M & A, MMA Style

September 21, 2007

Consolidation has been the name of the game this year in MMA. The UFC has acquired the WFA, WEC, and Pride, while EliteXC recently purchased Icon, Rumble on the Rock, Cage Rage, and King of the Cage. Each company has its own separate agenda for the acquisitions it has made.

The UFC’s motives were/are a little more obvious and concrete:

  • WFA – bought in a fire sale for the fighter contracts, namely Quinton Jackson. At the time with Forrest Griffin’s loss they were without a contender to face Chuck Liddell in May. Enter Jackson, Liddell’s only unavenged loss and one of the most charismatic fighters in the sport, who defeated the Iceman in a fight that brought the company unprecedented mainstream media coverage and drew over one million pay-per-view buys.
  • WEC – bought in order to block a rival promotion from securing a television deal with the Verses network. This move was necessitated by the company’s exclusive contract with Spike TV which prohibits UFC programming on another channel.
  • Pride – it’s incredibly hard to intelligently discuss this deal because so much is still unknown. In the end the Pride tape library is about the only tangible thing the UFC got out of the deal. Most of the fighter contracts ended up being nonassignable, but buying the company did essentially make those guys free agents, ultimately allowing the UFC to sign them. The deal also provided the chance to break into the Japanese market with the established Pride brand, but that idea ultimately was nothing more than hubris as the company found it difficult to run a business in Japan as an outsider.

EliteXC’s acquisitions are a little more difficult to understand. It’s tempting to write these off as bad deals because they netted no valuable TV contracts and no major talent, but in the short term these deals provide easy content for Showtime shows as EXC can use the local fighters with EXC’s guys on top. In the long term this move apparently has a lot to do with internet pay-per-view. The EXC website currently features live fight cards, losing lots of money in the process. In the long term they, along with the IFL, are building to the day when internet PPV content can be fed into HD TVs. Therefore it looks like the thinking is, show a lot of free events on the website in order to begin conditioning people to the idea of watching content on their computers.

No one thus far has been able to make internet PPV work, but as the old adage goes every idea goes through three stages: first it is ridiculed, then it is violently opposed, and finally it is accepted as self-evident. At this point I think we’re still in stage one with no immediate time table for progression to stage three. It’s also an open question how long EXC can bury money into this new model before the well runs dry. They do have the benefit of Showtime’s financial support which will probably last as long as the channel thinks EXC moves subscriptions regardless of the financial results.

For details of the most recent EXC transactions and discussion of these issues, visit FightOpinion.

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