream all 13 of UFC’s signature numbered events along with 30 Fight Nights annually on its Paramount+ channel, with select bouts simulcast on CBS.

Analysts also credit the agreement as a seismic shift for the UFC after it effectively ended its long-standing pay-per-view (PPV) model in the U.S. in favor of showcasing its premium fights on Paramount+ to subscribers at no extra cost. Paramount also expressed interest in seeking the international rights when they become available.

For Paramount investors, the move presents a lofty value proposition, allowing the firm to switch focus toward subscriber growth and retention within the highly competitive sports streaming marketplace.

Under the new agreement, Paramount will pay TKO Group Holdings (NYSE: TKO) – UFC’s parent company – an average of $1.1 billion per year, with agreed payments weighted toward the latter end of the contract.

In return, the agreement also grants Paramount the rights to develop its own UFC-themed programming, thereby opening up opportunities for cross-platform monetization.

Paramount CEO refers to UFC as a ‘unicorn’

The UFC’s evolution since its founding in 1993 has seen it ascend into a true global sports powerhouse, with over 100 million fans in the U.S. alone.

In addition to the millions of streams the UFC commands, the sport’s year-round event schedule also critically fills a sports content gap at Paramount, allowing it to plug the hole between its existing NFL, UEFA, Masters, and March Madness coverage.

In an interview with the Financial Times after the deal’s announcement, Paramount’s CEO, David Ellison, said: “The UFC really is a unicorn sports asset that is year-round, which is really critical to our overall sports strategy.”

This directly aligns with Ellison’s broader turnaround plans, which include streamlining Paramount into three core divisions – TV media, direct-to-consumer, and its own studio production portfolio.

TKO president and COO Mark Shapiro also backed the importance of the UFC securing the seven-year deal, stating, “Paramount is a platinum partner with significant reach. Our new agreement unlocks powerful opportunities at TKO for years to come.”

The deal now also positions Paramount as a direct heavyweight rival to other sports broadcasters, including Disney, Comcast, and Amazon, boosting its pricing power in both its U.S. advertising and subscription tier markets.

That being said, from an investor’s perspective, the agreement must be considered a calculated risk, as the firm banks on the exclusive rights translating into measurable subscriber growth and sustained engagement to be able to justify its sizable $7.7 billion outlay.

TKO Group shares, buoyed by the agreement announcement, rose to over $194 in trading this week. Meanwhile, Paramount’s valuation also climbed; however, analysts believe future stock movements will depend heavily on early subscriber metrics materialising following the deals’ unveiling.

UFC deal on the heels of Paramount’s Skydance merger

Incidentally, the UFC compact comes just days after Paramount completed its anticipated $8 billion merger with Skydance Media, having been given the go-ahead by the U.S. Federal Communications Commission (FCC) in late July.

At the time, the FCC’s 2-1 vote was preceded by the political controversy relating to Paramount’s $16 million settlement with President Donald Trump over its CBS 60 Minutes interview dispute.

Regardless, the merger resulted in the appointment of Ellison at the helm – alongside co-owners RedBird Capital – who has been tasked with cutting $2 billion in costs while also repositioning the broadcasting company for market growth across the board.

Nevertheless, for investors, the alternating narrative of the need to cut costs, while splurging cash on the latest UFC rights acquisition, does imply the firm’s willingness to aggressively invest while actively restructuring its internal operating efficiency.

As a result, the next 12 months will be pivotal to see if Ellison’s Paramount-UFC gamble can establish the firm’s standing in the sports streaming market and whether it delivers lasting shareholder value.

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