The deal announced last week between the UFC and ESPN is a landmark deal when it comes to changing the economics of the company.

There are a number of key factors to the story.

The first is that the deal, worth reportedly $150 million per year for 15 live events, largely establishes the U.S. market value of a UFC live event at $10 million.

The amazing thing about the price is that ESPN is paying that kind of money and not even putting the shows on television, where they would reach the largest audience. Instead, they are using the UFC as a major loss leader to drive ESPN+, the company’s $4.99 per month streaming service.

The new deal also includes other UFC products including the Dana White’s Tuesday Night Contender Series shows, and gives subscribers access to the UFC fight library, but it’s the live shows that are the primary selling point.

From the inception of the company in 1993 until recent years, the economic ups-and-downs were based on the pay-per-view business, which wildly fluctuated based on the star value and interest level in the main events. In 2005, when the company finally landed on television, it was primarily to create new fans for the sport and get them to pay for the big fights with the big stars on PPV.

Since 2012, when the UFC struck its deal with FOX — and to a lesser extent its Brazilian deal with Globo and other international partners — it changed. A good PPV year still meant a great year for business. But a bad year, whether it was due to injuries or not enough fights that the casual fan was interested in, was no longer a disaster. It was only a less profitable year.

Now, with this ESPN deal, combined with an expected television deal to be announced, the economics will blow away even what was considered a great year by prior standards, even a year like the promotion’s 2016 campaign, which had five 1 million buy PPV shows.

If one figures a new television deal will bring $200 million, a combined $350 million annually just from the U.S. market alone would more than double the $168 million that FOX paid last year for UFC programming. It also will lead to generating more than enough profits to justify the nearly $4 billion purchase of the company in 2016. Any questions about WME-IMG overpaying that were asked at the time have now been answered.

Even if the UFC loses popularity with the fan base, which is never a good thing, it will still have no major economic issues due to the huge fights fees cushion, at least until the end of 2023.

The key to the $10 million price tag per show is that previously, there was no way for the UFC to generate the kind of money doing a show other than what they could get from PPV. That is no longer the case.

For a UFC PPV show to generate $10 million, it has to beat about 285,000 buys, a figure the biggest shows blow past but a lot of the rank-and-file shows these days fall well under. Going forward, a show like UFC 224, which may not even do half that figure, would be better off for UFC to put on ESPN+ than on PPV.

So far this year, only two UFC PPVs have topped that figure.

The deal is tremendous for the UFC not just when it comes to money, but also for being part of the ESPN family, even if the events won’t be televised by ESPN proper. The UFC is likely to be more heavily promoted on the network, and in doing so will give the impression that it’s a more significant part of the sports scene.

From the ESPN standpoint, if you’re judging from traditional economics, the deal would make no sense.

To generate $150 million per year, ESPN+ would have to add a minimum, and likely a significant percentage more than 2.5 million subscribers, and they have to stay for the full year. Keep in mind the ESPN+ deal only covers the United States. For a comparison, only a few PPVs in UFC history — albeit at a much higher price tag — have ever done half that number on a worldwide basis. Keep in mind that the closest business to the UFC — the WWE, which puts all of its biggest shows on its streaming service and is a company that is holding steady in popularity as opposed to one with significantly declining ratings and PPV numbers — had 1,190,000 subscribers in the U.S.

Also note that a big show on FOX these days, for free, will be viewed in maybe 1.5 million U.S. homes. The UFC’s own Fight Pass streaming service is believed to have in the range of 450,000 subscribers, and that’s a worldwide total, not a U.S. number.

Clearly ESPN is playing the long game, spending big early with the idea of establishing its service as something the huge sports fan audience will see as a necessary product to subscribe to. The UFC, which does skew younger than most sports, is thought to be a key brand to help build it.

But with every major deal, there are always some negatives.

This deal may hurt Fight Pass subscriptions. But even so, what would seem to be a worst case scenario for Fight Pass would be a decrease of maybe $10 million in annual revenue, and adding $150 million while risking $10 million is a pretty simple economic decision.

While everyone looks at the monetary value of television, the secondary value of television is that it reaches the most people and expands your fan base. The perfect example was in 2005, with the Randy Couture vs. Chuck Liddell pay-per-view fight. The first fight between the two, before the UFC was on Spike, did about 50,000 buys. After just a few months of television on Spike, the rematch did almost 300,000 buys.

For creating new fans and new stars, which used to be the lifeblood of the sport, this deal is not a positive.

On a typical Saturday night, a UFC event will be watched by an avid fan base that plans viewing out in advance. But there are a sizeable number of people who may be watching the previous show and just don’t change the channel and watch the UFC, or flip through stations, have no idea UFC is even on, and then decide to watch it because nothing better is on. If they like what they see, they may become more ardent fans. And if a fighter catches their attention with an impressive performance, that is how new stars are created.

With a show on ESPN+, that isn’t going to happen. The only audience watching a streaming show is one that goes in planning on watching, particularly if there is a cost involved in watching.

Plus, only the most hardcore of the UFC fan base is going to watch a streaming show.

This was proven on Feb. 24, when KTVU-TV in San Francisco preempted the FOX special that night headlined by Jeremy Stephens vs. Josh Emmett. That preemption figured to cost the show about 40,000 viewers in Northern California.

One would have thought a large percentage of those displaced viewers would simply stream the show.

The reality was that the average number of streaming viewers per minute on the show was 11,067. The prior FOX show four weeks earlier, which had no major market preemptions, had 10,684 viewers for an average minute. The December show had 15,521 streaming viewers.

What that tells you is that with the exception of only a tiny percentage of hardcore viewers, if the show isn’t on television, most fans won’t watch it. And keep in mind, that show streamed for free, rather than having a small charge tacked on.

But in the end, this a new and completely different business. It is no longer based on presenting big fights that people want to pay to see, with success and failure depending on how successful the company is at selling fights to consumers.

It’s now about providing as much content as possible, and selling it to media providers. Stuff like building big fights and creating new stars are still important, but no longer a make-or-break issue.