MPO Year in Review: No. 8 Bellator among the parties pulled into UFC Antitrust Lawsuit

December 28, 2017

Bellator MMA found itself a part of the UFC Antitrust lawsuit as the two companies were opposing sides in a discovery dispute.  Bellator sued the UFC in Los Angeles, but the Court determined that the dispute should occur in the Vegas court handling the case between former fighters and the UFC.

Prior to the filing of the lawsuit in February, Bellator claimed that it had “produced in excess of two thousand pages of responsive documents.”  Yet, the UFC argued that it needed more which included payouts for Bellator fighters, contracts and financial information.

Bellator Motion to Quash Subpoena by JASONCRUZ206 on Scribd

Zuffa Opposition to Bellator Motion to Quash by JASONCRUZ206 on Scribd

The Vegas court issued a ruling in June.  Some of the findings are below:

Bellator was ordered to produce:

  1. A random sample of at least 20 percent of fighters under contract with Bellator between January 1, 2010 and the present. This will include any “amendments, modifications, side letters, or extensions that may exist with respect to any contract that is produced…”
  2. Bellator will produced “Anonymized contracts” with a unique identifier although identifying information “may be redacted.”
  3. The contracts “shall include the fighter’s gender, weight class, number of fights during term of agreements and any compensation to be paid.
  4. The Court limited and modified Bellator’s request for production to the following
    1. A list of all MMA events it promoted or co-promoted from January 1, 2010 through the present.
    2. An unaudited profit and loss statement through the quarter ending March 31, 2017 which will include Revenue, Expenses, Operating Income and Net Income.

In addition, Matt Hume, had a similar discovery issue in which the Plaintiffs sought information from OneFC (Hume is an executive for the company).  A lawsuit in Washington state ensued in which a motion to compel the documents of Hume in July included a request for attorney fees in the amount of $21,000.  Similar to the Bellator lawsuit, the federal magistrate dealing with the dispute decided to kick the case to Vegas for the trial court to handle.  The Plaintiffs demanded certain documents from Hume’s involvement with OneFC as well as to take his deposition.

Motion to Compel Depo of Matt Hume by JASONCRUZ206 on Scribd

Plaintiffs’ Opposition to Motion to Quash Hume Subpoena by JASONCRUZ206 on Scribd

The Washington state court decided that it did not want to intervene in the lawsuit and kicked the case to Vegas.

These were not the only two discovery issues in this case.  Zinkin Entertainment was ordered to produce documents related to the representation of its fighters.  Top Rank also came to terms with the UFC in the lawsuit over discovery.

Zuffa was ordered to hand over a study on fighter pay.

In addition, Zuffa filed a lawsuit to dismiss the claims of plaintiff Nathan Quarry due to statute of limitations.  The Court has yet to issue an order on the motion.

The UFC Antitrust lawsuit was a “discovery year” for the case as depositions were taken and fact discovery took over most of the year.  As expected, there were fights over the discovery of documents which seemed to have resolved.  In 2018, we will see the expert discovery phase start as the wheels of justice move slow on the civil side.

MPO Year in Review: 9. UFC Performance Institute opens

December 27, 2017

The UFC Performance Institute unveiled its new 15-acre, 184,000-square foot campus in Las Vegas this year.  The institute serves as an upgrade to MMA training offering the latest in technology to help the company’s contracted fighters.

The Performance Institute serves as a facility for training for many of the UFC fighters.  Conor McGregor took advantage of the facility as he prepared for his boxing match with Floyd Mayweather.  The UFC estimates 30% of its athletes have taken advantage of the Performance Institute.

The Institute has everything that a fighter needs for nutrition, health and injury rehabilitation and prevention.

One of the reasons for the Performance Institute is to help fighters train and train without getting injured.  In the end, the UFC has a vested interest in ensuring that fighters are healthy and are able to cut weight wisely.  Of course, its easier said than done, but the investment in this state of the art facility should help with the health of the fighter.  It also helps the UFC monitor the health of athletes.

Through the Performance Institute the UFC has forged partnerships with a couple surprising companies.  Endeavor (WME-IMG), the UFC’s owners, secured a sponsorship with New York’s Hospital for Special Surgery and Performance Inspired as “official sports supplement” of the UFC.  It also partnered with Body Armor to become the “official sports drink” of the UFC.  Recently, Trifecta Nutrition became an official UFC sponsor as well and will likely be a part of the Performance Institute’s nutrition menu.

While it was a big investment, the Performance Institute has opened up other areas of revenue through health and wellness that may not have occurred if it did not attempt to build the facility.

MPO Year in Review: 10. Bellator continues to sign former UFC stars

December 27, 2017

Another year, another group of UFC fighters are testing the other league with former Zuffa indy contractors heading over to the Viacom-owned company.

Michael McDonald, Gegard Mousasi, Frank Mir, Roy Nelson, Valerie Letourneau and Ryan Bader all signed with Bellator in 2017.  Rory MacDonald made his promotional debut for Bellator in May with a successful victory over Paul Daley.

The “Red King” might be the only one from the above group that the UFC may have wanted to hold onto.  MacDonald’s defection to Bellator was the best acquisition thus far (excluding Tito Ortiz) from the UFC fighters testing free agency waters.  Mousasi may be another although it seemed as though the UFC could not capitalize on his international appeal.

For Bellator, the acquisitions help builds up their roster.  Even though most of the fighters the UFC let go are past their prime and/or deemed not entertaining, the UFC brand has pull with the casual fans.  We shall see if Scott Coker will make a push for more former UFC fighters in 2018.  For the fighters, it provides a fresh start and a chance to capitalize on earning opportunities (i.e., sponsors).

UFC 218 replay on FS1 Christmas Eve draws 357,000 viewers

December 27, 2017

The Christmas Eve replay of UFC 218 drew 357,000 viewers per Nielsen via ShowBuzz Daily.  The event featured the main card of the PPV event earlier this month.

Last year’s Christmas Eve replay on Fox drew astounding 4.72 million viewers.  This year, the special presentation aired on FS1 despite the fact that the NFL games on Sunday may have brought the replay similar ratings to last year.

However, the 90-minute presentation on FS1 drew 0.13 in the A18-49 demo in addition to the 357,000 viewers.  The telecast featured Max Holloway’s domination of Jose Aldo as well as Francis Ngannou’s KO of Alistair Overeem.

Payout Perspective:

Maybe it was because it was Sunday night and on FS1 that we saw a large decrease over last year’s surprising ratings for the December replay.  It would be nice to see this Christmas Eve replay to return to the Fox network although we have seen one of the worst years for the UFC on Fox in terms of ratings.

MPO Year in Review – WSOF repackages as PFL

December 26, 2017

The World Series of Fighting went under new management and repackaged itself as the Professional Fighter’s League.

The league, which is set to roll out in 2018, promises steady pay and fights for its athletes which will see them compete for a $1 million payoff.

Via our April post:

The inaugural season will run for 10 months and will feature seven different weight classes.  Similar to league play, fighters will compete in three regular season fights with the best records moving to a playoff and then a championship round.  There will be $10 million in prize money with $1 million going to each winner of the 7 divisions.  The remaining 3 divisions will go to regular season and playoff competitors.

The Washington Post reported that the PFL’s new investors included Russ Ramsey, an investment banker and hedge fund manager along with venture capitalists Donn Davis and Mark Leschly.  Sports franchise owner Ted Leonsis is also an investor.  Leonsis owns the Washington Capitals, Mystics and Wizards.  Also, members of the Lerner family who own the Washington Nationals are investors.

The company’s first event took place this past July.  It also held an event in Everett, Washington and also a special Thursday night event in D.C.  in November.  The event drew 238,000 unique views in the online-only event.

Last spring, the company was hoping to secure a television deal but there has yet to be a movement on that area.

Recently, a PFL-signed athlete threatened to sue the company after he learned he would not be part of the upcoming season.

No word on the status of the company and its 2018 events for the PFL which is a little concerning because of the lack of promotion.  If the PFL is looking to make a splash in 2018, we might not see the promotion until the spring of 2018.

MPO Year in Review – South Korean court hands down sentence to former UFC WW for role in attempted fight fixing

December 26, 2017

Former UFC Fighter Tae Hyun Bang was sentenced to 10 months for his part in a fight fixing scheme that took place at UFC Fight Night 79 in November 2015.

The scheme had Bang taking money from an organized group to throw a fight against Leo Kuntz.  Bang was a favorite in the fight but after a vast swing in odds, the UFC put both fighters on notice of any improprieties prior to the fight.

According to the Seoul Central District Court, Bang was given $92,160 in U.S. dollars for his role.  The brokers who gave him the money were given jail sentences as well.

According to the Court, match fixing damages the credibility of the sport and had a bad effect on the country’s credibility.  Bang took the bribe and then bet roughly half of the money he received on Kuntz.  He was to lose the first two rounds of their three-round bout.  Thus, ensuing victory for Kuntz.

Bang ended up winning the fight via split decision. He had claimed he had not known of any scheme to fix the fight but received death threats due to his win.

While the fight fixing issue did not receive a lot of headlines in North America, fight fixing is a serious issue and could debilitate the sport.  The UFC advertises odds and uses them all the time when setting up storylines for fights.  The need to ensure credibility of the sport is vital.  There has been no huge gambling issues since this incident but with fighters on the prelim cards making small purse amounts, the temptation to take money is out there.  The company must still keep an eye out for those that might influence fighters to fix a fight.

MPO Year in Review: Bellator NYC does not deliver

December 25, 2017

It was Bellator MMA’s big debut in New York City as it returned to PPV with the long-awaited grudge match between Chael Sonnen and Wanderlei Silva.  Scott Coker stated that the mid-200,000 (buys) would be respectable.

However, the PPV card disappointed with 95,000 buys.

The event also featured Fedor Emelianenko as he faced Matt Mitrione.

The PPV was split with fights, dubbed as “Bellator 180” airing on 2 different networks and featuring Ryan Bader against Phil Davis.  The MSG event drew 12,133 with a gate of $1,630,314.  The television portion aired on Spike TV and Country Music Television drawing a combined 901,000 viewers.

According to an ESPN story, Viacom’s investment in the event was “20 to 30 times more” than anything put into Coker’s previous “tent pole” events.  The investment came with expectations and based on the PPV numbers did not deliver.

Bellator’s first try at PPV garnered 100,000 buys in 2014.  While the box office did well, the PPV numbers had to be a disappointment considering the belief that the company’s formula of using former UFC stars to headline a Bellator event drew big numbers (e.g., Ortiz-Bonnar).  But, the company foray into PPV still has to be fine tuned as the first two tries have not been good.

MPO Year in Review – Alliance MMA sued by investors

December 24, 2017

Alliance MMA, the publicly traded MMA organization that launched in late 2016, was sued by shareholders citing violations of securities law for alleged misrepresentation of information.

A class action suit is sought and there were efforts by multiple companies to seek out aggrieved shareholders.  Two lawsuits were filed in New York although one was later dismissed under the belief that the lawsuit originally filed would serve as the lawsuit that potential plaintiffs could join as part of a class action.

The lawsuit arises out of an amendment made by the company which trades on the NASDAQ.  In an 8-K filing made by the company last month, it stated that financial statements previously made for the nine months ended September 30, 2016 included in the Company’s Form 10-Q, three months ending June 30, 2016 and six months ending June 30, 2016 could no longer be relied upon because of an error in recognizing as compensation transfers of common stock by an affiliate of the Company to “individuals who were at the time of transfer, or subsequently became, officers, directors or consultants of the Company.”

Alliance MMA CEO, Paul Danner addressed the lawsuit. It has retained a law firm that will likely bring a motion to dismiss the lawsuit.

Alliance MMA lawsuit by JASONCRUZ206 on Scribd

The basic issue was an apparent error with the transfer of stock and the need to indicate the issue.  This sparked the lawsuit.

Regardless of the lawsuit, a concern for shareholders is that the stock price has tumbled since its initial launch.  The 52-week high as of this writing is $3.99 with its low at $0.85.  At closing on Friday, December 22nd, it traded at $1.20 per share.  The stock price is down approximately 65% from its IPO price.

There is also the issue raised as to whether Alliance MMA overstated its operating margin.  Alliance MMA denies it did but there is some speculation.

The company continued growth this year acquiring several regional promotions for its stable.  We shall see what 2018 brings for the company.

UFC 218 on FS1 Christmas Eve

December 24, 2017

UFC 218 will replay on Christmas Eve on FS1.  The main event featured Max Holloway successfully defending his Featherweight title against Jose Aldo.

The event also featured the brutal KO of Alistair Overeem by Heavyweight contender Francis Ngannou and Eddie Alvarez and Justin Gaethje.

Last year, Fox replayed UFC 206 on Christmas Eve highlighting certain entertaining fights.  The results drew 4.7 million viewers.

Payout Perspective:

Perhaps due to NFL Football, Fox is not airing UFC 218 on the network.  We will see if the UFC can capitalize on last year’s Christmas Eve success.  I would think we might see a downtick from last year’s 4.7 million since its on FS1 but I would think you may see a nice viewership rating.

MPO year in review – UFC takes out loan, cashes out Fertittas

December 23, 2017

In April, the UFC sought to raise $100 million in incremental loans to complete its buyout of the previous owners.  It appears that the UFC received those loans as the Fertittas cashed out the remaining shares they had left in the company in August.

KKR Capital was leading the effort in obtaining the loans for the company.  According to an investor presentation, with the $100 million loan, the UFC will be at 5.8 times whereas the first lien net leverage would be 4.8 times.

The UFC is marketing the company at $320M EBITDA which is an increase from an estimated $226M EBITDA from 2016 and $192M from 2015.  The numbers come from an investor presentation although there is skepticism about the vast jump from $226M to $320M.  Additionally, it is said that the company’s cuts once it took over in July has achieved cost savings of $10 million and it is projected to save $55 million by the end of 2017.

The UFC is seeking to raise $100 million in incremental loans to repay the previous owners (i.e. Frank and Lorenzo Fertitta and Flash Entertainment) in the case of a potential earnings-based payout according to a report from Reuters.

The payouts of $175M and $75M are due in the event of EBITDA milestones.  According to the Reuters report, the first payout could be due in the latter part of 2017.

KKR Capital, which took over from Goldman Sachs in January as the lead financier, is leading the process for this new loan.  Federal regulators took issue with Goldman Sachs due to its add-backs in projecting the company’s EBITDA.  KKR is not subject to the federal leverage lending guidance.

According to an investor presentation, with the addition of the $100 million loan, the UFC will be at 5.8 times (debt leverage) whereas the first lien net leverage will be 4.8 times.

The UFC is marketing the company at $320M EBITDA which is an increase from an estimated $226M EBITDA from 2016 and $192M from 2015.  The numbers come from an investor presentation although there is skepticism about the vast jump from $226M to $320M.  Additionally, it is said that the company’s cuts once it took over in July has achieved cost savings of $10 million and it is projected to save $55 million by the end of 2017.

In August 2017, Forbes reported that the Fertittas sold their remaining stake in the company. They received roughly a 26% premium over last year’s transaction.  The company acquired for $4.2 Billion dollars in July 2016 was valued at $5 Billion over a year later.

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