UFC Pay-per-view Business Up 35% in First Quarter

September 25, 2007

Last week’s Standard & Poor’s report offered a peak behind the curtain of the financial wizard that is Zuffa and it’s UFC brand. While the headline was a cut in the company’s credit rating outlook, the numbers behind the headline reflect a healthy growing business. While profit margins are down substantially due to European expansion efforts, pay-per-view, the company’s key revenue source accounting for 75% of gross revenue, is actually up 35% through the first quarter of the year. It is important to note that last year’s first quarter was the weakest quarter of the year, while this year’s may end up being the strongest. However, the numbers from Q1 ’07 are also slightly ahead of Q4 ’06 which was the company’s biggest quarter last year.

Furthermore, despite a dramatic increase in expenses the company remains profitable. It is believed that Zuffa grossed $190 million last year and posted a before tax profit of $76 million. They are far off that pace this year thanks to a substantial investment in publicizing the UFC brand in the United Kingdom. Dave Meltzer reported that Dana White said that the financial officers in the company told him that he was crazy for the amount of money he spent establishing the brand in the U.K. this year.

A 35% increase in pay-per-view revenue in the first quarter from the same period last year would translate to roughly 2,295,000 buys for the first four pay-per-views of the year (the Ireland show was excluded as an international pay-per-view). Estimates place the 2/4 show headlined by Anderson Silva-Travis Lutter at 350,000-400,000. According to the Wrestling Obsever Newsletter, there is some confusion regarding the numbers for the 5/26 show headlined by Chuck Liddell-Quinton Jackson. Dana White has publicly estimated one million buys, a figure corroborated by others in the company. However, Jackson was given a figure in the 625,000 range in calculating his cut of the pay-per-view revenue. I have a hard time believing the show didn’t approach one million buys considering the unprecedented push it got on ESPN.

Estimates of the 3/4 show headlined by Randy Couture-Tim Sylvia and the 4/7 Georges St. Pierre-Matt Serra show are not available. However, if you play the averages and assume the 2/4 show did 375,000 with the 5/26 show doing 812,500, that would leave 1,107,500 combined buys for the 3/4 and 4/7 show. If you assume that the 2/4 show represents the floor for a UFC pay-per-view at this point and give the 4/7 show the same 375,000, that would put Couture-Sylvia in the neighborhood of one million buys. Regardless of the actual breakdown, the one thing that is clear is that business remains very healthy.

We’ll take a closer look at how the rest of the year is shaping up for the UFC on pay-per-view and have a more in-depth year to year comparison later in the week.

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