What should the UFC expect in negotiating the next media deal?

February 22, 2018

Earlier this week, Deadline.com posted a story asking whether the UFC could still attain a TV deal to their liking despite less-than-stellar ratings.

Notably, in the article it reveals that UFC Fight Pass has 400,000 subscribers for its digital service.  Previously, the number has never been posted publicly.  The article notes that prior to Endeavor’s purchase it had 330,000 subscribers.  Thus, for whatever reason you might attribute, it has increased since the new ownership took over.

The UFC indicated last spring that it would be looking for an annual TV rights fee of $450 million per year which is a huge increase from the $165 million per year average of its current 7-year deal.  Reports have Fox offering $200 million per year to renew with the network.  This would be significantly lower than anticipated by the company.

But, the overarching issue with the UFC is that due to the number of cards it produces, ratings are decreasing.  Gone are the days of anticipating a big PPV event as there are ones every month (now at an increase of $65 per event).  If PPVs are not to you liking, the UFC has events almost every weekend on FS1 and an occasional event on UFC Fight Pass.  The glut of events are necessary to fulfill its obligations with its network partners and fighters but the lack of stars is a glaring issue.

Gone are the Brock Lesnar, Ronda Rousey or Conor McGregor.  Even the current champions such as Stipe Miocic and Daniel Cormier do not garner PPV buys as a Conor McGregor PPV.  Notably, this past Sunday’s UFC Fight Night peaked halfway through the telecast for Sage Northcutt.  The chiseled 21-year-old is a polarizing figure in the UFC as he’s commanded pay higher than his peers despite not being as skilled.  But, clearly, his look and “aw schucks” persona attracts a casual fan base that other fighters do not.

Despite the ratings stagnation, Deadline.com, notes that this should not be confused with money issues:

As with the NFL or other sports leagues whose ratings are faltering, the linear TV trajectory should not be confused with overall financial performance. Endeavor has a more global footprint than the Las Vegas-based Fertittas and has made international deals and sought to boost licensing, sponsorship and distribution prospects. Modelo came aboard as a sponsor and Monster Energy renewed its commitment.

Yet, with the announcement by Dana White that he is starting Zuffa Boxing, the question of whether the UFC has peaked is a natural question.  While boxing was thought to be dead several years ago, it has regained a foothold.  Recently, Brin-Jonathan Butler wrote a piece indicating that its boxing that may save the UFC’s doldrums as opposed to their positions several years ago.

Via Deadline.com

“Everyone now knows that the bloom is off the rose,” a major sports rights stakeholder told Deadline. “It has become a lesser, watered-down product and there is an array of other options for viewers, especially the core UFC demo.”

The question is how will the UFC adapt to the changing landscape.  While it still draws in a healthy share of the young male demo, that demo that started with the company in the 2000s is getting older.  Butler cites a Sports Business Journal article from last June which shows that the UFC has had the biggest change in viewership in the median age of its base between 2006-2016.  The increase saw it go from 34 years of age to 49 years of age.  Remember, median is not the average age.  Boxing’s median age is also 49.

Can it roll with the punches like boxing?

One of the suggestions made in the article is to evaluate a possible digital deal even without a network tie.  Twitter, Amazon, YouTube and Yahoo have been linked to the streaming of sporting events.  With the success of the NFL streaming on a digital platform, the possibility for the UFC to go strictly digital is out there.  But, as pointed out in the article, this might seem as a slight for the company and a demotion from the deals secured by other major sports organizations.  One question posed by a Syracuse professor and former ESPN exec is if Fox re-ups with the UFC, can it “repackage the package.”  This would infer that distribution would occur differently than it presently is with the current TV package.

With Fox securing Thursday Night Football earlier this year for more than $3 billion, one has to wonder if there’s anything left in the budget for the UFC.  There is Turner Network Television, but with an antitrust case ongoing over its merger with Time Warner, any deal may have to wait.  NBC Universal might be an option and so might ESPN.  With a new streaming service rolling out later this year, it might be an option.  But, its unlikely the UFC  will want to be OTT only and will it need to envelope its current digital network into a deal.

Payout Perspective:

Maybe Zuffa was projecting the worth of its worth or wishful thinking but it would seem as though $450 million deal it had touted in an Sports Business Journal feature this past November may not come to fruition.  It’s clear that the traction for a deal is waning considering its ratings and meager PPV buy rates for 2017. Certainly, Mayweather-McGregor was stellar, but if you look at the pure UFC product, it took a step back in ratings and PPVs.  Of course, they are still making money and with the sponsorship deals and popularity overseas there is still room to grow.  But, will networks see the same value?

Garcia-Rios on Showtime Saturday peaks with 558,000 viewers

February 21, 2018

The return of Danny Garcia to the ring saw him draw 516,000 viewers on Showtime Saturday night according to Nielsen.  His fight against Brandon Rios peaked at 558,000 viewers.

Garcia KO’d Rios in the 9th round.  It drew 0.18 in the A18-49 demo per Nielsen.  It was the main event of a 3-fight telecast on the network.

The first fight of the night saw Yordenis Ugas stop Ray Robinson in the 7th round.  The event drew 314,000 viewers and peaked with 487,000.  It drew 0.11 in the A18-49 demo.  The second fight saw David Benavidez defend his WBC super middleweight title against Ronald Gavril.  The fight was not too exciting although it drew 458,000 viewers and peaked with 489,000.  It drew 0.17 in the A18-49 demo.

Payout Perspective:

The ratings were not the best especially with the return of previously undefeated Garcia in the main event.  Many expected an easy fight for Garcia which was the result.  The event went up against NBA All-Star Saturday night and the Winter Olympics.  It also occurred after the PBC on Fox which mustered over 1 million viewers on the network.

UFC Fight Night Austin draws 893,000 viewers on FS1; Prelims draw 675,000

February 21, 2018

UFC Fight Night Austin on Sunday night drew 893,000 viewers according to Nielsen. The prelims which preceded the main card drew 675,000 viewers on FS1.

On Fox Sports Go and FOX Now the main card telecast had an average minute audience of 13,959. Peak viewership for UFC Fight Night was 1,078,000 viewers between 9:15-9:30pm which was for the Sage Northcutt fight.

The main event for the UFC Fight Night telecast was Donald Cerrone versus Yancy Medeiros with Cerrone getting the first round stoppage.

The main card drew 0.46 in the A18-49 demo. The prelims on FS1 drew 0.30 in the A18-49 demo.

Notably, the weigh-ins on Saturday afternoon on FS1 drew 261,000 viewers making it the 4th most-watched weigh-ins in FS1 history.

The pre-fight show on FS1 drew 131,000 viewers while the post-fight show drew 202,000 viewers.

Payout Perspective:

Hard not to ignore that the main card peaked during Sage Northcutt’s controversial victory over Thibalt Gouti. Northcutt is someone that the casual fan wants to watch. Even with a pretty interesting main event in Cerrone-Medeiros, many tuned in to watch Sage and then turned the channel. The ratings are good considering it went up against the NBA All-Star game and the Winter Olympics.

Bellator 194 draws 476,000 viewers on Paramount

February 20, 2018

Bellator MMA Live 194 on the Paramount Network drew 476,000 viewers according to Nielsen via ShowBuzz Daily.

The event featured the second fight in the Bellator MMA World Grand Prix with Matt Mitrione defeating Roy Nelson.  The telecast also featured Patricky Friere as he stopped Derek Campos in the first round.

Bellator
Event Rating DVR + 3 Peak
192 770,000 1,000,000 1,500,000
193 470,000 534,000 715,000
194 476,000

Payout Perspective:

The event did slightly better than last month’s Bellator 193 but is below of 2017’s average of 614,000 viewers.  Through just 3 events this year, the average is down to 572,000 viewers.  One would have suspected this event doing better than 476,000 viewers since it featured the Heavyweight Grand Prix.   But, it was going up against the Winter Olympics so that may have come into play.

 

 

In UFC Antitrust lawsuit, plaintiffs’ economic expert report compares UFC to pro leagues

February 20, 2018

MMA Payout takes a look at the 158-page expert report provided by plaintiffs’ economic expert Andrew Zimbalist.  Its Dr. Zimbalist’s opinion that Zuffa is attempting to exclude from the case at hand as they take issue with his calculation of damages.

As with most of the filings containing sensitive information about Zuffa contract and financial information, there are parts of the report that include heavy redactions.

In addition to a review of the NBA, NHL, NFL and MLB, Dr. Zimbalist reviews the history of boxing’s payment scale.  He identifies “at least five different boxing promoters who are prominent enough to promote major championship fights each year, and probably more than ten.”

In estimating damages, Dr. Zimbalist explained his methodology:

“For each sport that I use as a benchmark, I apply the athlete compensation share of revenue to the reported Zuffa bout revenues to arrive at what Zuffa’s fighters would have been paid if they received the same share as the athletes in these other sports where competitive labor markets prevail.  I then take the mean of these but-for compensation levels from the different sports and compare it to the total event-related fighter compensation paid out of Zuffa’s athletes.  The difference is the basis for my estimate of the total amount members of the bout class were underpaid due to the challenged conduct.”

In the next paragraph Dr. Zimbalist gives his explanation for using player share rather than the actual pay levels.  He believes that it would control the state of the industry and differences between the popularity and thus demand for each benchmark as compared to MMA.

Dr. Zimbalist includes Golden Boy Boxing Revenues and Expenses in his report as a comparison to MMA.  The information was disclosed in the Al Haymon-Golden Boy antitrust lawsuit.

Notably, the Fighter share of revenue was over 55% of the total revenue in 2014, 2015, and 2016.

He also provides a table reflecting share of revenue in the NFL and MLB.

Dr. Zimbalist includes a quote Zuffa LLC’s then CEO and co-owner Lorenzo Fertitta gave to ESPN’s Outside the Lines in a story on fighter pay in 2012.  Fertitta stated fighter pay was “not far off what the other sports leagues pay as a percentage of revenue.”  When informed that the players share in the big 4 leagues was around 50 percent, Fertitta agreed that the UFC’s fighter pay was comparable.  Dr. Zimbalist notes that this was an untruth.

He then gives his estimate and damages calculations.

Below, I calculate annual damages to the bout class by comparing UFC athlete share of event-based revenue to the average athlete share of revenue in the selected benchmarks discussed above: the NFL, MLB, NBA, NHL, and boxing. For those leagues whose competitive seasons nm between two calendar years, the year identified is the fiscal year. Hence, the 2014-15 NBA season corresponds to fiscal year 2015 and is represented as 2015. My source for Zuffa’s revenues and fighter compensation are Zuffa’s annual financial statements.

 

We don’t exactly know his damage estimate since it is redacted from the public report.  Dr. Zimbalist did base UFC fighter pay and revenues based on Zuffa annual financial statements (likely) provided in discovery.

Payout Perspective:

While Dr. Zimbalist believes his calculations are conservative, it’s clear that Zuffa thinks otherwise.  The “yardstick method” is at issue here as Dr. Zimbalist comes to the conclusion that the UFC used anticompetitive conduct which would lead to anticompetitive effects for a firm with monopoly or monopsony power.  He also believes that the rationale given for the conduct are not procompetitive are invalid, do not theoretically apply to MMA and there less restrictive conduct in its labor market.  Utilizing the “Big 4” sports and boxing to come up with a comparable estimation for damages is contested by Zuffa here as they make the assertion that the 4 sports leagues have unions which facilitate athlete compensation.  But, UFC fighters do not.  The data used from boxing is based on 2.5 years from Golden Boy Boxing so the argument there is that the analysis is incomplete and from a short span of time.

MMA Payout will have more on this and Dr. Zimbalist’s rebuttal report in the near future.

UFC attempts to exclude expert, Plaintiffs file for class certification in latest antitrust lawsuit filings

February 18, 2018

New filings in the UFC antitrust case filed Friday included plaintiffs’ request for class certification and Zuffa seeking to exclude the testimony of plaintiffs’ expert Andrew Zimbalist.  As is customary in litigation, a glut of pages of legal filings were made on a Friday, just in time for the three day President’s Day weekend for lawyers for the UFC and plaintiffs to sift through.

Both filings were anticipated.  Plaintiffs’ have been angling toward certification.  Zuffa’s motion to exclude plaintiffs’ expert is a strategic motion to discard or curb the testimony of Zimbalist based on his reports.

Zuffa’s Motion to Exclude plaintiffs’ expert economist Andrew Zimbalist is based on his expert reports and deposition testimony.  The basis for the request to exclude Dr. Zimbalist is that his method of coming up with his conclusion for plaintiffs’ damages is not premised upon a general accepted method of practice.  Zuffa categorizes Dr. Zimbalist’s reports and testimony as “junk science” that does not meet the Federal Rules of Evidence reliability standards. The “Daubert test” which is premised upon a court case, enables the court to perform a “gatekeeping” function to ensure that expert testimony admitted “both rests on a reliable foundation and is relevant to the task at hand.”

Zuffa argues that Dr. Zimbalist’s claim that he utilizes the “yardstick method” when assessing damages is incorrect.  “Instead, he compared Zuffa to other firms chosen based on his selecting comparison firms that had as much in common as possible.”  Zuffa takes issue with Dr. Zimbalist using a “damages method” with no standards.  The claim is that Zimbalist chose to compare UFC fighter pay with those of the NBA, NFL, NHL, MLB based on his previous work within those sports.  Zuffa describes Dr. Zimbalist’s testimony as one which lack standards without following the generally accepted “yardstick method” of assessing damages in comparing a market or firm similar to the plaintiffs’ situation for the impact of antitrust violations.  The issue taken with Dr. Zimbalist’s method and the accepted “yardstick method” is the comparability of markets.  Zuffa argues that Dr. Zimbalist did not make a comparison of the MMA market with a comparable other market.  Dr. Zimbalist argues that he used a model that had “as much in common as possible.”  But, as outlined by its motion, this does not follow the “yardstick method.”  Zuffa also claims that Dr. Zimbalist created a “selection bias” as he essentially used comparators he felt comfortable with to get to the desired result as opposed to determining whether the selection were the most appropriate.

If the Court agrees with Zuffa, this would deal a big blow to the plaintiffs’ case as one of its main experts would not be able to testify at trial and any evidence produced would not be used to prove damages as plaintiffs had planned.

Plaintiffs’ motion for class certification is a perfunctory motion necessary to attain class action status.  The requirements for the court to grant class status is based on four primary elements (which most attorneys know for studying the bar exam):  1) numerosity, 2) commonality, 3) typicality, and 4) adequacy.

The first element is the number of potential class member affected by the issues claimed in the lawsuit.  The second element is based on the common questions of law or fact in the lawsuit.  Third, the claims or defendants of the class representatives are typical of those of the class.  Finally, the class representatives (i.e., the lawyers involved in the current lawsuit) will adequately protect the interests of the class.

The plaintiffs move for an order certifying a Bout Class and an Identity Class.  The Bout Class encompasses all persons who competed in one or more pro UFC-promoted MMA bouts in the US between December 16, 2010 and June 30, 2017.  The Identity Class is based on each and every UFC Fighter whose Identity was expropriated or exploited by the UFC from December 16, 2010 and June 30, 2017.

In its motion, plaintiffs reiterate the “Scheme” outlined in their lawsuit.  The Scheme used by Zuffa in which it established and maintain market dominance in which it allows payment of fighters less than it would be in a more competitive market.  The three categories of the Scheme include its “long-term exclusive” “Contracts,” the “Coercion” of fighters to re-sign contracts, making them perpetual and the “Acquisitions” of other MMA promotions.

The motion for class certification is heavily-redacted especially when the motion relates to UFC contracts.  Looking at the class certification elements, its clear that there are many UFC fighters that may be affected by this lawsuit.  The overall argument for class certification is that too many people have been affected by the subject cause of actions that separate lawsuits would not make sense.  Secondly, the plaintiffs argue that there are common issues of law involved including:  1) whether Zuffa violated antitrust laws; 2) whether Zuffa possessed market power; 3) whether Zuffa’s Scheme had anti-competitive effects; 4) what injunctive relief is appropriate; and 5) the aggregate amount of damages caused by Zuffa’s unlawful Scheme.

Payout Perspective:

Both of these motions were likely to happen and we will see how the Court decides each.  With respect to the Motion to Exclude, the arguments asserted by Zuffa are valid but it’s the opposing party’s job to poke holes in the expert’s testimony.  The best-case scenario for Zuffa is that the testimony is limited in some way on the damages estimate.  It would be highly unlikely that the Court would exclude a witness in their entirety.  Dr. Zimbalist is an experienced expert and is used to attacks on his report and more importantly, knows how to craft a report.  Additionally, the reports are done in concert with plaintiffs’ attorneys so, overall, plaintiffs agree to what is being opined in the report.

More importantly for plaintiffs, class certification is a big deal for the plaintiffs and plaintiffs’ lawyers.  If the Court certifies class status for this lawsuit, then you will see more fighters joining the lawsuit and plaintiffs’ attorneys could collect a windfall if they are eventually successful at the end of the case either via settlement or verdict.

MMA Payout will keep you posted.

UFC Fight Night 126 attendance, gate and bonuses

February 18, 2018

UFC Fight Night 126 was a fast-paced evening with early-stoppage and exciting action Sunday night.  Derrick Lewis led the list of bonus winners with his KO of Marcin Tybura.

Lewis, Curtis Millender, Brandon Davis and Steven Petersen earned the $50,000 bonuses for the night.  Millender earned the other Performance Bonus while Davis and Petersen earned Fight of the Night.

Despite being held on the ground in the previous round, Lewis used his power to KO Tybura in the third round for the stoppage.  Millender stopped Thiago Alves with stunning left knee to Alves’ head which put him on the canvas without a need for Millender to follow him to the ground.  Davis earned a unanimous decision over Petersen.

The event took place at the Frank Erwin Center in Austin, Texas.  The event drew 10,502 for a live gate of $794,350.  Out of 3 visits to Austin, Texas, it had the highest gate and attendance.

The UFC announced the attendance, bonus and gate post-event.

Payout Perspective:

The event saw Donald Cerrone stop Yancy Medeiros in the first round which highlighted a night with 8 of the 12 fights ending in stoppages and 6 of those ending in the first round.  It was surprising that Cerrone did not receive a Performance Bonus although Lewis and Millender had impressive stoppages.  There also a variety of other fights to choose from for the honor.

PBC on Fox draws 1.06M viewers opposite Winter Olympics

February 18, 2018

PBC on Fox drew 1.06M viewers on Fox Saturday night according to Television By Numvers.  The event featured Victor Ortiz taking on Devon Alexander in a fight that ended in a draw.

The event drew a 0.3 rating in the A18-49 demo and a 1 share.  The event came in 4th in its overall timeslot with the Winter Olympics drawing over 13.62 million viewers for the night.

The ratings are down from October’s 1.3M viewers.  But, did better than July’s 866,000 viewers.  In February 2017, it drew 1.76M viewers.

Payout Perspective:

The ratings are slightly lower than this past fall when it went up against the MLB Playoffs and College Football.  However, the Winter Olympics is a huge draw despite reports that viewership is down from the last Olympics.

UFC 220 buys estimated between 340K-380K

February 16, 2018

According to Dave Meltzer in a report at MMA Fighting, UFC 220 is estimated at doing 340,000 to 380,000 pay-per-view buys.  The ratings are similar to numbers in line for UFC 219 in December.

UFC 220 featured two title fights.  The main event was Stipe Miocic defending his title against Francis Ngannou.  The co-headliner was Daniel Cormier defending his light heavyweight title against Volkan Oezdemir.

There were over 1 million google searches the night of UFC 220 which is an indicator of PPV interest.  Also, the UFC 220 Prelims drew 905,000 viewers on FS1.

UFC 219 featured Cristiane “Cyborg” Justino as she earned a unanimous decision over Holly Holm.  It was previously reported doing between 340,000-380,000 buys.

Payout Perspective:

UFC 220 reflects the new normal for the company’s PPV business.  It is an achievement if the show can do over 200,000 buys notwithstanding a Conor McGregor on the card.  Of course, any buy over 200,000 garners some of its participants a PPV upside which is good for the fighters.  The UFC still made money on the PPV but not as much as it would have hoped.  UFC 221 last week will likely do much less than the past two cards.  But, the March and April events should bring back the average for the company.

Magomedov and Tukhgov accept 2-year sanctions for violating UFC Anti-Doping Policy

February 15, 2018

Ruslan Magomedov and Zubaira Tukhgov have accepted two-year sanctions for violating the UFC Anti-Doping Policy.  They will be eligible to fight in the UFC in September 2018.

Both fighters accepted two-year suspension as a result of out-of-competition positive tests on September 7, 2016 revealing ostarine in their systems.

Tukhugov also tested positive for ostarine in an out-of-competition test on October 29, 2016.  USADA indicated that since the second positive test resulted from a sample that was collected before he was notified of his first positive test, they were treated as a single violation.

Via USADA:

Following notification of their positive tests, both Magomedov and Tukhugov claimed they had tested positive due to their use of a contaminated supplement, which USADA was unable to confirm at that time to justify a reduction from the maximum two-year period of ineligibility for a non-Specified Substance.

Magomedov and Tukhugov subsequently exercised their right to have their cases submitted to a neutral arbitrator for resolution.

Magomedov’s and Tukhugov’s cases were consolidated, allowing for a single presentation of the athletes’ defenses to the independent arbitrator. During a multi-day hearing, the athletes presented testimony and submitted evidence in an attempt to support their supplement contamination claims and request for a reduced period of ineligibility. Nevertheless, after two days of testimony, USADA informed Magomedov and Tukhugov that it was still unwilling to consider a reduced sanction because it did not believe supplement contamination was a valid explanation for their positive tests. Thereafter, and before the conclusion of the hearing, USADA and the athletes reached an agreement to resolve the case, with Magomedov and Tukhugov each accepting a two-year period of ineligibility and agreeing to contribute a total of $10,000 toward the costs of the arbitration proceedings.

Magomedov’s and Tukhugov’s two-year periods of ineligibility began on September 26, 2016, the date the first of the athletes’ provisional suspensions was imposed.

Both Russian fighters train out of American Kickboxing Academy in San Jose.

Payout Perspective:

The settlement at time of arbitration likely means that the fighters’ case was not going well and the threat that an unfavorable ruling could have meant more of a penalty for both.  A two-year suspension means that they will be able to fight starting this September.  The arbitration hearing was the fourth of its kind under the UFC Anti-Doping Policy.  The athlete has never won an arbitration hearing since the policy was put in place.

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