Hennessy debuts Pacquiao commercial
April 6, 2012
Manny Pacquiao’s first commercial with sponsor Hennessy was released earlier this week. The commercial is part of the liquor brand’s “Wild Rabbit” campaign which is said to “redefine what it means to be a luxury brand,” according to Hennessy vice president Rodney Williams.
The commercial features the rise to greatness of Pacquiao from a young man in poverty to a successful boxer to a congressman.
Payout Perspective:
Pacquiao’s deal with Hennessy is for 1 year and $1 million dollars. While the commercial is confusing at first, it accomplishes its goal of conveying a rags to riches story and is very well done. What it has to do with the cognac I do not know but its a much better effort than the Pacquiao’s State Street Produce commercial.
More from Shanks and Fertitta at the World Congress of Sport
March 21, 2012
The Sports Business Daily/Journal had another short report from Fox Exec Eric Shanks and UFC head Lorenzo Fertitta at the 2012 World Congress of Sports. The two spoke today at the conference during a panel discussion entitled, “How the UFC/Fox deal could be a game changer.”
For those wondering, here’s the synopsis of the talk from the brochure:
In 2011, Ultimate Fighting Championship expanded into South America and Asia, and continued its surge in popularity, particularly among the 18-34 year-old male demo. But it was the mixed martial arts organization’s seven-year agreement with Fox — to show UFC programming on the Fox broadcast network and cable TV channels FX and FUEL TV — that made the biggest splash. As part of the deal, dozens of live fights will be airing on Fox networks and, this spring, “The Ultimate Fighter” reality show will feature a new format that includes live fights, rather than prerecorded events. This session will take an inside look at the UFC/Fox agreement and its role in the growth of mixed martial arts. You will hear from Lorenzo Fertitta, Chairman & CEO, Zuffa (Ultimate Fighting Championship); and Eric Shanks, President & COO, Fox Sports.
Shanks and Fertitta spoke about the UFC-Fox deal and the issue of control being a huge factor in Zuffa’s decision to go with Fox.
Here are some additional highlights:
- Shanks said that the 64 second JDS KO of Cain at UFC on Fox 1 wasn’t ideal but “it was exciting,” he added, “It was a knockout. It was a style of a knockout people were used to seeing. It could have gone a lot of other different directions.” As a result, it learned that fans want more action and less fluff (i.e., talking and promoting).
- As indicated at the end of last year, the UFC and Fox are concentrating on expanding its advertising partners. In addition to sponsors RYU and MetroPCS signing on recently it has secured Dr. Pepper. Its had success with the auto category but is still looking for sponsors in the financial services, insurance and other areas.
- Shanks stated that there is still room to grow to procure blue chip advertisers but emphasized its strong 18-34 male demo.
- Fertitta believes that more advertisers will sign on citing, as Shanks did, that it will take time for advertisers to understand the UFC audience. He also cited the fact that the UFC has an “affluent fanbase” as the average income for fans is $80,000 a year and the average UFC ticket is the highest in sports at $275.
- Fertitta also touched on the New York legalization issue stating that the brand will be elevated if (and when) MMA is legalized in the state.
Payout Perspective:
Nothing earth shattering from Shanks and Fertitta so don’t feel bad you weren’t in Dana Point, CA (the site of the World Congress of Sport) this morning unless you are a leader in sports business – in that case where were you? Nonetheless, I find the average income of the UFC fan really high. Of course, it’s not clear if Fertitta is referring to household income or that of an individual. Also, $275 for an average ticket is really steep and it’s ironic since we hear so much of the tons of comps that are given out at various UFC Vegas events.
It will be interesting to see what sponsors get onboard with the UFC this year. It was expected for there to be some time for advertisers to get comfortable with the UFC product which Shanks and Fertitta acknowledge. But, how long will it take?
UFC hard sell for advertisers while on Versus
February 20, 2012
The Sports Business Journal reported on the drop in ratings of NBC Sports Network as it rolled out its new name and brand last month. The article also comments on the fact that NBC found it difficult finding advertisers for the UFC when it was on the network.
For those that don’t know, NBC Sports Network was known as Versus prior to its re-branding at the start of the year. The SBJ article (subscription required) stated that NBC had a hard time finding advertisers for the UFC. Yet, UFC programming averaged 124,000 viewers on Versus. These ratings doubled the average for the channel. The article also states that the loss of the UFC has hurt NBC Sports Network ratings. Still, NBC described the UFC as “off brand,” a show that brought ratings but the network had a hard time finding a way to monetize it.
Payout Perspective:
While the UFC portion of the NBC Sports Network article was a small example compared to the overall theme of the article which was the slow start for the network, its an interesting take of the pull of the UFC. Its also an example of the obstacles the UFC still faces in trying to appeal to mainstream advertisers. We will see in the coming year if the UFC has problems on Fox, FX or Fuel with retaining and obtaining mainstream advertisers.
Pacquiao’s State Street Produce commercial
January 7, 2012
Bad Left Hook provides us with Manny Pacquiao’s commercial for his sponsor, State Street Produce. The message is positive but the commercial is questionable.
Here it is:
Payout Perspective:
It would be interesting to hear from someone in the advertising/marketing industry to tell us your thoughts about the commercial. The actual message by Pacquiao is clear as to why he wants to be associated with the brand. But the concept seems to be lacking. He’s in an open ship container with a heavy bag and then he runs to another and needs help to unlock it. And then, he’s interviewed with sunglasses on. I really think the last 5 seconds of the video (with Pacquiao and all the kids and Pacquiao giving the tag line) is all you needed.
By the way, if you want your MMA tie-in, one of the kids helping Pacquiao opening the container in the video is wearing a jiu jitsu gi.
There hav been questions about whether Pacquiao’s brand has peaked. State Street Produce is one of the bigger deals Pacquiao has and it will be interesting how successful it will do. As most know, the HP tablet, one of Pacquiao’s other major endorsements, has flopped. Its not all Pacquiao’s fault there, but one wonders about his draw as an actual pitchman for products. He seems to have an engaging personality and not afraid to be a showman (e.g., his singing, movie career) so it should follow that he’d be a good person to represent a brand.
Ad inventory sold out for UFC on Fox
November 10, 2011
Ad Week reports that all ad inventory for Saturday night’s UFC on Fox event has been sold. Media buyers indicate that a 30 second spot for Saturday night cost “north of $100,000.
Via Ad Week:
Media buyers say a 30-second spot in The UFC on Fox cost just north of $100,000. Among the marketers advertising are Anheuser-Busch, the Casio G’zOne Commando smartphone, and the U.S. Marine Corps. Two studios–20th Century Fox and Warner Bros.–have also made buys.Velasquez and Dos Santos will begin trading blows at 9:35 p.m., following a half-hour setup by host Curt Menefee, UFC president Dana White, and announcer Joe Rogan. Fox will not throw to commercial between the first and second rounds, electing instead to keep its cameras on the octagon.
The $100,000 number is double the amount that was previously reported. In a survey, Ad Age stated that Fox typically receives about $50,000 per 30 second spot on Saturday night.
Payout Perspective:
All signs point to a big night Saturday. The price per spot for Saturday indicates that mainstream advertisers are intrigued by the potential for the UFC to draw the casual fan in key demos. Of course, the skeptic may argue not to look too deeply into the price considering that Fox usually does not run live events as part of its Saturday night lineup. With a start time of 6pm/9pm (PT/ET), its interesting that the UFC has indicated the fight will not start until 35 minutes after the hour. Its obvious that there will be a lot of run up to educate the casual fan but it seems like the UFC could include another match in this hour.
The Sports TV Landscape
January 20, 2011
Television is inherently competitive. There are a limited number of viewers and nearly limitless viewing options. Those that succeed do so on the basis of consistent and engaging content that drives viewership. Thus, the latest shift in the industry towards dual revenue (advertising and carriage fees) is born as much out of a necessity to fund the acquisition of premium content as it is to hedge against the volatility of advertising revenues.
If the business objectives of these networks are to increase ad revenue, increase households, and increase the fee per household, then sports properties may help them achieve success. The last few years have seen ratings increases across several sports properties and many of these broadcasts are even setting records of one kind or another (e.g., Superbowl XLIV, NBA Finals, or Olympic hockey). This is why NBC paid $820 million for the 2010 Winter Olympics, why ESPN just paid $2 billion for a single season of MNF, and why the rights fees will continue to escalate over the next few years.
Where does UFC fit into all of this? The UFC offers a relatively inexpensive product, but delivers a somewhat comparable audience in the key demographics. Yes, there are concerns about the violence of the sport and general brand alignment between any of the networks and the UFC. However, the potential value the UFC could provide to a network is going to be hard to pass up. This is especially true if one or more of the big leagues goes to a lockout next year (the NBA being most likely) and networks are left scrambling for sports content.
Hence, I’d like to take a look at the potential candidates for the UFC’s next television network (once its deal expires with Spike at the end of 2011):
ABC/ESPN
The UFC and ESPN have engaged in talks before. In fact, according to Dave Meltzer, the two were close to an agreement last year, but talks ultimately fell through due to money. The UFC is willing to give ESPN pay-per-view caliber shows, and in return expects some sort of comparable rights fee. However, ESPN is much less certain about the property; younger employees are in favor of the sport and some of the older employees remain staunch boxing advocates who believe the UFC doesn’t align well with the Disney-owned ESPN brand. Perhaps the most important point in all of this is that ESPN doesn’t need the UFC. The World Wide Leader in Sports has more than enough properties to satisfy its viewers. ESPN can afford to pass on this round and then simply overbid a little in four years if the UFC is hot enough.
NBC-Comcast
This week the FCC approved the merger between NBC Universal and Comcast. Speculation is that NBC-Comcast is going to put together a sports network (in what may or may not be Versus) to challenge the ESPN-dominated cable sports marketplace. I expect the first few years will be quite lean until the network has an opportunity to bid on some of the bigger properties that will again become available. In the mean time, properties like the NHL and UFC will prove attractive.
The network has kind of been in a holding pattern with this merger announcement, but I suspect we’ll start to receive more news in the coming months. I wouldn’t be surprised if this new sports network, should it materialize, is quite aggressive in acquiring the remaining properties (NHL, UFC, college sports rights, etc.). It’ll certainly be interesting to see how it handles the UFC on Versus cards this year. That should provide us with some insight as to how committed NBC-Comcast is to the UFC moving forward.
FOX/FX
MMAPayout’s Robert Joyner was the first to write about the possibility of FOX and FX entering the sport of MMA in 2009. At that time, FX was rumored to be looking for a sports property to complement its original programming lineup. Joyner hypothesized that MMA could provide the perfect vehicle to deliver a solid audience in the key demos while also aligning with some of FX’s edgier content. Then news broke late last year that Bellator had secured FX as a broadcast partner for its 4th season. While this deal ultimately fell through, it certainly helped to fuel further speculation of FOX/FX’s interest in MMA.
The FOX/FX package is intriguing. FX provides a solid cable foundation for the UFC with its solid original programming content, including the highest rated cable show on TV in the M18-49, Sons of Anarchy (H/T: TVbytheNumbers) that would provide the perfect lead-in, exit, or target promotion audience. FOX provides the UFC with a good broad exposure play 3-4 times per year and the ability for FX to cross-promote during NFL or NASCAR programming.
Spike TV
The UFC’s home for the past seven years isn’t out of the picture yet. The UFC has had tremendous success on the network. Spike was the only network willing to gamble on the UFC (what did they have to lose, some may argue). However, don’t believe for a second that sentiment will have much of a bearing on this decision. If anything, the argument in favor of Spike has more to do with the value it brings to the UFC from a promotional perspective. No other network is going to provide the UFC with as much advertising, promotion, or flexibility as does Spike TV. Thus, I pose the following question: is it better to be a big fish in a small pond or a small fish in a big pond?
Ultimately, I think the UFC chooses to move to a bigger pond. Yet, that does not exclude Spike from being involved at all. Perhaps the UFC enters the market having over-estimated the appetite for its product. Maybe it re-signs with Spike for a larger dollar figure and alters/removes the cable exclusivity clause that might allow it to jump on another opportunity should one come to pass. It’s possible.
The PPV vs. Rights Fee Trade-Off
Approximately 75% of UFC revenue is event-related. The UFC wants to ensure it doesn’t lose out on substantial PPV money by moving to a network (or ESPN). Hence, this issue is one of getting a large enough rights fee plus other boosts in business that the loss in PPV dollars from those televised events is immaterial.
The exact size of the rights fee the UFC is looking for is unknown, but it’s not hard to determine a ballpark figure. If the UFC is looking to use the rights fee as a way to offset the lost PPV revenue, then the size of the rights fee ought to be a significant portion of the estimated value of those events as PPV cards:
- Assume 4 events per year
- If you use the absolute worst PPV of 2010, UFC 109 at 215,000 buys, then the opportunity cost is 215,000 x 4 x $49.99/2 = $21.5 million or $5.3 million/event
- If you consider the likely strength of 4 events, say two title events at 600,000 buys and two non-title events at 325,000 buys, then the opportunity cost is 1,850,000 x $49.99/2 = $46 million or $11.5 million/event.
If the opportunity cost of moving a UFC PPV event to a broadcast network is roughly $11.5 million/event, then it’s likely the UFC is asking for at least $5 million/event. I’m not sure the UFC will be able to get even $5 million from a network given some of the reservations that industry people still have about the sport. Although, if one is willing to set aside the sport’s imagery issues, there is an interesting value comparison to be made between the UFC at say $5 million/event and MNF at $117 million/game (I’ll leave for another time!).
The rights fee is one way of reducing or eliminating the above opportunity cost, but it’s not the only way. Increased exposure as the result of a broadcast television platform will undoubtedly boost PPV and merchandise sales. The value of sponsorships is also likely to increase given the national exposure of the platform and the likely increase in viewership of all other non-broadcast network events. Moreover, I also tend to think that moving four events to broadcast television and away from the PPV calendar may act as an artificial constraint in supply. The UFC would essentially be giving fans fewer cards to spend the same amount of money on.
However, if I come back to the numbers once more, it’s clear that eliminating this opportunity cost is a tough proposition. The UFC would have to make up roughly $46 million over (what I assume would be) 12 PPV events per year, which translates into roughly 150,000 more PPV buys per card or a 20% increase on its average PPV event of 600,000. The UFC has grown its PPV business at 23%, 26%, and 14% over the last three years, but it has largely done so by increasing the number of events, not the average event buy. Thus, it seems a stretch that it can push its event average to 750,000 PPV buys within the first year (or even two years) of a broadcast network deal.
Perhaps a more realistic figure is a 8% increase in average PPV buyrate, which would mean an extra 50,000 PPV buys per event (or a push of the average to 650,000 per event). This would still leave the UFC with a $30 million gap to fill through some combination of rights fees, increased merchandise sales, and new sponsorship agreements. The UFC could probably add $5 million in merchandise and another $5-10 million in new sponsorships sales, but rights fees would need to cover the remaining $15-20 million gap. It’ll be challenging.
This is Dana White’s “right deal”, and when you consider there are still other ways to expand the UFC’s reach (digital, marketing partnerships, etc.) the UFC doesn’t seem interested in risking this guaranteed PPV. Then again, there are some that would suggest the UFC should sell high, lest things cool off in the next few years, it’s unable to command anything close to what it can today, and has few remaining options to expand outside of TV.
The Domino Effect
What sort of impact might the UFC’s decision have on the rest of the industry? This is an interesting question. If the UFC stays put, the landscape doesn’t change a whole lot. But, if the UFC leaves Spike TV, it’s more than possible that we see someone jump to Spike. I can’t see Spike wanting to get out of the MMA business given the success it’s had. Plus, it’s an attractive platform for a young MMA promotion looking for an experienced partner that will provide ample support and broadcast flexibility.
Viacom is the parent company that owns both Spike TV and MTV2. If the UFC leaves Spike, might Viacom attempt to shift Bellator over to Spike TV in order to fill the gap? Bellator’s weekly, but seasonal content could provide Spike with the programming consistency it desires. The tournament format is also an intriguing promotional angle with which Spike can leverage to better sell what is likely to be an inferior product to the UFC. I doubt the ratings for Bellator on Spike are even close to what the UFC was able to do, but they could prove to be adequate.
Credits
I feel obliged to acknowledge Adam Swift for his help with this article. This is all largely the product of many rambling conversations we have had back and forth over the last several months and years. Adam truly has one of the best perspectives on television in the entire MMA industry (not to mention one of the best minds for the business of MMA, period).
UFC 125: Payout Perspective
January 2, 2011
Welcome to another edition of Payout Perspective! This week we’ll be taking at look at UFC 125: Resolution which was held on January 1, 2011 at the MGM Grand in Las Vegas Nevada. The event featured a lightweight title fight between Frankie Edgar and Gray Maynard, but the likes of Chris Leben, Brian Stann, Thiago Silva, and Clay Guida also appeared on the night.
Edgar vs. Maynard Ends in Draw
Frankie Edgar and Gray Maynard put forward a fight of the year candidate on the very first day of the year in their five round back and forth battle that featured a remarkable comeback by Edgar who was absolutely trounced in the first round. In the end, the fight was incredibly close and the decision of a draw was probably appropriate. Regardless, I think we’d all agree that this fight demands a rematch and the draw should facilitate that.
Dana White sent word through VP of Production, Craig Borsari, that Anthony Pettis would get the next shot at Frankie Edgar. White is probably looking to capitalize on the mainstream attention that Pettis garnered with his incredible kick two weeks ago at WEC 53. The promotional value of that kick is significant and there’s no doubt the UFC will be able to leverage it further on the PR front in the lead up to a title fight. Imagine Pettis doing a SportsCenter interview on the Wednesday morning before the fight; he’s introduced, talks about the fight, ESPN shows the clip, and then he’s asked to comment further. It will prove to be very effective (although it will need to be supported by a solid integrated promotional campaign).
I doubt very much that this is the absolute final decision, because there’s a strong argument to be made for giving Gray Maynard an immediate rematch: the fans want to see this score settled, a rematch would do bigger business than the first fight, the winner would certainly see his stock elevated to new heights, and few actually believe that Pettis can put up the same type of fight as Maynard. However, in this case, what is to be done with Pettis? He’s got the WEC belt and that unification needs to happen at some point (unless they just scrap the idea altogether. It doesn’t make sense for Pettis to fight someone else (and most probably lose). And, I’m not sure the UFC wants to see an exciting fighter like Pettis sitting on the sidelines for 8 months, either. Tough decision. Perhaps the UFC just scraps the unification idea altogether (they didn’t give Condit an automatic shot).
(Edit: Ariel Helwani tracked down Dana White late Saturday night. White has had a change of heart and Maynard will get the next shot.)
Regardless, I think they use the next lightweight title fight as the co-main event at UFC 129 to bolster that fight card and bring a little bit of added promotional press (either in the form of the Pettis kick or the Maynard rematch).
Stann KOs Leben
Brian Stann beat Chris Leben at his own game on Saturday night. It was an impressive display of precision and punching power, yet this style of fighting is often a very risky game of who can strike first. Stann will need to take on a more well-rounded opponent in his next fight to prove he deserves to be considered amongst the contenders in the division. While he’s asked to fight Wanderlei Silva, he’ll likely have to find a different opponent as Silva seems to be all but committed to fighting Chael Sonnen in the next few months.
Stann is an intriguing fighter because he’s got knockout power and some of the finer marketing attributes that could help make him an ambassador for the sport moving forward. In particular, the combination of his soft spoken, polite mannerisms and his military past make him an ideal regulatory asset. He’s definitely one to watch.
Prelims Broadcast on ION TV, Spike, Versus “Counter Program”
The UFC struck a deal with Ion TV to broadcast three live preliminary fights from UFC 125. The major draw of Ion is that it’s available in 100+ million households, but it’s hard to assess how well the UFC was able to leverage that fact on account of the following:
- We don’t know how much advertising was done on the network prior to the broadcast
- Many of the digital cable companies on the West Coast listed the program as starting at 9pm instead of 6pm
- Those that did tune in at the right time were greeted by a blank screen for the first minute or two
- Spike TV and Versus were both showing Zuffa-related content at the time of the preliminary fights (Spike had UFC’s Best Submission and Versus had Best of the WEC)
It seems clear that this Ion TV deal was less about expanding the UFC’s reach through network television and more about providing its existing fan base with an opportunity to watch the preliminary fights.
The UFC’s deal with Spike expires at the end of this year and it’s no secret that the UFC is looking to upgrade to a bigger and better network. This is going to make 2011 quite interesting because I don’t think we’re going to see nearly the same type of support for the UFC on Spike as we have in the past (e.g., preliminary card slots, live weigh-ins, etc.). Thus, you have to wonder what type of impact it’s going to have on the UFC’s ratings (and that’s the point if you’re Spike; to negatively impact the UFC’s negotiating leverage with other networks).
If you’re the UFC, you have to be careful here. This is the type of situation that can turn very ugly, very quickly. UFC brass must keep its composure because it doesn’t want to jeopardize the quality of its programming in a war of words or bad gestures.
UFC 125 Dominates Twitter
The following were all worldwide trending topics at some point during the night: UFC125, Frankie Edgar, Gray Maynard, Brian Stann, Chris Leben, Clay Guida, Grispi. Moreover, UFC125 was the topic trending topic in Brazil, Canada, the United Kingdom, and the United States at the end of the Edgar-Maynard bout.
This all leads me to wonder what type of buyrate the fight did. My own expectation was 400,000 given the headline and New Year’s day sports competition. However, the incredible response online leads me to believe it might have been higher. We’ll see in the next few weeks. Certainly, I think we’d all agree that the fight helped raise the profile of guys like Edgar and Maynard. If and when a rematch happens, it will sell.
Sponsorship Watch
MusclePharm made a surprising return to the Octagon at UFC 125. The company had previously failed to pay the money owed to Zuffa from its sponsorship of the WEC in 2010 (something in the range of $300,000). However, Zuffa sold that outstanding debt to a collections company and now it appears that MP has been given the okay to resume fighter sponsorships. It’s interesting to me that Zuffa has allowed them back in. There are any number of potential explanations as to why, but regardless, this is a good thing for the fighters (something the UFC is often criticized for).
Harley Davidson was the presenting sponsor of the UFC 125 Prelims on Ion TV. This is surprising to me because HD has gone through a leadership shake up recently and I’ve heard rumblings that its uncommitted to renewing with the UFC when the deal expires this year. Keep your eye on this situation moving forward.
Edit 2: I’d earlier commented that Tapout was not officially a part of the fight card, but this was incorrect. The brand did have some bumper signage on the top of the Octagon. It also continues to sponsor fighters, which has never been disputed. Please forgive the mistake.
The larger point still stands that Tapout has become much less active as an official UFC sponsor in the last few months. I suspect this reduction is due to ABG’s acquisition of Tapout (along with Hitman and Silver Star) and some reformulation of the marketing strategies for each brand. It may also be the result of a renegotiation between Zuffa and ABG that’s looking to explore new possibilities for a greater partnership. I’d expect an increase in activation quite shortly; an involved UFC-Tapout partnership is highly mutually beneficial. Perhaps the only way it doesn’t happen is if the UFC can swing a deal with a larger apparel company like Under Armour. UA is an incredible fit for the UFC, and it could provide the brand with a very competitive strike against the competition (Nike, Adidas, etc.). However, at this time, consider this just speculation.
The Promotional Value of the Pettis Kick
December 17, 2010
Anthony Pettis became a worldwide trending topic on Twitter on Thursday, December 16 when in the 5th round of his WEC lightweight championship fight he leapt from the ground, pushed off the cage, and delivered a roundhouse kick to the face of a stunned Ben Henderson and dropped him to the floor.
Naturally, my reaction was “Nice kick. I wonder how much it’s worth?”.
Payout Perspective:
I’ll point out that the promotional value of the Pettis kick depends on the assumptions made. It’s nearly impossible to come up with an accurate number because there are so many factors that influence a UFC PPV event purchase decision. Yet, I always enjoy estimating the value of fights and performances simply as an exercise to further my understanding of how the fight game works. So, let’s have some fun and play with it a little:
UFC
The promotional value of this kick to the UFC will be determined by a number of things: increased interest in the UFC, its PPVs, its live events, it’s television events, and its merchandise. However, for simplicity’s sake let’s just look at the number of people influenced by Pettis to watch his next fight. In this case the short term is far easier to estimate than the long term (just know that the more success Pettis comes to have, the more this kick will continue to add value to the UFC in the future).
I’ll start with asking a simple question: how many people were watching the fight last night? We’ll know in a few days, but the peak viewership was likely in the 500,000 to 750,000 range. Now let’s make two assumptions:
1. Nearly everyone that saw last night’s event has been motivated to watch Pettis his next fight.
2. The UFC will get 1 PPV buy from every 10 of those fans (this is consistent with the notion of 10 fans per viewing party)
This gives us 50,000 to 75,000 PPV buys as the result of Pettis’ performance (the kick being the last thing that most fans remember is very influential here). The calculations then are as follows:
- 50,000 x $49.99/2 = $1.25 million
- 75,000 x $49.99/2 = $1.9 million
*Note: under the terms of the UFC’s agreement with PPV companies, it receives approximately half of that $49.99 (although I understand that the UFC is starting to earn a more favorable term here).
Now, it’s here that we need to adjust our estimate based on the likelihood that those watching the WEC show are the types that buy UFC cards every time out. In other words, how do we know those 500,000-750,000 fans watching WEC (most likely semi to hardcore fans) aren’t the types that buy every PPV anyway? It’s a valid consideration. So, let’s assume that 50% of those watching the WEC card would have been on the fence as to whether to buy Pettis’ next fight. The new estimated value of the kick is then probably closer to $625,000-$950,000.
MMAPayout.com’s Jason Cruz rightly points out that the UFC will use this kick in a host of future promotional videos, Spike TV Countdown Shows, ESPN SportsCenter, and other PR efforts in order to convince casual fans that missed the fight that Pettis is a dynamic and exciting fighter worthy of challenging for the belt. It’s plausible, depending on how much they push Pettis’ kick and dynamic abilities that this could translate into as few as 25,000 PPV buys or as many as 50,000 more. This adds an $625,000 to $1.9 million to the value pie.
Thus, we arrive at an estimated short term promotional value of the kick at between $1.25 million and $2.85 million.
Pettis
The value to Pettis is harder to determine. Immediately he received a $10, 000 bonus for fight of the night. I’d also venture to guess he’ll be given a sizable discretionary bonus from Zuffa (anywhere between $10,000 and $50,000). However, in moving to the UFC, we have to be careful to separate the extra value Pettis will receive as the result of that kick from what he would have received just because of the move itself.
The easiest way to estimate this is perhaps to just take a percentage of the UFC’s value. The UFC typically pays out ~20% of its gross revenue to the fighters and this translates to anywhere between $250,000 to $570,000 over the medium term. I say medium term because there’s going to be a lag between what the UFC earns due to Pettis and what Pettis earns due to himself (as the result of contracts that lock him into a certain compensation set for a period of time).
Don’t forget sponsorship value too. Pettis will be a hot commodity for his fight with the winner of Edgar vs. Maynard.
Conclusion
The kick was incredibly impressive. It’s moments like that which make this sport so incredible. It’s also more support for the idea that the key to developing PPV draws is finding those with immense and entertaining fighting ability. All the charisma and good looks in the world cannot match the selling effect of a beautifully timed jumping roundhouse kick off the fence. It all starts and ends with fighting ability. Everything else comes second.
Perhaps the only thing I would have changed is the fact that it happened in the WEC. Imagine the value of that kick if it happens in the UFC (or even for the WEC in an earlier show). I also think this kick (and the card as a whole) is demonstrative of the value the WEC’s divisions will add to the UFC.
UFC 124: Payout Perspective
December 13, 2010
Welcome to another edition of Payout Perspective! This week we’ll be taking a look at UFC 124: St-Pierre vs. Koscheck II which was held at The Bell Centre in Montreal, Quebec on Saturday, December 11th. The event was headlined by the much anticipated welterweight title showdown between Ultimate Fighter Season 12 coaches Georges St-Pierre and Josh Koscheck. The card also featured the likes of Thiago Alves, Joe Stevenson, Mac Danzig, and Stefan Struve.
GSP dominates Koscheck, now looking at Shields
Georges St-Pierre used a stiff jab and a few nasty left hook combinations to fracture the orbital bone of Josh Koscheck on the way to a dominant unanimous decision victory on Saturday night at UFC 124. He put on a clinic, as they say, with his masterful use of the jab and superb head movement to avoid Koscheck’s overhand right. It was truly a performance in which St-Pierre cemented his legacy as one of the best fighters of this era and undoubtedly the best welterweight of all-time.
St-Pierre is likely to face Jake Shields next. Dana White seemed to be most in favor of this bout. However, if you look around at the list of contenders, it’s hard to justify any other bout. St-Pierre has defeated the who’s who of the 170lbs. division, including Koscheck (2), Fitch, Alves, Penn (2), Hughes (2), Hardy, and Serra. Here we see the business side of the sport coming into play. Jon Fitch is probably the most deserving of the next shot from a wins perspective, but he’s failed to impress in any of his latest victories. He’s not the UFC’s only option – and certainly not the most appealing – so why would they give him a shot? If he keeps good to his word and puts on a dominating performance against BJ Penn in February, he’ll likely be next up for the WW defense in Fall of 2011.
Naturally, there’s been some talk of GSP fighting Silva, but, it will have to wait at least until after Silva fights Belfort in February and GSP fights Shields (likely in April). A fight between St-Pierre and Silva would undoubtedly be the most important fight in UFC history, although there’s no guarantee it would break 1.6 million PPV buys. I could see the UFC using a fight like this as a center piece to a brand new integrated marketing campaign; something to help push it further towards mainstream acceptance with the goal of leveraging the fight and the marketing campaign towards obtaining a solid network television deal. The timing is certainly right.
UFC 124 attendance and gate
The UFC pushed the media all week with the message that UFC 124 was going to have the biggest attendance and live gate in UFC history, but sadly only one of those came true. The official attendance set a new record with 23, 152 people cramming The Bell Centre in Montreal. However, the official gate slightly underperformed at $4. 586 million. It should be noted that $4.6 million is still an excellent gate (my how far this sport has come to look at things and say a gate like that actually underperformed!).
Fight Week
Most casual fans make their purchase decision the week of the fight and these are the types of consumers that can make the difference between a fight selling 600,000 buys or 1.6 million buys. Therefore, as I’ve said many times before, fight week is the most critical time for any PPV in terms of promotion. There’s nothing in this sport that adds to the short-term bottom line like a good fight week campaign. Therefore, let’s take a look at some of what we saw this past week:
- ESPN has shown an increasing commitment to the UFC and this was definitely on display this week. The fight week SportsCenter interviews and MMA Live coverage that have become commonplace over the last six months were accompanied by the first MMA-related SportsCenter commercial featuring Georges St-Pierre. Additionally, ESPN also released a viral video on Youtube that showed GSP teaching two college mascots how to fight.
- SpikeTV debuted its Countdown to UFC 124 program on Monday, December 6th at 7pm EST/PST and garnered 470,000 average viewers. It’s a solid but unspectacular number. However, Spike has switched up its strategy in recent months and this Countdown show now plays so often that it’s the aggregate number of views across the entire week that truly counts.
- In Canada, Rogers Sportsnet led the way with its usual stalwart programming featuring Showdown Joe Ferraro and his MMA Connected series. Sometimes I believe that American fans don’t realize how significant Sportsnet’s coverage of MMA really is. They were the first major sports network in the world to give MMA primetime love and they back this up with a host of online and behind the scenes content that isn’t matched anywhere else.
- TSN also jumped on the bandwagon with considerably more coverage on its SportsCentre (notice the spelling) and almost three full days worth of Off The Record coverage of UFC 124, including a special preview show on Saturday night. The preview show was solid as it featured interviews with both fighters and a good 5 minute clip with Cain Velasquez that took viewers through a typical fight day routine for the average fighter.
UFC 124 fight trailer featuring music by Jay-Z and Rhianna
The UFC has experimented with the use of mainstream music in its promo trailers over the last few years, but UFC 124 is the first time I can remember the company ever using music for a publicly released trailer that didn’t also contain some sort of co-promotion. The UFC did the video with 50 Cent for UFC 91 but that was just spliced fight video into 50′s regular music video. UFC 124′s trailer did not include anything from Jay-Z or Rhianna except the music.
I’ve said for a while now that one of the keys to the UFC’s impending mainstream acceptance will be smart and proper integration with popular culture. Music definitely helps them do that. Don’t get me wrong, I love the UFC’s Stemm intro, but that music only appeals to a very small subset of people. I can remember seeing Craig Borsari mixing up a “Welcome to Atlanta” version of the intro for UFC 88 on Dana’s Vlog a few years ago, but we never saw that on the PPV. Hopefully this latest Rhianna mix is a sign that the UFC is willing to pay the royalties necessary to use these songs in its promotional content.
UFCVote.com
The UFC unveiled UFCVote.com at UFC 124 in which fans were allowed to pick the winners of fight of the night and the $100,000 bonus checks. In what was clearly a pilot thrown together to test the idea, the UFC learned that it’s probably not the best idea to put hundreds of thousands of dollars in bonus money into the hands of biased fans. That’s because the fans chose the main event as the FON by an overwhelming margin despite Riddle vs. Pierson probably being the more spirited and entertaining bout.
UFCVote.com is a great idea, because it allows the brand to further engage the fans and give them a say over part of the product. This is especially relevant in a climate where many fans have criticized the UFC for its pay of the fighters (though I find it odd that, in light of this fact, the majority still elected to give more money to the fighters that were already set to make the most on the card).
I don’t believe the UFC ought to get rid of the idea altogether. Instead the UFC should modify the award by separating it from the FON and creating a distinct fans fight of the night honor worth $5,000-$10,000 per fighter. The UFC could further develop the existing website to allow fans to rate each fight on a scale of 10; the highest rated fight wins (perhaps you exclude from eligibility the main event guys). The additional upside to this idea is that the UFC could further sell a ton of inventory to what is likely going to be a highly trafficked website. Then, if it wanted to go one further, it could even take the winning fight from each PPV event on the year and compile them for an end of the year Spike special. The special could be used to review the year that was and determine the fans’ ultimate fight of the year (of course, you’d sell this to sponsors, too).
Sponsorship Watch
I criticized Boost Mobile for its involvement at 123, but I thought it did a better job at 124 of integrating its brand into the broadcast. They brought us the Judge’s Call, were a part of the UFCVote.com, and were generally visible throughout the fight card.
There’s been much ado this week regarding the UFC’s fighter sponsorship policies and how they influence fighters financially. If you haven’t jumped in on the debate yet, I suggest you take a look.
UFC 131 announced for April 30th at the Rogers Centre
Earlier in the week, the UFC announced it will host its very first show in Ontario on April 30th when it plans to visit Toronto’s Rogers Centre and absolutely smash the North American attendance and gate record. The Rogers Centre is the enclosed baseball stadium where the MLB’s Toronto Blue Jays play (formerly known as the Skydome), and it actually sat upwards of 70,000 for a Wrestlemania show a few years ago. It’s likely the UFC is going to opt for a smaller seating configuration (40,000), not because it couldn’t fill 68,000 but more because it wants to make sure every fan can see the action. The nature of the UFC’s cage has always detracted from the live experience; this would really come into play for fans sitting in the very upper deck, a mile away from the action inside of a black cage.
The UFC Fan Base
November 29, 2010
There’s no shortage of news or information available regarding the UFC’s growth from a pay-per-view or gate perspective, but there’s considerably less information where the growth of its fan base is concerned. I suspect this is the case because the UFC is a relatively new sporting phenomenon that’s yet to gain the requisite level of acceptance that would make it worthwhile for survey companies to collect the data from consumers needed to produce relevant information on the fan base. However, the times are changing and we’re now beginning to see some information emerge related to the demographics and psychographics of the UFC fan.
Today, we’ll be taking a glimpse at the age and gender demographics of the UFC. I’ve also included information from the NFL, MLB, NBA, NHL, NASCAR, and MLS to provide some context to the overall sports landscape, which will help to put the UFC’s current fan base into perspective – both its strengths and shortcomings.
The following information was mined from the Simmons Research Database.
Notes and Definitions
The title of this article and its subject matter should not imply a bias towards the UFC. The survey was simply conducted in a manner that quizzed its respondents on a variety of topics, including their interest in professional sports leagues. I’ll remind you that while the interest in a league implies a larger interest in the sport, this is sometimes not the case. There are many “fans” that are interested in the UFC but not other MMA; likewise there are “fans” interested in the NFL but not college or high school football.
Thus, the “fan” is defined as someone that is “very”, “somewhat”, or “a little bit” interested in the league in question. These are obviously subjective terms open to a very large spectrum of interpretation, which is why I’ve also set out to compare these figures against the “avid fan” – someone that is “very” interested in the league in question.
I’ll also caution that the following sets of information are just estimates based on data in the Simmons Database. Other polls and databases have also produced similar information (e.g., ESPN Sports Poll and Scarborough) to support some of the analysis done below. However, I encourage everyone to read the following a natural level skepticism.
Americans 18+
The size of the UFC fan base in the United States is estimated to be approximately 31 million people. You can see below how this compares to the size of the general fan base of the other major sports played in the US over the last three years. Note that the UFC was the only property to experience growth in its fan base of the last three years.
The size of the UFC avid fan base in the United States is estimated to be approximately 11 million people or 35% of the overall fan base. Note, again, that the UFC and the NHL were the only to properties to grow their avid fan bases over the last three years.
The avid fan as a percentage of all fans gives us an interesting look at how competitive the UFC is among most sports properties. The UFC has been able to match the avidity of most sports properties with the exception of the NFL. The NFL is the sports league model in many respects, but the way it has managed to engage its fans is what truly allows it to generate revenues far greater than any other league. Engaged fans are more apt to receive and comprehend advertiser and sponsor messages. When these television networks and corporate sponsors are evaluating a property they look to how well a property can engage its fans (or what opportunities they have to engage those fans). Thus, one of the mid-to-long term objectives and challenges for the UFC moving forward is to increase the level of avidity in its fan base to levels beyond 35% and into the 50% range.
I mentioned above the tremendous growth that the UFC has enjoyed over the last few years and the following comparison really puts that into perspective. It’s only over a three year period, but this is the only data we have and that’s largely because the UFC has only become a relevant commercial entity in the last 3-4 years.
Some might argue that 30% growth is meaningless considering the UFC didn’t start out with a lot to begin with, but I reject this counter argument. The UFC owns an interest level commensurate with lower tier sports leagues like the NHL and MLS; no one would dismiss the fan bases of those two leagues as insignificant.
Americans 18-34
The 18-34 demographic – specifically the M18-34 demographic – is always a very important consideration in any fan base analysis, because it is probably the most coveted target audience in the world. Those within the 18-34 demographic possess relatively high levels of disposable income and a demand for luxury goods, but also lack many of the serious financial or family commitments of other demographics.
The numbers for the UFC here aren’t that far off from the NFL or MLB, yet the discrepancy in required sponsorship investment is stunning. If a brand determined that its image was somewhat aligned and fit well with that of the UFC, it could literally own the UFC consumer for $5m/year in sponsorship fees and another $5-10m in activation. Compare that to $100m/year that Bud Light just dumped on the NFL or the $75m/year that Verizon just spent on the NFL.
Is it a risk? Sure. But what isn’t in this day and age. If we’ve all learned one thing in the last 12 months, it’s that no sponsorship is risk-less. Tiger Woods is that case study. However, there remains a sizable opportunity here for a company to come in and completely own a category tied to this sizable demographic for an absolute fraction of the price a company would pay somewhere else. The only two things the company would need to do are a.) commit to activating and b.) find a group of people that know the sport well enough to formulate the right activation plan (I think there are a few people around that might fit that mold!).
Men and Women
Dana White stated some time ago that the split between male and female UFC fans is somewhere in the range of 56-44, but the numbers below indicate that the split is actually closer to 75-25. How do we reconcile this information? I’d venture to guess that 60-40 is a good estimate for the split at live UFC events, but those events are not necessarily an accurate reflection of the entire fan base.
I’m not sure these figures come as much of a surprise to anyone. MMA is a rough and violent sport that still possesses a brutal image in some circles of the larger population. It will be a while before it can eschew conflicts with this boxing paradigm through which most casual sports fans still view combat sports. However, a 60-40 split across the entire fan base seems inevitable at some point.
Estimating Global Size
The global size of the UFC fan base is difficult to estimate, because there are material components of the fan base not included in the above survey or that do not live in the United States. We must reasonably adjust for American children (12-17), Canadians, British, and other fans throughout the world.
The following is a bit of envelope math using the American 18+ interest level (13%) as a foundation for adjustment and should only be taken as a loose estimate for the purpose of framing a conversation regarding the UFC/MMA fan base.
- Americans 12-17 at 13%: 800,000. This group accounts for approximately 8% of the American population and assuming the same overall interest levels between adults and children (which is conservative considering that the interest level for MMA is likely to be higher for youth) we arrive at 800,000.
- Canadians at 18%: 6,000,000. The sport has exploded in the country of 34 million people and the UFC’s interest levels in Canada far exceed that of the US in every demographic; 18% of the entire popular seems like a fair and conservative estimate, which gives us 6 million people.
- British at 8%: 5,000,000. The sport is slowly picking up speed in Britain, but still not close to enjoying the interest levels in Canada or the US.
- The World: 20,000,000. The rest of the world — including markets such as Japan, Korea, Brazil, Europe, Australia, and the Middle East — likely numbers into the 20 million range.
The above estimates would then put the global size of the UFC fan base at roughly 65 million. The growth potential is considerably higher, but that’s still a pretty solid number all things considered.
