UFC Increases PPV price for announced 2015 events

January 3, 2015

According to UFC.TV and multiple PPV providers such as DirecTV and Time Warner, the UFC will charge consumers an estimated $59.99 HD/$49.99 SD for all PPVs scheduled in 2015 so far, which include UFC 182: Jones vs Cormier, UFC 183: Silva vs Diaz and UFC 184: Weidman vs Belfort.

UFC_182_price_incr

 

Payout Perspective:

UFC President Dana White went on record (MMAFighting) years ago, stating that PPV prices would never be raised and would stay at their regular price of $54.95/$44.95 SD. That tune changed for UFC 168 in December of 2013, when the PPV price was raised to $59.95 HD/$49.95 SD. Dana White went on the record once again and stated that the PPV price hike was “just for UFC 168″, since it was justified by placing some of UFC’s biggest stars in highly anticipated match-ups (Weidman, Silva, Rousey, Tate).  White stated PPV prices would go back down to their regular price after UFC 168’s one-off price adjustment.

That brings us to 2015, which is just over a year after the UFC 168 PPV price hike experiment took place. To kick-off the new year, the UFC has scheduled it’s first three events of the year (UFC 182, UFC 183, and UFC 184) with an increased PPV price of  $59.99 HD/$49.99 SD ($64.95 HD/$54.95 SD for Verizon customers). Another one-off experiment cannot be the culprit this time around. So, what could have caused the PPV price hike this time around? Well, you don’t have to look any further than how mightily the UFC struggled in 2014 on the PPV front, which may seem a bit counter intuitive.

Last year’s down PPV business forced Standard & Poors to lower Zuffa’s outlook and threatened to lower their credit rating if things didn’t turn around by the end of Q1 2015.  Now having said that, it makes sense as to why Q1 2015 has been scheduled with some of UFC’s biggest stars and match-ups. As for the price hike, looking back at UFC 168, it did an estimated 1.025M PPV buys with the hiked PPV price, so it doesn’t appear to have been much of a deterrent. It’s pretty much a safe bet to say that the UFC’s takeaway from the UF 168 experiment was that their customers have no problem paying extra for a major event.  In 2015, it looks like they are taking that experiment a bit further by scheduling the first three events of the year with the price hike.

Essentially, the UFC is applying ad-hoc variable PPV pricing to their product, which is something the UFC has criticized and has tried to stay away from since their parent company, Zuffa, took over.  Fans have demanded variable PPV pricing for years as justification for not purchasing cards that were not as “stacked” as others yet cost the same amount. The UFC’s belief, however, has always been that consumers are buying the UFC experience via PPV, regardless of who is fighting on the card for the most part.  The UFC never wanted to admit in the past that some cards have less worth than others, which is a perception that has been shattered the past few years.  If the UFC wants to keep that perception that all PPV events have the same value, a uniform PPV price hike may be the next logical step in this experiment, but for a company who has struggled so much recently with their PPV business model, increasing the price on a product that many fans feel is over-saturated and watered-downed may prove to be quite the risky move.

14 for 14: No. 1 the UFC antitrust lawsuit

January 1, 2015

In a lawsuit that may change the structure of the UFC and the MMA business as a whole, fighters have sued Zuffa for alleged violations of section 2 of the Sherman Antitrust Act.  The fighters intend to seek class action status as 5 law firms have joined together to represent the plaintiffs.

The UFC recently retained Boise Schiller & Flexner to defend itself in the lawsuit.

Attorneys for the UFC have yet to file responsive briefing in the three lawsuits filed by 7 fighters (so far) that claim that the UFC was both a monopoly and monopsony in violation of antitrust laws as it suppressed fighter pay as well as other incentives that the fighters believe that they could have received but for the UFC’s business practices.

The dollar amount of what the plaintiffs are seeking has not been identified and will not be until economists  and other experts opine about the issue.  But, under the antitrust laws, the plaintiffs may seek three times the actual amount of damages proven.

Payout Perspective:

Unless the UFC can get the lawsuit dismissed or the parties somehow decide to settle, we probably will see this go through 2015 with no resolution.  Recall, the Zuffa lawsuit filed against New York in 2011 is still pending a summary judgment motion with no trial date set. This lawsuit will be one to watch and if it gets to the discovery phase, we could see some damaging documents (i.e, Zuffa emails, financial information, etc.) which could turn out to be a public relations disaster.  On the other end, look for Zuffa lawyers to paint the plaintiffs as malcontents looking to make a “quick buck” because they were never good enough to make it in the UFC.

But even before we get to the juicy stuff, there may be some procedural hurdles that the plaintiffs may need to go through.  2015 will certainly be a year to brush up on the terms monopoly and monopsony.

14 for 14:

2.  UFC-Reebok announce uniform deal

3.  Bellator 131/Bellator on PPV

4.  Zuffa downgraded by Standard & Poor’s

5.  CM Punk signs with the UFC

6.  Rebney replaced by Coker

7.  UFC Fight Pass a success in first year?

8.  TRT banned by NAC, UFC

9.  UFC PPVs down

10.  WSOF airs on NBC

11.  UFC continues global expansion

12.  Rousey wins CSAC arbitration against Fight Tribe

13.  Cung Le drug suspension overturned

14.  Gil re-signs with the UFC

14 for 14: No. 2 UFC-Reebok announce uniform deal

December 31, 2014

There was much speculation as to when the UFC would broker a uniform deal.  The long-awaited deal will begin during International Fight Week in July 2015 according to the joint announcement on December 2nd.

Details of the deal are outlined here.

ufc and reebokThe deal is estimated at 6 years for $70 million and offers a unique distribution deal which the UFC touts will give back to its fighters based on UFC rankings.  However, with the announcement of the UFC-Reebok deal, it also means that all other fight sponsors would be eliminated from the Octagon.  There will no longer be fight banners or any other sponsor patches on shorts or t-shirts.  Fighters may not wear other sponsors during UFC related promotions leading up to an event.  This information led to many concerned fighters.  Brendan Schaub indicated that he lost 6 sponsors in light of the Reebok deal.  The Heavyweight stated that he made twice as much from sponsors as his fight purse from the UFC.  It also means the end of many sponsors we are familiar seeing such as Dynamic Fastener.

On the other end of the spectrum, Jon Jones and Ronda Rousey signed individual sponsorship deals with the brand.  The two join Johny Hendricks and Anthony Pettis as those fighters with sponsor deals with the company.

The UFC indicated it reached out to fighters about the deal prior to its announcement although a list of those fighters has not been disclosed to the public.

Payout Perspective:

It will be interesting to see how the deal will play out.  While many knew of the impending uniform deal, they did not know that fighters would be paid based on their UFC ranking.  The rankings are based on media vote which adds a layer of uncertainty to the whole situation.  One might surmise that any controversy about fighters getting paid from this deal will be immediately deflected to those media members that choose the rankings.  Then again, the entity that chooses the media members that votes on the rankings…the UFC.  Moreover, at this point, it does not seem like any of the fighters know how they will be compensated or what to expect based upon fighter rank.  Also, if you are an unranked fighter, will you be making more or less with the Reebok deal?  It will be interesting to see how this deal will play in the current antitrust lawsuit filed by fighters against Zuffa.

14 for 14:

3.  Bellator 131/Bellator on PPV

4.  Zuffa downgraded by Standard & Poor’s

5.  CM Punk signs with the UFC

6.  Rebney replaced by Coker

7.  UFC Fight Pass a success in first year?

8.  TRT banned by NAC, UFC

9.  UFC PPVs down

10.  WSOF airs on NBC

11.  UFC continues global expansion

12.  Rousey wins CSAC arbitration against Fight Tribe

13.  Cung Le drug suspension overturned

14.  Gil re-signs with the UFC

Zuffa retains Boies Schiller & Flexner

December 30, 2014

The UFC issued a statement in which it announced that it has retained the law firm of Boies, Schiller & Flexner to defend it against plaintiffs seeking class action status alleging Zuffa of violating antitrust laws.

Per the UFC web site:

We have built a popular business from modest beginnings by meeting the needs of fans and fighters. Millions of people have watched our bouts, we have instituted leading health and safety measures for our athletes, and fighters are free to negotiate contract terms.

We will stand up against the plaintiffs in this litigation every step of the way, and have engaged attorneys from Boies, Schiller & Flexner LLP with a depth of experience in antitrust issues.

Bill Isaacson, our lead litigator, says, “The antitrust laws have long favored companies that create new products and services that consumers want. That is exactly what the UFC has done here through its long and substantial investment in building a popular sport.”

We are proud of the company we have built, confident in our legal position, and intend to prevail in this lawsuit.

Payout Perspective:

Boies, Schiller & Flexner is a high profile firm as some may recognize the last name Boies as David Boies from Bush v. Gore (Boies represented Gore) fame.  Lead counsel appears to be Bill Isaacson, a partner with the firm.  According to his bio, he provided key cross-examination (according to me the hardest thing to do in litigation) of NCAA witnesses in the 2014 case of O’Bannon v. NCAA.  Isaacson, who was one of the attorneys representing the plaintiffs, prevailed on behalf of O’Bannon.  With the retention of its attorneys, it will be an interesting and hotly contested matter.  Stay tuned in 2015.

14 for 14: No. 5 CM Punk signs with the UFC

December 30, 2014

It’s rare that a hyped-up announcement lives up to expectations.  But, the signing of Phil Brooks (aka CM Punk) did when he came on during the UFC 181 PPV to announce his intent to fight in the UFC.

Punk’s announcement left many UFC fans wondering about the direction of the UFC.  Some like the signing seeing it as good business as Punk is a “needle mover.”  Others, like Nate Diaz and Jon Jones questioned the signing.  For those fighters that had to fight and scrape their way to make it to the UFC, seeing Punk, a 36 year old without any MMA fights under his belt, entering the UFC was a joke.

Jones provided sound reasoning for his anti-Punk sentiment (via MMA Fighting):

“Every day I’m [Jones] at the gym watching these kids training. These guys have no money and they’re training their tails off, giving up everything to be a fighter.  Living in the gym, eating turkey and peanut butter, bare minimum to chase this dream and then a superstar like him just gets to jump into the UFC just because he knows the right people and has a name.”

Punk stated at the initial interview that he had not decided on a place to train and what weight division he would compete in.

The signing came shortly after Punk was on the Colt Cabana Podcast detailing health issues including admitting to 12 or 13 concussions.  One would think that this concern will come into play if a commission will have to sanction Punk’s first fight.

Payout Perspective:

Can Punk draw ratings and PPV buys for the UFC?  The day after UFC 181, the name CM Punk drew over 100,000 in U.S. google searches.  A Fox Sports Live which featured a CM Punk interview drew more than the usual amount of viewers.  One might conclude that there is a definite interest, or should we say curiosity, about whether Punk can actually fight.  Sure, he is great in the gym and trains with a lot of MMA fighters, but there are a lot of basketball players that are great in the gym but horrible in actual games.  Will Punk be able to translate his athletic ability in the Octagon?  Although Brock Lesnar was able to make the switch to MMA, he was a decorated college wrestler.  He also had at least one pro fight before entering the UFC.  Thus, the Punk signing is a gamble.  Moreover, the Punk signing reflects a move by the UFC to focus on the spectacle aspect of its business.

14 for 14: No. 6 Rebney replaced by Coker

December 29, 2014

Bjorn Rebney was relieved of his duties as the head of Bellator in June of this year. He was replaced by former Strikeforce head Scott Coker.

In addition, Bellator president and COO Tim Danaher was let go by Viacom.  According to MMA Fighting, the replacement of Rebney was dependent on waiting out Coker’s Zuffa’s non-compete clause.

Rebney indicated that he had differed “on views of the right strategic direction.”

A week or so before the change Rebney announced a change to its title fights which allowed for former tournament winners to challenge for a title.  They would no longer have to enter a tournament again to regain a chance for a title fight.

Looking back, one might infer a difference of opinion with the Bellator tournament structure.  In fact, this was one of the changes made by Coker upon him taking power.

Coker produced the biggest event in Bellator history in November with Bellator 131 with the main event of Tito Ortiz and Stephan Bonnar.  The change in promotion philosophy looks to have the company turning the corner as it competes with the UFC in the MMA landscape.

Payout Perspective:

The move from Rebney to Coker looks to have worked out in the short term.  He’s focused on the “less is more” strategy with the goal of producing 16 shows next year while focusing on quarterly “big events” which would include title fights along with headline names.  Per MMA Fighting, Coker plans on concentrating on promoting the company’s monthly shows on Spike TV along with focusing on a three month marketing campaign for its “big events” which will air on Saturday nights.  With word that it will actively try to sign more free agents including Brock Lesnar after his WWE contract expires, one might assume that Viacom is willing to expand its budget for Bellator.

14 for 14: No. 7 UFC Fight Pass a success in first year?

December 28, 2014

In its first full year of UFC Fight Pass, the company’s over the top digital network, it can be seen as an overall success despite some initial flaws, ongoing administrative issues and a more serious security breach.

It recently came under attack by a group known as “Anonymous” which has posted a link on its twitter account containing login credentials and credit card information of subscribers.  It appears that the attack may be associated with a Christmas Day attack on Xbox Live, PlayStation Network and Amazon.  In addition to the security breach, it has had issues with respect to charging customers that were trying out Fight Pass during their free trial period.  For the most part, it has been responsive in rectifying charging errors.  Yet, it still charged customers and if you didn’t check your credit card statement, you might have been charged without knowing.  There were also issues with functionality of the interface which have been addressed.  In my opinion, while both UFC Fight Pass and the WWE Network are viewer friendly, Fight Pass is superior.

The digital network launched on December 28, 2013 with a two month free trial before it began charging $9.99 per month.  The company held multiple Fight Night events (starting last January) on Fight Pass in addition to prelim fights for other televised events and/or PPVs.  It also carries InvictaFC live events.  It has also added original content throughout the year as well as showing Nevada Athletic Commission hearings.  The hearings were an interesting add as many tuned in to watch the monthly proceedings including the Cormier-Jones post-media fight hearings, and the hearings of Chael Sonnen and Wanderlei Silva

The original price point for the service was $9.99 per month although it has offered the service at lower price points including $8.99 per month and $6.99 per month.  The lower price points were usually associated with a year’s subscription.

According to Yahoo! Sports Kevin Iole, the UFC “generates $1 million in gross revenue per month for every 100,000 subscribers.”  The UFC has not indicated how many subscribers there are and the “churn” of its subscribers.  It also has not disclosed how much it spends to run the Fight Pass.  It is available in 178 countries and expanded internationally far faster than the WWE Network.

This past October, Iole reported that Conor McGregor and Jon Jones were the most searched fighters on Fight Pass. Also, the most-watched UFC fight on Fight Pass through October 2014 was Jon Jones-Alexander Gustafsson at UFC 165 in September 2013.

Payout Perspective:

Despite the initial apprehension of subscribing to the network, the amount of fans gravitating to Fight Pass has been very good.  One of the reasons for its popularity may be its expansion overseas and the fight libraries it has on the network.  We will see what the UFC will do to keep the digital network fresh to retain and increase its number of subscribers. Fight Pass has to be one of the biggest assets for the company going into 2015.

14 for 14: No. 8 TRT banned by NAC, UFC and others

December 28, 2014

In February 2014, an investigative report by ESPN on testosterone replacement therapy (TRT) in MMA revealed the practice of fighters utilizing a diagnosis of low testosterone for the usage of synthetic testosterone.

Not surprising, Dana White called out the ESPN report as an embellishment.  He noted that 5 fighters had TRT exemptions out of the “500 guys under contract.”  Still, the UFC issued a ban on the use as well.

It started with the Nevada Athletic Commission in February when it unanimously voted to ban TRT in MMA.  The UFC also decreed a ban.  In addition, other states including California and also Brazil followed suit with a ban on therapeutic use exemptions (TUE) for testosterone replacement therapy (TRT).

If Dan Henderson’s performance against Daniel Cormier at UFC 173 is an indication as to what happens after a fighter (Henderson benefited from the TRT exemption) comes off of TRT, the ban may have an effect on future fights and fighters.

Notably, Vitor Belfort, the next challenger to Chris Weidman’s light heavyweight title benefited from TRT.  ESPN highlighted Belfort in its February expose on the practice.  Belfort withdrew from his title fight against Weidman earlier in the year due to the Nevada ban on TRT.  Belfort chose not to apply for a license for the fight and Lyoto Machida stepped in.

Belfort was awarded a license by Nevada in July provided he would concede to random blood and urine testing.  However, Belfort was only tested once since July to the consternation of Chris Weidman.  His fight against Chris Weidman was moved to California where the CSAC will take over testing of Belfort.

Payout Perspective:

The ban on TRT in MMA was a step in the right direction for the sport in 2014.  It offered legitimacy to the sport as the use of TRT was perceived as cheating by many.  And while the ban may not be fair for a fighter like Antonio “Bigfoot” Silva, it was likely the right move.

14 for 14: No. 9 UFC PPVs down

December 27, 2014

UFC PPV buy rates are down from 2013 as an increase in the number of events, injuries and lack of star power have contributed to find the company’s prime business in decline.  This year’s average is at a lowly 256,000.

Standard & Poor’s downgraded Zuffa’s credit rating and its financial outlook this past fall citing in part the PPV business decline as a reason.  Dana White acknowledged the decline of PPV business in 2014 at the NeuLion Sports Media Technology Conference in November.  While the PPV model is a big part of the UFC business model, White stressed in November that the UFC was “much more” than PPV.  The promoter that he is, White stated that when “big events happen, the pay-per-view numbers will come back.”

As all of the PPVs for 2014 have occurred, the biggest event this year was UFC 175 in July which drew 540,000 PPV buys.  There were 4 events in 2013 that exceeded 540,000 PPV buys.  The previous high was UFC 168 in December 2013 with 1,025,000 PPV buys.  Outside of UFC 175, no 2014 PPV drew over 400,000 PPV buys.  It also had to cancel UFC 176 in August due to injuries.  Although there is a lot of hope for UFC 182 in January, it’s unlikely that event would eclipse UFC 168’s number or even UFC 175.

UFC PPVs in 2014 (main event in parentheses)

UFC 169 (Barao vs. Faber II) 230,000

UFC 170 (Rousey vs. McMann) 340,000

UFC 171 (Hendricks vs. Lawler) 300,000

UFC 172 (Jones vs. Teixeira) 350,000

UFC 173 (Barao vs. Dillashaw) 215,000

UFC 174 (Johnson vs. Bagautinov) 115,000

UFC 175 (Weidman vs. Machida) 545,000

UFC 177 (Dillashaw vs. Soto) 125,000

UFC 178 (Johnson vs. Cariaso) 205,000

UFC 179 (Also vs. Mendes II) 160,000

UFC 180 (Werdum vs. Hunt) 185,000

UFC 181 (Hendricks vs. Lawler II) 380,000

UFC 2014 PPVs

UFC PPVs averaged 256,000 PPV buys which is off from 2013’s PPV buy rate average of 468,000.  2013 did see two appearances by UFC PPV bell cow Georges St. Pierre.  It also benefited from UFC 168 which featured the dual main event of Rousey-Tate and Silva-Weidman II.  2013 had one more PPV due to the cancelled one this year.

UFC 2013 PPVs

2014 did not do as well as 2012 (448K PPV avg over 13 events) or 2011 (413K PPV avg over 14 events).

Payout Perspective:

 One may argue what’s been the cause for the poor PPV buy rates this past year.  On the one hand, there is the amount of UFC events which allows the fight fan to pick and choose which PPV events to purchase.  On the other, there are the many injuries which cause fighters and fights to be re-shuffled.  Then, there’s the lack of star power (i.e. GSP).  There’s not an easy answer to the PPV issues unless the UFC decides to pull back on the number of PPV events (which does not look likely).   With three big PPV events in 2015, we will see if the PPV buy rates increase from 2014’s dismal average.

14 for 14: No. 11: UFC continues global expansion

December 27, 2014

The UFC held 22 events outside of the United States in 2014 in its continued expansion of the brand.  The expansion will not end as 2015 will bring one more event in the new year making 23 events to be held outside the United States.

Arguably, Mexico City, Mexico and Dublin, Ireland were the two hottest spots for international events for the UFC this year.

In recent days, the UFC has hired Ken Berger to direct UFC’s Asian division.  Zuffa let go of Mark Fischer in August and promoted Garry Cook from the UK region to UFC’s Chief Global Officer.

In April, the UFC visited Abu Dhabi and Quebec City, Quebec.  It was the first time the UFC made it to Quebec City and the second to Abu Dhabi.

In May, the UFC visited Berlin for the first time.

In June, the UFC and Vale Tudo Japan announced a partnership which would help the Japanese organization in promoting its fighters.  Although no news has yet come down, the two companies announced a TV show featuring Japanese fighters would be produced in the future.  Dana White indicated that this show would be available on Fight Pass.  The UFC held an event in Japan this past September which aired on Fight Pass.

The UFC also visited New Zealand for the first time in June.

In July, the UFC visited Dublin for UFC Fight Night 46 featuring Conor McGregor.  The event was a success with McGregor defeating Diego Brandao before 9,500 fans.  MMA Fighting reported that he ticket demand was high and nearly all the tickets sold within hours of going on sale.  The event was a Fight Pass exclusive and White indicated it was the biggest event on the platform to date.  The success of the event sparked interest of a potential stadium show in Ireland likely featuring McCregor.

The UFC also visited Nova Scotia for the first time in October.

Similarly, UFC 180 in Mexico City was a sellout within 8 hours as 21,000 tickets were scooped up for the intended main event of Cain Velasquez versus Febricio Werdum.  Unfortunately, Velasquez was injured prior to the event and Mark Hunt stepped in.  The injury likely hurt PPV buys.

The UFC announced a stadium show for January 2015 in Sweden where native Alexander Gustafson would take on Anthony Johnson as part of the January UFC on Fox event.

The UFC’s signature series, The Ultimate Fighter included a TUF Nations Edition (Canada vs. Australia), TUF Brazil, TUF China and TUF Latin America.

Payout Perspective:

Despite its recent credit downgrade in October, Standard & Poor’s indicated that one of the positives for Zuffa was its international expansion.  With big shows in Dublin and Mexico City this year, there is hope of building new audiences in these areas.  Of course, that is dependent on the country’s stars (i.e., Conor McGregor, Cain Velasquez).  According to the Las Vegas Review Journal, for 2015, its Reebok deal will mean UFC logo gear in retail stores around the world, expansion of the UFC gym business globally and targeting Russia, South Korea, Scotland and Panama or Costa Rica.

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