October 31, 2016
With the UFC heading to New York on November 12th for UFC 205, a report states that the company will draw $14-$15M in “live event revenue” per documents obtained by MMA Junkie.
An investor presentation which Junkie obtained indicates that gate receipts, merchandise and other add-on should draw the astronomical amount which excludes PPV sales. In addition, sponsors such as Xbox, Atos and Toyota have interest in sponsoring UFC events according to the company.
An Adweek article stated that brands are attracted to the UFC and its New York City debut due to its appeal worldwide and the important millennial demo. While the Adweek did not state specifics, the hope for the company is that it will attract blue chip brands for its debut in New York.
It’s clear that ticket prices for the MSG event were going to be astronomical since it’s the debut. There are tickets available via Ticketmaster with the lowest going for slightly over $1,000 per seat. The “get-in” price on the secondary market as of the date of this writing is $739 according to SeatGeek. Cageside seats started at over $1,500 per when tickets went on sale late last month. We will see whether or not the promotion can continue with such high prices as more UFC events take place in New York (especially at MSG and/or Barclay’s Center).
As for sponsors, this is where I could see the UFC doing some deals. Whether or not they will be one offs or if they can forge relationships with blue chip brands will be interesting to see. Thus far, we have not seen any big sponsor activation plans centered toward UFC 205. Perhaps we see a push next week during fight week in New York. I would think that a brand such as Microsoft’s Xbox will be a part of UFC 205 in some way. The former Mighty Mouse sponsor will likely get back in with the company. With the holidays coming up, the UFC demo is primed for Xbox marketing.
October 30, 2016
MMA Junkie reports on the positive outlook for the UFC’s broadcast rights after its current deal expires in 2018. The article states that NBC, ESPN, Turner and Fox will all vie for the rights which will bolster the value.
According to information included in an investor presentation obtained by Junkie, indicates that the UFC will have increased leverage due to the lack of other sports rights fees coming due until 2021. MLB, PGA and NHL will not be up until 2021. It also will seek to unbundle US and Hispanic rights that were previously bundled in the Fox deal.
The interesting financial numbers state that in 2015, the UFC generated $462 million in revenue for “content.” Of that amount 28% ($129M) was from domestic television deals and 18% ($83M) from international deals. 51% ($236M) of the $462 million was from domestic and commercial PPV. Notably, and perhaps a surprise to some, UFC Fight Pass provided just 3% with $14 million in revenue.
The investor presentation notes “escalators” within the UFC Fox deal which would grow the payout to $168 million by 2018 when the existing right deal ends.
The UFC is still a PPV-based business and its reflected in the money it reportedly generates from fights. Obviously, the presentation is bullish on the UFC as it is trying to sell the idea that it will increase its current deal in 2018. The upcoming television rights fees deal will be a major event for the company as it is predicting a huge increase in its rights fee. You may also see it hoping to sell its digital rights in addition to the broadcast rights as a way to further monetize its content. It is notable that for as bullish as consumers were with UFC Fight Pass, it does not generate much in revenue for the company.
October 30, 2016
MMA Fighting reports that the UFC will need to pay $1,675 per fighter for its two shows that will be in New York this year. The payment is the insurance premium based on a $1 million traumatic brain injury insurance provision that was part of the bill that legalized MMA in the state.
Based on the insurance coverage, the UFC will pay $43,550 for this type of insurance for UFC 205 on November 12th at Madison Square Garden. It will pay $40,200 for its show in Albany on December 9th. The amounts do not include the typical $50K medical and $50K accidental death insurance policies.
The $1 million traumatic brain injury insurance provision also applies to boxing events which has drawn the ire of boxing promoters. Last week, boxing promoter Lou DiBella announced via press release that he would pull the remaining cards he was promoting in New York this year.
The $1 million insurance provision was a likely concession by pro-MMA legislators to push through the bill to legalize professional mixed martial arts in the state. We are now seeing the repercussions of this. The expense to hold a combat sports event in New York will be at a premium and will likely foreclose a lot of smaller shows. Boxing promoters have been vocal about this since the bill was legalized. One might wonder whether there were lobbyists looking out for boxing’s interest last spring in Albany. The news of the opposition to the insurance requirement is just coming out after the fact.
October 28, 2016
MMA Junkie reports on a document the site obtained regarding the acquisition of the UFC by WME-IMG. The information reveals cost-cutting on the part of the new owners.
According to the document, the purchase price for the UFC was $3,775,000,000 with $200 million going to banker fees and other expenses.
As outlined by a Moody’s report in July, there are “earn-outs” if performance goals are met over the next two year. The new owners could make an additional $250 million if it meets EBITDA goals. According to the Moody’s report, it will receive a $175 payment upon the achievement of $275 million in EBITDA (but not earlier than June 30, 2017) and $75 million payable upon achieving $350 million of EBITDA (but not earlier than December 31, 2018).
With the employee layoffs, the previous payroll of $55.4 million will be cut by $27 million. The new owners did not acquire the corporate airplane used by Dana White, et al. It also indicated that it would “increase standardization and more rigorous corporate discipline, namely in “compensation practices, (travel and expense) policies…” It will also cut the budget for “The Ultimate Fighter.” The show’s production budget will be cut from $27.6 million to $10 million per the document obtained by Junkie.
It was expected that there would be cost-cutting upon the new owners taking over. With the news that the owners would receive a bonus upon meeting EBITDA expectations over the next two years, the cuts are more glaring than one might expect. The news likely means that any chances of significant raises for fighters will likely not happen. Moreover, with more “corporate discipline” it’s unlikely that the company will take on significant extravagances. The news of cuts with “The Ultimate Fighter” likely means the show will not have international TUF’s although I would expect the show to continue since it does provide content for FS1.
October 28, 2016
The UFC debut for Canadian middleweight Adam Hunter will not happen as USADA and the British Columbia Athletic Commission (BCAC) announced on Friday that Hunter has received a two-year sanction after testing positive for 5 prohibited substances.
The 33-year-old fighter has accepted the punishment. He was scheduled to debut at UFC on Fox 21 in Vancouver but was pulled due to an out-of-competition sample on August 11, 2016.
USADA announced the banned substances were tamoxifen metabolite, boldenone metabolites, methandienone metabolites, drostanolone metabolite and clenbuterol.
Notably, Hunter had six first-first-round stoppages prior to signing with the UFC. Clearly, the stoppages may correlate with the positive tests. Testing positive for 5 banned substances should garner the two-year suspension. At 32, it appears that Hunter’s chance at the UFC may go away since he’ll be 34 when he may return and it’s not known how he will be without the substances.
October 27, 2016
Bellator 162 last Friday night drew 659,000 viewers in adjusted DVR +3 ratings. Its an increase from the 562,000 viewers in Live + SD.
The event peaked at 956,000 viewers during the main event between Shlemenko and Grove.
The ratings made it the third-highest cable sporting event last Friday night behind two college football games on ESPN.
October 27, 2016
It’s another episode of Show Money with Bloody Elbow’s Paul Gift and John Nash. In this episode, we talk GSP’s contract dispute, the WME purchase and WSOF’s troubles.
October 26, 2016
Forbes.com reports on 2016’s 40 best business brands. The UFC ranks 6th as one of the best brands for 2016.
Nike topped the list with a current brand value of $27 billion which is up 3.8% from last year. ESPN came in second with a brand value of $16.5 billion despite being down almost 3% from 2015. Adidas, Under Armour and Sky Sports round out the top 5.
The UFC placed seventh with a brand value of $2 billion and a remarkable one year change of 335%. Reebok, the UFC’s official clothing sponsor, ranked 9th with a current brand value of $800 million, down 3.6% from last year.
Forbes.com explains the brand value for a sports business, which differs from sports teams, athlete and sport event brands, in the article:
the brand value is the difference between the estimated enterprise value of the business brand and what the enterprise value of a similar business is worth.
Forbes.com specifically addressed the UFC sale as well as a word of caution:
By my count the price allocation of the deal valued the UFC’s brand at $2 billion–more than three times its value a year ago–based on the enterprise value premium paid for the mixed martial arts promotion. The UFC posted the biggest year–over-year increase among business brands. But if the UFC does not become bigger and more profitable–thereby justifying its $4 billion price tag–its brand could fall sharply in value.
Undoubtedly the UFC’s sale to WME-IMG impacted the brand value. Is it possible that the UFC brand is overvalued? One of the reasons for the high price tag for the company was the strength in the brand. It is MMA to the casual fan. Of course, the buyout loan strategy implemented in the sale has been questioned by federal regulators due to the increase in the possibility of a default.
October 25, 2016
UFC welterweight Lyman Good was flagged by USADA for a potential anti-doping violation. The UFC announced the news on Monday and the former Bellator champion will be taken off of the UFC 205 card as a result of the potential violation.
Good, a native of New York, will not be able to face Belal Muhammad in his home state. The UFC will be seeking a new opponent for Muhammad.
The UFC issued its standard statement part of which reads:
The UFC organization was notified today that the U.S. Anti-Doping Agency (USADA) has informed Lyman Good of a potential Anti-Doping violation stemming from an out-of-competition sample collected on October 14, 2016. USADA has provisionally suspended Good based on the potential anti-doping violation.
Lyman won his first, and only, fight in the UFC, a 2nd round KO over Andrew Craig in July 2015. He was 9-3 in Bellator and was the Welterweight Champion in 2009.
Bad news for the former Bellator champ as he does not get to perform in front of his home fans.
October 25, 2016
Jon Jones’ arbitration hearing is coming up next Monday and the former UFC light heavyweight champion’s lawyer, Howard Jacobs spoke about the upcoming case.
Jacobs, a noted anti-doping lawyer, indicated to Luke Thomas on his SiriusXM show that the products that were found in Jones’ system were a result of a contaminated product. Per Jacobs, he states that USADA testing confirmed what Jacobs’ investigation found which reveals that the product is contaminated with Hydroxy-clomiphene, an anti-estrogenic agent, as well as the Letrozole metabolite, an aromatase inhibitor. Both of the substances were found in Jones USADA tests. The supplement/product that Jones took was not identified in the interview.
Under USADA rules, clomiphene and letrozole are “specified substances” under the World Anti-Doping Agency Code (“WADA”). Per the WADA Code, “there is a greater likelihood that these (specified) substances could be susceptible to a credible non-doping explanation.” The WADA Code recognizes that it is possible for a prohibited substance to enter an athlete’s body inadvertently, “and therefore allow a tribunal more flexibility when making a sanctioning decision.
Jacobs states that under the USADA rules, you may argue that taking the specified substances you are not at fault if you take a supplement or product that contaminated but you may argue that you’re not “significantly at fault,” which allows for the ability to argue a reduced sanction.
Jones could face up to a one-year suspension per the UFC anti-doping policy guidelines.
Under Article 3.1 of the UFC Anti-Doping Policy, USADA shall have the burden of establishing that an Anti-Doping Policy Violation (ADVP) has occurred. USADA must establish that an ADVP has occurred to “the comfortable satisfaction of the hearing panel bearing in mind the seriousness of the allegation which is made.” The standard of proof is “greater than a mere balance of probability but less than proof beyond a reasonable doubt.” It would seem that the legal standard is between “clear and convincing” and “more likely than not.” Jones may have a rebuttable presumption or establish specified facts or circumstances if USADA establishes its burden. Jones’ burden would be “by a balance of probability” per 3.1. It would appear the standard that would be more likely than not.
Based on Jacobs’ view, it would seem that USADA knows that the product taken by Jones was likely contaminated and he apparently has the evidence. It would seem that USADA might meet its burden in proving that Jones took the substance but Jacobs could establish that the product taken was done inadvertently. As a result, Jacobs would be asking that Jones be given a more lenient sentence. We shall see if that will happen on Monday. Of course, the parties could settle the issue prior to the hearing.