UFC 102 Far From Sold Out; Economy, Taxes Problematic

August 18, 2009

A story that’s seemingly flown right under the radar the last couple weeks is the fact that the UFC is having trouble selling tickets for its 102 event to be held at the Rose Garden in Portland, Oregon. The venue holds nearly 20,000 people for an MMA event, but has sold just over 9,000 tickets to date.

It’s surprising news for a number of reasons: Randy Couture is an Oregon boy, MMA is fairly popular in the state, and the UFC has built up a tremendous amount of momentum in recent months. When you look deeper, however, it’s not so surprising at all that UFC 102 is struggling to fill its arena.

The UFC was actually slated to bring their show to Portland back in November of 2008, but it is believed that the organization cancelled those plans and chose Las Vegas instead due to a combination of the poor economy in Oregon and exhoribidant event taxation in Portland.

Fast forward to 2009 and the economy is only getting worse:

Oregon’s economy, bad as it is, will get even worse over the coming months, threatening double-digit unemployment and early school closures while sucking billions of dollars from the state budget, according to a forecast released Friday.

 

“We’re falling basically into a pit,” said state economist Tom Potiowsky. He had the unenviable job of telling stone-faced state officials how much — or how little — they can spend on education, aid to the poor and other programs.

 

According to Potiowsky’s forecast, which is used to set state spending levels, the current state budget will come up short by $855 million. For the 2009-11 budget, the gap between projected revenue and the rising cost of state services grows to $3 billion.

 

The sharp drop stems from the same forces that clobbered the nation’s economy: dried-up export markets, tumbling home values, falling stock prices and frightened consumers.

 

“The perfect storm is here,” Potiowsky said. “And Oregon is feeling the recession stronger than many other states.” He predicted

Exacerbating the problem even further are the 6% gross receipt taxes levied by both the Oregon State Athletic Commission and the City of Portland for MMA events held in the city – ie., 12%.

The UFC subsequently set ticket levels at $600, $400, $300, $200, $100, and $50 ostensibly to recover some of the bottom line that will be taxed away. This has obviously left some UFC fans quite reluctant to pony up their hard earned cash in a very drab-looking economy.  

Brad Darcy, the Executive Director of the Oregon State Athletic Commission captures the heart of the issue:

“It’s an obstacle, I’m afraid,” Darcy said. “There is a six percent tax on gross receipts of live events to the commission. And on top of that, there’s a city tax of six percent. We rank pretty high (nationally) in terms of our level of taxation.” 

Payout Perspective:

Ticket pricing is a complex science designed to help firms maximize their revenue from any given event. I’d be curious to see if the UFC employs such a system when setting their prices. And, as it is a science, certain intangible variables such as the long-term benefit of a full house don’t always factor into the equation; it’s very much a short-term analysis.

Personally, I tend to take the long-term approach in thinking that an immediate sacrifice of revenue maximization at the event level is probably worth selling the tickets for less, filling the seats, maximizing sponsorship value, and reaping the benefits of an increased  fan base in the future.

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