The Savage Truth: Going, Going, Gone … UFC Officially Sold
Editor’s note: The views and opinions expressed below are those
of the author and do not necessarily reflect the views of
Sherdog.com, its affiliates and sponsors or its parent company,
Evolve Media.
* * *
I remember perusing the old submissionfighting.com forum in January
of 2001 when I came upon a thread talking about the new owners of
the
Ultimate Fighting Championship. Station Casino scions Frank and
Lorenzo Fertitta were buying the cash-strapped promotion from
Semaphore Entertainment Group and the small, tight-knit community
seemed pretty excited about it. With Dana
White -- the former manager of Octagon stalwarts Tito Ortiz and
Chuck
Liddell -- in tow, the downtrodden sport finally had some cause
for optimism.
Well, here we are, over 15 years later and the shop is being sold again. Things are a tad bit different this time around. Rather than a company dangling by a single fraying thread, the UFC is a monster in the sport’s world.
Seriously, let that sink in for a moment.
The buyers, WME | IMG and their financial partners, are obviously very bullish on the UFC and its future. They most assuredly are banking on continued global expansion -- something they believe they can help facilitate -- as well as a lucrative television rights deal that will be up for negotiation in the next couple years to recoup their investment.
And what an investment it is. Even for media company acquisitions, which tend to fetch more than a lot of companies, the 25 times profit purchase price the UFC has commanded is staggering. That figure represents the number of years it would take the buyers to get a 100 percent return on their investment if they maintained last year’s record profit margin.
With that said, it is obvious the new owners feel there is a way to increase revenues and increase the equity value of the property. This is one of the ways franchise owners have made money even when they’ve been forced to operate at a loss or break even. Television rights, integration with other WME | IMG properties, an expanded over the top network are all ways they can add value and recapture the capital they’ve laid out.
So, what does this all mean for the day-to-day operations of the promotion and those left to man the ship through the transition?
Well, I don’t expect there to be too much change right off the bat but you can be sure no private equity firm, like the ones backing this purchase, pays 25 times earnings to pilot the ship exactly the same way. We’ve already heard White talk about the new avenues in television and movies that could be open to UFC athletes. Building their brands, and in turn, elevating the UFC as well, could be a big shot of adrenaline for both parties.
We’ve seen the effect of star power on the UFC’s bottom line over the past 18 months or so. With Conor McGregor and Ronda Rousey lighting up the pay-per-view window in record fashion, the promotion’s revenues skyrocketed. Their success can be directly attributed to their crossover appeal.
WME | IMG could, in a perfect world, help to create even more stars for the brand with their connections across the fields of sports, entertainment and fashion. The direct correlation between mainstream awareness and revenue generation is hard to miss. Both McGregor and Rousey have proven that star power goes a long way, especially in a company like the UFC that has trumpeted the brand above the fighter for so long.
It is a bit of a risky proposition for the new ownership, building fighter brands on equal footing with the promotion. For every Rousey, a fighter who seems extremely loyal to the promotion, there will be a McGregor who wants to extract every penny possible during his short window of earning potential. If they can keep fighter contracts as ironclad as they have seemed thus far, it may be a more navigable issue going forward.
Another potential landmine comes with increased success. How often are star fighters really going to want to get in there and scrap if they’re pulling down regular eight-figure paydays? Add in the money they could potentially be making outside of competition and there is less incentive to fight three or four times a year.
That problem can be mitigated with the creation of more high-end stars but with so many shows it will eventually become a problem if you don’t have the talent to headline the shows. Honestly, these will be good problems to have for the organization considering they will be expanding the reach and power of their brand.
So where do they recoup all the money that has been laid out?
Well, the first place I would look is in the television deals the company will look to cut when their current deal with Fox is up in 2018. I cannot imagine the media giant is not looking at expanding any new deal to more than one network, a la the NFL’s deals with multiple television partners. Imagine the UFC on ESPN, Fox and maybe a Showtime or HBO component to complement their PPV offerings.
Diversifying their partnerships would create incentive for even more coverage from said partners and their affiliates that would drive still more interest in the sport. Add in the OTP Fight Pass network and you have a powerful, diverse set of platforms to get your content out to the masses.
In the end, it was a very successful 15-year run for the Zuffa ownership group. They will leave behind a legacy that includes saving a sport that was destined for the dustbin of athletic history. They also leave the new ownership with a class-action lawsuit claiming they have a penchant for anti-completive business practices and a reputation as one of the most aggressive players in the sport’s business world.
They have also effectively cornered the high-end MMA market for many years. This has brought both admiration and scorn from both fighters and prospective challengers. WME | IMG has to look at this dominance as a positive so I doubt we’re going to see them willing to sitting down to sing Kumbaya with anyone at anytime soon.
This company obtained their stake in UFC to expand its reach and revenues. So, be forewarned, with White still at the helm, the public persona of the company is probably not going to be altered too much.
The more things change, the more they stay the same.
Sherdog.com Executive Editor Greg Savage can be reached by email or via Twitter @TheSavageTruth.
Advertisement
Well, here we are, over 15 years later and the shop is being sold again. Things are a tad bit different this time around. Rather than a company dangling by a single fraying thread, the UFC is a monster in the sport’s world.
The approximate $4 billion valuation this places on the premier
mixed martial arts promotion should tell you everything you need to
know about how the organization is viewed in the marketplace. When
this deal is finally consummated -- in about four months, we’re
told -- it will be the biggest sports’ acquisition of all time.
Seriously, let that sink in for a moment.
The buyers, WME | IMG and their financial partners, are obviously very bullish on the UFC and its future. They most assuredly are banking on continued global expansion -- something they believe they can help facilitate -- as well as a lucrative television rights deal that will be up for negotiation in the next couple years to recoup their investment.
And what an investment it is. Even for media company acquisitions, which tend to fetch more than a lot of companies, the 25 times profit purchase price the UFC has commanded is staggering. That figure represents the number of years it would take the buyers to get a 100 percent return on their investment if they maintained last year’s record profit margin.
With that said, it is obvious the new owners feel there is a way to increase revenues and increase the equity value of the property. This is one of the ways franchise owners have made money even when they’ve been forced to operate at a loss or break even. Television rights, integration with other WME | IMG properties, an expanded over the top network are all ways they can add value and recapture the capital they’ve laid out.
So, what does this all mean for the day-to-day operations of the promotion and those left to man the ship through the transition?
Well, I don’t expect there to be too much change right off the bat but you can be sure no private equity firm, like the ones backing this purchase, pays 25 times earnings to pilot the ship exactly the same way. We’ve already heard White talk about the new avenues in television and movies that could be open to UFC athletes. Building their brands, and in turn, elevating the UFC as well, could be a big shot of adrenaline for both parties.
We’ve seen the effect of star power on the UFC’s bottom line over the past 18 months or so. With Conor McGregor and Ronda Rousey lighting up the pay-per-view window in record fashion, the promotion’s revenues skyrocketed. Their success can be directly attributed to their crossover appeal.
WME | IMG could, in a perfect world, help to create even more stars for the brand with their connections across the fields of sports, entertainment and fashion. The direct correlation between mainstream awareness and revenue generation is hard to miss. Both McGregor and Rousey have proven that star power goes a long way, especially in a company like the UFC that has trumpeted the brand above the fighter for so long.
It is a bit of a risky proposition for the new ownership, building fighter brands on equal footing with the promotion. For every Rousey, a fighter who seems extremely loyal to the promotion, there will be a McGregor who wants to extract every penny possible during his short window of earning potential. If they can keep fighter contracts as ironclad as they have seemed thus far, it may be a more navigable issue going forward.
Another potential landmine comes with increased success. How often are star fighters really going to want to get in there and scrap if they’re pulling down regular eight-figure paydays? Add in the money they could potentially be making outside of competition and there is less incentive to fight three or four times a year.
That problem can be mitigated with the creation of more high-end stars but with so many shows it will eventually become a problem if you don’t have the talent to headline the shows. Honestly, these will be good problems to have for the organization considering they will be expanding the reach and power of their brand.
So where do they recoup all the money that has been laid out?
Well, the first place I would look is in the television deals the company will look to cut when their current deal with Fox is up in 2018. I cannot imagine the media giant is not looking at expanding any new deal to more than one network, a la the NFL’s deals with multiple television partners. Imagine the UFC on ESPN, Fox and maybe a Showtime or HBO component to complement their PPV offerings.
Diversifying their partnerships would create incentive for even more coverage from said partners and their affiliates that would drive still more interest in the sport. Add in the OTP Fight Pass network and you have a powerful, diverse set of platforms to get your content out to the masses.
In the end, it was a very successful 15-year run for the Zuffa ownership group. They will leave behind a legacy that includes saving a sport that was destined for the dustbin of athletic history. They also leave the new ownership with a class-action lawsuit claiming they have a penchant for anti-completive business practices and a reputation as one of the most aggressive players in the sport’s business world.
They have also effectively cornered the high-end MMA market for many years. This has brought both admiration and scorn from both fighters and prospective challengers. WME | IMG has to look at this dominance as a positive so I doubt we’re going to see them willing to sitting down to sing Kumbaya with anyone at anytime soon.
This company obtained their stake in UFC to expand its reach and revenues. So, be forewarned, with White still at the helm, the public persona of the company is probably not going to be altered too much.
The more things change, the more they stay the same.
Sherdog.com Executive Editor Greg Savage can be reached by email or via Twitter @TheSavageTruth.
Related Articles
