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The Economics of the UFC

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In just a few weeks, one of the greatest mixed martial artists of all time, Georges St. Pierre will return to the octagon to challenge Micheal Bisping for the UFC Middleweight championship after a four-year hiatus. GSP, one of the most dominating champions in the history of the sport, relinquished the welterweight championship after he successful defended the belt against Johnny Hendricks at UFC 167. It was later revealed that St. Pierre wanted to take a rest from fighting because the pressure of the fight game affected his mental health. Make no mistake, GSP already reached legendary status and his health is more important than an MMA career.

Since GSP temporarily hung up his gloves, the complexion of the Ultimate Fighting Championship, both in terms of sport and the business structure, changed drastically. The Fertitta’s, the casino executives that rescued the organization from obscurity and helped make it a main stream sport, sold the promotion to the WME-IMG group for $4.2 billion in 2016. One of the reasons for the hefty price tag was the Fox deal that the MMA league signed five years earlier that brought the promotion to broadcast television on the primary Fox network, as well as a variety of events on the subsidiary cable channels, including Fox Sports 1. The deal seemed to be mutually beneficial, as the UFC debut on Fox of the Junior Dos Santos/Cain Velasquez bout for the heavyweight title garnered an estimated 5.7 million viewers.

However, there was a much more complicated flip side to the situation. As apart of the Fox deal, Zuffa was contracted to produce a specific number of events, sometimes on a weekly basis, during a calendar year. This translated to an agreement that demanded content regardless of injuries, rankings, or contract negotiations to sign fights. The result of all this lead to the roster being flooded with fighters to take the spots on the extra cards. With a wave of new competitors all on UFC programming at once, there wasn’t a way to properly introduce or build them up through the ranks. The current UFC under cards often showcase athletes that the audience isn’t familiar with, and it seems as though most preliminary fighters get lost in the shuffle with the amount of events the organization runs each year. Too many cards to follow and too many new faces to introduce has undoubtedly affected the promotion’s ability to make marketable stars.

A look at the history of the company and its surge in popularity in the mid-2000s explains the lack of new marketable stars today. The reason the Ultimate Fighter reality show launched the MMA boom was because it finally gave the audience an opportunity to know who the fighters were and their background. For example, Forrest Griffin’s quirky personality and Rocky-type style endeared him to fans. When he fought the equally tough and humble Stephan Bonnar, it produced quite possible the most important fight in the history of the sport.

When the new audience saw the brawl that resembled Balboa vs. Apollo on Spike TV in 2005, not only did it spark a new popularity for mixed martial arts, it made both fighters legitimate stars that fans would pay to see fight again. In many ways, the reality show did the same for the coaches of that season, the legendary Randy Couture and Chuck Liddell. The diehard fan base knew the amazing story of Couture’s debut in the sport at the age of 33 and his ability to keep winning near the age of 40, but his time as a coach allowed his accomplishments to be highlighted to a main stream audience. For Liddell, most casual fans only knew him from clips of his looping hooks, but again, the Ultimate Fighter gave him a platform that allowed him to become the top fighter in the organization at the time.

The reality show concept continued to produce marketable athletes, including Rashad Evans, Michael Bisping, Nate Diaz, and others. But, when the concept was watered down and several seasons were produced in a relatively short time, it didn’t have the same effect because the winners didn’t stand out as unique, but rather became lost in the shuffle of many spin offs of the show. The same could be said for much of UFC programming now, with so many cards in a short span, it’s difficult to keep track of most of the results.

In many ways, the Fox deal and the contract that demands a number of events that translates to cards on an almost weekly basis have watered down the UFC as a whole. The events themselves and the fighters on the card don’t stand out nearly as much as in years previously because there isn’t nearly the same amount of build up for each card. Instead of being “special events,” UFC pay-per-views are often scheduled between lesser fight night or Fight Pass cards. Essentially, it’s supply and demand, and despite the major popularity that the organization had, is there really a demand for weekly MMA events? Plus, the key is star power because that’s what sells tickets and draws ratings. It’s very difficult to say that they could be enough star power within any combat sport to run weekly cards. However, the Fox deal was a business decision, not a decision based on the sport. As I’ve said before, the Ultimate Fighting Championship is as much a business, if not more so as it is a sport.

Further complicating the situation is the change in ownership, as it puts pressure on WME executives to generate revenue. The group that bought the UFC did so because they wanted to make a profit from it, and a $4.2 billion investment makes it a difficult process to see a return. It’s still somewhat puzzling how the sale number for determined because while Zuffa was estimated to be worth $1 billion, how exactly did it sell for more than four times that amount? Don’t get me wrong, the Fertitta’s deserve the most that they can get, especially because they risk millions to save the sport, but you have to wonder, can WME really generate $4 billion with the UFC?

The recent UFC 216 pay-per-view would suggest that won’t be the case, at least not anytime in the near future. Headlined by Tony Ferguson vs. Kevin Lee, the event garnered a dismal 120,000 buy rate. That followed an Amanda Nunes title defense against Valentina Shevchenko the previous month that had just 100,000 buys. The problem is, none of those athletes, as talented as some of them might be, are necessarily known to the general public. Ferguson, a skilled striker, is an eccentric character that doesn’t really identify with the audience. Kevin Lee was more or less trying to copy Conor McGregor’s promotional style without the skills to back it up. Nunes is talented, but is still known as the fighter that KO’ed Ronda Rosuey into retirement instead of any of her own accomplishments. Shevchenko is simply unknown to most casual fans.

On the surface, the return of Georges St. Pierre should sell itself, but according to longtime UFC commentator, Joe Rogan mentioned on his podcast that the event at Madison Square Garden is not selling well. There are a few factors that could be the reason behind the lack of sales.

GSP is without question one of the best MMA fighters of all time, but his exit from the sports was just prior to Ronda Rousey’s meteoric rise, and many of the athletes from his era have now retired so it’s possible that the UFC fan base is different now than it was when he was champion. Those that are aware of GSP’s greatness might also have some reservations because he walked away from the cage four years ago so there could be questions about if he will return in the same top form. Basically, will GSP be the GSP that people know or is he past his prime? Finally, it could be as simple as the very expensive ticket prices of a UFC event that have prevented a sell out. Still, it must be concerning for UFC brass to have a stacked event with three title fights at MSG that isn’t selling tickets.

Michael Bisping’s journey through the ranks from a brash challenger to a humble champion is an intriguing story, but he hasn’t fought in a year so there’s not much hype behind him as the Middleweight champion. Despite the extended absence, it still makes sense that GSP will get a title shot because he vacated the Welterweight belt prior to his hiatus. UFC 217 should be a tremendous event, considering the three title fights that feature some incredible athletes. More specifically, the undefeated Women’s Straw weight champion, Joanna Jędrzejczyk will defend the title. Joanna might be the most dominant female fighter in UFC history and arguably the best pound-for-pound fighter in the sport today. Regardless of any ticket sale concerns, I would guess that the pay-per-view numbers will be solid.

Still, with pay-per-view one of the company’s top revenue sources, how will UFC brass increase sales?

All of this speaks to the situation that was mentioned earlier, there aren’t enough stars in the UFC, and the structure of the Fox deal doesn’t lend itself to the process of building stars. There’s another year left on the Fox contract, and if WME decides to resign with the network, there should be some major consideration to reduce the number of events each year. As far as what should be done right now, it seems to make sense to make the biggest fights possible while they are still possible. For example, the UFC 216 numbers imply that Tony Ferguson isn’t a draw, even if the interim title win puts him in line for a contest against Conor McGregor. Since Rousey was KO’ed in retirement, and Jon Jones wasted his career with multiple failed drug tests, McGregor is the only main stream draw in the UFC.

The Nate Diaz trilogy fight is the money fight to sign. Does it go along with the ranks? No, but it will sell better than a Ferguson bout. While the UFC is very stable, it doesn’t speak well to the brand when the amount of star power within the company decreased exponentially in comparison to prior years. Diaz/McGregor 3 probably wouldn’t be for a belt, but sometimes championships don’t automatically sell. The bottom line is, the fight that the general public is willing to pay to see is what sells and that’s the best business move. When there aren’t enough marketable stars, ranks shouldn’t necessarily dictate business. For example, Demetrius Johnson set a record for the most title defense in the history of the UFC, but he defeated mostly unknown competitor in a division that lacks depth. The charismatic Dublin native against the brash Diaz in a third fight would draw over a million PPV buys.

More than anything, it will be interesting to see if these scenarios dictate the future of the UFC and the contract negotiations for the organization. Even with the ups and downs of the Zuffa era, the combination of the Fertitta’s and Dana White provided a sense of direction for the promotion. The WME acquisition has casts a level of uncertainty that hasn’t been seen since the original Zuffa purchase of the company.

What do you think? Comment below with your thoughts, opinions, feedback and anything else that was raised.

Until next week
-Jim LaMotta

E mail drwrestlingallpro@yahoo.com | You can follow me on Twitter @jimlamotta

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