Affliction Countersues M-1 Global

May 31, 2010

Loretta Hunt of Sherdog.com is reporting that Affliction has countersued M-1 Global by asking for declaratory relief on the validity of a “consultation agreement” between Affliction and M-1.

Affliction Entertainment filed a countersuit against M-1 Global, the management and promotional group that reps Fedor Emelianenko, in Los Angeles federal court on Thursday, asking for declaratory relief on the validity of a “Consultation Agreement” signed into by the two parties in April 2008 — allegedly under false pretenses. Affliction is also asking the court to rule that M-1 Global return $2.4 million in consulting fees it was paid in conjunction with two Affliction MMA events the two groups co-promoted in July 2008 and January 2009.

In the filings obtained by Sherdog.com, Affliction claims it, under M-1 Global’s directive, entered into two separate agreements with Emelianenko and the Holland-based organization to procure the services of the world’s No. 1 heavyweight as a headliner for three events.

According to Affliction, the California-based promotion inked a “Fight Agreement” that tendered $300,000 to Emelianenko per bout he participated in, while Affliction was directed to pay the remaining $1.2 million of Emelianenko’s $1.5 million asking purse per bout directly to M-1 Global under the auspice of a “Consultation Agreement.”

“The reason for the two agreements, Affliction was told, was for personal tax implications,” reads the countersuit.

Affliction claims no consultation was ever agreed upon or given by the M-1 Global group for the two events.

“Because the consulting agreement was a sham contract designed to avoid tax obligations, M-1 had no obligations to perform pursuant to the consulting agreement and therefore rendered no performance under the consulting agreement,” alleges Affliction’s filings.

Affliction is asking the court to deem the consulting agreement unlawful and that M-1 Global refund the $2.4 million it initially collected for the two events, plus a 10 percent interest rate per year along with attorney’s fees.

Payout Perspective:

We’d all heard of these so called “consulting agreements” when the Affliction-M1 deal was signed. Most viewed it for what it was: purely a tactic designed to extract more money out of the organization. It was the price Affliction had to pay for playing the Fedor game. Now they’ve conveniently turned around and said, “hey, this probably wasn’t on the up and up.”

I guess my question is, whose fault is that? Affliction – and Strikeforce, for that matter – knew what it was getting into when it signed the deal.

Hopefully the MMA community can learn from this: don’t sign the wrong deal for the wrong reasons. Moreover, you can’t bet the farm on one fighter (especially an unknown within your own domestic market).

This could get ugly. It would seem that both sides are prepared to battle this out in court, which could take a while (and a fair degree of money).

UFC 114: Payout Perspective

May 31, 2010

Welcome to another edition of Payout Perspective! This week we’ll be taking a look at UFC 114: Rampage vs. Evans, which was held at the MGM Grand in Las Vegas, Nevada on May 29th, 2010. The event featured a light heavyweight contender bout between Rampage Jackson and Rashad Evans and coincided with the second ever UFC Expo.

Rashad prevails and earns title shot

It’s very difficult for grudge fights to ever live up to their hype. Rampage vs. Evans didn’t exactly deliver the KO fireworks that some fans might have expected, but the bout was thoroughly entertaining and had most on the edge of their seats. The bout was an exhibition of first-class MMA between two fighters with wildly different styles and game plans. It was just about anyone’s best guess as to whom would come out on top — would Rashad get the takedown and dictate the fight with his speed or would Rampage catch him with a hook?

The fight was well-hyped and received a great deal of interest from the media and casual fans. I suspect this will be enough for the UFC to make Rua vs. Evans in September or October of this year.

Rampage defeated, but more popular than ever

Rampage may have come out on the losing end of the fight on Saturday, but he definitely won the popularity contest. This is very interesting to me, because Rampage had a difficult time catching on with the UFC crowd as champion – he wasn’t as popular as he maybe should have or could have been. Now, however, it would appear as though his popularity is at an all-time high and that’s important for the UFC moving forward.

If Brock Lesnar is set to fight in July, Silva and Edgar in August, and GSP in December, only the light heavyweight title is guaranteed to be available from September through to December. I think you could make a case for the winner of the Lesnar-Carwin fight to turn around and defend in November, but that still means the UFC is going to need one or two solid non-title main events to headline cards in this period. The popularity of Rampage makes him an obvious choice (should he be healthy and willing) and I tend to think that a Rampage vs. Forrest rematch makes a lot of sense here because it’s relevant and it’ll draw well.

Just to finish that thought: if Chuck Liddell is successful in his comeback in two weeks, he’d be another capable headliner the UFC could fit into that September-December gap (possibly against a healthy Tito).

ESPN2 extends agreement with MMA Live through August

The news of an extension is certainly welcome, but I think this was pretty easy to predict: the UFC has a monster summer coming up – Lesnar at 116, Couture vs. Toney at 118 – and ESPN definitely wants a piece of that to really gauge how far this “MMA thing” can go.

Note: MMA Live on ESPN2 averaged something around 130,000 viewers in May, which is higher than what the network normally draws in that time slot.

UFC 114 gate and PPV success

Dana White announced at the post-fight press conference that the event did $3.895 million at the gate on the strength of 15,081 fans, which is the strongest Las Vegas gate the company has had since UFC 100 (and the second strongest gate, period, since UFC 100). Moreover, the event benefited from an incredible level of hype that likely pushed the PPV broadcast into the 700-800k mark, which would make it the best-selling non-title event ever.

Just to recap, here’s some of what the UFC used to promote the fight:

  • UFC Primetime
  • MMA Live on ESPN2
  • The launch of UFC Undisputed 2010 on May 25th (note the crucial timing – fight week)
  • The UFC Expo (which you might attribute to the sell out and rather strong gate).

Prospect watch

It was an interesting night for our prospect watch segment:

Todd Duffee, the former NCAA Division 1 middle linebacker and owner of the UFC’s fastest knockout (7s), was dominating his fight against Mike Russow before getting buckled with a right hand and then smashing his head on the canvas. I don’t think this changes anything in terms of Duffee’s career trajectory – he still figures to be a top heavyweight in 2-3 years from now – but it probably will delay his development as a contender. He’s got to work on his gas tank, but I’m also inclined to believe he needs time to become more comfortable with the cameras and the spotlight.

John Hathaway, on the other hand, looked outstanding against Diego Sanchez. His striking was crisp, footwork was good, and he showed great poise against a veteran like Sanchez. For all the noise about Bisping, Hardy, and Daley, this Hathaway kid could prove to be the best of the bunch (along with, perhaps, Ross Pearson).

Cyrill Diabate is not a prospect, but deserves mention for a great performance as well. He was the guy, if you remember, that Dan Henderson brought in to mimic Anderson Silva before their fight at UFC 82. Joe Rogan commented on his improved ground game and if that holds true, he could be a legitimate contender at 205.

Sponsorship watch

It was a pretty interesting night on the fighter sponsorship side as Reebok, Bud Light, and Boost Mobile jumped into the fray. Dong Hyun Kim’s shorts and banner featured a Reebok Zigtech ad, which might surprise some people considering Reebok hasn’t announced any entrance into MMA within North America. However, Kim is extremely popular in Korea and has become a great asset for the UFC in the country – the Reebok sponsorship, as with the rest of his sponsors, were geared towards the Korean viewership of UFC 114. Bud Light sponsored both Efrain Escudero and Rashad Evans, which continues the company’s growing activation around the UFC sponsorship (although I’m still not convinced it’s where it needs to be). Rampage Jackson, was sponsored by Boost Mobile,  which caught my eye because the UFC has really been devoid of cell phone sponsors since Amp Mobile filed for bankruptcy.

There were also a couple of things I noted from a property perspective:

  • UFC 114 presented by UFC Undisputed 2010, but the spike card was sponsored by another video game — Split/Second.
  • BSN sponsored an interesting segment at the end of the night — the BSN Finish First “Finish of the Night” — but overall the company is doing little to draw an association between their brand and the UFC (at least on television, perhaps they’re doing more at retail POS locations). I find myself wondering what exactly BSN is hoping to accomplish with its sponsorship of the UFC.

Note: the MMAPayout.com Sponsorship Blue Book has been updated.

UFC 114 provides solid night of fights, reason to come back for new fans

Overall, the event has to be deemed a success: the gate was excellent, the PPV sales will very likely be stellar, and show delivered with plenty of memorable moments to motivate repeat business in the future.

I’ve talked about the role momentum plays in PPV sales before and I think this might be a case where that comes into play again: UFC 115, in two weeks, isn’t a super strong card, but it’s got Chuck Liddell and will benefit from a reinvigorated UFC crowd. I wouldn’t be surprised to see the show do 500k.

TUF 11 & Primetime Ratings

May 28, 2010

MMAPayout.com has learned that episode nine of TUF 11 drew a 1.1 HH rating on the strength of 1.5 million viewers Wednesday night, which is an improvement from last week’s episode (season low 1.0). The broadcast also drew well in the M18-34 and M18-49 demographics with a 1.53 and 1.33, respectively.

Quarterlies: .99, 1.06, 1.05, 1.26

UFC Primetime: Rashad vs. Rampage aired its final episode the same night to an audience of 1.1 million viewers.

Payout Perspective:

The “firing” of Tito Ortiz was likely responsible for the up-tick in ratings for this week’s show and the way Spike cut the episodes leads me to believe they’ve left enough on next week’s episode to help it draw beyond the 1.0 mark as well.

Primetime delivered a very strong 1.1 million viewers in which the conversion from TUF was more than 73% (up from 67% in the previous two episodes). UFC 114 is gaining a great deal of momentum and is looking to be a stellar show for the company.

100 Annual UFC Shows Possible?

May 28, 2010

John Morgan of MMAJunkie reports that the UFC has already begun the preliminary research necessary to determine whether an office in China is feasible and worthwhile. The goal of the UFC is to begin expanding its reach with localized versions of TUF in several different markets and eventually to begin promoting 100 shows per year.

The growth prospects for the UFC are astounding. As recently as 2007, the UFC held just 19 events. White said he envisions a day in the not-too-distant future when the company could hold as many as 100 events annually including single nights with multiple events on multiple continents.

“This is is a work in progress,” White told MMAjunkie.com (www.mmajunkie.com). “We bought this company, and we were doing five fights a year. If you would have told me six or seven years ago that we’d be doing 34 fights a year, I would have said, ‘That’s impossible. It’ll never happen. That’s crazy.’ We’re probably going to end up doing 100 fights a year.

“We could have a show [in the U.S.] on Saturday night and five more going on in five other countries. That’s what’s going to eventually happen. It’s figuring this thing out, putting the pieces together, and like I said, it’s a work in progress. But I’m telling you guys, I said it years ago, and I’ve been saying it – how big this thing is going to be. I think people are now really starting to realize how big this thing is really going to be.”

Payout Perspective:

To promote 100 events, the UFC assumes the following will be in place:

  • Fighter availability (quantity and quality)
  • Worldwide legalization and acceptance
  • Access to substantial distribution in each market

I tend to think that 100 shows per year is a possibility, but the time frame for such an accomplishment is absolutely up in the air and certainly isn’t something that will happen within the next 5 years.

Fighter availability (quantity and quality)

The UFC currently does 30+ shows per year with a roster of ~220 fighters and that number is closer to 260 when you consider the number of guys that are signed and then cut after one or two fights in any given year. The UFC would probably need 900-1000 fighters to do 100 shows and that’s conservative considering the global nature of its 100 show ambitions would strain the ability of fighters to compete more than 2-3 times per year.

The surge in the sport’s popularity is driving a lot of new interest in participation among elite athletes, but it’s going to take a great deal of time to develop the talent necessary to host 100 UFC events a year. This, unless the UFC is willing to sacrifice product quality — especially with its undercards. Yet, I wouldn’t suggest that, seeing as top-to-bottom fight quality is a key point of differentiation between MMA and boxing. The overall strength and entertainment value of a UFC card in its entirety is very much a part of the value proposition which it has used to build the sport.

Moreover, promoting 100 shows in a year would almost necessitate the inclusion of further weight classes at 125, 135, 145, and possibly 225 to give the UFC a chance to fill all of these cards. What does that mean for the WEC? What does that mean for other promotions? I suppose part of the assumption here is that, if the UFC gets to this point, its size and scale afford it so many advantages that it really does become the NFL of MMA (meaning you’re not going to have Fedor with Strikeforce or Aoki/Kawajiri in Dream).

Worldwide legalization

Despite the success of MMA in North America over the last five years, the sport is still not legalized in major markets like New York and Ontario — the UFC’s road to worldwide legalization will be no less tumultuous. I fully expect that history will repeat itself; and, when you take into account the cultural differences that exist between North America and other regions of the world, the road to legalization could be an even longer haul for the UFC in certain international markets.

In Germany, Austria, and France the thought of hitting a downed opponent is near sacrilegious to the mainstream sports fan. More than that, their consumer population is far more sensitive to violence, in general, which will very much make the sport a long-term proposition.

China is a very attractive market, but also one that can be unpredictable and very difficult to do business. The WWE have had a very difficult time penetrating the market (as have bigger companies like Google), because its conservative culture governed by a semi-communist state that operates under an “our way or the highway” policy. Although, the addition of Flash Entertainment (the Abu Dhabi state-owned company that bought 10% of Zuffa in 2009) will certainly help, because they have the connections and clout to get meetings with the key decision makers.

Moreover, I tend to think that people often over-estimate the future size and purchasing power of markets like China and India based solely upon what they’ve heard (much of which is exaggeration on the part of the American political and media bodies fearfully looking over their shoulders at the next challengers to American superiority). Many have suggested that China’s GDP will soon exceed that of the US (and possibly triple the US by 2050), but the country has its own economic and political challenges ahead. For example, the combination of nearly ubiquitous cigarette smoking, airborne pollutants, water contamination (nearly 33% of their fresh water is undrinkable), and the one-child policy will soon put a strain on China’s already questionable health care infrastructure and force a relatively small and proportionately shrinking middle class to support a very large and very sick group of elderly. None of which bodes well for China’s economy in the long-term.

The UFC and Dana White may very well come to realize that “getting the US done” was easier than expanding globally.

Access to distribution

The future of television might be the internet (sometimes I think Dana reads the site), but it’s not going to happen overnight and its not going to happen easily. There are many powerful people earning a lot of money through the status quo (i.e., television networks and cable/satellite providers) that really don’t have much incentive or desire to change the existing model. It’s going to be a tooth-and-nail fight to switch the medium.

Thus, I’m betting on a rather slow change and proliferation of internet-based television, which suggests that the distribution necessary for 100 shows a year will necessitate a hybrid system. Not everyone is going to switch at once, which means the UFC still wants to be on traditional television for now (but it will take internet-based distribution in markets like China or Germany where it can’t get to television, in the mean time).

What does the UFC need to do next?

Be patient.

I understand the temptation — the potential of MMA is huge — but it would be unwise to rush global expansion beyond the current capabilities of the firm. The UFC risks stretching everyone and everything too thin, which would utterly kill product quality in the long-term.

Therefore:

  • Let the localized versions of TUF do their magic: develop regional talents, build regional fan bases, and encourage grassroots development.
  • Give the UFC programming time to develop a following in the over 150+ markets it now resides.
  • Further push merchandise and collectibles into these foreign markets to give the UFC additional presence.

In the mean time, concentrate on dominance within existing markets and work to develop further competencies in marketing, public relations, and digital media. The UFC is good in these areas, but it could also definitely improve. There’s no such thing as perfect; and if there were, it wouldn’t be good enough.

UFC 114: Sold Out

May 27, 2010

The UFC has announced that UFC 114: Rashad vs. Rampage has officially sold out and will likely become the organization’s largest live gate in Las Vegas since UFC 100 last July.

UFC officials announced today that tickets for UFC 114: Rampage vs. Evans at MGM Grand Garden Arena in Las Vegas, Nev. are officially sold out. The war of words between former UFC light heavyweight champions Quinton “Rampage” Jackson and “Suga” Rashad Evans has created one of the fiercest rivalries in the history of the sport. It’s also created one of the hottest tickets in Sin City.

Tickets are still available for the closed circuit telecast of UFC 114: Rampage vs. Evans to be held at MGM Grand Conference Center. Tickets for the closed circuit telecast are available at all Las Vegas Ticketmaster locations (select Smith’s Food and Drug Centers and Ritmo Latino) and at any MGM Grand box office outlet. To charge by phone with a major credit card, call Ticketmaster at (800) 745-3000. Tickets also are available for purchase at UFC.com, www.mgmgrand.com or www.ticketmaster.com.

Payout Perspective:

I’m guessing the show will probably do in the $3.5-$4 million range based upon tickets prices of $650, $450, $300, $200, $125 and $75.

The event is certainly gaining momentum now: Dana White has been flying all over the continent to promote the bout, the video game launched on Tuesday, the last Primetime aired last night, and ESPN has really jumped on board (not just with MMA Live, but other interviews as well).

My early prediction of 800k is looking like more and more of a dead certainty at this point, which would easily make this event the highest grossing non-title PPV in UFC history.

Server Issues Resolved

May 27, 2010

We are pleased to announce that we have made a switch from the troublesome GoDaddy.com servers to our new home! You should no longer be experiencing redirect issues with any browser type, although we’re still working out the kinks with the posting system. However, if you do experience any difficulties, I’d really like to be informed ASAP.

If you were one of the unlucky people victimized by the issues, we’d really like to apologize. Moreover, we’d like to welcome you back and bring you up to speed on what you might have missed:

ESPN Sports Poll: MMA Fan Avidity

May 27, 2010

This isn’t recent news – somehow it slipped past me and the rest of the community last Fall – but according to an ESPN Sports Poll, mixed martial  arts was the only sport in North America to grow in fan avidity over 2009. The size of the sport’s overall fan base increased by approximately 4%, while the number of avid fans increased by approximately 6%. No other sport experienced growth in both its overall fan base and its avid fan base.

In fact, MMA seems to have fared very well in all fan base metrics. The sport grew in terms of fan intensity (avid fans as a percentage of overall fans) – one of only a handful of sports to do so. Plus, when asked “are you more or less interested in the sport this year compared to last year,” nearly 75% of respondents indicated greater interest (compared to only 25% that said less). The only other sports to generate an increase in fans were the NFL and NCAA Football, but neither increased by more than a few percentage points.

Payout Perspective:

The poll certainly confirms what we all expected: that 2009 was an incredible year for the sport of mixed martial arts in North America. Not only did the UFC sell a record number of PPVs in 2009, but it also broke its own live gate record and sold over 3.5 million copies of its video game (all, of course, in the context of an economic operating environment that was far from favorable for anyone, in any industry). Then, add to that the unparalleled growth in its fan base that the UFC experienced.

It was a tremendous year.

Now, fast forward to today and we see that the UFC will likely break its PPV totals for the third consecutive year (with the possibility it does so not just on account of having more events, but on account of those events averaging a higher overall buyrate than last year’s shows). Despite its slow start, the UFC is only 300k behind its 2009 PPV totals at this point in the year (and $2 million ahead of last year’s gate total):

2009, January – May: 2.9 million buys on 5 PPVs
2010, January – May: 2.6 million buys on 6 PPVs

The expected +700k buyrate for Saturday’s card will push this year’s total well beyond the 2009 mark. Setting aside the uncertainty of UFC 115 (my own prediction is likely ~400k) and we move onto a strong summer schedule of UFC 116: Lesnar Carwin, a stacked UFC 117, and UFC 118: Couture vs. Toney.

All the people that were so quick to predict the UFC has peaked might want to revise that statement; especially considering the organization has yet to put together a consistent year (imagine if the injuries hadn’t derailed last year’s hot start or slowed the UFC coming out of the gates in 2009).

—-

The Sports Business Journal held its 2009 Sports Business Awards last week and I’m really not sure how you can objectively keep the UFC, at the very least, off the list of nominees for best sports league (which included NFL, MLB, NBA, and Professional Bull Riding).

UFC 114 Coverage @ MMAPayout.com

May 26, 2010

The following UFC 114 media content will be available through MMAPayout.com this week according to the schedule below. Also, keep an eye out for other fight week promo material on ESPN and other networks.

  • UFC 114 press conference: Wednesday, May 26th @ 1PM PT
  • UFC 114 weigh-in: Friday, May 28th @ 4PM PT
  • UFC 114 post-fight press conference: Saturday, May 29th @ 10PM PT

Strikeforce Challengers 8: Payouts and Ratings

May 26, 2010

Strikeforce held a Challengers Series show in Portland, Oregon over the weekend that featured some pretty good prospect talent in the likes of Tyron Woodley, Roger Bowling, and Tarec Saffiedine. The event managed to draw 249,000 average viewers on Showtime, which isn’t that far off what last weeks heavily promoted Strikeforce: Heavy Artillery card.

MMAJunkie, also provided the payouts for the event:

Matt Lindland: $1,000 (no win bonus)
def. Kevin Casey: $10,000

Tyron Woodley: $9,000 (includes $4,500 win bonus)
def. Nate Coy: $3,000

Roger Bowling: $6,000 (includes $3,000 win bonus)
def. Bobby Voelker: $3,500

Tarec Saffiedine: $8,000 (includes $4,000 win bonus)
def. Nate Moore: $4,000

Pat Healy: $6,000 (includes $3,000 win bonus)
def Bryan Travers: $3,000

Pro Escobedo: $2,000 (includes $1,000 win bonus)
def. Jason Sharp: $1,000

Payout Perspective:

The organization has drawn anywhere from 100,000 to  315,000 with these Challengers cards in the past, but the high end of that scale came as the result of a free preview that significantly expanded Showtime beyond its 18 million subscribers. The average draw for these Challengers events seems to be a little below 200,000, which suggests that the Heavy Artillery card, while maligned for itself being average,  actually boosted the short-term interest in Strikeforce to benefit this Challengers’ card.

This really speaks to the need for Strikeforce to develop a consistent media and communications strategy. If the brand is going to grow, the organization must be in constant contact with the fans and media to produce content every week – these intermittent flurries of information every couple weeks just won’t cut it.

—–

Matt Lindland was not paid $1,000 for his fight with Casey. He’s a local product and undoubtedly received bonuses for his participation in the event (perhaps even related to the gate itself and how much business he was able to bring the event).

UFC: Tom Wright to Head Canadian Office

May 25, 2010

Dana White and Lorenzo Fertitta have announced that former commissioner of the CFL, Tom Wright, will head the Canadian Office of the UFC in Toronto, Ontario.

“I am pleased to announce we are opening an office in Canada, and that Tom Wright, who is so respected and accomplished here in Canada, will lead our business in this critically important market,” said Fertitta.  “This will be the second international office for the UFC, and much like our UK operation, this presence will allow us to better serve the fans and businesses here, and to continue on our path of global expansion.”

With a successful sports business career spanning more than 25 years, Wright will serve as Director, Canadian Operations for the Ultimate Fighting Championship organization. In this role, he will focus on improving and strengthening UFC’s relations within local communities, provincial governments, Canadian businesses and the national and local media. Wright will build upon the efforts to regulate the sport of mixed martial arts in Ontario, and as he stated today, toward implementing a regular UFC events schedule that would include holding up to three UFC events per year in Canada. The UFC also pledged to develop a program to support local community sports with resources put back into the many regions of the country that have so strongly embraced the sport of mixed martial arts.

Payout Perspective:

UFC Canada is smart for a number of reasons:

  • UFC Canada symbolizes the UFC’s commitment to Canada – sending a statement to the fans and the government.
  • It gives the UFC a sustained presence in the country, which will undoubtedly help to main pressure on the government.
  • The office is strategically placed in arguably the UFC’s biggest market.
  • The timing of this announcement is also key in the sense that it helps to maintain the momentum that MMA has generated in the Canadian press over the last few months (first with GSP’s fight at 111, then 113 in Montreal, and in two weeks, UFC 115 in Vancouver).

The announcement of Tom Wright is interesting; being a former Adidas and Soloman guy, I imagine there might have been a connection there with Bryan Johnston (UFC CMO – hired last year).

Edit: I’ve now seen part of the earlier press conference – that would seem to be the case.

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