WWE announces new name, business strategy
April 9, 2011
World Wrestling Entertainment announced that it is changing its name to WWE in a rebranding effort that includes a new business strategy. The purpose of the change is to “better reflect the company’s global entertainment offerings.”
Via WWE.com:
Two key components to WWE’s brand expansion will be the active pursuit to acquire entertainment content companies and the outsourcing of WWE’s core competencies – television and film production, live event production and licensing. As part of the new business model, the company will also focus on the development of new television products including scripted, non-scripted and animated programs, as well as the launch of a new WWE network in the next 12-18 months. The first new program of the brand expansion is Tough Enough®, WWE’s non-scripted program that debuted on the USA Network on Monday.
This new rebranding initiative will be highlighted through a national consumer and business-to-business advertising campaign entitled “Bigger. Badder. Better.™” The campaign kicked off at WrestleMania® XXVII on Sunday and will be featured on cable TV, print and online.
More from the LA Times:
The moves come as WWE looks to rebound from a tough end to 2010 that saw attendance at its events and pay-per-view revenue both drop 15% in the fourth quarter. The declines were blamed on the economy, although WWE probably didn’t help matters by raising prices at a time when its core audience was feeling the pinch.
There is some skepticism of the expansion outside the ring as well as concern that the WWE is losing some of its market share to MMA.
“I think that the most important thing right now is the return of the health of the core business,” said Jay Kaplan, portfolio manager for Royce & Associates, which holds about 9% of WWE stock. “One of the market’s big concerns is are they losing market share to real fighting,” Kaplan added, referring to mixed martial arts and ultimate fighting.
Payout Perspective:
The WWE new strategy is risky. But, it is familiar with taking risks lest we forget the XFL. How much of the refocusing has to do with the fact that MMA has taken some of its core audience? The timing of the move is curious considering the financials. There are some positive signs: Wrestlemania 27 was a success, the debut of Tough Enough received good ratings and the WWE will see a boost with The Rock back. Prior to the refocusing of its business strategy, there were plans of further international expansion. Als0, its film division has made stars out of some of its in ring talent (e.g., John Cena, The Big Show, Triple H).
Dropping “wrestling” from its name may benefit the company in working with mainstream companies. If it is to extend its brand and compete with the likes of AEG in live entertainment production, the name change could help.
Another intriguing aspect of this is the development of a WWE network. With a vast wrestling library at its disposal, it would not be far fetched to create a network. This could be the blueprint for the UFC to one day have its own network.
One final interesting bit from the LA Times piece is the question of whether the rebranding effort will attract a bigger company to purchase the WWE. Vince McMahon denied this is the reason for the new strategy. It would seem unlikely that this would be the case knowing how hard McMahon worked to build the WWE.
Update On Bellator Majority Shareholder: Plainfield Asset Management
March 2, 2011
In September of 2010, MMAPayout reported that Bellator funder and majority stake holder, Plainfield Asset Management (a hedge fund based out of CT) was being investigated by the FBI. The recession, FBI Investigations and whistleblower allegations have caused great hardship on the company over the past few years.
Wall Street Journal now gives us an update on the health of the hedge fund (according to AR Magazine).
Other firms that lost large amount of assets, according to AR, included Max Holmes’s Plainfield Asset Management, whose assets fell by 62.1% to $1.25 billion because of the liquidation of several large privately held positions
Payout Perspective:
Back in 2010, Plainfield Direct, an investment fund managed by PAM, held a 51.6% majority stake in Bellator Sports Worldwide LLC. Before the recession hit the U.S. economy, Plainfield Asset Management had $5 billion in assets under management. According to AR Magazine, Plainfield’s assets fell by %62.1 to 1.25 billion last year due to the liquidation of several large privately held positions. It was also reported today (Nasdaq) that Plainfield Asset Management had offloaded a direct private investment portfolio made up of debt and equity positions to Paul Capital for roughly 150 million.
Hedge fund firm Plainfield Asset Management LLC has offloaded a direct private investment portfolio made up of debt and equity positions to Paul Capital for roughly $150 million, according to people familiar with the situation…The portfolio is made up of 14 companies with two-thirds of illiquid debt positions and one-third equity investments, these people said.
In addition to the sale, the business development company of Plainfield Asset Management is said to be shopping a senior loan portfolio as well. The reason behind the sales is believed to be tied to redemption requests by it’s clients that were blocked for the past year due to the economic downturn.
As of now, it is unknown whether the hedge fund continues to be a majority stakeholder of Bellator.
UPDATE: Plainfield Asset Management is liquidating its hedge funds and will return all capital to investors by June 2012. At that point, a decision will be made regarding the funds future, which includes PAM founder Max Holmes starting up a new fund.
UFC 129: $40 million economic impact for Toronto
February 17, 2011
Dana White predicts a $40 million economic impact for Toronto as a result of UFC 129. White also stated in a conference call Tuesday that UFC 129 could bring $1.5 million in revenue to the city from ticket taxes alone. In addition, the UFC has sold $11 million in tickets for the event
Via Rogers Sportsnet:
Tom Wright, the UFC’s director of Canadian operations, said the Ontario Athletic Commission will also benefit to the tune of five per cent of the gross ticket sales. That’s $550,000, working on the gate figure of $11 million.
Via MMA Junkie:
The demand was shocking even to White, who had seen the promotion do big business in all five of its trips to Canada. White added that UFC 129 also broke a box office record previously held by the NFL in the Rogers Centre. The arena previously has hosted events with up to 69,000 spectators. However, given the UFC’s event-night layout, large video screens, and the UFC president’s commitment to maintain as much as the “intimate atmosphere” of a live UFC-show experience, officials initially expected 50,000 to be the absolute maximum capacity for UFC 129.
Payout Perspective:
Outstanding numbers for the UFC and further evidence that the UFC’s popularity can affect the economy of the cities where it holds its events. For the skeptics, the $40 million figure does seem huge, but if you factor in the money generated from the Fan Expo the same weekend, the number could be possible. The numbers also supports the premise of the NY economic study provided by the UFC several weeks ago in that MMA can stimulate the local economy. More fuel for the argument that NY should legalize MMA.
Business Journal: Strikeforce Makes Millions On Mixed Martial Arts
February 8, 2011
Silicon Valley / San Jose Business Journal recently wrote a “Small Busines Spotlight” feature on Strikeforce and Strikeforce CEO Scott Coker that revealed some insight into how much the promotion has grown since they started promoting MMA back in 2006.
Although this article is premium content and needs a pay subscription to read the entire piece, it is probably one of the most insightful write-ups which focus on the business side of Strikeforce. The article can be summed up nicely by this quote:
Scott Coker and San Jose Sharks owner Silicon Valley Sports & Entertainment are on pace to rake in up to $30 million this year from Strikeforce fights at HP Pavilion and other venues.
Payout Perspective:
Here are other random interesting notes that caught my attention in the article and other input from us.
- Strikeforce is on pace to post up to $30 million in revenue for this fiscal year (June 2011), compared to 4 million in 2006, which was their first year of operations.
- There are current plans to release DVD’s from older events and also launch an online catalog within the upcoming quarters, which would add another great revenue stream which they have not fully utilized yet.
- Strikeforce was founded in 1992, back when they used to promote kickboxing events. Amazingly, they only employ 13 workers. Their philosophy has always been to never over extend and exercise great fiscal responsibility, something that has plagued other promotions who were not able to last in the MMA market alongside the UFC.
- Main source of income are ticket sales, sponsorships, and most importantly, television licensing. Back in 2009, Strikeforce signed a TV deal with Showtime, which MMA insiders said the promotion would make $25 million in licensing fees over the course of the three-year deal, which runs into 2012. The deal was made after Strikeforce purchased assets from Showtime’s previous MMA partner, ProElite for $3 million, which included roughly 42 fighter contracts and a video library of 20 live events, just to name a few.
- Scott Coker, a black belt in TKD, promoted his fight combat sports event, kickboxing, back in 1985 at the age of 21. His first MMA promoted event took place in March, 2006 in California, just a few months after the sport was legalized in the state.
- The Strikeforce: Shamrock vs Gracie event held in March of 2006 in San Jose had no sponsors and no TV, drew 18,300 fans, which set the North American paid attendance record (which it still holds for the US) and produced about a $1 million dollar gate for the event. They were expecting about 7,500 fans for the event.
- Explosion Entertainment LLC was formed in May of 2008 consiting of SVSE personnel and Scott Coker, which was the first major move which led to many TV, licensing, and sponsorship deals in the following months.
- Strikeforce currently boasts a roster of 125 fighters under contract. Back in 2008, they had 10 fighters under contract.
- Strikeforce main sponsors include Full Tilt Poker, Rockstar Energy Drinks, GoDaddy and EA Sports.
- After signing a deal with Collective Licensing International on April 12, 2010. Since then, Strikeforce has gone through some changes, including a new logo, new merchandising, and a new store website to bring the brand up to date.
MusclePharm Raises $1.4 Million
January 8, 2011
In December, nutritional supplement company, MusclePharm, raised $1.4 million through convertible promissory notes and a registration agreement with accredited investors.
“We are very pleased with the successful completion of the agreement with the investor and believe this capital will support our capital requirements for growth,” commented Brad Pyatt, MusclePharm’s Chief Executive Officer. “We appreciate our investor’s confidence in MusclePharm as we continue to execute our long-term growth strategy.”
This capital raise, combined with the previously released fulfillment agreement with IVitals, further enhances the Company’s overall financial strength for future long-term profitable growth. Management will continue to focus on the development, sales & marketing of MusclePharm’s growing portfolio of nutritional supplement products.
Payout Perspective:
It was announced last month that nutritional supplement company, MusclePharm, owed Zuffa approximately $375,000 in over-due sponsorship fees accrued over the course of a year-long agreement between the two companies starting in January. This outstanding debt was subsequently sold by Zuffa to a collection agency in the Fall.
Many were surprised to see the brand return to the Octagon in January. The WEC deal had expired and Zuffa didn’t appear to have any outstanding obligations to the company. Why would it do business with a company that had already failed to pay its debts? The answer is ostensibly because MusclePharm was able to raise new capital in December to fund new marketing efforts and recommit to sponsoring UFC fighters (including the payment of the UFC “sponsor tax”).
MusclPharm’s new apparel partnership with Tapout is encouraging. It’s a textbook case of two brands working together to better leverage the sponsorship of a property and increase value. This is something that’s going to hit across multiple sponsorship objectives such as awareness, interest, intent to purchase, favorable attitudes towards the brand, and increased sales.
However, I remain skeptical that the company can turn things around. The company sponsors a lot of fighters and that’s a good thing, but if it blows through its working capital again, then it’s likely to leave a lot of people in the lurch. Here’s a glimpse of its liquidity and capital resources as of November 15th’s Q10 (emphasis mine):
Liquidity and Capital Resources
Our primary source of operating cash has been through the sale of equity and through the issuance of convertible secured promissory notes and other short term debt as discussed below.
At September 30, 2010, the Company had cash of $10,657 and a working capital deficit of $2,578,866, compared to overdrawn bank accounts of $17,841 and a working capital deficit of $1,223,074 at December 31, 2009. The working capital deficit increase of $1,355,792 is primarily attributed to the operating losses incurred for the nine months ended September 30, 2010.
Cash used in operating activities was $2.4 million for the nine months ended September 30, 2010, as compared to cash used in operating activities of $0.4 million for the nine months ended September 30, 2009. The increase in cash used in operating activities for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 was primarily the result of the net operating loss net of non-cash expenses, for the current nine month period.
Cash used in investing activities was $30,395 for the nine months ended September 30, 2010, as compared to cash used in investing activities of $5,510 for the nine months ended September 30, 2009. The increase in cash used in investing activities represents purchases of various fixed assets. We also maintain a website http://www.musclepharm.com), designed for customers and investors. Future investments in equipment and other fixed assets, as well as further development of our Internet presence will largely depend on available capital resources.
Note: I pointed out last week that Tapout has been much less consistent on the activation front in the last six months (due, in part, to what I believe to be the ABG acquisition and likely marketing strategy reformulation). However, the partnership is something I also believe needs to be recognized; more sponsoring brands need to co-promote, because its an innovative way of pooling resources, leveraging a sponsorship, and creating value that might not always be present with stand alone activation strategies. Kudos.
PAG Capital Partners invests in MMA Warehouse
January 7, 2011
Internet retailer MMA Warehouse received a major financial boost when PAG Capital Partners made a major equity investment in the online apparel company Thursday.
Via PAG Capital Partners press release (h/t Robert Joyner on twitter):
MMA Warehouse, LLC is a leading internet retailer specializing in selling a wide selection of mixed martial arts gear, apparel and accessories. MMA Warehouse sells products directly to consumers all over the world through its flagship website. Mika Casey will continue in his role as Chief Executive Officer and has retained a significant ownership stake in the company.
Established in 2004, MMA Warehouse has grown to become one of the largest mixed martial arts retailers in the world. The company achieved record performance in 2010 by providing its customers excellent service and an extensive selection of high-quality merchandise from the industry’s top brands.
“We are very excited to have completed this transaction as we head into 2011,” said Mika Casey, CEO. “In PAG Capital, we have found a partner that will best position us to capitalize on the strong worldwide growth of the mixed martial arts industry. PAG Capital’s strategic and financial support will enable us to continue to invest in our platform, expand our marketing capabilities, and capitalize on the many organic growth and acquisition opportunities available to us in the industry.”
Alex Fridman, Partner at PAG Capital, said, “MMA Warehouse’s track record of growth, best-in-class platform and excellent customer service makes this a very exciting investment for PAG Capital. Mika Casey and his team have built an industry-leading company and we are committed to support them as they build on their momentum of growth and success.”
Payout Perspective:
According to its web site, PAG Capital focuses on acquiring lower middle market companies with untapped potential and partnering with management to build great businesses. This is a good indicator of the continued growth of mixed martial arts if an investment firm is willing to provide financial backing for an online retailer of MMA goods. With the ever expanding UFC and Strikeforce, investors foresee a demand from consumers for MMA goods.
It will be interesting to see what MMA Warehouse will do next. How will it expand its business? Is a physical storefront in its long-term planning? Will it acquire other online retailers?
Zuffa Credit Rating Upgraded to BB
December 22, 2010
Standard and Poor’s have upgraded Zuffa’s credit rating from “BB-” to “BB” on the strength of the UFC’s strong operating trends, improved profitability internationally, and good credit measures.
Report Summary
- Zuffa has increased profitability in large part due to holding its events in more profitable domestic venues or international markets that facilitate live PPV broadcasting to the domestic market.
- Specific mention is made of the UFC-WEC merger as potential source of incremental ticket and ppv sales growth.
- The volatility of consumer tastes and preferences continues to be a slight concern as these may impact PPV revenues, but the report also cites the development of new fighter talent and regulatory acceptance as additional risk factors.
- However, the company’s strong EBITDA margin and healthy cash flow conversion rate are reportedly sustainable over the near to intermediate term and partially off-set concern over volatility in PPV earnings and risk factors mentioned above.
- The report reinforces that 75% revenues are event-related; PPV buys account for nearly 60% of all PPV event revenue while gate and sponsorships account for the rest.
- The remaining 25% of revenue comes from live and taped broadcasts on SpikeTV, merchandise, and digital media revenue; much of that is broadcast revenue, but an emerging portion is merchandise and digital media.
- EBITDA margins are expected to track within a consistent range in the future, even with expansion into new markets like Brazil.
- Liquidity remains strong due largely to limited capital spending requirements.
- Debt: $50 million credit facility expiring in 2012; $425 million term loan due in 2015.
Zuffa Credit History
November 2007 – S&P Cuts Zuffa Rating, BB to BB-
July 2008 – Zuffa Rating Goes Negative to Stable
July 2009 – Cuban Now a Zuffa Bond Holder
October 2009 – S&P Re-Affirm BB-, Slide Recovery Rating Down
December 2010 – S&P Raises Zuffa Rating, BB- to BB
Payout Perspective
Zuffa has invested a great deal of time, effort, and money to diversify its revenue sources over the last few years. I expected this focus on merchandising and digital media revenue generation to increase non-event-related revenues as a percentage of overall revenues, but Zuffa has matched this revenue growth with substantial growth in the PPV domain. Thus, there remains a 75-25 split between event and non-event related revenues.
Overall, the raised rating is not surprising. Zuffa has had another excellent year, breaking its PPV and live gate marks for the third consecutive time. I suspect it may break the record again in 2011 with the addition of the WEC roster that now gives them two more titles to use in its event scheduling rotation.
There’s been a lot of talk lately about the UFC peaking, but I don’t think this is the absolute top of the mountain. Sure, the company is going to have its ups and downs – we can’t expect straight line 20% growth in perpetuity – but I do think there remains a host of growth potential both on the event-related side and the ancillary side. Its best chance for growth is to gain exposure domestically with a new television deal (somebody other than Spike). However, it may also achieve growth in other ways:
- The UFC Gyms model
- The continued development of its merchandising business
- An aggressive digital media expansion to reach new audiences
- Investing in a strong integrated marketing campaign (something they’ve yet to really do) to work on converting awareness to interest and beyond
UFC Gyms are perhaps the most exciting opportunity that has yet to be fully explored. I’m not sure they’ll provide material revenues (either in operation or through licensing fee), but the potential is there to leverage these gyms as first a means to greater exposure and then as a teaching tool. This seems to be even more crucial in MMA than other sports; it’s something that people don’t think much about trying, but upon doing so often realize the many health and fitness benefits to the training. These workouts often provide enough new perspective and appreciation for the sport that a new fan is born.
There are many things the people of this industry have yet to discover (myself included, certainly). However, one I feel quite strongly about is the notion that a.) while everyone may “get” MMA, not everyone is going to like it, and b.) not all those that like it, come to like it in the same way or for the same reasons. MMA has to learn to be flexible and accommodating to all sorts of people that like the sport for various reasons or get into the sport in various ways. The UFC Gym idea is something that helps in this regard.
UFC Sponsorship Policies Hurting Fighters?
December 10, 2010
Jonathan Snowden of BloodyElbow has written an interesting sponsorship piece that argues the combination of the UFC’s sponsorship policies and the bad economy are hurting the fighters. He also suggests that this confluence of factors has perpetuated the fight camp issue over the last year.
As the UFC continues to record record profits at events around the world, it’s never been harder, in the post Ultimate Fighter world, for a fighter to secure a lucrative sponsorship deal. This is particularly true for fighters outside of the Zuffa empire – and it’s not just a product of an economy staggering and reeling like Zab Judah after a Kosta Tsyzu flurry. It’s part of a calculated campaign by the UFC to hurt its competition. Unfortunately, the primary victims are the men and women trying to make a living in the cage.
In many ways, this is just a reality of today’s business climate. While we often think of the UFC as an established monolith, the Fertitta brothers have actually owned the company for less than a decade. It’s still a very young business, run by the hyper-competitive Dana White. He wants the UFC to be associated with MMA the way professional football makes fans immediately think “NFL.” And he’s not afraid to play hardball with sponsors and rival fight promoters to get there.
“As the market collapses and the major sponsors keep cutting back, television fighters are losing their leverage. Guys without names are being pushed out of the market entirely,” one agent told Bloody Elbow anonymously for fear of retribution. “Clients outside the UFC are in even worse shape. Apparel companies are walking on eggshells and essentially won’t touch anyone outside of the UFC they don’t already have a deal with. No one wants to get banned.”
Payout Perspective:
I agree with the basic argument that the combination of the UFC’s sponsorship policies and the current economy have hurt the fighters financially. I also concur that this financial instability has helped to perpetuate the fight camp mentality that is currently wreaking havoc with many UFC divisions. However, I feel as though the article from Snowden unduly frames the UFC as the greedy bad guy in this situation.
It should be pointed out that official UFC sponsors are paying millions of dollars every year for a very particular, and often exclusive, set of rights. What other brands are doing through the sponsorship of fighters inside the Octagon is tantamount to ambush marketing. In that sense, the UFC is justified in charging the excess sponsorship fee as a means of curtailing these ambushing strategies, not of punishing or harming the fighters.
Tapout has become synonymous with the UFC by virtue of its long-held official sponsorship (essentially ownership) of the apparel category. Yet, if we were to erase all memory of Tapout from our collective brains and insert them as official sponsor today – given the current UFC sponsorship climate – does anyone really think Tapout would have a snowball’s chance in hell of becoming as strongly associated with the UFC? No, absolutely not, and that’s the concern here. The level of confusion that exists as the result of ambushing may really hinder a brand’s ability to collect ROI/ROO. This, of course, then has some bearing on the ability of the UFC to solicit sponsorships across its official categories.
However, it’s also fair to acknowledge that the UFC has been less than consistent on this front. Bud Light is the UFC’s largest corporate partner and official beer sponsor, but the UFC has in recent years signed both Miller Lite and Mickey’s Malt Liquor to sponsor its TUF program on Spike TV. The same can be said for Xyience and AMP Energy or BSN and MusclePharm.
The Fighter Sponsorship House of Cards
The ability of brand’s to collect an ROI/ROO is also the reason I believe fighter sponsorship is a house of cards waiting to collapse. Yes, fighter sponsorship has played a pivotal role in helping to support fighters in the early years, but there simply isn’t a strong enough return under the current model to justify the investment. It’s not just a case of the economy being tough, either. It’s a case of the sponsorship industry waking up and finally understanding that this 1980′s model of sponsorship of cash for signage is absolutely ridiculous.
Investors have seen the success of the UFC or Tapout and figure they can achieve something similar. Unfortunately, it’s not that easy. ABG’s acquisition of Tapout, Hitman and Silver Star is just the start of what will likely be a great deal of consolidation in the industry over the next few years. Some of these brands will be purchased by larger holding companies in order to gain market share, capitalize on economies of scale, and accumulate negotiation leverage. Many of the others will close up shop because they can’t differentiate their brand from the plethora of competition.
The brands that do survive are going to be the ones that figure out how to differentiate. Here, I do see a role for fighter sponsorship, but it’s likely to be something far closer to the contemporary endorsement agreement that brands have with today’s top athletes. The brand will pay for likeness rights and commitments to advertising, a set number of appearances, and specific social media interaction with the brand. Any sort of fight night signage will probably end up being a throw in or small percentage of the overall deal.
Why? The value in sponsorship comes from the generation of repeated impressions with an audience across a host of different message channels. The fighter’s appearance on a televised card with minuscule logos on his advertising banner or fight shorts simply is not enough to generate material ROI; and if that’s all the fighter is doing for the brand, there’s likely to be very little ROO, either.
The brands that find a way to create an integrated marketing strategy and then incorporate the fighter into that strategy will be most successful at leveraging his abilities to gain traction with the consumer.
UFC 121: Payout Perspective
October 24, 2010
Welcome to another edition of Payout Perspective! This week we’re taking a look at UFC 121: Lesnar vs Velasquez which was held at the Honda Center in Anaheim, California on Saturday, October 23rd. The event featured a heavyweight title clash between Brock Lesnar and Cain Velasquez, but also featured the debut of Jake Shields in the Octagon as well as the return of Tito Ortiz.
Velasquez punishes Lesnar, vaults UFC into new territory
Cain Velasquez was able to negate Brock Lesnar’s tremendous size and athleticism with his combination of wrestling prowess and stand-up acumen. He then displayed a great deal of patience and poise in picking Lesnar a part on the ground to finish the fight. Velasquez is the real deal. He may not be the best pure wrestler or pure striker in the division, but he’s the most well-rounded. Perhaps even scarier is the fact that he’s only 28 and still got room to improve just about everything.
The business implications of this fight are several and involve a bit of a trade-off between the short and long term. Lesnar is the sport’s top draw and best mainstream enabler, but he’s likely to lose a bit of his appeal without the belt. Certainly the 1 million buy guarantee is probably gone unless he fights Mir in a rubber match or lands another title shot. However, it is my belief that we’ve witnessed the birth of the next big draw in the UFC in the form of Velasquez. He may not be the most stirring interview or imposing physical specimen, but he finishes fights and that is ultimately what the fans care about most.
Velasquez also happens to bring a new demographic to the table. Say what you want about the UFC’s marketing tactics for this fight, but it knew it had to hedge its bets when promoting this fight. Velasquez may not sell 1 million PPV buys every fight, but he will prove to be a solid draw for the company on the merit of his 89% stoppage rate and the fact that he gives them a somewhat credible entry point into the Hispanic market both North and South of the border.
I also like this new heavyweight reality from the perspective of asset management. Velasquez is likely to fight more often than Lesnar, which means a quicker turnaround for lucrative heavyweight title fights for the UFC. Lesnar is also now unquestionably the biggest non-title draw in the UFC and someone that can anchor a successful PPV card without title fight support. This single fight has just given Joe Silva a host of new options to play around with when booking fights over the next 6-12 months.
The Lesnar loss probably isn’t optimal from a short term perspective, but the combination of Velasquez as a dominant champion and Lesnar as versatile non-title draw will help the UFC cover the gap and even come out ahead in the long term.
Shields earns win, not fans
Jake Shields did what he does best on Saturday and that’s smother his opponent. It wasn’t an endearing performance and it seems reasonable to assume the UFC was looking for a little more from him last night. However, he did get the job done and remains the front runner to challenge the winner of GSP-Koscheck II, according to Dana White. The choice between Shields and Fitch – both of whom have similar styles – has likely come down to providing the welterweight division with a fresh-faced contender. Shields has been hyped for so long as the best welterweight outside the UFC that he’ll likely generate more interest than a guy like Fitch.
Note: Keep a close eye on the payouts this week. It’ll be interesting to see what kind of guaranteed money Shields received from the UFC to defect from Strikeforce.
Ortiz classy in defeat, but that may not help him
Tito Ortiz may have been all class on Saturday night, but I’m not sure that’s going to help him stay in the UFC. He’s now lost four of his last five bouts and is no longer a relevant player within his division – not even as a gate keeper. Furthermore he isn’t the PPV or live gate draw that he used to be which calls the nature of his sizable contract into question.
The new relationship between Ortiz and the UFC was founded upon mutual benefit, but I can’t see it lasting if Ortiz no longer brings something to the agreement. This is simply the nature of the business.
UFC 121 draws the smallest gate of Brock Lesnar’s career
The UFC drew 14,856 to the Honda Center on Saturday night for UFC 121, which generated $2.15 million at the gate. Here’s the paradox: UFC 121 has come in as the lowest gate of Brock Lesnar’s career but on an event that will likely become the second or third highest-grossing PPV card of his career.
It’s difficult to reconcile the above, but I think it’s largely reflective of ticket pricing. The range for this fight was $75, $125, $200, $300, $400 and $500. While the demand for this fight may have been there at lower ticket levels or on PPV, the $300+ tickets may have exceeded the Anaheim MMA area reservation price.
I’d be very interested to learn whether the UFC is experimenting with any sort of ticket pricing sensitivity models, because from what we’ve seen over the last few years it appears as though the company is leaving money on the table with some of these inflated prices. Sure, the UFC comps a couple thousand tickets every night and that’s great from an exposure perspective, but at some point you want to maximize ticket revenue. I’d also argue that there are benefits to making the consumer purchase a product that go well beyond short-term revenue: the consumer is far more engaged with a product when they’ve had to sacrifice something to get it and it’s certainly difficult to get someone to pay for something after they’ve been consuming it for free.
Sponsorship watch
UFC 121 marked the official debut of Boost Mobile as an official UFC sponsor. They had a host of cage and mat signage, cut graphics through the telecast, and a presence on the UFC promotional material in the weeks leading up to the fight. It’ll be interesting to see what they drum up in terms of activation. The company has already initiated a nationwide sweepstakes entitled Your Town, Our Fighter, which offers a UFC viewing party with the fighter of your choice. Interestingly, the promotional partner for this activation is Samsung. I’ve said for a while now that the consumer electronics industry ought to seriously look at a partnership with the UFC, and Samsung might be able to use this promotion with Boost as a way to test the waters.
UFC overtakes WWE in PPV buys
October 6, 2010
Barron’s featured former WWE CEO/Senatorial Candidate Linda McMahon and the decline in finances of World Wrestling Entertainment. As McMahon’s political career heats up, the WWE business is cooling.
The article points out that the past three years; WWE popularity has taken a nose dive whereas the UFC has taken over in PPV dominance.
Revenues began to slip at WWE well before Linda [McMahon] left and eventually won the Republican nomination to face Democrat Richard Blumenthal in what looks like a tight contest. In 2009, total sales of $475 million were down 10%. But [WWE] Chief Financial Officer George Barrios proudly notes that profit margins have generally improved since he arrived in 2008. He says WWE earnings should rise when the company finds new performers that connect with its fans. “We are actually pretty happy with the way we’re doing,” says the financial chief.
Payout Perspective:
A reason for the decline in the WWE PPV buys has to do with the poor economy and the frequency of PPVs. Not only does the WWE compete with the UFC for PPV dollars, it is being challenged by rival wrestling organization, TNA, a league that includes Hulk Hogan, Ric Flair and Cactus Jack – notable wrestling figures albeit older. As Barrios indicates, the WWE needs to find a new performer to connect with fans. Although John Cena is a viable candidate, he cannot carry both its Raw brand on USA and Smackdown on the SyFy network. If you do tune in, there are many younger wrestlers that have been given the chance to become the next big thing. But, they have not found the popularity or gimmick that will sell them to the fans.
PPV fatigue can be another reason for the WWE decline in numbers. As mentioned, the lack of recognizable stars along with the saturation (WWE has 3 or 4 original programs on per week) on TV plus the tightening of discretionary income may equal the decline of WWE PPV buys.
The UFC rise in popularity the past couple years is another reason for the decline of the WWE PPV numbers. With the slowed economy, many fans are choosing the UFC over the WWE when it comes to spending their discretionary income on PPVs.
It will be interesting to see how the UFC PPV numbers will be for UFC 121 as the UFC seems to be heavily promoting this show hoping for a big gate and PPV buys. Also, after UFC 121, Zuffa will have done 4 live shows in the past 30 days. The lukewarm reviews of UFC 119 were a red flag for many UFC fans that usually made the monthly PPV purchase. Bloody Elbow notes how some have criticized the UFC for possible PPV-fatigue which has shown through lack of production innovation and a failure to stock its monthly cards with marketable stars. Certainly, the WWE decline in PPV buys could happen to the UFC down the road. It will be up to the UFC to see how it can sustain its market of PPV buys.
