All In: A Lot is Riding on UFC 79

December 28, 2007

If UFC 79 were a hand of poker then the UFC would be betting it all. The company has built toward 12/29 all year and appeared to be determined, come hell or high water, to put forward its best lineup. First the company put its most talented weight class on hold for seven months in order to devote twelve weeks of The Ultimate Fighter to building Matt Serra v. Matt Hughes for the Welterweight Title. Then the company booked Chuck Liddell v. Wanderlei Silva, after first trying to make the fight in September, despite the fact that both men were coming off consecutive losses.

Then the best laid plan came apart with Serra forced to pull out due to an injury. Rather than cutting their losses and muddling forward with a safe replacement, the UFC chose to hot shot Hughes-St. Pierre III on short notice for the interim Welterweight Title no the less. The big show must go on, consequences be damned.

So the pressure is on with the company set to play its two biggest trump cards, outside of next year’s Jackson-Griffin fight, on the same night. The results, both in the pay-per-view receipts and the octagon, will go a long way towards charting the company’s course in 2008.

From a business and media perspective, with pay-per-view numbers down slightly for the year and the perception, real or perceived, that the industry has cooled off, the company could use a strong pay-per-view number to close the year. MMAPayout.com should have a complete story on the the company’s pay-per-view numbers for the year next week, however, the company likely needs 600,000+ buys on Saturday to have a shot at beating HBO Boxing for the year.

The race is about far more than just bragging rights as much of this year’s gushing media coverage is largely built on last year’s record setting year on pay-per-view, including the beating boxing storyline. It has been said before, but momentum is self-perpetuating and the company has benefited tremendously from the mainstream media exposure that has resulted from its perceived momentum. If the media stops seeing the sport as the next big thing it could become a self-fulfilling prophecy.

Perhaps in a demonstration of how strongly the company feels about the event, the format of this month’s Countdown show was revamped with ramped up production values and more intricate story telling. The show had become very formulaic, although far from stale in my estimation, in the past few months. This month’s version had a more cohesive documentary feel, something like a poor man’s version of 24/7. In other words, the kind of hype show that would have drawn rave reviews before HBO raised the bar. I would describe the show as effective, but not spectacular.

I expect the company to do 500,000 buys in the worst case scenario, with something in the 600,000-700,000 range being the most likely result. Liddell’s last four pay-per-views have averaged nearly 650,000 buys, while the last Hughes-GSP fight did 500,000 buys on its own. Of course, some of the luster is off all the main eventers coming off high profile losses and the general business climate has changed significantly in the last year. I believe that a slowing economy is an increasing threat to pay-per-view numbers and there are those who believe it played a significant role in the disappointing numbers from this month’s Mayweather-Hatton fight.

To further complicate the picture, it was announced this week that Saturday’s mega game between the New England Patriots and the New York Giants will be simulcast on CBS and NBC in addition to the previously scheduled NFL Network. While boxing may not hurt the UFC’s numbers, football is a proven competitor. The NFL is the only sporting event that regularly beats the UFC in its key demographics and the only programming the company actively tries to avoid. The Ultimate Fighter’s move to Wednesday night was in large part an effort to get away from football.

In addition to the immediate business and media ramifications, the outcome of the top two fights will setup next year’s big fights, provided the company gets the “right” results. A Liddell win and resurgence would mean more to ’08 business than anything else on the horizon. Liddell would be one, at most two, fights away from a big money bout next December against the winner of Jackson-Griffin for the Light Heavyweight Title. A Silva victory could eventually mean something to business, especially against Jackson whom he holds victories over, but not anywhere near what Liddell chasing the title at 205 would.

Georges St. Pierre may be the future of the sport, but for now Matt Hughes is one of only three proven draws the company has left (Liddell and Oritz being the others). A Hughes win would setup a big fight with Serra in the spring followed by a string of fresh title defenses (Parisyan and Fitch) or a long anticipated move up to middleweight for a showdown with Anderson Silva (provided he can make it through Dan Henderson in March).

The rest of the sold out card features Rameau Sokoudjou’s much anticipated debut against undefeated Lyoto Machida in a top contenders match at 205, Rich Clementi Vs. Melvin Guillard, and Soa Palelei Vs. Eddie Sanchez.

UFC Labor Relations Back in the News: New Details on Bonus Structure; White Defensive and Defiant

December 27, 2007

The growing tensions between the UFC and its top fighters is back in the mainstream with an article in the Los Angeles Times this morning. The piece, titled This UFC Battle is All About Money, focuses on Randy Couture’s resignation as an illustration of the growing criticism of the company’s pay scale. The article includes quotes from Dana White, Tito Ortiz, and Randy Couture.

Most of the ground covered by the article is old news to those who follow the MMA media, however, White did reveal that the company has eliminated signing bonuses in the aftermath of the Couture resignation. It was also confirmed that Matt Hughes received a $1 million dollar bonus in the aftermath of his bout last year with Royce Gracie. However, it is not clear if the bonus was a signing bonus (as previously reported here) or a post fight performance bonus.

Of course this should come as no surprise since the distinction, or lack there of, between signing bonuses and discretionary performance bonuses was one of the issues at the heart of the dispute between Couture and the UFC. Contracted signing bonuses, a widely accepted practice in professional sports, seem much less worrisome in a labor relations context than discretionary performance bonuses doled out at management’s will. However, the elimination of undisclosed bonuses of any kind is a step in the right direction (SEE: Transparency is the Answer).

Ortiz brought up his bout with Chuck Liddell last December as an example of the inequity of the company’s pay scale. Ortiz claimed that the UFC made $42 million from the event while he and Liddell received $1.5 million each.

The $42 figure is misleading. UFC 66 is believed to have drawn 1,050,000 buys which would represent a total gross of $42 million, however, Zuffa’s share would be at most $21 million. There have been conflicting reports on the company’s arrangement with pay-per-view distributors, but the company is believed to receive 40-50% of gross pay-per-view revenues.

Ortiz went on to summarize his position:

We’ve had to put our lives on the line, and now that we’ve seen the UFC making its money back — and more — we’re asking, ‘Where’s the money?’ Dana’s famous words are, ‘I’m going to make you the biggest superstar in the world,’ but they make great [dollar] numbers on their video games, merchandising, and DVDs of us fighting, and the fighters get none of it.

Perhaps the most noteworthy aspect of the article was White’s aggressive response, calling Ortiz an “idiot”–again–before defiantly stating:

Am I entitled to make some money? This is a business, and the business deserves to make money. These guys wouldn’t be putting their lives on the line if I hadn’t busted my [rear] to build this infrastructure, and Randy Couture wouldn’t be a millionaire now.

The first part of the statement is largely uncontroversial, at least as far as I am concerned. Zuffa assumes an even greater financial risk than most other promoters, particularly more than boxing promoters, and thus deserves a larger financial reward (SEE: Boxing v. MMA Pay Scale & Business Model – expanded version available in the new issue of MMA Sports Magazine). The real question is not whether or not the company deserves to make money, but rather how much? Irregardless, it is hard to understand why fighters do not deserve at least some cut of DVD and merchandise sales.

It is no doubt true that White deserves a large share, possibly even the lion’s share, of the credit for the growth of MMA and with it the compensation of its top stars. However, taking the public tact that your most important employees should be grateful to you for whatever they get is probably not the most effective labor or public relations strategy, benevolent dictator rarely plays well for very long. White has to know as much, leading one to wonder whether or not White is really feeling defensive, and a little bit guilty, rather than defiant.

Fedor: "Patently Impossible" to Sign UFC Contract

December 26, 2007

In an interview with Sherdog.com, Fedor Emelianeko offered his assessment of his failed negotiations with the UFC. Emelianko was not very impressed, to say the least, with the company’s negotiation tactics or contractual demands:

“I never met Dana White, never spoke to him on the phone, never exchanged e-mails,” Fedor said. “However, I did read a lot on the Internet about what he said in regard to me and Vadim []. I also read e-mails that he sent to Vadim; all of his correspondence was very upsetting. The contract that we were presented with by the UFC was simply impossible, couldn’t be signed — I couldn’t leave. If I won, I had to fight eight times in two years. If I lost one fight, then the UFC had the right to rip up the contract. At the conclusion of the contract, if I am undefeated, then it automatically extends for an as yet unspecified period of time, though for the same compensation. “

“Basically I can’t leave undefeated. I can’t give interviews, appear in films or advertising. I don’t have the right to do anything without the UFC’s agreement. I could do nothing without the OK from the UFC. I didn’t have the right to compete in combat sambo competition. It’s my national sport. It’s the Russian sport, which in his time our president competed in, and I no longer have the right to do so. There were many such clauses; the contract was 18 pages in length. It was written in such a way that I had absolutely no rights while the UFC could at any moment, if something didn’t suit them, tear up the agreement. We worked with lawyers who told us that it was patently impossible to sign such a document.”

SEE ALSO: Recap of the Sticking Points in Fedor-UFC Negotiations and Inside the Standard Zuffa Contract for a full breakdown of the clauses Fedor alluded to.

Cuban Has High Expectations for 2008

December 26, 2007

In an interview with Josh Gross at Sherdog.com, Mark Cuban set a lofty goal for HDNet in the year 2008: surpass Showtime’s viewership. HDNet currently has 9 million subscribers, up from a reported 5 million earlier this year as the penetration of high definition television continues to expand. Showtime currently boasts approximately 15 million subscribers while HBO, the undisputed leader in premium television, has almost 30 million subscribers.

The network’s MMA initiative is a key component in it’s expansion plans. In addition to MMA, HDNet also features NASCAR and the NHL, however, according to the piece MMA is the network’s most successful programming.

Merry Christmas!

December 25, 2007

Calvin Coolidge once observed, “Christmas is not a time nor a season, but a state of mind. To cherish peace and goodwill, to be plenteous in mercy, is to have the real spirit of Christmas.”

For Christians, this spirit is epitomized by our Savior, Jesus Christ. Christ came to earth as God’s only son and gave His life that we might live. On Christmas we celebrate the birth not only of our Savior, but the redeeming love that his birth brought into the world.

Christian and non-Christian alike can come together to embrace the spirit of the season, the peace, love, and mercy that Christ represents. In the words of Charles Dickens, let us honor Christmas in our hearts and try to keep it all the year.

Merry Christmas and Happy Holidays to you and yours,

God Bless,

Adam Swift

"If It Don't Make Money, It Don't Make Sense:" Floyd Mayweather to MMA?

December 24, 2007

Floyd Mayweather’s manager, Leonard Ellerbe, remarked on Mayweather/Hatton 24/7, “if it don’t make money, it don’t make sense.” Based on a recent ESPN.com report, it appears as though the calculus of Mayweather entering MMA may be starting to add up. The report that Mayweather met with Mark Cuban of HDNet Fights last Thursday to discuss a move to MMA was the talk of the MMA world this weekend.

The odds of Mayweather actually entering the cage in near future seem slim to none, not with another $25 million dollar boxing bout on the table against undefeated Miguel Cotto, however after that bout who knows what the future might hold? If MMA keeps growing and boxing is unable to offer a steady supply of marketable challengers for Mayweather, it is not altogether inconceivable that the money offered by MMA will indeed eventually make sense.

It’s hard to overstate the magnitude of a potential Mayweather crossover. Properly promoted, Mayweather’s MMA debut would have the potential to become the most watched pay-per-view not only in the history of MMA, but pay-per-view in general. The event would also have the ability to single handily break the UFC’s stranglehold on the industry, launching not only Cuban’s HDNet Fights, but an entirely new promotional model more closely resembling the boxing industry.

Of course, we’re a long way from such an event becoming a reality, let alone a historic success. For starters, outside of basically risking his career and much of his legacy, Mayweather is accustomed to $20 million payouts, which Kevin Iole points out is slightly more than the payouts of the last three UFC pay-per-view events combined. However, it is not hard to envision a scenario under which a Mayweather fight would make financial sense, outside of the invaluable mainstream publicity such an event would garner. The UFC grossed roughly $20 million on pay-per-view for its biggest event to date, last December’s UFC 66: Liddell v. Ortiz at approximately 1,000,000 buys and a $40 price point.

On the pro side of the equation for boxing’s best fighter, as Iole points out, even one hand picked win would give Mayweather a foothold in the MMA industry and a platform from which to launch his own promotional efforts. Setting aside the media’s rampant cynicism for a moment, it is also at least conceivable that Mayweather is truly interested in a new challenge after dominating boxing for the better part of two decades. A successful crossover to MMA would establish Mayweather as something more than just a tremendous boxer, perhaps the best of his generation, but as a legendary fighter at the vanguard of the fight sport revolution, that may or may not be taking place at present.

That kind of transcendent legacy is something that would likely interest the brash superstar–if the money is right.

Prospect of UFC-CBS Deal Fading?

December 22, 2007

For whatever it’s worth, based on conversations between MMAPayout.com and multiple sources within the industry, there seems to be a growing belief that the UFC-CBS deal has stalled or fallen apart altogether. At the very least there seems to be an emerging consensus that the deal won’t be in place in time for UFC 81 as has been rumored.

It should be noted that none of the sources referenced are parties to the negotiations (i.e. placed within the UFC or CBS). As a result, the above report should be considered rumor or informed speculation at best. It also bears mentioning that the situation is fluid as there is still time for a deal to be struck and announced for UFC 81.

Approximately one month ago, a published media report suggested that a deal was imminent. As recently as several weeks ago, The Wrestling Observer Newsletter reported that the belief within the industry was also that a deal was imminent. It should be noted that there was a similar belief in the industry during the UFC’s negotiations with HBO only to ultimately see the negotiations break down.

Envelope Math: The Fortunate 50

December 22, 2007

Sports Illustrated just released its fourth annual Fortunate 50. The list ranks the top 50 earning American athletes based on salary, winnings, bonuses, endorsements, and appearances. On the strength of their record setting pay-per-view fight in May, Oscar De La Hoya checks in at # 2 with $55 million in total earnings while Floyd Mayweather comes in at # 21 with $20,250,000.

Tiger Woods paces the list at $111,941,827 (including $100 million in endorsements), while it took roughly $15 million to crack the top 50. 25 basketball players, 12 baseball players, 5 football players, 3 NASCAR drivers, and one women’s professional golfer round out the list.

For comparison’s sake let us engage in a little envelope math to see how MMA’s top earner, widely believed to be Chuck Liddell, compares. To be clear, this is an almost entirely speculative exercise. MMAPayout.com estimates Liddell’s 2007 earnings to date, not including endorsements and appearances, at roughly $2.7 million based on:

  • 5/21 – lost to Quinton Jackson – $1,707,500 ($500,000 guarantee, estimated $1.2 million pay-per-view bonus*)
  • 9/22 – lost to Keith Jardine – $1,032,500 ($500,000 guarantee, estimated $532,500 pay-per-view bonus based on 400,000 buys*)
  • * – assuming Liddell’s pay-per-view bonus scale is similar to Randy Couture’s

Conservatively, Liddell stands to make an additional $1 million for his 12/29 fight with Wanderlei Silva (based on a loss and 400,000 buys). That would put Liddell at $3.7 million for the year, not including endorsements, appearances, or undisclosed bonuses, not to mention $1.5 million in win bonuses (Liddell’s contract is $500,000 guaranteed per fight, plus a $500,000 win bonus) he would have left on the table (assuming an 0-3 record). $6 million total earnings for 2007 is not an unreasonable estimate based on the above assumptions.

In the best case scenario, Liddell could have earned as much as $6.7 million in the octagon in 2007 based on the following assumptions:

  • An average of 630,000 buys per fight, the number he averaged over his last four fights prior to his 9/22 fight with Jardine. Assuming that buy rate would have held up if he hadn’t lost to Jackson.
  • Assuming a 3-0 record resulting in $3 million in earnings

Taking into account undisclosed performance bonuses, endorsements/sponsorships, and appearance fees in addition to the above assumptions, it is not impossible to imagine Liddell taking home over $8 million in total earnings in a best case scenario.

NOTE: As the title of “Envelope Math” suggests, the exercise above regarding Liddell’s salary projections is almost purely speculative with the resulting estimates representing nothing more than educated guesses.

WEC 31 Payouts

December 21, 2007

MMAOnTap.com has payouts from WEC 31 which took place in Las Vegas on 12/5:

  • Jens Pulver: $60,000
  • Paulo Filho: $56,000
  • Urijah Faber: $40,000
  • John Alessio: $26,000
  • Chael Sonnen: $25,000
  • Charles Valencia: $12,000
  • Jeff Curran: $10,000
  • Doug Marshall: $10,000
  • Bryan Baker: $8,000
  • Alex Karalexis: $8,000
  • Ed Ratcliff: $8,000
  • Brian Bowles: $6,000
  • Cub Swanson: $5,000
  • Marcos Galvao: $5,000
  • Eric Schambari: $5,000
  • Ariel Gandulla: $4,000
  • Todd Moore: $4,000
  • Ian McCall: $3,000

UFC Turns Down Co-Promotion

December 21, 2007

Steve Sievert of the Houston Chronicle reports that, as expected, the UFC rejected M-1’s offer to co-promote Couture-Fedor. According to Randy Couture:

We got an official offer from M-1 to the UFC to do a co-promotion for the Couture-Emelianenko fight, and they (UFC) rejected that offer. Really, the only thing standing in the way for that fight right now is Dana and the UFC. Obviously, M-1 is happy to do a co-promotion like that. It only serves to help them. I think the UFC is looking at it the other way, and it’s like why do we want to help out another organization? The fans want to see that fight. At some point, you have to put that first.

MORE ANALYSIS: Open the Door: Couture-Fedor, MMA as a Whole, Will Move Forward, With or Without the UFC

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