16 for 16: No. 1 WME-IMG purchase the UFC

December 31, 2016

The UFC was sold for approximately $4.2 billion this summer changing the face of the largest, mixed martial arts company.

Despite internal and external denials, it was clear that Zuffa was set to sell the company.  Perhaps we should have seen this coming the year prior.  Subtle changes made to the brand logo and broadcasts, making Reebok the official clothier of the company and adding a drug testing component likely solidified the company as prime for purchasing.  One of the things that appealed to the buyers was the strong brand and making investments in its brand pre-sale helped the eventual transaction.

WME-IMG made the purchase.  The deal was backed by private equity firms Silver Lake, Kohlberg Kravis Roberts and the investment firm of Michael S. Dell.  The price tag of $4 billion was surprising considering that the sport is still considered a niche.

Via our post this past July

The purchase price of $4 billion represents a 22 multiple of the UFC’s earnings before interest, taxes, depreciation and amortization.  On $600 million in gross revenue from 2015, UFC’s EBITDA is $180 million.  $180m x 22 =$3.96 billion.  The hope is that with a new media rights deal, the multiple will lower to 13-14 range which would make it a much better purchase.

The Fertitta brothers, Dana White and Flash Entertainment cashed out on their ownership interests.  White signed back on with the new owners for 5 years and 9% of the company’s net profits.  Ari Emmanuel and Patrick Whitesell are the new faces of the UFC.  They were No. 4 on a list of most influential in sports business for 2016.

The transaction was scrutinized by government regulators for its questionable buyout-loan strategy.  The Fed warned Goldman Sachs and Deutsche Bank AG, the entities that marketed the debt to investors, of abuse in inflating earnings before interest, taxes, depreciation and amortization. The EBITDA for the UFC was pegged at $170 million but then was estimated up to $300 million when presented to debt investors helping finance the sale.  The higher EBITDA allowed WME borrow $1.8 billion for the deal without running afoul of the guidelines which prevent borrowing for more than 6x a company’s EBITDA.  A WSJ article stated $48 million in expected “future step up payments to television contracts and other licensing agreements,” helped bring the EBITDA up to $300 million. Under the new owners, it is looking for $450 million per year for 10 years in next media rights deal.  This would have bolstered the anticipated EBITDA of the company.  Whether or not the UFC could garner $450 million is yet to be seen.  We’ll see if there are buyers on the market this time next year.

Regulators made a second reprimand to Goldman Sachs earlier this month.

The sale included incentives for WME-IMG which included a $175 million contingent payment upon achievement of $275 million in EBITDA (but not earlier than June 30, 2017 and $75 million payable upon achieving $350 million of LTM EBITDA (but not earlier than December 31, 2018).

A Sports Business Journal poll of its readers found 66% of the responses thought that WME-IMG overpaid for the UFC while only 3% of the responses found it underpaid.  Another 30% thought it paid the right amount.  26% of SBJ readers polled thought the UFC to be the hottest sports property of 2016.  The NBA, NFL and NCAA were ahead of the UFC (in that order).

As far as changes, the new regime is looking to institute corporate discipline in cutting costs.  The new owners trimmed staff which included consolidating overseas operations in what seems to be a focus on domestic events.  Matt Hughes and Chuck Liddell were let go by the UFC.  Perhaps indirectly, long-time PR exec Dave Sholler found a job with the Philadelphia 76ers and Joe Silva announced he was leaving the company at the end of 2016.  Also, Mike Goldberg called his final UFC fight at UFC 207. In its new media rights deal, it indicated that its partner would be in charge of production of events whereas the UFC had been in charge of it in the past.

The sale also sparked more fighters to express their discontent with the organization over pay.  With the news of the purchase price, fighters wondered their worth to the company.  The interest in organizing an association or union for the UFC came to the forefront this year as we saw a willingness by fighters to publicly state their views.  But, with an incentive to increase revenues to hit their EBITDA goals by the end of June 2017 and December 2018, the UFC will seek to cut more costs which does not bode well for fighter benefits.

2017 will be an interesting year to see how the new owners will manage the company and deal with the evolving issues that will come up.

16 for 16

2.  PFA and MMAAA seek to organize UFC fighters

3.  MMA finally legal in New York

4.  Legislation to expand Ali Act introduced

5.  UFC 200

6.  The year of Conor McGregor

7.  Bellator signings

8.  UFC pulls credentials for Helwani after breaking news

9.  Legal troubles for Jon Jones continues

10.  WSOF legal woes continues

11.  Ronda Rousey returns

12.  Alliance MMA goes public

13.  GSP declares himself a free agent

14.  Bellator 149

15.  CM Punk debuts

16.  Former Bellator employee sues company, organization sues back

UFC 207 draws largest MMA attendance in Nevada

December 31, 2016

UFC 207 drew 18,533 and a live gate of $4.75 according to UFC officials post-event.  The gate set an attendance record in Nevada but lands 14th on the list of biggest gates in Nevada.

The event was a sell-out according to the UFC.  As we reported on Friday morning, there were just scattered tickets available through the T-Mobile Arena.  It was announced that they were also selling standing room only tickets.

The numbers narrowly beat out UFC 200 (18,202) for attendance but UFC 200 had the bigger gate $10.7 million.

(h/t: MMA Junkie)

In comparison UFC 141, the last Friday night show in Vegas for the company did 13,793 and a $3.1 million for Lesnar-Overeem.

Payout Perspective:

Dana White indicated that he predicted the gate to be $4.5 million and the numbers did slightly better perhaps due to the standing room only seats.  The sell out on a Friday night before New Year’s Eve shows the star power of Ronda Rousey.

16 for 16: No. 2 PFA and MMAAA attempt to organize fighters

December 31, 2016

Two movements seeking to organize fighters launched this year as the discontent over pay and benefits grew.  Whether or not either one will be successful is yet to be determined.

In addition to the PFA and MMAAA which announced their intent to organize UFC fighters.  The Professional Fighters Association, led by Jeff Borris, seeks to organize UFC fighters to establish a union and a fighters’ association to collectively bargain with the UFC.  Borris, a baseball agent, made the announcement in August.  However, the PFA has experienced troubles in just 4 months of attempting to reach out to fighters.  Its labor lawyer, Lucas Middlebrook and one of its core supporters, UFC fighter Leslie Smith left PFA due to disclosures made about a fighter board that was released in an MMA Junkie article.  Smith believed those names were confidential.  Borris denies that he leaked the names.

Notably, a press release sent out on Friday by PFA noted that it would cease efforts if it was unable to obtain the requisite number of fighter signatures by April 2nd.

On November 30th, MMAAA announced its intent to organize fighters behind former Bellator head Bjorn Rebney.  The press conference included Georges St. Pierre, Tim Kennedy, Donald Cerrone, Cain Velasquez and T.J. Dillashaw.  The fighter presence gave credibility to the organization and they indicated that they would actively recruit more fighters to join.  Rebney indicated that they would intend to collectively bargain on behalf of the UFC fighters.  Curiously, he stated that MMAAA would focus on an association rather than a union.  There were no specifics given on how they would achieve its goals.

Of course, Rebney’s involvement did not sit well with many.  Fighters and managers spoke out about him and questioned whether he was the right person to be lending advice.

A week later, lawyers on behalf of the former UFC fighters in the antitrust lawsuit in Nevada sent a “cease and desist” letter to Rebney and MMAAA stating that they stop their attempt to organize fighters by December 9th.  No word on whether the parties have settled or legal action is pending.  The letter indicated that Rebney met with the lawyers on behalf of the plaintiffs at CAA offices in New York to discuss working together.  However, Rebney and his attorneys wanted to share in any recovery for use to repay investors and fund MMAAA.  They also wanted to participate in any settlement negotiations with the UFC.

MMAAA denied the allegations set forth in the letter and stating that the lawyers in the antitrust lawsuit were just interested in attorney fees and not the long term benefits of the fighters.

Notably, MMAFA, a long-time organization working for better conditions for fighters, have supported the litigation against the UFC.

Will there be any chance that there will be a collective effort for MMA fighters to organize?  At this point, it’s more likely that we’ll see a lawsuit between the class action plaintiffs’ attorneys and Rebney’s MMAAA before we see an organized effort by fighter to collectively bargain with the UFC or any organization.

16 for 16

3.  MMA finally legal in New York

4.  Legislation to expand Ali Act introduced

5.  UFC 200

6.  The year of Conor McGregor

7.  Bellator signings

8.  UFC pulls credentials for Helwani after breaking news

9.  Legal troubles for Jon Jones continues

10.  WSOF legal woes continues

11.  Ronda Rousey returns

12.  Alliance MMA goes public

13.  GSP declares himself a free agent

14.  Bellator 149

15.  CM Punk debuts

16.  Former Bellator employee sues company, organization sues back

UFC 207 bonus winners include Nunes, Garbrandt

December 30, 2016

Amanda Nunes, Cody Garbrandt, Dominick Cruz and Alex Garcia were the post-fight bonus winners at UFC 207.

The bonuses were announced post-fight.

Garbrandt and Cruz earned Fight of the Night for their 5-round battle.  Nunes and Garcia won Performance bonuses.  Garcia starched Mike Pyle in a vicious KO and Nunes probably ended the MMA career of Ronda Rousey with a first round stoppage.

Payout Perspective:

Hard to argue with these awards.  Certainly, the Garbrandt/Cruz fight was the best of the night while Garcia’s KO of Pyle was devastating as Pyle’s head bounced off the canvas.  And, for the second straight fight, Nunes took the soul of her opponent as she stopped Rousey.

Rousey to make $3M at UFC 207

December 30, 2016

Ronda Rousey will be making $3 million tonight as she returns to the Octagon at UFC 207.  The purse was disclosed by the Nevada Athletic Commission.

Brett Okamoto at ESPN reported a portion of the purses including the women’s bantamweight champion, Amanda Nunes.  She will be making $100,000 to show and $100,000-win bonus.  Okamoto also reports that Nunes will be receiving a PPV upside.

Rousey is not receiving a bonus if she wins.  She may also be receiving a PPV upside.

In addition, Dominick Cruz will be making $350,000 (no win bonus) in defending his bantamweight title.  Cody Garbrandt will make $200,000 (no win bonus).  T.J. Dillashaw will make $100,000 ($100,000 win bonus) and his opponent John Lineker will make $43,000 ($43,000 win bonus).

Payout Perspective:

The $3 million is ties her with Conor McGregor for the highest-reported pay for a UFC fighter. Nunes made $100,000 at UFC 200, but no win bonus guarantee.  Prior to that, she was made $28K/$28K at UFC 196.  Thus, a huge step-up in pay for Nunes this year. The $350K is the same amount Cruz made at UFC 199 when he beat Urijah Faber.  Garbrandt made $27K and $27K for his win against Takeya Mizugaki.

16 for 16: No. 3 New York finally passes law to legalize professional MMA in the state

December 30, 2016

After a long battle, the New York Assembly voted to legalize professional MMA in the state this past spring. It was signed into law by Governor Andrew Cuomo on April 14th.

Thus, on September 1st the sport became legal and regulated by the state.

Assembly votes shown in this picture.  Green is good.

After much lobbying, time and effort, the UFC opened up with the first major card at Madison Square Garden on November 12th.

Notably, the UFC 205 Countdown show included a part dedicated to showing Sheldon Silver indicted on corruption charges.  He is currently appealing his prison sentence.  It was one final shot at the individual that Dana White blamed for not allowing a vote on the bill for years.

The UFC debut did not disappoint as it enjoyed the richest gates in company history.

Not long after the initial joy of legalizing the sport, boxing promoters began to complain about the hefty tax needed to insure fighters for events.  A new insurance premium that would cover $1 million for each fighter on the card would be required for operation in New York.

In October, Promoter Lou DiBella canceled the remaining cards he was planning in the state due to the new requirement that has a $1 million minimum for each fighter in the event the fighter suffer a traumatic brain injury.  The UFC paid approximately $1,675 per fighter and approximately $44,000 overall.  It paid $40,200 for the Albany, New York show on December 9th.  This does not include the standard $50K medical and $50K accidental death insurance policies.

Of course, one has to wonder whether or not boxing lobbied against the MMA bill due to the new insurance requirement.  The new requirement does stem in part from a 2013 post-boxing incident in the state which left boxer Magomed Abdusalamov fighting for his life and a commission report found issues with the handling of the event.

New York set a tax of 8.5% on gross receipts in addition to other tax terms for MMA events.  Thus, the state collected approximately $1.5 million in taxes from UFC 205 according to the reported gate of $17.7 million.

Despite the hefty tax paid by the UFC, it reported the best merchandise sales ever for an event.

Look for the UFC to hold big events in the New York to offset the insurance and taxes it needs to pay.  Notwithstanding the cost, the final hurdle to legalize the sport in the state was a monumental hurdle the company overcame.  One might consider it a factor in the sale of the company.

16 for 16

4.  Legislation to expand Ali Act introduced

5.  UFC 200

6.  The year of Conor McGregor

7.  Bellator signings

8.  UFC pulls credentials for Helwani after breaking news

9.  Legal troubles for Jon Jones continues

10.  WSOF legal woes continues

11.  Ronda Rousey returns

12.  Alliance MMA goes public

13.  GSP declares himself a free agent

14.  Bellator 149

15.  CM Punk debuts

16.  Former Bellator employee sues company, organization sues back

Ticket demand for Rousey still there for UFC 207

December 30, 2016

The average resale price for a ticket for today’s UFC 207 is $348.  According to Nate Rattner at SeatGeek, it is nearly 3x hotter than a ticket to UFC 206 in Toronto (the average resale price was $124).

Per SeatGeek, here are the average resale prices for the top 5 UFC fights since 2010:

  • UFC 205: $1233
  • UFC 200: $1137
  • UFC 202: $929
  • UFC 194: $843
  • UFC 189: $741

In comparison, here are the prices for Ronda Rousey fights on the secondary market per SeatGeek.  Note that the last two UFC Rousey fights are not included here since SeatGeek does not track international events.

  • UFC 184: $263 (vs. Zingano at Staples Center)
  • UFC 175: $411 (vs. Davis, Weidman-Machida co-main)
  • UFC 170: $205 (vs. McMann at Mandalay Bay)
  • UFC 168: $545 (vs. Tate, Weidman-Silva II)
  • UFC 157: $186 (debut vs. Carmouche at Honda Center)

According to Rattner, the median price on the secondary market dropped 5% from $417 to $389.

In comparison, per Julia Litz at Vivid Seats, the minimum ticket price on the secondary market is $152 and the median ticket price is $525.

A look on Ticketmaster as of 8:00am PT, had scattered seats available with the get-in price being $605.

Per Kevin Iole, T-Mobile Arena will sell standing room tickets which will be the first time the arena has done it in its short history. Iole also reported on that Dana White told him that the gate looks to be about $4.5 million and roughly 19,000 in attendance.  Of course, with standing room sales, this could go up.

Payout Perspective:

The ticket sales show you that the Ronda Rousey return is a big seller despite her media blackout.  While the median price may have dipped a little on the secondary market, the news that they will sell standing room only tickets reflects the demand.  The resale market does indicate that the tickets are “affordable” for a Rousey fight.  This might be due to it being a Friday event, New Year’s Eve and not a strong co-main (although Cody-Cruz should be fun).  Still, the demand for Rousey is there for her return.

16 for 16: No. 4 Legislation to Amend Ali Act Introduced

December 29, 2016

In May 2016, Oklahoma Republican Congressman Markwayne Mullin introduced an expansion of the Muhammad Ali Boxing Reform Act to include MMA.  A Congressional Subcommittee hearing was conducted in December to discuss the issues related to mixed martial arts and how the introduced law would help fighters.

In addition to Congressman Mullin, it is co-sponsored by Democrats including Joseph P. Kennedy of Massachusetts and Mark Takano of California.  Overall, 5 Republicans and 2 Democrats have put their name to the bill.

The UFC opposes the expansion and hired a lobbying firm to influence legislators into voting down the amendment to the existing law.  Several op-eds have come out to oppose the law citing government overreach among other reasons.  It attempted to strong-arm the December hearing by indicating it would not participate if Randy Couture testified.  It backed off and Jeff Novitsky represented the UFC at the hearing.

The amendment to the Ali Act mirrors the current law with few changes but for the inclusion of combat sports.  Earlier this year, I outlined the issues with the expansion of the Ali Act which included a variety of cases where boxers sued promoters and came up with a loss.  Notably, there could have been more done with the Ali Act to ensure functionality to allow fighters an alternative to needing to file a lawsuit under the Act.

Currently, the Ali Act is in the House Education and the Workforce Subcommittee.  There is no word on whether there will be additional hearings on the subject or what the next move will be on the bill.

With the new UFC ownership and its previous relationship with the incoming administration in January I do not know how successful passage will be.  At this point, there seems to be a lot more work to do before it comes to a vote in the House.

16 for 16

5.  UFC 200

6.  The year of Conor McGregor

7.  Bellator signings

8.  UFC pulls credentials for Helwani after breaking news

9.  Legal troubles for Jon Jones continues

10.  WSOF legal woes continues

11.  Ronda Rousey returns

12.  Alliance MMA goes public

13.  GSP declares himself a free agent

14.  Bellator 149

15.  CM Punk debuts

16.  Former Bellator employee sues company, organization sues back

16 for 16: No. 5 UFC 200

December 28, 2016

Ronda Rousey and Conor McGregor were thought to be shoe-ins for this event at one point.  But, a set of circumstances had Miesha Tate and Amanda Nunes as the headliners for the biggest event in company history.

Rousey was not ready to come back to the Octagon for UFC 200 due to scheduling and her want to take time away from the sport.  McGregor lost at a power play with the Fertittas as he attempted to broker less media for the event.  Instead, he claimed to have retired and the UFC moved to Jon Jones versus Daniel Cormier as the headliner.  Also, Brock Lesnar returned to the Octagon.

This all sounded good as there would be two title fights plus Brock Lesnar.

The only problem was that a Jon Jones out of competition USADA test was flagged just days before the event and Jones was provisionally suspended due to the test.  In a hastily put together press conference, Jones proclaimed his innocence despite the failed drug test.

Dana White was upset as Jones’ drug test failure caused the company extra expense to repackage UFC 200 and scramble to find an opponent for Daniel Cormier.  Embedded caught up with White when he broke the news to Cormier and the light heavyweight champ was devastated.  White got Anderson Silva to take the fight without any preparation. Maybe a couple years ago, Silva would have drawn interest, but he was more of an afterthought and did not do much in his fight with Cormier.

Lesnar was impressive against Mark Hunt and even showed some humanity in his post-fight speech, unlike his rant 100 UFCs ago.  Of course, this did not have a happy ending as Lesnar USADA tests were flagged and the only reason he was able to compete was that the results were not made known until after the fight.  It brought up the issue of USADA allowing a waiver to Lesnar of being a tested UFC athlete.

Lesnar made $2.5 million for his fight against Hunt.  After news of Lesnar’s drug test failure, Hunt was outraged and demanded a portion of Lesnar’s purse.  Hunt made $700,000 at UFC 200.

The event drew criticism as there were reports of a lot of empty seats for the prelims and then people leaving before Tate-Nunes.

UFC 200 was the debut for the company at the T-Mobile Arena in Las Vegas and was the culmination of International Fight Week.  Despite the pre-event issues, the attendance and gate were record-setting making the event the largest MMA gate in Nevada history. It drew 15,154 for a gate of $10,746,248.

It was a landmark event for the company as it had produced 200 PPV events.  An unthinkable achievement several years prior.  And as we now know the big announcement didn’t occur until Sunday after the fights.

UFC 206 replay on Christmas Eve draw 4.72M viewer average

December 28, 2016

The final Live + SD ratings for the replay of UFC on Fox Saturday night drew 4.72 million viewers per Sports TV Ratings.

Monday TV By Numbers reported the huge ratings win for the UFC on Christmas Eve.  Only UFC 1 drew more viewers.

Payout Perspective:

Great ratings as we see a new tradition begin.  The UFC on Christmas Eve.  Another piece of good fortune with the large viewer audience was the promotion for this Friday’s UFC 207.  As many point out, cable companies have been advertising the PPV being this Saturday, not Friday.  So, at least the promotion during the 206 replay may have helped.

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