11 for 11: No. 1 UFC-Fox television deal

December 31, 2011

The number one business story of the year was the UFC-Fox deal as mixed martial arts entered the mainstream with its 7 year, $90 million television rights deal.

The deal was an upgrade from its $35 million a year deal with Spike TV. The longtime relationship between the UFC-Spike relationship deteriorated this year with passive aggressive moves. Spike debuted UFC 132’s Countdown show during the middle of the day instead of its usual primetime placement. It also counterprogrammed UFC’s live Versus card in June with a marathon featuring main eventer (at the time) Nate Marquardt. And, of course, there is the issue of the UFC library rights.

 

Fox immediately marketed the UFC’s November 12th debut with promos during MLB and NFL games. It also ran its UFC Primetime show on an NFL Sunday to encouraging ratings.

The UFC on Fox Payout Perspective details the huge ratings Fox received for the 1 hour program which featured approximately 1 minute of actual fight action. It was the most watched UFC event ever.

FOX TV Rating Breakdown (Quarterly):

– UFC on FOX (9:00 pm-9:15 pm): 5.25 million viewers

-UFC on FOX (9:15 pm-9:30 pm): 5.48 million viewers

-UFC on FOX (9:30 pm-9:45 pm): 7.09 million viewers

-UFC on FOX (9:45 pm-10:00 pm): 4.88 million viewers

– Overall: Average of 5.7M viewers watched the fight live or via DVR playback within the same day. (Nielsen)

Via UFC press release:

The hour-long UFC on FOX premiere scored a 3.1/5 household rating/share, with 5.7 million viewers making it the most-watched UFC event ever and the most-watched professional fight of any kind on any network since 2003 when 7.0 million tuned in to watch Lewis-Klitschko on HBO.  Velasquez-dos Santo is also the highest-rated and most-watched professional fight of any kind on a broadcast network for OSCAR DE LA HOYA’S FIGHT NIGHT on FOX. (4.3/6, 5.9 million viewers) in 1998.

FOXSports.com, one of the world’s leading sports web sites with almost 30 million unique visitors monthly, also delivered substantial viewing for UFC-related video.  On Saturday, FOXSports.com tallied an impressive 257,000 total live streams for the nine undercard matches, while all UFC content during and around the event generated over 1 million streams.  Other than Super Bowl-related content, this was the biggest video event in FOXSports.com history.

The number of live streams on FOXSports.com is notable as its not usual that we see these numbers for the UFC Facebook streams. It shows the impressive numbers the UFC put up on multiple platforms.

In addition to Fox and online, Fuel TV and Fox Deportes had solid ratings for the UFC’s debut. Spike TV also put up huge numbers as it played past UFC fights of JDS and Cain opposite UFC on Fox.

We will see how the UFC-Fox relationship does in its first full year. UFC on Fox 2 is set for January 28th and Spike TV is set to counter as well. It will be interesting to see how the UFC will do on Fuel and FX. We’ve already seen a potential problem with Fuel TV as the UFC 141 Countdown show only garnered 15,000 viewers for its debut. Hopefully for Fuel TV, its January 1 UFC marathon will raise awareness that it is the new home for UFC programming.

11 for 11: No. 2 Zuffa buys Strikeforce

December 30, 2011

The second biggest business story of the year shook the state of MMA. In March, Zuffa purchased its biggest rival, Strikeforce.

It was reported that the purchase price was $40 million which included some debt repayment by Zuffa for Strikeforce. The deal occurred as Silicon Valley Sports and Entertainment, main financial backer of Strikeforce, wanted to refocus its business on its NHL, the San Jose Sharks and other business. It is also believed that it may be trying to acquire an NBA team to San Jose.

Excellent coverage of the purchase is here and here is the text of the official Zuffa press release. Prior to Zuffa’s purchase, MMAPayout learned that there were other bidders for Strikeforce but Zuffa came up with the biggest monetary deal.

Prior to the purchase, Strikeforce was in the midst of its Heavyweight Grand Prix which was supposed to create interest in what was arguably the best divsion in the sport. Surely, Strikeforce execs were hoping for a Fedor-Overeem Final. Fedor’s upset loss to Bigfoot Silva made the GP less appealing. And, a futile effort to hold a card in Japan for its HW Grand Prix caused a delay in the tournament.

From the start, Zuffa stated that UFC and Strikeforce would operate separately although Zuffa execs (you know who) would provide input on its show starting with its April 9th show. The constant talking point was “Business as usual.”

But, that’s not the case as we’ve seen numerous Strikeforce fighters move over to the UFC. Notably, Strikeforce welterweight champ Nick Diaz. Other fighters such as UFC 141’s main eventer Alistair Overeem came over to the UFC after time fighting in Strikeforce. In addition, some Strikeforce staff were let go and replaced by Zuffa employees. Finally, Scott Coker has lost a lot of power in the new regime as it appears from interviews that he no longer has any say with the direction of Strikeforce.

Recently, Strikeforce and Showtime agreed to renew its television contract which was somewhat of a surprise considering the fact that many believed that Strikeforce would be consumed by the UFC.

It will be interesting to see the Strikeforce product in 2012. How will it compete, or complement the UFC product? Who is the face of Strikeforce? Certainly, a Gilbert Melendez and Mo Lawal would have fit in nicely with the UFC creating interesting fights. But, it appears that they will be in Strikeforce for at least the next year.

Links to MMAPayout coverage regarding the Zuffa-Strikeforce purchase can be found here:

Zuffa Purchases Strikeforce, Agrees to Blockbuster MMA Deal

Mystery Strikeforce Third Bidder, Early Signs Of Sale, & UFC Purchase Notes

Exploring Why SVSE Walked Away from Strikeforce & MMA

11 for 11: No. 3 Zuffa offers its fighters insurance

December 28, 2011

This year Zuffa offered its 400 fighters in the UFC and Strikeforce health insurance beginning this past June. Zuffa is paying the premiums for all of its fighters under contract.

The accident-insurance coverage covers up to $50,000 (annually) of medical costs for each fighter. Its an unprecedented move to cover fighters and its a sign that the organization is moving in the right direction if it wanted to be thought of as a major league sport.

So far, fighters have taken advantage of the health insurance without any issues. Cub Swanson became the first fighter to utilize the health insurance one day after it went into effect.

While insurance may not be the most exciting business story of the year, it is one of the more important ones for the fighters covered.  A fighter’s health is very important from the business side of things as we know from this year’s constant reshuffling of main events. Insurance may alleviate some of the concern for the mid to low tier fighter that is concerned about what happens if they are hurt while training for a fight. While the $50K may not cover a serious surgery or procedure, it still helps with the  financial burden placed on fighters that likely fought without insurance prior to Zuffa’s coverage.  In a related story, this week, Combat Sports Insurance announced an accident-related insurance policy that would allow any pro MMA fighter to receive insurance for just “a little over $20  month.”

11 for 11: No. 4 Injuries plague PPVs; Buy rates down

December 27, 2011

Injuries have plagued 2011 as many of the UFC’s top stars have had to postpone or delay fights this year.

GSP, Brock Lesnar, Jon Jones, Frankie Edgar, Gray Maynard and Rashad Evans are just a sample of the fighters that were scratched from PPV cards due to injury. This does not even touch upon the number of fighters on the undercards that have been shuffled due to injury.

Lorenzo Fertitta acknowledged this fact in a recent LA Times interview.

Via the LA Times:

…but our biggest issue lately has been 11 of our last 14 main events have fallen out and required replacement fighters. It’s like there’s been a hex over us. So it’s been a challenge to run the business how we’ve planned to.

Fetitta indicated that if the UFC gets a run of of good health (and is able to book the fighters and fights it can), then the business will take off.

Injuries haven’t helped with the PPV buys for the UFC. This year we saw a decrease in PPV numbers and only two shows (UFC 126 and UFC 129) reached 500K PPV buys. In 2010, 11 PPVs scored 500K or better.

If the Brock Lesnar factor holds true, UFC 141 would be the only UFC PPV this year to go over 1 million PPV buys.

At the beginning of the year, Dave Metzler believed that 2011 would be a rebuilding year for PPVs. But, he cited the need to build up the bantamweight and featherweight divisions and building new stars as reasons for smaller PPV numbers. Jon Jones is a new star that the UFC hopes to build into a PPV attraction. However, the PPV numbers do not reflect the bantamweight, featherweight or lightweights gaining traction as main eventers. As an example, the third fight between Frankie Edgar and Gray Maynard at UFC 136 received only 225K PPV buys.

It will be interesting to see how 2012 will fare on the injury front. We already know Anderson Silva will not be available until mid-2012. This will delay a guaranteed PPV draw, a potential rematch with Chael Sonnen. Also, GSP will be out until late 2012 and the division will have an interim champion in the meantime.

We will see if the UFC tries to push Jon Jones to the forefront as a PPV draw. Also, how will the UFC utilize the flyweight division. And, will the lighter weight divisions draw. We shall see at UFC 142 as Jose Aldo fights Chad Mendes in the main event.

Of course another factor in addressing the PPV buys is PPV fatigue. There will be 16 PPVs this year with a PPV almost a bimonthly happening. Its hard for a fan to pay over $100 bucks a month in PPVs in addition to their normal cable/satellite bill. Couple the economic factor with the injuries to main events, and its a combination which likely led to the lower numbers.

Photo via LA Times

11 for 11: No. 5 Culinary workers versus Zuffa

December 26, 2011

The Culinary Workers Union Local 226 became one of the biggest opponents of the UFC in 2011. It has helped opposed the legalization of professional MMA in New York state and has requested that the Federal Trade Commission investigate Zuffa for possible antitrust investigations.

In late August, the union sent a letter to the FTC requesting that it look into Zuffa’s acquisition of several of its competitors:

The letter goes on to point out that since 2001, Zuffa has acquired four of its key rivals (Pride Fighting Championship, World Extreme Cagefighting, the World Fighting Alliance, and most recently Strikeforce earlier this year.  They also state that through some independent research performed in 2008, Zuffa controls 80-90% of the mixed martial arts market.

Specifically, the letter points out that Zuffa has preserved and strengthened its dominance in the market through their unwillingness to co-promote events as well as anti-competitive contractual restraints placed on their contracted fighters.

As most know, the union’s beef with Zuffa stems from the Fertittas ownership of its Stations Casino. A failed attempt to unionize the workers at the Stations Casinos is the reason why there is staunch opposition to the legalization of MMA in New York. Lobbying efforts by the Culinary Workers have stifled efforts for passage of legislation allowing the UFC in New York.

USA Today reported in October that the union contacted Anheuser-Busch to boycott the UFC for “a history of tolerating homophobic conduct.” In addition, the Union has done the following to get its message across:

• Backing anti-MMA legislators in New York.

• Calling on the Federal Trade Commission to investigate UFC parent company Zuffa, which the union accuses of using monopolistic tactics to thwart competition from other promoters of mixed martial arts.

• Launching a website designed to highlight White’s use of vulgar language.

It will be interesting to see how much more the Culinary Workers will go to lobby against the UFC. The recent Zuffa lawsuit is a way around the union and lobbyists opposing MMA. So far, nothing is being reported about an FTC investigation of Zuffa and we will see if 2012 gives us any findings from the FTC about Zuffa and the claimed anti-competitive practices.

11 for 11: No 6 Viacom purchases Bellator

December 25, 2011

Viacom purchased a majority stake in Bellator this fall and announced that it would move its newest purchase to Spike TV in 2013.

With the UFC looking for a new network dance partner most of 2011, many believed that Bellator would make the move to Spike. The purchase of Bellator confirmed the speculation.


Spike TV has the rights to the UFC library through 2012 and it was thought that Zuffa would purchase the library from Spike but that notion has died down. Spike.com began airing the preliminary fights of Bellator events this year as well.

Ironically, Dana White embraced the Viacom move as the UFC believed that the purchase would ease an FTC investigation and any notion of Zuffa monopolizing the MMA industry. Instead, White described the UFC as a “mom and pop” in comparison to Viacom.

With the Viacom acquisition, it will be interesting to see how much of an investment it puts into Bellator on Spike. Talent acquisitions, production for Bellator programming and marketing should be at the top of the list for improvement for the organization.

11 for 11: No. 7 Twitter bonuses for UFC fighters

December 24, 2011

Where would the world of sports, and sports reporting without twitter? The UFC has been on the cutting edge of social media at made twitter a requirement for its fighters.

Starting in June, the UFC announced quarterly bonuses for fighters using twitter. As part of its Fighter Summit held in May, the UFC held a workshop for fighters on utilizing twitter. The first quarterly bonuses came out in November with fighters receiving $5,000 each. The UFC intends to expend $240,000 in annual twitter bonuses.

While the UFC promotes its fighters to use twitter to promote the UFC, there are pitfalls to twitter usage. Forrest Griffin, a winner of one of the twitter bonuses, was criticized for a tweet he sent about rape. Griffin quickly apologized and donated money to a rape crisis center. Dana White defended Griffin in explaining away the tweet.

In contrast to Griffin, Miguel Torres was fired for a tweet in which he referenced a line from FX’s “Its Always Sunny in Philadelphia.”

And, as always ,Dana White is very active and outspoken on twitter. The phenomenon of twitter continues to help and hurt UFC stars (as well as other sports stars) as there is no filter and the user must self-edit their thoughts lest they get caught in PR problems like Griffin and Torres. We will see if fighters change their twitter usage in 2012 or will they continue to push the envelope to gain more followers.

11 for 11: No. 8 The state of MMA sponsorships

December 23, 2011

With the purchase of Strikeforce by Zuffa, sponsors felt the squeeze as Strikeforce imposed the same fee (or tax) as the UFC does with its sponsors.

Strikeforce imposed the sponsor fee starting with June’s Strikeforce event. The fee also applied to Strikeforce Challengers’ sponsors.  As a result, sponsors such as Ranger Up, CageHero and VXRSI are no longer sponsoring fighters in Strikeforce.

While some do not dispute the imposition of the fee, it severed relationships some fighters had with brands since they fought at small MMA promotions. For the sponsors unable to pay the $35,000 to $50,000 fee to have its logo on a fighters’ shorts, it meant revamping its marketing strategy.

Also this year, the state of sponsors in MMA was examined as many sponsors questioned the return on investment.

Recently, clothing brand Respect Your Universe (RYU) became the UFC’s newest sponsor and signed welterweight Jon Fitch. Despite RYU, some have been critical about the UFC’s lack of obtaining new sponsorships. It will be interesting to see how many new sponsors sign on in 2012. With the Fox deal, Zuffa should be able to take advantage of the momentum.

11 for 11: No. 9 UFC’s big shows in Toronto and Rio

December 22, 2011

UFC 129 in Toronto was the company’s first stadium show which set records for attendance, gate and bonuses. The bonuses were the biggest ($129,000) in recent memory. It also held the first of two UFC Expos held this year. In the end, the UFC had a substantial impact on the economy in Toronto.

The card featured the showdown between GSP vs. Jake Shields, Jose Aldo vs. Mark Hominick and Randy Couture (in his final match) vs. Lyoto Machida.

UFC 129 was the biggest PPV buy of this year (excluding UFC 141) with 800,000 buys. We will see how it does in January for UFC 142 as Aldo headlines the card.

UFC 134 in Rio De Jineiro, Brazil was a return for the company. The show was a sellout and similar to Toronto, the crowd was hot during the entire show. Anderson Silva headlined the show by defeating Yushin Okami. Notably, the UFC promoted that it would air the prelims on a digital screen in the Little Brazil section of Times Square to watch the prelims. Unfortunately, due to Hurricane Irene, this promotion was thwarted.

Silva scored major sponsors for UFC 134 including a soccer club, Burger King and Nike. He also starred in a Budweiser commercial that aired in Brazil.

Bonuses were huge as well with every category winner getting $100,000.

Unlike 129, UFC 134 did not score as well with PPV as it only garnered 335,000 buys.

The UFC’s return to Toronto this December did not garner as much fanfare as 129 but received a nice PPV number of 480,000 buys worldwide.

These two shows paved the way for international expansion for the UFC. 129’s stadium show displayed the type of draw and economic impact it could have over an area when it comes to town and its Rio show spawned UFC 142 and the first international TUF.

11 for 11: No. 10 Zuffa sues New York

December 21, 2011

For years, the UFC tried to lobby and legislate and now its time to litigate. Prior to its lawsuit, it presented an economic impact study, educated the concerned that MMA is safe and brought its top fighters to the state to rally supporters. Facing a roadblock, Zuffa decided to file suit against the state Attorney General and District Attorney of New York.

The crux of the lawsuit argues that MMA should receive First Amendment protection and that the New York MMA Professional Ban on the sport is unconstitutional. At this point, the defendants have until January to file its Answer to the Complaint.

Only speculation, but its likely that New York will attempt to dismiss Zuffa’s lawsuit. If this occurs, what would Zuffa do next? We should see in 2012.

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