14 for 14: No. 9 UFC PPVs down

December 27, 2014

UFC PPV buy rates are down from 2013 as an increase in the number of events, injuries and lack of star power have contributed to find the company’s prime business in decline.  This year’s average is at a lowly 256,000.

Standard & Poor’s downgraded Zuffa’s credit rating and its financial outlook this past fall citing in part the PPV business decline as a reason.  Dana White acknowledged the decline of PPV business in 2014 at the NeuLion Sports Media Technology Conference in November.  While the PPV model is a big part of the UFC business model, White stressed in November that the UFC was “much more” than PPV.  The promoter that he is, White stated that when “big events happen, the pay-per-view numbers will come back.”

As all of the PPVs for 2014 have occurred, the biggest event this year was UFC 175 in July which drew 540,000 PPV buys.  There were 4 events in 2013 that exceeded 540,000 PPV buys.  The previous high was UFC 168 in December 2013 with 1,025,000 PPV buys.  Outside of UFC 175, no 2014 PPV drew over 400,000 PPV buys.  It also had to cancel UFC 176 in August due to injuries.  Although there is a lot of hope for UFC 182 in January, it’s unlikely that event would eclipse UFC 168’s number or even UFC 175.

UFC PPVs in 2014 (main event in parentheses)

UFC 169 (Barao vs. Faber II) 230,000

UFC 170 (Rousey vs. McMann) 340,000

UFC 171 (Hendricks vs. Lawler) 300,000

UFC 172 (Jones vs. Teixeira) 350,000

UFC 173 (Barao vs. Dillashaw) 215,000

UFC 174 (Johnson vs. Bagautinov) 115,000

UFC 175 (Weidman vs. Machida) 545,000

UFC 177 (Dillashaw vs. Soto) 125,000

UFC 178 (Johnson vs. Cariaso) 205,000

UFC 179 (Also vs. Mendes II) 160,000

UFC 180 (Werdum vs. Hunt) 185,000

UFC 181 (Hendricks vs. Lawler II) 380,000

UFC 2014 PPVs

UFC PPVs averaged 256,000 PPV buys which is off from 2013’s PPV buy rate average of 468,000.  2013 did see two appearances by UFC PPV bell cow Georges St. Pierre.  It also benefited from UFC 168 which featured the dual main event of Rousey-Tate and Silva-Weidman II.  2013 had one more PPV due to the cancelled one this year.

UFC 2013 PPVs

2014 did not do as well as 2012 (448K PPV avg over 13 events) or 2011 (413K PPV avg over 14 events).

Payout Perspective:

 One may argue what’s been the cause for the poor PPV buy rates this past year.  On the one hand, there is the amount of UFC events which allows the fight fan to pick and choose which PPV events to purchase.  On the other, there are the many injuries which cause fighters and fights to be re-shuffled.  Then, there’s the lack of star power (i.e. GSP).  There’s not an easy answer to the PPV issues unless the UFC decides to pull back on the number of PPV events (which does not look likely).   With three big PPV events in 2015, we will see if the PPV buy rates increase from 2014’s dismal average.

14 for 14: No. 10 WSOF airs on NBC

December 27, 2014

The World Series of Fighting debuted on NBC on Saturday afternoon July 5th in the first of two airings on network television in 2014.

The second airing on NBC occurs today, December 27th with a “Best of” show.

The debut show on NBC in July drew 781,000 average viewers for its Saturday afternoon card.  The card featured Jon Fitch defeating Dennis Hallman and Justin Gaethje defending his lightweight title against Nick Newell.

Notably, the biggest demo during the WSOF’s debut on NBC was males over 50 years of age which is not the norm when it comes to MMA.  One may assume that the demo is based on the time of day that the WSOF event aired.  The event occurred the same day as UFC 175.

In addition this year, WSOF added international broadcast deals thanks to IMG media.

Also this year, WSOF renewed its broadcast agreement with NBC.  The 4 year extension is not a “time-buy” or a rights fee deal. according to SBJ’s John Ourand  But, NBC will cover some of the costs of production.

WSOF also announced what it characterized as a “game changer” with a unique PPV revenue structure model which it plans to implement in the second half of 2015 with an anticipated PPV later next year.

Payout Perspective:

Can the WSOF garner a bigger audience by appearing on NBC?  The 781,000 viewers on NBC was the best television rating for the organization but did not do as well as boxing in a similar time slot on the network.  From what appears as a crowded television landscape for MMA, WSOF finds itself a second (or third) choice for MMA viewing on any given event by the company.  We note WSOF 15 airing on NBC Sports Network drew just 161,000 viewers on November 15th, the same night as UFC 180 and Bellator 131.  Its replay on NBCSN did better ratings-wise than the live broadcast.

Coker denies “minor league” status; Bellator scouts Lesnar, Del Rio

December 27, 2014

MMA Fighting reports on Scott Coker’s impressions of the UFC lawsuit as it pertains to how his organization is described in the lawsuit as a “minor league.”

Coker indicated in the article that he had not read the Complaint (we assume the first one filed by Le, Quarry and Fitch but all of them mirror each other) filed by former UFC fighters against Zuffa.  Unsurprisingly, Coker does not think that Bellator is a minor league.  He did not comment on whether the UFC was a monopoly or his thoughts on the lawsuit.  He did indicate that Bellator and parent company Viacom had nothing to do with the lawsuit.

Coker also stated to MMA Fighting that it reached out to Brock Lesnar about fighting with the company.  Lesnar’s WWE contract ends after Wrestlemania in March.  He also stated that Bellator would be in on “every single major MMA free agent in 2015.”  Apparently this also may mean every pro wrestler wanting to be an MMA fighter as it has initiated talks with former WWE star Alberto Del Rio.  Del Rio is slated to do some dates with Ring of Honor Wrestling in the new year but Bellator has reached out.  The 37 year old Del Rio (real name Jose Rodriguez) has an MMA background including two fights in Pride which includes a loss to Mirko Cro Cop in 2003 per Sherdog.  His last MMA fight was in February 2010.

Payout Perspective:

The lawsuit filed against the UFC has to be of interest for Bellator and its own business practices.  For the cynical, the fact that Coker did not read the lawsuit or watch the press conference announcing the lawsuit allows him plausible deniability on commenting on his impressions of what was filed and what he thinks becomes of it.  Certainly, Bellator lawyers are keeping an eye on the litigation that is evolving in San Jose.  Yet, Coker denying that Bellator is “minor league” is not surprising.  As the head of the organization, he does not want the company characterized in that way as it sends a message to fighters, sponsors and advertisers.

Will Bellator business come into scrutiny if the UFC lawsuit gets to substantive legal issues?  Certainly.  But, even before the lawsuit, in January of this year White stressed that Viacom-backed Bellator was a competitor (h/t MMA Junkie).  Coker’s comments appear to indirectly support White’s statement here which may be beneficial for Zuffa in the lawsuit.

As for its strategy in 2015 of actively pursuing free agents, looking at a pair of 37 year olds (Lesnar and Del Rio) may not be best for competition but as we are seeing, MMA is moving to more entertainment than pure sport.  Bellator’s biggest night occurred with a Tito Ortiz-Stephan Bonnar main event.  The UFC recently signed 36 year old CM Punk.  Signing Lesnar would be huge for Bellator.  Although the former UFC Heavyweight Champ may be past his prime, he is a proven draw.  Besides Lesnar and Del Rio, if Bellator can secure quality free agent fighters in addition to “brand name” talent, it can continue to build toward competing with the UFC.

14 for 14: No. 11: UFC continues global expansion

December 27, 2014

The UFC held 22 events outside of the United States in 2014 in its continued expansion of the brand.  The expansion will not end as 2015 will bring one more event in the new year making 23 events to be held outside the United States.

Arguably, Mexico City, Mexico and Dublin, Ireland were the two hottest spots for international events for the UFC this year.

In recent days, the UFC has hired Ken Berger to direct UFC’s Asian division.  Zuffa let go of Mark Fischer in August and promoted Garry Cook from the UK region to UFC’s Chief Global Officer.

In April, the UFC visited Abu Dhabi and Quebec City, Quebec.  It was the first time the UFC made it to Quebec City and the second to Abu Dhabi.

In May, the UFC visited Berlin for the first time.

In June, the UFC and Vale Tudo Japan announced a partnership which would help the Japanese organization in promoting its fighters.  Although no news has yet come down, the two companies announced a TV show featuring Japanese fighters would be produced in the future.  Dana White indicated that this show would be available on Fight Pass.  The UFC held an event in Japan this past September which aired on Fight Pass.

The UFC also visited New Zealand for the first time in June.

In July, the UFC visited Dublin for UFC Fight Night 46 featuring Conor McGregor.  The event was a success with McGregor defeating Diego Brandao before 9,500 fans.  MMA Fighting reported that he ticket demand was high and nearly all the tickets sold within hours of going on sale.  The event was a Fight Pass exclusive and White indicated it was the biggest event on the platform to date.  The success of the event sparked interest of a potential stadium show in Ireland likely featuring McCregor.

The UFC also visited Nova Scotia for the first time in October.

Similarly, UFC 180 in Mexico City was a sellout within 8 hours as 21,000 tickets were scooped up for the intended main event of Cain Velasquez versus Febricio Werdum.  Unfortunately, Velasquez was injured prior to the event and Mark Hunt stepped in.  The injury likely hurt PPV buys.

The UFC announced a stadium show for January 2015 in Sweden where native Alexander Gustafson would take on Anthony Johnson as part of the January UFC on Fox event.

The UFC’s signature series, The Ultimate Fighter included a TUF Nations Edition (Canada vs. Australia), TUF Brazil, TUF China and TUF Latin America.

Payout Perspective:

Despite its recent credit downgrade in October, Standard & Poor’s indicated that one of the positives for Zuffa was its international expansion.  With big shows in Dublin and Mexico City this year, there is hope of building new audiences in these areas.  Of course, that is dependent on the country’s stars (i.e., Conor McGregor, Cain Velasquez).  According to the Las Vegas Review Journal, for 2015, its Reebok deal will mean UFC logo gear in retail stores around the world, expansion of the UFC gym business globally and targeting Russia, South Korea, Scotland and Panama or Costa Rica.

14 for 14: No. 12 Rousey wins CSAC arbitration hearing against Fight Tribe

December 26, 2014

Earlier this year, Ronda Rousey split with longtime manager Darin Harvey and his management company Fight Tribe Management.  After an arbitration hearing in which both sides participated, it was determined that Rousey could be released from her fight contract and was not responsible for payments claimed by Harvey due to him.

Harvey filed a “Petition to Compel Arbitration” in LA Superior Court and requested that the briefing be sealed which precludes the public from reviewing the documents filed.   After the hearing held this past March, the CSAC determined that Rousey’s “Service Agreement” with Fight Tribe was void as to the “professional fighting services only.”  The arbitrator determined that Harvey had not followed the rules promulgated by the California State Athletic Commission with respect to fight contracts.

From our post earlier this year:

The ruling, in favor of Rousey, is premised on Harvey not properly executing the fight contract on “printed forms approved by the commission.”  The Commission ruled that, “[t]he controlling contract was the subject “Representation Agreement”, which was entered into in California and specifically binds the parties to be governed by California law.” Hence, the rationale by the Commission would lead it to conclude that since the contract was not on its printed forms, the contract was void as to the fighting portion of the contract.  In addition, the Commission ruled that “a fighter-contract” is not valid unless both parties appear at the same time before the Commission, and the contract receives the Commission’s written approval.”  This did not happen as the contract, which was originally drafted in May 2012, was not executed until January 2013.  Regardless, it was not done before the Commission.

Even though Harvey’s “Representation Agreement” did not comply with the Commission rules, he still argued that he was entitled to “quantum meruit” (latin for “what one has earned”).  This is a theory in contract law allowing a party to be compensated for actual work/services performed.

Under this theory, Harvey was seeking to recoup losses incurred from representing Rousey.  Harvey indicated in an exhibit at arbitration that from January 1, 2010 to January 31, 2014, he collected $25,608 in income from Rousey fights, $23,180 from PPV fights and $20,830 from income of sponsorships.  This is offset by Harvey’s claim that he paid $170,376 in expenses related to Rousey’s fighting career which makes Harvey at a loss of $85,818 from representing Rousey.  The paid expenses included paying for training including strength and conditioning, sparring partners and living expenses.

Longtime California promoter, Roy Englebrecht empathized with Harvey’s situation but also advised:

I have seen this happen a number of times over the years, where well intentioned people want to get involved in the fight business, but never take the time to learn about the business and some of the rules that govern it. This situation with Ronda and Darin could have been avoided if Darin knew the CSAC rules and followed them. This manager/fighter agreement or promoter/fighter agreement in California is unique to the sport, and if not followed you will lose, as this ruling showed.

The issue of the contract between Rousey and Fight Tribe with respect to representation outside of “professional fight services” still remains in state court in California.

Payout Perspective:

This is a textbook example of the ills of manager representation in sports.  Certainly, Harvey and Fight Tribe should have followed the rules of the CSAC.  While the representation of Rousey probably was a “handshake agreement” at first (note that there was an 8 month lag between Rousey actually signing contract and the date of Representation Agreement), it was not until Rousey started to become popular that issues began to occur. Rousey signed on with William Morris Endeavor and Fight Tribe likely felt like it was being boxed out of its representation.  We shall see if 2015 brings a resolution to the issue.

Vera, Garza file third lawsuit against Zuffa in antitrust class action

December 26, 2014

A third lawsuit was filed on behalf of fighters against Zuffa in the Antitrust Class Action lawsuit in San Jose.  Brandon Vera and Pablo Garza were the two plaintiffs in this particular lawsuit which was filed on Christmas Eve.

“The Truth” was thought of in high regard by the UFC at one time.  But, he was derailed by contract issues in 2006 which had him embroiled in a civil lawsuit with his former manager.  Vera came back to the UFC but never lived up to the lofty expectations.  Vera was released from the UFC in June 2014 after a 9 year career with the company.  According to Vera, he turned down the UFC’s offer to extend his contract.   Dana White indicated to Vera that White wanted to “fix this” but communication between the two stalled after that.  Vera later found out through social media that he was released by the UFC. Vera signed with OneFC and fought earlier this past month.  Vera indicated, per MMA Fighting, that White congratulated him about the signing.  According to the article, Vera stated he had “no hard feelings with White in particular.” However, he stated that he had wished the UFC had “handled things differently.”

Pablo Garza fought with the UFC from December 2010 until April 2013.  According to Bloody Elbow, in 2012 Garza refused to sign a petition which stated the UFC was not a monopoly and that fighters are treated fairly.

MMA Payout has not seen the third lawsuit as of this writing, we will update if needed.  But, one might expect the lawsuit to mirror the two previous ones filed in San Jose.  As with the previous two, there is no word of service of the Complaint or whether Zuffa’s legal team will waive service to allow for more time to respond.

There has not been an official statement released by the UFC on this third lawsuit (or the second for that matter).

Payout Perspective:

In my parts, there is usually a “gentleman’s/gentlewoman’s agreement” about filing things on Christmas Eve although there was no need to respond by Zuffa on Wednesday.  Regardless, Vera is a noteworthy plaintiff in this action since he had contractual issues with the company dating back to 2006.  Garza also may be an interesting plaintiff based on his representation that he was asked to sign a document stating that the UFC was not a monopoly.  Of interest would be whether the UFC allowed the fighters to review it, how much time they had to review it and if they were allowed to have an attorney review it.

MMA Payout will keep you posted on the situation as the lawsuits continue to come in.

14 for 14: No. 13 Cung Le drug testing suspension overturned

December 25, 2014

After losing his match against Michael Bisping at UFC Fight Night 48, the UFC determined that UFC middleweight Cung Le had failed a post-fight drug test.  As a result, Le was suspended by the UFC for one year.  However, Le’s representatives noted the faulty drug testing methods and requested arbitration.

The suspicions about Le using PEDs occurred after an Instagram pic showed the 42 year old more chiseled than he had ever been.  A drug test after his fight with Bisping showed elevated levels hGH in his system.  However, Le and his representatives denied his PED use citing a faulty drug testing policy.  The UFC acted as the commission in Macau as the country had no regulating authority to administer the drug tests.  However, the UFC did not use a WADA-approved lab to examine Le’s tests.  Even if the lab had used the same procedures as WADA, Le’s reps pointed out that there was a lab that was accessible to take the results.  There was also the contention that taking the sample after the fight may not prove an accurate test for elevated levels of hGH.

In addition, it was not clear what the appeal process was for Le.  Based on some of the speculation of the grounds for appeal, it was clear that an appeal process when the UFC is the acting regulator for a failed drug test was not readily spelled out.  It turns out that the arbitration would be under AAA rules which meant that there would be an evidentiary hearing as well as evidence submitted prior to the actual hearing.

Soon after the request for an appeal of the suspension and arbitration was made, the UFC rescinded the suspension of Le.  In a release, the UFC indicated that “based on the lack of conclusive laboratory results” UFC officials determined to rescind the suspension.  Backtracking on the suspension  could be seen as a PR hit by the UFC as one might infer that it did not want to go through a hearing and reveal its drug policy, or lack thereof.

Payout Perspective:

As we pointed out back in October, the UFC did not want to go to arbitration as it would have likely exposed the UFC’s drug testing policy (or lack thereof).  Rescinding the suspension did not mean that Le was not guilty of taking illegal substances; it’s just that the process for testing was faulty.  Regardless, this episode shows that the UFC drug testing policy must be retooled to address issues in its testing and appeal process.  As the company continues to expand in new countries and regions, it must have a concrete drug policy or work with the local commissions.

We will see what 2015 holds for this particular issue.

14 for 14: No. 14 Gil re-signs with the UFC

December 25, 2014

Back in February, Gilbert Melendez re-signed with the UFC after it was initially reported that he had agreed to a deal with Bellator.  But, the UFC exercised its “right to match” in Gil’s contract.  The move showed a newfound Bellator strategy to become more competitive with the UFC

Melendez became a free agent after his contract with Zuffa ended with his fight against Diego Sanchez at UFC 166.  Melendez was given offers from Bellator and the WSOF.  It was thought that Bellator had secured the lightweight but the UFC agreed to match the terms of the Bellator deal.  Melendez also received a title shot for the lightweight title and became a coach on TUF opposite Anthony Pettis.

Via MMA Fighting:

Per the terms of the agreement, according to several sources, Melendez’s deal guarantees that at least 75 percent of the 31-year-old’s fights will be contested on pay-per-view moving forward. Additionally, income earned from Melendez’s contracted pay-per-view points will kick in at a lower minimum buy rate than for any contract in UFC history, meaning Melendez will still earn pay-per-view point earnings on an event that performs poorly at the box office.

Payout Perspective:

The Gil deal makes the list because it revealed some key points that his representation was able to get on his behalf.  This drew the envy, of some fighters.  Shortly after Gil’s deal, Nate Diaz went on a twitter rant about his unhappiness with his UFC contract and asked to be released.  Gil’s deal was a rare example of fighter leverage and the invocation of the “right to match” clause.  We recall the problems occurring with this in the Eddie Alvarez legal battle.  Here, there were no problems, and in fact, Gil made out well.  Of course, his next fight was a loss to Anthony Pettis at UFC 181.  He made a base of $200,000 and should receive PPV points from the PPV buys.

With the recent UFC lawsuit filings in San Jose, new uniform deal, potential new sponsors in the UFC and the rise of Bellator, it will be interesting to see if/when another top free agent comes up, how the UFC deals with the negotiations.

EA Sports UFC giving away Bruce Lee for free during holidays

December 24, 2014

It seems that EA Sports is channeling their inner Holiday spirit and has decided to give away arguably it’s most iconic character in the game, Bruce Lee, as a free download to game owners for the PS4 and Xbox One consoles.

 

Payout Perspective:

EA Sports UFC continues to do as best as it can to support it’s customer base after the rocky launch.  Since the launch, which caused many to stray away from the game, EA Sports UFC developers have continued to listen to community feedback and have continued improved the game.  This time around, Bruce Lee, who was initially a free character for those who pre-ordered the game, will be available as a free downloadable character during the following dates:

– Xbox Live: December 22, 2014 to January 5, 2015

– Playstation Network – North America: December 22, 2014 to January 5, 2015

– Playstation Network – All Other Territories: December 23, 2014 to January 5, 2015

During this time period, all variations of Bruce Lee/The Dragon will be available for download including:

Bruce Lee – Bantamweight Division
Bruce Lee – Featherweight Division
Bruce Lee – Lightweight Division
Bruce Lee – Welterweight Division
Bruce Lee – Weightclass Bundle (all four divisions)

It was also recently announced that EA Sports UFC will now be a free game for those that subscribe to EA’s Access paid subscription program, which is currently only available for Xbox One.  The price for EA Access is $5 a month, or $30 a year and also has other games such as Battlefield 4, Madden 25, FIFA 14, and Need for Speed Rivals, and Plants vs Zombies: Garden Warfare.

Second antitrust lawsuit filed by fighters against Zuffa

December 24, 2014

Two more MMA fighters have filed a lawsuit against Zuffa citing violations of Sherman Antitrust Act Section 2.  The second Complaint which will seek to establish a class action lawsuit was filed Monday, December 22nd in Federal Court in the Northern District of California San Jose Division.

Luis Javier Vazquez and Dennis Hallman filed their Complaint which mirrors the one filed last week by Jon Fitch, Nate Quarry and Cung Le.  The same law firms that represent the initial three fighters are also representing Vazquez and Hallman.  According to Bloody Elbow, there are more fighters “on deck” to filing lawsuits.

Vazquez fought only once in the UFC in June 2011.  He had another 5 fights in WEC from August 2009-November 2010.  Zuffa purchased the WEC in December 2010.

According to Sherdog, Hallman fought in the UFC from December 2009-December 2011.  He may be best remembered for wearing a speedo to fight Brian Ebersole.  As a result, Dana White gave Ebersole a bonus after his win over Hallman.

As of this writing, the UFC has not issued a formal response to the second lawsuit although one might assume it would respond the same as it did with the first lawsuit.  It’s not known whether Zuffa has been served with the second Complaint and/or it will waive service to give itself an additional amount of time to respond.

Vazquez et al. v. Zuffa, L.L.C. by JASONCRUZ206

Payout Perspective:

Vazquez resides in Ontario, California and Hallman is from Olympia, Washington yet the lawsuit is filed in San Jose, California; the same venue as the other UFC case. We shall see when Zuffa lawyers respond, whether there is a challenge that these plaintiffs are “forum shopping.” It’s clear that the filing in San Jose is part of the plan by plaintiffs.  It looks like the intention is for these lawsuits to be filed in San Jose and seek to certify the class and request a consolidation of the cases as the plaintiffs will establish the commonality of the legal claims, the adequacy of the fighters representing the lawsuit, the size of the class and the similarity of plaintiffs’ claims.  We will keep you up to date as to if and when other fighters file a lawsuit against the UFC.

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