14 for 14: No. 2 UFC-Reebok announce uniform deal

December 31, 2014

There was much speculation as to when the UFC would broker a uniform deal.  The long-awaited deal will begin during International Fight Week in July 2015 according to the joint announcement on December 2nd.

Details of the deal are outlined here.

ufc and reebokThe deal is estimated at 6 years for $70 million and offers a unique distribution deal which the UFC touts will give back to its fighters based on UFC rankings.  However, with the announcement of the UFC-Reebok deal, it also means that all other fight sponsors would be eliminated from the Octagon.  There will no longer be fight banners or any other sponsor patches on shorts or t-shirts.  Fighters may not wear other sponsors during UFC related promotions leading up to an event.  This information led to many concerned fighters.  Brendan Schaub indicated that he lost 6 sponsors in light of the Reebok deal.  The Heavyweight stated that he made twice as much from sponsors as his fight purse from the UFC.  It also means the end of many sponsors we are familiar seeing such as Dynamic Fastener.

On the other end of the spectrum, Jon Jones and Ronda Rousey signed individual sponsorship deals with the brand.  The two join Johny Hendricks and Anthony Pettis as those fighters with sponsor deals with the company.

The UFC indicated it reached out to fighters about the deal prior to its announcement although a list of those fighters has not been disclosed to the public.

Payout Perspective:

It will be interesting to see how the deal will play out.  While many knew of the impending uniform deal, they did not know that fighters would be paid based on their UFC ranking.  The rankings are based on media vote which adds a layer of uncertainty to the whole situation.  One might surmise that any controversy about fighters getting paid from this deal will be immediately deflected to those media members that choose the rankings.  Then again, the entity that chooses the media members that votes on the rankings…the UFC.  Moreover, at this point, it does not seem like any of the fighters know how they will be compensated or what to expect based upon fighter rank.  Also, if you are an unranked fighter, will you be making more or less with the Reebok deal?  It will be interesting to see how this deal will play in the current antitrust lawsuit filed by fighters against Zuffa.

14 for 14:

3.  Bellator 131/Bellator on PPV

4.  Zuffa downgraded by Standard & Poor’s

5.  CM Punk signs with the UFC

6.  Rebney replaced by Coker

7.  UFC Fight Pass a success in first year?

8.  TRT banned by NAC, UFC

9.  UFC PPVs down

10.  WSOF airs on NBC

11.  UFC continues global expansion

12.  Rousey wins CSAC arbitration against Fight Tribe

13.  Cung Le drug suspension overturned

14.  Gil re-signs with the UFC

14 for 14: No. 3 (tie) Bellator 131 scores ratings, Bellator hits PPV

December 31, 2014

A pair of Bellator events make it to the top 3.  First, Bellator 131 has its best ratings.

Bellator 131 on SpikeTV

November 15, 2014 was the biggest event in Bellator history to date.  As we know, Bellator 131 took place in San Diego, California with Tito Ortiz taking on Stephan Bonnar in the main event.  The main card took place on Spike TV and scored the largest rating ever for the organization.

Ortiz-Bonnar drew an average of 1.8 million viewers on SpikeTV with a peak of over 2 million which made it the most-watched and highest-rated MMA fight on cable in 2014.  The overall telecast of 3 hours and 16 minutes drew a rating of 1.24 million viewers.  Each of the fights on the Spike TV card drew over 1 million viewers and it was the clear winner of the night compared to the UFC 180 Prelims and WSOF card which portions of those shows aired at the same time as Bellator 131.

The great ratings for the event were based on strong promotion of the card which included shoulder programming on SpikeTV and, of course, Tito Ortiz and Stephan Bonnar.  While their “bad blood” stemmed from a pro-wrestling-like skit, the build was promoted well by Bellator.  Although the actual fight was not a classic, Bellator got what it wanted, an audience willing to tune in.

Payout Perspective:

Bellator 131 was a reflection of the Scott Coker-era and his new strategy.  Based on the ratings, it seemed to work.  On a night opposite a UFC PPV, Bellator seemingly won the night.  We will see if its strategy of placing quarterly tent pole events will continue to work.

Bellator finally on PPV

In May, Bellator decided to test the waters of PPV.  After its initial plans were set aside due to an injury by headliner Tito Ortiz, it went ahead with another try in May.

Unfortunately, its co-main event fell through as Eddie Alvarez had to pull out due to an injury.  In his place to face Michael Chandler was Will Brooks.  With a Rampage Jackson-Mo Lawal headliner the question was whether the card was strong enough to remain on PPV.

The PPV’s price point was between $35 and $45 which some believed was overpriced for the talent the event was offering.

It turns out, the PPV was a small success as multiple reports had the PPV at 100,000 buys.  The number was confirmed by Spike TV’s president Kevin Kay.

Payout Perspective:

Although the PPV was a success, it appears that Bellator will step back from any further attempts at PPV for now.  If the 100K PPV buy rate is correct, it’s a testament to the promotion and shoulder programming by Spike which supported the event.  It also played up the rivalry between Jackson and Lawal.  Once again, known talent (Jackson) and a hot rivalry helped bring in the PPV buys.  We’ll see if Coker’s strategy will include another Bellator PPV down the line.

14 for 14: No. 4 Zuffa downgraded by Standard and Poor’s

December 31, 2014

This fall Standard & Poor’s downgraded Zuffa’s credit rating and then its business outlook over a month later.

The downgrade in credit rating from “BB” to “BB–” was due to “greater EBITDA volatility.”

S&P issues credit ratings for the debt of public and private companies and is one of several credit agencies that is designated as a nationally recognized statistical rating organization by the Securities and Exchange Commission.

From our write-up in October:

In its overview, S&P concluded that Zuffa “will experience a 30% decline in EBITDA (Earnings Before Income Tax, Depreciation and Amortization) in 2014 and greater EBITDA volatility over time than we previously had anticipated.”  Despite the gloomy outlook, it stated that Zuffa’s outlook is stable and 2015 will be a recovery year for the company.  This is based on the belief that injured fighters return and PPV buys and ticket prices increase.

The report identifies Zuffa having $535 million in credit with $60 million in “senior secured revolving credit facility due 2018 and a $475 million senior secured term loan due 2020.”

Zuffa’s credit rating had maintained a “BB rating” since December 2010.  It was previously downgraded in November 2007 from BB to BB-.

Just over a month later, S&P revised its outlook on Zuffa from “stable” to “negative” with the forecast that Zuffa’s earnings would decline “approximately 40%”

Via S&P press release:

“The negative outlook revision reflects our updated forecast for 2014 EBITDA to decline approximately 40% (compared to a decline of 30% previously), primarily due to a change to a marquee fight card in the fourth quarter of 2014 as a result of another fighter injury causing anticipated pay per view (PPV)  buys and event ticket prices to decline further, as well as higher remarketing expenses for the event, and additional costs related to the company’s international expansion,” said Standard & Poor’s credit analyst Stephen Pagano.

Payout Perspective:

When we see the UFC using the hashtag #thetimeisnow, you can almost interpret it for the UFC business as well as the impending fights happening in the first quarter of 2015.  Since S&P’ handed down the news to Zuffa, we’ve seen an increase in business activity.  It has forged a deal with Reebok making it the exclusive clothier of the UFC, the signings of CM Punk and Rampage Jackson and the potential sponsor signing of Monster Energy Drink.  Add these business happenings with three big PPVs to start off the first quarter and the hope is that business is picking up.  If this were to happen, Zuffa may stave off another bad review by S&P in the first quarter of 2015.

Zuffa retains Boies Schiller & Flexner

December 30, 2014

The UFC issued a statement in which it announced that it has retained the law firm of Boies, Schiller & Flexner to defend it against plaintiffs seeking class action status alleging Zuffa of violating antitrust laws.

Per the UFC web site:

We have built a popular business from modest beginnings by meeting the needs of fans and fighters. Millions of people have watched our bouts, we have instituted leading health and safety measures for our athletes, and fighters are free to negotiate contract terms.

We will stand up against the plaintiffs in this litigation every step of the way, and have engaged attorneys from Boies, Schiller & Flexner LLP with a depth of experience in antitrust issues.

Bill Isaacson, our lead litigator, says, “The antitrust laws have long favored companies that create new products and services that consumers want. That is exactly what the UFC has done here through its long and substantial investment in building a popular sport.”

We are proud of the company we have built, confident in our legal position, and intend to prevail in this lawsuit.

Payout Perspective:

Boies, Schiller & Flexner is a high profile firm as some may recognize the last name Boies as David Boies from Bush v. Gore (Boies represented Gore) fame.  Lead counsel appears to be Bill Isaacson, a partner with the firm.  According to his bio, he provided key cross-examination (according to me the hardest thing to do in litigation) of NCAA witnesses in the 2014 case of O’Bannon v. NCAA.  Isaacson, who was one of the attorneys representing the plaintiffs, prevailed on behalf of O’Bannon.  With the retention of its attorneys, it will be an interesting and hotly contested matter.  Stay tuned in 2015.

Jones reveals truth about losing Nike sponsorship

December 30, 2014

MMA Fighting reports that Jon Jones did not lose his Nike sponsorship due to his media day brawl with Daniel Cormier.  But while under oath with the Nevada Athletic Commission in September, he told the commission that he lost it due the brawl.

The public revelation of this came out during a media call on Monday in which Jones was promoting UFC 182 set for this Saturday.

Jones informed the media of this during the conference call (via MMA Fighting):

When I was in front of the commission, I definitely worded it wrong.

Nike did not drop me because of that fight  and I kind of owe an apology to Nike for saying they dropped me because of the fight. They actually didn’t. Nike has been known to support its athletes through much worse things than a brawl in the middle of MGM [Grand].

As we pointed out back in September, there’s a list of athletes that have been let go by Nike for far more severe indiscretions.  Jones being let go due to this brawl did not seem to fit.  Yet, he informed the commission that he lost Nike as a sponsor due to this fight.

Payout Perspective:

Essentially, Jones did not speak the truth (sometimes this is called lying) when placed under oath by the Commission.  As we all know, just like in the movies, being under oath carries a “penalty under perjury.” Basically it’s falsifying the affirmation of telling the truth.

The commission has the authority to discipline an individual that provides it with “false or misleading information.”  The discipline may include suspending or revoking a license under NAC 467.885.  While Jones did misstate that he lost Nike due to the brawl, the bigger question in my opinion is whether that information led to the commission’s decision on the discipline for Jones.  Thus, if the commission based its fine and community service on the fact he lost Nike, there may be an issue.  But, if the commission would have decided the penalty regardless of losing Nike (or Nike was an additional factor), Jones’ misstatement might not bear any subsequent penalty.

At the hearing, the commission did appear impressed with Jones’ remorse, thus, this revelation that Jones’ Nike deal was not nixed because of the media day fight may be a non-issue to the commission.  On the other hand, the commission might be upset with Jones here and call him back before the commission to have him clarify his statement and/or ask him why he said he lost Nike as a sponsor when he did not.  A penalty might occur simply as an example that you cannot misspeak before the commission.

14 for 14: No. 5 CM Punk signs with the UFC

December 30, 2014

It’s rare that a hyped-up announcement lives up to expectations.  But, the signing of Phil Brooks (aka CM Punk) did when he came on during the UFC 181 PPV to announce his intent to fight in the UFC.

Punk’s announcement left many UFC fans wondering about the direction of the UFC.  Some like the signing seeing it as good business as Punk is a “needle mover.”  Others, like Nate Diaz and Jon Jones questioned the signing.  For those fighters that had to fight and scrape their way to make it to the UFC, seeing Punk, a 36 year old without any MMA fights under his belt, entering the UFC was a joke.

Jones provided sound reasoning for his anti-Punk sentiment (via MMA Fighting):

“Every day I’m [Jones] at the gym watching these kids training. These guys have no money and they’re training their tails off, giving up everything to be a fighter.  Living in the gym, eating turkey and peanut butter, bare minimum to chase this dream and then a superstar like him just gets to jump into the UFC just because he knows the right people and has a name.”

Punk stated at the initial interview that he had not decided on a place to train and what weight division he would compete in.

The signing came shortly after Punk was on the Colt Cabana Podcast detailing health issues including admitting to 12 or 13 concussions.  One would think that this concern will come into play if a commission will have to sanction Punk’s first fight.

Payout Perspective:

Can Punk draw ratings and PPV buys for the UFC?  The day after UFC 181, the name CM Punk drew over 100,000 in U.S. google searches.  A Fox Sports Live which featured a CM Punk interview drew more than the usual amount of viewers.  One might conclude that there is a definite interest, or should we say curiosity, about whether Punk can actually fight.  Sure, he is great in the gym and trains with a lot of MMA fighters, but there are a lot of basketball players that are great in the gym but horrible in actual games.  Will Punk be able to translate his athletic ability in the Octagon?  Although Brock Lesnar was able to make the switch to MMA, he was a decorated college wrestler.  He also had at least one pro fight before entering the UFC.  Thus, the Punk signing is a gamble.  Moreover, the Punk signing reflects a move by the UFC to focus on the spectacle aspect of its business.

14 for 14: No. 6 Rebney replaced by Coker

December 29, 2014

Bjorn Rebney was relieved of his duties as the head of Bellator in June of this year. He was replaced by former Strikeforce head Scott Coker.

In addition, Bellator president and COO Tim Danaher was let go by Viacom.  According to MMA Fighting, the replacement of Rebney was dependent on waiting out Coker’s Zuffa’s non-compete clause.

Rebney indicated that he had differed “on views of the right strategic direction.”

A week or so before the change Rebney announced a change to its title fights which allowed for former tournament winners to challenge for a title.  They would no longer have to enter a tournament again to regain a chance for a title fight.

Looking back, one might infer a difference of opinion with the Bellator tournament structure.  In fact, this was one of the changes made by Coker upon him taking power.

Coker produced the biggest event in Bellator history in November with Bellator 131 with the main event of Tito Ortiz and Stephan Bonnar.  The change in promotion philosophy looks to have the company turning the corner as it competes with the UFC in the MMA landscape.

Payout Perspective:

The move from Rebney to Coker looks to have worked out in the short term.  He’s focused on the “less is more” strategy with the goal of producing 16 shows next year while focusing on quarterly “big events” which would include title fights along with headline names.  Per MMA Fighting, Coker plans on concentrating on promoting the company’s monthly shows on Spike TV along with focusing on a three month marketing campaign for its “big events” which will air on Saturday nights.  With word that it will actively try to sign more free agents including Brock Lesnar after his WWE contract expires, one might assume that Viacom is willing to expand its budget for Bellator.

Jackson’s management clarifies severing ties with Bellator

December 29, 2014

The manager for Rampage Jackson issued a statement regarding the reasons it left Bellator and signed with the UFC per a report with MMA Fighting.  Jackson’s management cites Bjorn Rebney as the source of the contractual irregularity with Bellator and its subsequent reasons it left the company.

Per Lee Gwynn, Jackson’s manager, Jackson was disenchanted with Bellator and decided to leave.  According to Gwynn, in addition to a Bellator contract, Bjorn Rebney offered a Paramount movie deal, a Spike TV reality show and a TNA pro wrestling contract.  Gwynn interpreted these additional incentives as creating an entertainment contract rather than a normal fight contract.  He also included a PPV payment model for Jackson.

It appears from the statement that the PPV buys did not meet Jackson’s incentives in his contract and they looked to renegotiate the structure at that point.  However, Rebney was replaced by Scott Coker.

As Gwynn interprets the contract with Bellator as an entertainment contract, they claim that there was a 45 day notice to list the grievances it had with the company and the company had time to rectify the issues.  Obviously, with Jackson signing with the UFC, Coker was not able to satisfy Jackson’s concerns.  Per Gwynn’s statement it gave Bellator 70 days instead of the requisite 45 days.

Gwynn indicated that his lawyers, UFC lawyers and “an outside law firm” agreed with Jackson’s position that terminating the Bellator contract was “legitimate.”

Payout Perspective:

This is obviously one side of the story.  But, Jackson’s reps paint the picture that Rebney is to blame for the contract and the subsequent breach.  The question of whether Jackson could renegotiate the contract when the PPV did not fulfill his contract is an issue.  Also, another issue is whether the additional “entertainment” sweeteners made the entire contract an entertainment contract.  Rampage did have a “reality series” on SpikeTV entitled “#Rampage4Real.”  He also participated in TNA.  As we recently revisited the Ronda Rousey split with Fight Tribe, at least in California (we assume the Rampage contract was signed in California since Bellator’s office is in Newport Beach) the fight contract and entertainment portion of the contract can be parsed out to be litigated and/or arbitrated.  This will not be the end of this contractual drama.

14 for 14: No. 7 UFC Fight Pass a success in first year?

December 28, 2014

In its first full year of UFC Fight Pass, the company’s over the top digital network, it can be seen as an overall success despite some initial flaws, ongoing administrative issues and a more serious security breach.

It recently came under attack by a group known as “Anonymous” which has posted a link on its twitter account containing login credentials and credit card information of subscribers.  It appears that the attack may be associated with a Christmas Day attack on Xbox Live, PlayStation Network and Amazon.  In addition to the security breach, it has had issues with respect to charging customers that were trying out Fight Pass during their free trial period.  For the most part, it has been responsive in rectifying charging errors.  Yet, it still charged customers and if you didn’t check your credit card statement, you might have been charged without knowing.  There were also issues with functionality of the interface which have been addressed.  In my opinion, while both UFC Fight Pass and the WWE Network are viewer friendly, Fight Pass is superior.

The digital network launched on December 28, 2013 with a two month free trial before it began charging $9.99 per month.  The company held multiple Fight Night events (starting last January) on Fight Pass in addition to prelim fights for other televised events and/or PPVs.  It also carries InvictaFC live events.  It has also added original content throughout the year as well as showing Nevada Athletic Commission hearings.  The hearings were an interesting add as many tuned in to watch the monthly proceedings including the Cormier-Jones post-media fight hearings, and the hearings of Chael Sonnen and Wanderlei Silva

The original price point for the service was $9.99 per month although it has offered the service at lower price points including $8.99 per month and $6.99 per month.  The lower price points were usually associated with a year’s subscription.

According to Yahoo! Sports Kevin Iole, the UFC “generates $1 million in gross revenue per month for every 100,000 subscribers.”  The UFC has not indicated how many subscribers there are and the “churn” of its subscribers.  It also has not disclosed how much it spends to run the Fight Pass.  It is available in 178 countries and expanded internationally far faster than the WWE Network.

This past October, Iole reported that Conor McGregor and Jon Jones were the most searched fighters on Fight Pass. Also, the most-watched UFC fight on Fight Pass through October 2014 was Jon Jones-Alexander Gustafsson at UFC 165 in September 2013.

Payout Perspective:

Despite the initial apprehension of subscribing to the network, the amount of fans gravitating to Fight Pass has been very good.  One of the reasons for its popularity may be its expansion overseas and the fight libraries it has on the network.  We will see what the UFC will do to keep the digital network fresh to retain and increase its number of subscribers. Fight Pass has to be one of the biggest assets for the company going into 2015.

14 for 14: No. 8 TRT banned by NAC, UFC and others

December 28, 2014

In February 2014, an investigative report by ESPN on testosterone replacement therapy (TRT) in MMA revealed the practice of fighters utilizing a diagnosis of low testosterone for the usage of synthetic testosterone.

Not surprising, Dana White called out the ESPN report as an embellishment.  He noted that 5 fighters had TRT exemptions out of the “500 guys under contract.”  Still, the UFC issued a ban on the use as well.

It started with the Nevada Athletic Commission in February when it unanimously voted to ban TRT in MMA.  The UFC also decreed a ban.  In addition, other states including California and also Brazil followed suit with a ban on therapeutic use exemptions (TUE) for testosterone replacement therapy (TRT).

If Dan Henderson’s performance against Daniel Cormier at UFC 173 is an indication as to what happens after a fighter (Henderson benefited from the TRT exemption) comes off of TRT, the ban may have an effect on future fights and fighters.

Notably, Vitor Belfort, the next challenger to Chris Weidman’s light heavyweight title benefited from TRT.  ESPN highlighted Belfort in its February expose on the practice.  Belfort withdrew from his title fight against Weidman earlier in the year due to the Nevada ban on TRT.  Belfort chose not to apply for a license for the fight and Lyoto Machida stepped in.

Belfort was awarded a license by Nevada in July provided he would concede to random blood and urine testing.  However, Belfort was only tested once since July to the consternation of Chris Weidman.  His fight against Chris Weidman was moved to California where the CSAC will take over testing of Belfort.

Payout Perspective:

The ban on TRT in MMA was a step in the right direction for the sport in 2014.  It offered legitimacy to the sport as the use of TRT was perceived as cheating by many.  And while the ban may not be fair for a fighter like Antonio “Bigfoot” Silva, it was likely the right move.

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