UFC one of the best brands in 2016

October 26, 2016

Forbes.com reports on 2016’s 40 best business brands.  The UFC ranks 6th as one of the best brands for 2016.

Nike topped the list with a current brand value of $27 billion which is up 3.8% from last year.  ESPN came in second with a brand value of $16.5 billion despite being down almost 3% from 2015.  Adidas, Under Armour and Sky Sports round out the top 5.

The UFC placed seventh with a brand value of $2 billion and a remarkable one year change of 335%.  Reebok, the UFC’s official clothing sponsor, ranked 9th with a current brand value of $800 million, down 3.6% from last year.

Forbes.com explains the brand value for a sports business, which differs from sports teams, athlete and sport event brands, in the article:

the brand value is the difference between the estimated enterprise value of the business brand and what the enterprise value of a similar business is worth.

Forbes.com specifically addressed the UFC sale as well as a word of caution:

By my count the price allocation of the deal valued the UFC’s brand at $2 billion–more than three times its value a year ago–based on the enterprise value premium paid for the mixed martial arts promotion. The UFC posted the biggest year–over-year increase among business brands. But if the UFC does not become bigger and more profitable–thereby justifying its $4 billion price tag–its brand could fall sharply in value.

Payout Perspective:

Undoubtedly the UFC’s sale to WME-IMG impacted the brand value.  Is it possible that the UFC brand is overvalued?  One of the reasons for the high price tag for the company was the strength in the brand.  It is MMA to the casual fan.  Of course, the buyout loan strategy implemented in the sale has been questioned by federal regulators due to the increase in the possibility of a default.

Stratus Media Group & New ProElite CEO Paul Feller Interview

June 21, 2011

After Stratus Media Group announced that they had acquired ninety-five percent of ProElite, CEO Paul Feller gives MiddleEasy.com a great interview on what we can expect from the resurging MMA group.

Here are some excerpts from the interview conducted by MiddleEasy’s Elena Lopez.  When asked about why Stratus Media made the deal to acquire a large stake in ProElite, Feller stated the following:

We have a well-established name worldwide, they have a wonderful library of previous events and we’re looking to take that branding and that history, and rebuild the brand as a major player and we’re looking to fill the number two spot that Strikeforce once held.”

In terms of making ProElite a success, feller stated that they will use their experience and already-existing relationships and leverage those into all properties they manage.

We have multiple events, not just in the MMA space, but music festivals, concerts, film festivals, autoracing, autosports — and we’re going to extrapolate the benefits of media and sponsorship from all of our different properties and cross-pollinate them across all of our brands and all of our events including ProElite. That means leveraging our television relationships, our sponsorships and our merchandising partners. We have considerable resources to go into this and better the chances and the odds to make ProElite a large success.

 

Payout Perspective:

Here is  a summary of other topics the extensive interview touched on:

– Feller attributes the video library, intellectual property value, fighter relationships, and equity in brand-awareness as reasons they invested in the defunct company.

– Feller admits that they were in “significant discussions to acquire a large portion of Strikeforce” but the deal did not materialize.

– Regarding the future of the promotion, Feller states that a bulk of what could happen in the future is dependent on what happens with the future of Strikeforce and UFC. In terms of acquiring fighter, Feller states that they are “already  in major communications” to get a number of fighters and free agents.

More Details Behind Zuffa-Strikeforce Purchase

April 25, 2011

Dave Meltzer over at F4WOnline.com is reporting some interesting details behind the Zuffa-Strikeforce purchase, which details why the UFC broke the news that Saturday morning and some info behind the bidders and the acquisition timetable.

On F4WOnline’s latest newsletter (subscription), some more notes regarding the deal between Sports Valley Sports and Entertainment and Zuffa were released:

– SVSE was looking for a strategic business partner who would help fund Strikeforce in order to expand and become a PPV revenue company.

– The key members during the negotiations were Lorenzo Fertitta and Lawrence Epstein from the UFC, Dana White was not involved.

– Talks began in December and terms and money had been agreed on by January.

– The story behind the Saturday announcement is summarized best from the quote below, taken from the write-up.

The plan was to make the public announcement on 3/14, however a media outlet found out and was going to go with a story on 3/12. That’s when UFC contacted Ariel Helwani as they wanted to get the word out first and get their version of the story out immediately.

–  MMAPayout was aware of the story 2 weeks before it broke that Saturday but could not confirm it before the story broke.  A few MMA outlets were on to the story already by that weekend, and it is said that Ariel Helwani was already flown in to tape the interview with Dana White by the end of the week to release it with the official announcement.  When the UFC realized that another MMA outlet was going to break the story first, they decided to release the tape and break the news on Saturday morning instead of Monday to get their version of the story out there first. Josh Gross of ESPN reported the news shortly after it broke that Saturday, followed by MMAJunkie and the other outlets that evening.

– Multiple legit offers were made for Strikeforce, including some from the boxing world.  UFC had the best deal and wanted to make it because it would eliminate their main competitor, gain marketable athletes, and would be able to run more shows and expand. One note here is Pro Elite’s alleged 40 million offer, which apparently was mostly a paper offer, was never considered a legit offer.

***

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

Zuffa Purchases Strikeforce, Agrees to Blockbuster MMA Deal

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

Exploring Why SVSE Walked Away from Strikeforce & MMA

Exploring Why SVSE Walked Away from Strikeforce & MMA

March 24, 2011

Last week’s shocking Strikeforce sale is still resonating through the MMA landscape as it left fans and media with many unanswered questions. MMAPayout will explore why Strikeforce was sold, SVSE’s future plans, and why they decided to walk away from MMA.

 

In an interview with HDNet’s Bas Rutten, Scott Coker revealed that Silicon Valley Sports & Entertainment (main financial partner behind Strikeforce) wanted to bring another sports franchise to San Jose, ultimately deciding that in order to do so, they wanted out of the MMA business to focus on that as well as continue to build their San Jose Sharks NHL franchise.

Frank Shamrock told MMA Fighting’s Ariel Helwani the following regarding the relationship between SVSE and Strikeforce:

“I can’t say I saw it coming but I know the demands of Strikeforce were high and I knew the financial partners were strained and weren’t interested in the big risks,” Shamrock said. “I knew change was coming, I didn’t know we were going to change that much.”

According to Shamrock, Coker spent a lot of money to compete in the marketplace. For SVSE, Strikeforce became too much of a risk.

“They got tired of writing big checks and not seeing the big return,” he said. “For them [the older established sports model is] the kind of business they wanted to be in. They didn’t want to be in the visionary, high-risk startup kind of MMA business.”

 

In regards to the sports franchise that SVSE is looking at to bring into San Jose, it has been speculated since the end of 2009 that they have diligently pursued an NBA team to occupy the NBA-ready HP Pavilion.  Former SVSE/San Jose Sharks CEO Greg Jamison, who stepped down from his position in October of last year, was said to be looking at the Sacramento Kings NBA franchise and was in talks with their owners, the Maloof brothers, for a good portion of 2010.

Greg Jamison, chief executive of Silicon Valley Sports & Entertainment, which manages the Pavilion and owns the San Jose Sharks hockey team, said his company has talked to “a number of teams” over the last year about relocating to San Jose.

A source familiar with the situation said Jamison in recent months has met with the owners of the Sacramento Kings, who are looking for an alternative to aging Arco Arena.

Though it’s far from certain that the Kings will ever play a game in San Jose, things have apparently moved far enough ahead that the San Jose City Council as early as month’s end will vote on a “memorandum of understanding” that would guide negotiations with any National Basketball Association team.

 

Back in September of last year, MMAPayout reported on rumors of a Strikeforce sale tied to Greg Jamison’s decision to step down as CEO of SVSE. Nearly three months later, Strikeforce was searching for financial partners to keep the MMA promotion going.  It was a clear sign at the time that SVSE was changing their strategy and vision for the future, and they couldn’t sustain high-risk ventures that were not profitable (though both had potential to become profitable investments in the near future) in the San Jose Sharks and Strikeforce.

Jamison, who has worked in the NBA’s Dallas Mavericks and Indiana Pacers in the past, has vast experience dealing with the NBA and was the front man in the negotiations with NBA franchises.  Although he has stepped down from his position as CEO from SVSE, it is said that Jamison still serves as a San Jose Sharks representative for the NHL and is still a minority owner of the team.  Under his ownership, the San Jose Sharks have been widely regarded as one of the best managed teams in the NHL according to Forbes magazine back in 2009. In the NHL, the team earned a league-wide reputation for quality and thoroughness from the bottom up. Without the television dollars and revenue sharing other leagues enjoy, the Sharks and SVSE helped turn HP Pavilion into a top 5 event destination and made some key investments in local ice hockey rinks, the Strikeforce MMA promotion, tennis tournaments, and driving successful merchandising and publishing arms.

Although the news is all positive regarding management, Forbes also noted that they weren’t profiting (something very common in the NHL), and were hoping to be doing so by 2012.  They also point out that the San Jose Sharks brings them $84 million out of the $155 million total revenue accounted for back in 2009 (compared to the $30 million revenue that Strikeforce brings).

Of SVSE’s revenue of $155 million, NHL hockey brings in $84 million. The rest comes from things like a chain of ice rinks, three professional tennis tournaments, a mixed martial arts circuit and an apparel company. Last year the team’s hockey operations lost $5 million, but the profits from the other businesses cut that loss to an estimated $2 million. Gregory Jamison, a Sharks co-owner who’s in charge of day-to-day operations, sees the combined businesses turning a profit in two to three years.

In May 2008 SVSE acquired a 50% position in cage-fighting outfit Strikeforce. Since then revenue for the fighting operation has shot up tenfold to an estimated $30 million. Thanks to the credibility and broadcast experience of the Sharks’ owners, Strikeforce’s fights will now move from a 2 a.m. time slot on NBC to prime time on CBS and Showtime. The TV deal, signed in February, would not have happened without the Sharks on board, says Strikeforce founder Scott Coker.

 

Going after another major league franchise and bringing it to San Jose would easily bring in over $100 million in revenue to SVSE and to the city of San Jose in addition to the $84 million the Sharks bring in, although luring an NBA team has not been an easy task, failing to do so over the past couple of years.  Dropping unproven high-risk investments  in order to focus on acquiring an NBA team and growing the San Jose Sharks makes the most business sense for SVSE and for the city of San Jose, as Strikeforce attendance numbers were dropping since they started to host events back in 2006, when they drew an amazing 18,265 fans for their debut event in the HP Pavilion.

Along with the Sacramento Kings (who are now rumored to be moving to Anaheim instead of San Jose), there have also been talks with the New Orleans Hornets, with the help of one of the richest men in the world – Larry Ellison, who is the co-founder and CEO of the Oracle Corporation (net worth is around $40 billion dollars). According to the Mercury News:

The NBA/San Jose advantages: Ellison’s billions, the handful of teams in financial distress, and the existence of HP Pavilion, which is NBA-ready.

In January, Ellison, one of the richest men in the world, confirmed that he bid on the New Orleans Hornets, but the league chose to take the team over at that time and said it was seeking local ownership.

But it’s probably safe to assume the NBA will wait until after this summer’s labor negotiations, then put the Hornets back up for sale…

Of course, any Ellison/San Jose effort would involve Silicon Valley Sports & Entertainment, the company that runs the Sharks and the arena and has sought an NBA co-tenant for years.

 

Although luring an NBA franchise is a huge task to take on, there are plenty of other barriers that would have to be settled before an NBA team could move to San Jose.  One being that the Golden State Warriors, who reside in Oakland (40 miles away from San Jose), have a 75-mile NBA “marketing rights” zone, but could potentially be waived if the NBA Board of Governors chooses to do so. Other concerns include TV deals and splitting the fanbase in the area with two NBA franchises.  Although there are obstacles, there is no doubt that SVSE made up their mind on what their next move was going to be.  MMA and Strikeforce were not in the plans any longer and choosing a more proven and lucrative venture is most likely the right call, but it also raises red flags to any potential MMA investor with deep pockets hoping to jump into a market which is now heavily dominated by the UFC. High-risk, high-reward will continue to be the saying in MMA for years to come.

MMA Investors Searching for Viable Competitor, Is It Worth the Risk?

March 16, 2011

This weekend’s Zuffa-Strikeforce purchase announcement shook up the MMA landscape in such a way, that many fans, fighters, and sponsors were left in limbo as to what the future will hold for the sport and business of MMA.  The announcement also created a huge void for a number 2 promotion in the market, an opportunity which some MMA investors are already analyzing and moving some money around.

 

Why would investors be interested in MMA at this point after Strikeforce was just purchased by Zuffa? Well, lets take a look at the events that lead to Strikeforce’s sale to understand why.

Showtime, which was a part owner of ProElite, spent a good amount of resources and budget to build up and kick-off MMA on the network. They were fairly successful in making stars within the promotion, such as Kimbo Slice, Gina Carano, Robbie Lawler and Nick Diaz, though they spent way too much money and accumulated debt of around $55 million, which lead the company to to almost file for bankruptcy, but instead chose to sell off it’s assets to recuperate some of the losses for Showtime.

Strikeforce and CEO Scott Coker were in the kickboxing promotion business all the way up to 2006, when they promoted their first MMA event in California, which was hugely successful and still holds the U.S. paid attendance record for MMA.  Before their first MMA event, they had a strong regional fanbase and following in San Jose.  SVSE along with Scott Coker struck a deal and created a partnership which slowly built up the company to the point where they were well positioned enough that when the Showtime was looking for a new MMA promoter, they were able to strike a deal with Showtime and Pro Elite to acquire their assets. Sherdog had the details back in February 12, 2009.

Strikeforce parent company Explosion Entertainment LLC purchased selected assets of Pro Elite Inc. for $3 million, according to a United States Securities and Exchange Commission report released Wednesday.

As part of the multi-million dollar purchase announced last week, Strikeforce acquired valuable fighter contracts, media assets that include the ProElite fight library and inventories that include all EliteXC-related DVDs. Various promotional and marketing materials were also part of the deal.

The asset purchase also lead Strikeforce to signing a TV deal with Showtime/CBS, a deal which was estimated to pay Strikeforce $25 million dollars in license fees over the course of the three-year deal.

In October of 2009, the Stratus Media Group acquired a 95% stake in ProElite for $2 million after the companyalmost filed for bankruptcy earlier in the year.  Although they sold most of their valuable assets to Strikeforce, they still maintained rights to the brand name ProElite (ProElite.com), Cage Rage, Spirit MC, and most importantly the EliteXC brand. The ProElite group, who put a bid for Strikeforce back in December of 2010, was composed of some original ProElite members such as Doug De Luca, William Kelly, Glenn Golenberg, along witch newly appointed Chairman of the board Paul Feller from the Stratus Media group.  It was said they raised enough capital to place a bid for $40 million dollars, though it wasn’t enough and was eventually outbid by Zuffa.

The other bidder for Strikeforce was from a group headed by Shelly Finkel, who is Mike Tyson’s manager and has been one of the most powerful managers in boxing for the past 30-plus years.  Finkel officially announced that he was leaving the sport of boxing back in June of 2010, citing politics of the sport as the reason he was driven away to where he got his start, music promotion under Empire Sports and Entertainment.  Although Finkel left boxing, he continued to act as an advisor to heavyweight champions Wladimir Klitschko and Vitali Klitschko, with whom he has worked for several years.  Empire Sports and Entertainment’s mission was said to become a leading media and entertainment company known for promoting the best events in concerts, music festivals, pay-per-view specials and sporting events around the world.

If we look back at some of those figures, it took an investment of $3 million dollars from SVSE and Explosion entertainment back in February of 2009 to cash out on March of 2011, span of 2 years, to be bought by Zuffa for above $40 million dollars. Being the #2 promotion or the “next competitor to the UFC” paid off for Strikeforce, and I think many other promotion are looking at their model to try and accomplish the same.

On Monday, just a couple of days after the Zuffa-Strikeforce purchase was announced, ProElite stock (one of the bidders for Strikeforce) opened at less than $0.01/share and closed at a 52 week high of $0.06 /share with a volume of just under 1 million. The average volume over the past 3 months had been around 14,000.  On Tuesday (the following day March 15, 2011), ProElite stock closed at $0.19 /share and had a day high of $0.24 /share.  What the numbers are saying is that investors and MMA fans have already started looking for a viable competitor for the UFC in the MMA market, and as Strikeforce proved in the span of 2 years, money can still be made in the market without being the #1 promotion as long as you have a platform for your product (Showtime) and a unique selling point you offer to fans.

If Zuffa ends up deciding that they do not want female MMA in the UFC, another promotion could build a solid stable of female fighters and scoop whatever talent is left out there not under the UFC umbrella (see Bellator) to start the process all over again.  FX, Fuel TV, G4, FSN, and other networks have shown recent interest in MMA programming, and all it takes is the right deal to present itself to a promotion for a shot at the #2 spot.  With that being said, the risk in the market has grown exponentially high this time around, as UFC has taken a dominant share of the market and has the majority of the top fighters in MMA.

Strikeforce is said to have roughly 140 fighters under contract in addition to UFC’s current 260 fighters, which is a whopping 400 fighters under the Zuffa banner at the moment.  It is expected that a good portion of those fighters will be cut and out of the UFC by 2012, since Zuffa has said before that they feel comfortable with a roster of around 200-220 fighters.  The UFC will also have to sign many foreign fighters as they keep reaching new international markets (trying to find the GSP of each country they visit), which only guarantees that many domestic fighters will be getting cut in the next 12 months.  This bodes well for the promotions such as Bellator, MFC, Shark Fights, Titan FC, & Tachi Palace Fights in the States,  BAMMA, Cage Wars, & Cage Warriors in the UK, and KSW in Poland to name a few. It also bodes well for a station like HDNet who has TV contracts with MFC, Shark Fights, and Titan FC. These promotions have shown a great deal of potential in the last couple of years and the talent pool quality of MMA fighters should be increasing in the next year.  One of those could make the next step up or it could be an investment group, like the ones behind ProElite to assume the #2 spot in the market. It will definitely be a risk for any investor to jump into the current state of the market, but fans and investors seem eager to give it another go.

Analyzing the WEC & UFC Merger: Its Effect On the MMA Landscape

November 18, 2010

Last week, the UFC announced they would be absorbing the World Extreme Cagefighting (WEC) promotion under the parent Zuffa banner, taking on new Lightweight fighters and adding the Featherweight and Bantamweight divisions to the promotion.

WEC Faber vs Pulver Banner

The WEC released the following statement detailing the merger:

“As the UFC continues to evolve and grow globally, we want to be able to give fans title fights in every weight division,” said White. “This is a big day for the sport and the athletes who will have the opportunity to fight on the biggest stage in the world.”

The two new divisions feature WEC featherweight champion Jose Aldo who will now be recognized as the reigning UFC featherweight champion, and WEC bantamweight champion Dominick Cruz. White confirmed that the winner of the Dec. 16 lightweight title fight between WEC champion Ben Henderson and top contender Anthony Pettis live on VERSUS will take on the winner of the UFC 125 main event title bout between champion Frankie Edgar and Gray Maynard. This upcoming fight will serve as a UFC lightweight title unification bout to be held next year.

White also stated the UFC is expanding its presence on the VERSUS Network in 2011, and will increase its number of UFC events from two to four per year. Versus is scheduled to air the two remaining live WEC events in 2010 on Nov. 11 and Dec. 16. The Nov. 11 event in Las Vegas will feature “The California Kid” Urijah Faber’s debut at bantamweight as he takes on Takeya Mizugaki, while the Dec. 16 event in Glendale, Ariz. will feature Henderson-Pettis and a bantamweight title clash between Dominick Cruz and challenger Scott Jorgensen with the winner becoming the new UFC bantamweight champion

“We have a great relationship with the VERSUS network, and we look forward to working with them to give UFC fans even more free fights in 2011,” said White.

Last week, Strikeforce Lightweight fighter Josh Thomson sparked a hot debate between MMA fans and bloggers, stating that the only reason the merger was taking place was because the WEC failed as a promotion:

“They made it sound so great that a company went under. The simple fact of the matter was that the WEC failed and they put it with the UFC to carry it.”


PAYOUT PERSPECTIVE :

MMAPayout has covered the potential merger between the WEC and UFC for quite some time, since speculation of the merger has been rumored and hinted by fighters in the past couple of years. During the process, we have raised quite a few questions in terms of what this means for the UFC and for the WEC. We will explore the merger in more detail and analyze how the move will impact the MMA landscape.

ZUFFA ACQUIRES WEC AND SETS HIGH EXPECTATIONS

World Extreme Cagefighting, which was started by Scott Adams and Reed Harris in 2001, signed a deal with HDNet and joined their lineup in early 2004. Shortly after Zuffa purchased the WEC in December of 2006, Zuffa chose not to re-sign with HDNet and instead opted to sign with the newly revamped Versus Network (formerly known as the Outdoor Life Network).  This was around the same time when Zuffa also purchased the WFA (which brought over fighters such as Quinton “Rampage” Jackson, Rob McCullough,  Heath Herring,  Lyoto Machida, and Urijah Faber).  Around the same time, Zuffa also purchased the Japanese promotion PRIDE, a move which proved to severely impact the future sate of the Japanese MMA scene and helped catapult the budding American organization into the next level.

The UFC’s initial intentions with the WEC were not known, but amidst heavy conversations with HBO to air MMA, the newly acquired promotion was rumored to be airing events on HBO since the UFC had a TV deal with Spike TV.  Regardless of where the WEC would land, at the time, the acquisitions the UFC were taking on not only benefited their own roster and brand, but it also impeded potential threats at the time (PRIDE, IFL, EliteXC) from getting TV deals from networks ready to jump on the MMA bandwagon.  MMAWeekly reported the details back in 2006:

The Observer reports that the UFC is buying the WEC for many reasons, one of which is to serve as a venue in which to groom up-and-coming talent, and another is so that they can attempt to secure a high-profile national television deal for the WEC in a strategic maneuver to impede the chances of other MMA promotions (specifically the IFL or Pride) to secure a national TV deal in the United States.

There are only so many TV deals available for an MMA company in the United States. If a TV deal could be secured for the WEC, Zuffa would have the UFC on Spike TV, perhaps the UFC on HBO at some point, and the WEC on another network besides HDNet.

If the UFC were able to secure a deal for the WEC, this would leave any other MMA company with very limited options in terms of securing their own TV deals, with no possibility of signing with Spike TV, HBO (assuming that the UFC is able to secure some sort of deal with the premium network), Showtime (because of their agreement with Pro Elite, Inc.), and the network that would sign the WEC.


Shortly after the WEC acquisition in 2006, MMAWeekly interviewed Kit Cope, who have his impressions as to what the fans could expect from the WEC acquisition:

According to Cope, “Apparently, the plan is to throw some superstars in the WEC… build the WEC up a little bit and kind of have a parallel [organization] with the WEC, so you can someday have an undisputed champion holding both the belts [WEC & UFC]. That’s my take on it.”


John Alessio gave his opinion a year later in an interview with ADCombat, reported back in late 2007, by BloodyElbow:

KM: If your contract is with WEC and you are on deck with UFC can you clarify the connection? I thought WEC were running independently.

JA: My contract is with Zuffa. I am considered a WEC fighter and they don’t like to cross paths like that, they are trying to build it up. What I was told is eventually the idea is build them up to where they are even with each other and have title unifications and stuff like that. We are still a year, maybe two years away.

After the acquisitions took place, it was clear to see that Zuffa  would use the recently purchased assets like the WFA and PRIDE not only to grow their two brands (WEC and UFC), but also to make it more difficult for current and future competitors from ever gaining any momentum in the North American marketplace.  The WEC held three events under the Zuffa banner before making their Versus debut with WEC 28 on June  3rd, 2007 from the Hard Rock Hotel & Casino in Las Vegas, where Urijah Faber headlined the event against Chance Farrar.

To put the current WEC ratings on Versus in perspective, WEC 28 in 2007 drew 416,000 viewers on a network that at the time was in less households than they are now.  The last two WEC events on Versus  at press time were reported to have garnered 570,000 (WEC 52) and 486,000 (WEC 51) viewers.  The chart below describes the viewership history


ZUFFA MAKES STRATEGIC CHANGES TO THE WEC

On December 2008, in order to differentiate the WEC product from the UFC (which at the time found itself competing against the UFC brand and causing confusion among MMA fans),  Zuffa dissolved the WEC Light Heavyweight, Middleweight, and later on the Welterweight divisions and merged them to the UFC roster, making the WEC the home of the lighter weight classes.  This move was indeed a strategic move to differentiate both products in the same marketplace, as Zuffa was starting to realize that the UFC brand power was affecting the WEC brand as a competing brand within the same umbrella, preventing the WEC from gaining any traction with the mainstream MMA fans or UFC only fans.


DECISION TO MERGE WEC WAS MADE MONTHS BEFORE ANNOUNCEMENT

At this point, it was only a matter of time until the UFC and WEC were merged considering that the UFC started to televise their own events on Versus, only waiting on the WEC TV deal to expire in order to make the announcement. Not only did ratings start to dip after WEC 34, but the DirecTV carriage dispute on August of 2009 really hurt the brand, where millions of DirecTV fans were lost as the network went dark until March 15th, several weeks later.  Since then, the ratings on Versus dipped to some of their lowest ratings ever and only supported the claim that the promotion would not be able to last much longer.

Although the WEC served it’s purpose of preventing other MMA organizations to get TV deals (it was believed that the IFL was in negotiations to put on live MMA events on Versus) , the platform was also creating a ceiling for potential stars such as Urijah Faber, Miguel Torres, and Jose Aldo.  The fact that the consensus among MMA fans was that the WEC hosted some of the most exciting shows in all of MMA for years, yet was not able to get better viewership and traction among MMA fans only shows the lack of brand strength both the WEC and Versus have.  It also shows how incredibly difficult it is for any MMA promotion outside of the UFC to be successful within the same MMA market.

Although the WEC was not able to meet the lofty expectations the UFC had for the promotion when it first acquired it, it will be vital for UFC’s future plans of increasing their brand presence world wide, tapping new markets, and trying to land a coveted TV deal. In the next few years, the UFC has ambitious plans to host events all around the world, specifically trying to build bridges to markets such as Brazil, China, and India in the near future.  At the same time, they don’t want to lower the quality of their events, so adding WEC fighters to events that would have little to no star power makes a ton of sense for them in that regard.


POSITIONING FOR THE FUTURE

The UFC will be televising events on Spike TV and on Versus until the end of 2011, at that point, it is believed that the UFC will be looking to join a bigger television platform and possibly even creating their own channel.  By keeping deals with both Spike TV and Versus, he UFC maintains leverage and is well positioned to negotiate future TV deals it chooses to pursue, one being that Versus is owned by Comcast and is in the middle of acquiring NBC Universal.

A UFC event on NBC would be huge for all parties and it’s something we will definitely keep our eyes on, though it is safe to say that this is far from a done deal at this point.  We will examine the television landscape in a future MMA writeup.


WEC MILESTONES

– In January of 2008, WEC announced that they signed a deal with AMP Energy Drink to become its official energy drink.  This business move by the WEC was important for a few reasons.  One, it was able to attract a major sponsor who was not tied to their big brother the UFC.  Second, AMP Energy would now sponsor fighters under the promotion, which was much needed since the fighter pay under the WEC could not match the UFC’s pay scale.  Having two promotions under the same banner gave Zuffa the flexibility of signing separate TV deals (Spike TV and Versus), and in this case, was able to gain more sponsors and sponsorship money under the Zuffa banner which would otherwise be competing with other sponsors in the same market and be less likely to sign with the UFC. The WEC also announced a sponsorship deal with MusclePharm, which like AMP Energy, became huge sponsors and supporters of the promotion and fighters.

– In June 1st of 2008, WEC 34 aired on Versus and set the all time record for viewership for an MMA event, drawing 1.5 million viewers.  Since WEC 34, 18 WEC events and 2 UFC events have aired on Versus, and none have been able to top the viewership WEC 34 drew, thanks to the great marketing push by the UFC  and how likable Urijah Faber and Jens Pulver are. Jens Pulver had just previously been featured on TUF and had fought BJ Penn in a major UFC event before making his WEC debut.  In retrospect, this event will most likely be considered the peak of the promotion’s existence.

– In April 2010, the WEC held its first PPV event under the Zuffa banner, headlined by Urijah Faber and Jose Aldo.  The event was estimated to have done 150,000-200,000 PPV buys, which would make it the most successful PPV by an MMA organization other than the UFC in North America. The previous leader was the Affliction Banned event, which was said to have done  around 100,000 to 120,000 PPV buys.  Though the event was claimed a success internally, Dana White had previously made some statements that if the PPV fell short of 180,000 PPV buys, it would be considered “terrible”, probably taking into account that the UFC PPV floor baseline is 300K PPV buys. MMAJunkie had the interview with Dana White:

White said it would be “terrible” if Saturday’s pay-per-view buy rate did not double the numbers of April 3’s boxing match between Bernard Hopkins and Roy Jones, Jr., which reportedly drew 90,000 buys.

Though Dana White’s assessment may have fallen short, most MMA analyst and insiders agree that the WEC PPV was a success, though the feat wasn’t an easy one for the UFC to pull off and it did little to help the WEC brand since it was stripped from the event. In order to make the PPV a success, the UFC had to jump through quite a few hoops to make it work.  One strategic move, which clearly foreshadowed the future of the WEC, was to completely remove the WEC brand and production crew from the WEC PPV event since the plan was to televise some of the prelims on Spike TV.  Reed Harris was also left behind the scene as Dana White became the sole promoter for the event, which essentially made it a UFC PPV event using WEC fighters but without a promotional brand.


PROS & CONS TO THE MERGER

Merger PROS:

MMAPayout’s Kelsey Philpott wrote a great write-up exploring the benefits of the merger, which include :

– A return on Assets

– More Title Belts

– More Fighters, More Growth

– Television Appeal

– Attention for the Lighter Weights

– No More Consumer Confusion With Multiple Brands

– More Monetary Opportunities for Fighters

Merger CONS:

– The UFC now only has two TV deals that expire at the end of  the 2011 calendar year, which will put pressure on the promotion to strike a TV deal relatively soon or be forced to sign short extensions with either network again until a deal the UFC is comfortable with can be reached.

– The exciting WEC events are now gone where the spotlight was placed on the smaller weight classes.  In fact, the WEC fighters will now have to move on to a bigger cage which will give them more room to add to their fight strategy, not to mention the pressure of fighting in UFC events who are not afraid to cut fighters after a string of losses.  Smaller cages have always been said to create fast paced and exciting fights, so we will see how the WEC fighters transition to the bigger cage and into the spotlight.

– We can expect a good number of fighters to be cut within the first half of 2011.  With the UFC roster increasing now to around 270 fighters after the merger, we can expect around 20-40 fighters to be cut in the next 6-8 months.  Previously, the UFC has stated that it likes to keep its roster size to around 200 fighters.  With the added divisions, it is unsure if they will increase the preferred roster size to accommodate the new weight classes. The UFC has a set amount of PPV’s, which is maxed out for 2011, and a fixed number of Versus events (4), so there only way to adding more events would be to produce more fight night like events and give them away to the fans for free on Versus or Spike TV, which would be a plus but is not written in stone and was only presented as an option.  In 2010, the UFC ran 24 shows while the WEC ran 8, so we can expect that the UFC will add a few more shows in 2011 to accommodate the fighters it now has under its banner.

–  The amount of MMA content we get from Zuffa on Versus drops from 10 televised events (8 WEC and 2 UFC) to 4 events.  Losing six events where the lighter fighters would have been showcased will hurt those fighters that don’t yet have the star appeal to be showcased on UFC events.  In fact, we can estimate that about two to three 135lbs/145lbs will be used for each event, though we can expect the majority to be on prelims and not on the televised portion of the event unless they are stars like Aldo, Faber, or Torres, who will benefit greatly from the move. The UFC will have to add more shows to keep all their fighters busy.

–  Since the LW divisions overlap between the WEC and the UFC, we can expect a high number of lightweights to be cut in the next few months. This will crate a high influx of UFC vets filling other regional promotions.  I expect promotions like the MFC, Bellator, Shine Fights, and in cases where it makes sense Strikeforce to benefit greatly here.  We can already see fighters such as Patrick Cote, Gabriel Gonzaga, Rolles Gracie, Gilbert Yvel, Efrain Escudero, and other notable UFC fighters start to sign with other promotions.

– With every merger, I am sure we can expect an assessment on positions that overlap. Although, the UFC has said that they will take in every WEC employee, that is rarely the case.  Insiders have said that WEC match-maker Sean Shelby will still handle the match making among the lighter weight classes while Joe Silva continues to concentrate on the original UFC weight classes, though for figures like Reed Harris, it is unknown what his role will be in the UFC.  The WEC production crew and announcing team will be another group that will take hits, unless they start assigning different production crews for international events, which is a complex situation to manage. The fighters are the other party that will be worried about cuts from HW all the way down to BW’s, specially if we take into account the plans of adding a 125 lbs class as well.

– Overlapping personnel is not the only concern.  One question that is still up in the air is what happens to major WEC sponsors such as AMP Energy and MusclePharm? The UFC already has official sponsors such as BSN and Xyience, which the UFC brass heavily protects.  That was evident recently when GOOD4U Drinks was banned from the UFC, which upset UFC notable HW Shane Carwin and a few other fighters such as Patrick Cote and Matt Hamill, who were scheduled to be sponsored by the company for UFC 121 before the ban.

Authentic Brands Group purchases Sinister

November 17, 2010

Today, Authentic Brands Group (ABG) announced the purchase of MMA brand Sinister. Earlier this fall, ABG purchased Tapout, Silver Star and Hitman.

According to ABG’s press release (via The Street):

“This acquisition completes our mixed martial arts stable of brands that will now reach all tiers of distribution,” said Jamie Salter, chief executive of Authentic Brands Group. “Not only is Sinister’s distribution at Kmart and Sears highly appealing but they have a world-class partnership with Hybrid, one of the best-in-class apparel licensees in the business.”

____

Authentic Brands Group expanded Sinister’s reach globally by signing its first major licensee deal in Canada with CMT Sourcing Group Limited, an affiliate of PTX Performance Products in Ontario, and will introduce the brand to additional foreign markets, as well as expand Sinister’s product categories within the U.S

Payout Perspective:

ABG has acquired an impressive stable of MMA brands. The acquisition appears to be a good move for Sinister as ABG plans to expand its presence nationally and globally. Sinister’s sponsorship presence has decreased in recent years as less fighters come out to Sinister brand shirts or shorts. However, its recent partnership with KMart has increased its brand awareness (notably, James Toney at UFC 118).

It will be interesting to see the future of the Sinister brand as we go forward. What does the ABG acquisition mean for sponsorship of fighters? Will Sinister’s brand see a resurgence? Will ABG change anything about the brand?

Toronto Company buys TapouT, Silver Star and Hitman

September 6, 2010

MMA Weekly reports that TapouT, Silver Star Casting Co. and Hitman Fight Gear have been sold to businessman Jamie Salter.

The MMA clothing brands will be merged under Salter’s Toronto-based Authentic Brands Group, LLC.

From Bloomberg:

Salter’s Toronto-based Authentic Brands Group LLC is betting the three labels — TapouT, Silver Star Casting Co. and Hitman Fight Gear — are ripe for expansion as mixed martial arts tightens its grip on the mainstream. J.C. Penney Co., Kohl’s Corp. and Macy’s Inc. already sell some of the gear, and the new owners and founders are looking to add sales both at home and overseas.

“These are some of the most exciting brands I’ve seen in years,” Salter said in a telephone interview. “The popularity of mixed martial arts and the UFC is soaring around the world. The last time I saw a sport with this much potential was 20 years ago with snowboarding.”

Salter wouldn’t say how much his firm paid for the brands.

Payout Perspective:

This purchase shakes up the MMA merchandise market as this merges TapouT with two of its competitors. According to the Bloomberg article, TapouT President Dan “Punkass” Caldwell and Tim “SkySkrape” Katz will be joined by Silver Star’s Luke Burrett.

The acquisition shows the growth of the MMA market and this marks the further expansion of the brands into mainstream awareness. What will be interesting in the coming days will be the organizational leadership of the new company. What changes will be made to the brands? Will Caldwell and Katz be able to work with Burrett and vice versa? What affect will the merged companies have on the identity of the individual brands?  We will have more on this later this week.

K-Swiss Purchases FORM Athletics

July 30, 2010

Yesterday, it was officially announced that K-Swiss has purchased FORM Athletics from founder and CEO, Mark Miller.

California Sports Company K-Swiss (Nasdaq: KSWS) announced today the acquisition of Laguna Beach-based FORM Athletics. Terms of the deal were not disclosed.

FORM Athletics will operate as a division of K-Swiss led by Mark Miller, FORM’s incumbent founder and CEO. Under the agreement, Miller will become President of FORM Athletics, and has also been appointed President of K-Swiss Orange County (KSOC), where he will establish and lead a new division of the brand focused on the youth consumer. A force in the action sports industry, Mark Miller has built businesses for iconic brands for nearly three decades, launching M3 Snowboards in 1996, and more recently, playing a key role in the growth of DC Shoes, as SVP and General Manager in the Americas Region.

“Mark has incredible experience leading some of the most prominent action sports companies in history, and we are confident that he will create a progressive and successful program for K-Swiss,” said Executive Vice President of K-Swiss, David Nichols. “FORM plays well as a growth opportunity for our portfolio as Mixed Martial Arts is one of the fastest growing, and most relevant new markets in sports today. Viewership and participation in Mixed Martial Arts events is explosive, as is the market for Mixed Martial Arts consumer brands.”

Miller launched FORM Athletics in early 2010 in conjunction with MMA/WEC athlete and former Featherweight Champion Urijah Faber. The brand has quickly established itself as a successful and progressive Mixed Martial Arts (MMA) and lifestyle brand with a distinct surf-and-skate inspired aesthetic. Since its January debut, FORM has formed a global fan following, adding powerhouse athletes including Mark Munoz, Joseph Benavidez, and Jon “Bones” Jones to its roster.

Payout Perspective:

Just a few weeks ago, Billabong acquired RVCA and some people were questioning whether the company would be able to continue it’s commitment to the sport of MMA. Those concerns seem to be unfounded as Billabong is intent on maintaining the core essence of RVCA and its “artist network”.

I had the same concern when I first heard rumors that K-Swiss was looking to purchase FORM. Fortunately, the management team at K-Swiss seems to be saying all the right things about FORM’s continued participation in MMA. I am also intrigued by the possibility of K-Swiss using FORM as an entry point into the sport for the larger K-Swiss brand.

There’s a strong target market fit between K-Swiss and MMA. I also tend to think the brand aligns pretty well with the sport from an image perspecctive; both have that new generation swagger going for them. FORM affords K-Swiss the opportunity to dip its toes in the industry and learn the ins and outs before jumping in with its own, more established brand.

ProElite Purchased for $2 million

October 26, 2009

Stratus Media Group, Inc. has announced that it has reached an agreement to acquire a 95% stake in ProElite, Inc. for $2 million.

Stratus Media Group, Inc. (OTCBB: SMDI ), a live entertainment company, announced today that it has entered into an agreement to acquire a 95% interest in ProElite, Inc. (PK: PELE), a sports, entertainment and media company that has produced arena-based mixed martial arts (MMA) events.

 
Prior to the sale of significant revenue-generating assets, ProElite recorded $13.5 million in MMA event and television revenues during the 18 months ended June 2008. ProElite has engaged in an extensive restructuring that included the sales of these revenue-generating assets for cash and a share of future revenues, significant expense reductions, the elimination of $12 million of direct and contingent liabilities and the shedding of unprofitable subsidiaries.

 

“ProElite, a globally recognized brand, is a great addition to our portfolio of companies and live entertainment events and provides an experienced management team with demonstrated success in operating MMA events and generating broadcast revenues,” stated Paul Feller, President of Stratus. “By combining ProElite with sufficient capital and Stratus’ strengths in event production and sponsorship sales, we intend to re-establish ProElite as a leading international MMA company.”

 

Stratus will purchase Series A Preferred Stock of ProElite, convertible into 95% of the outstanding Common Stock of ProElite, for $2,000,000. The acquisition will be closed when certain conditions have been met, which the company expects will occur within the upcoming weeks. Upon closing, all of the current directors of ProElite will resign and the board of directors of ProElite will consist of Paul Feller and Glenn Golenberg, both current members of Stratus’ board of directors, and a third director to be announced. Paul Feller, Stratus’ Chief Executive Officer, will become ProElite’s Chief Executive Officer. Certain present and former key ProElite executives will continue employment with ProElite or will enter into employment agreements with Stratus.

Payout Perspective:

The purchase is a little surprising, because there’s not much left to ProElite other than some brand recognition in the name and certain elements of the former management team.

The acquisition certainly begs a number of questions:

  • Without the revenue-generating assets that essentially made ProElite/EliteXC, is the company really worth paying $2 million dollars for?
  • One could quite fairly question whether ProElite’s experienced management team is really the right group to lead an MMA company to profitability.
  • Lastly, what does Stratus know about MMA, and how can they make a difference to ProElite? Stratus has yet to turn a profit since they recommenced operations in 2006 off of a 5-year hiatus (the company only made $40k in revenue last year). Not surprisingly, they’ve also got substantially negative cashflows from operations – nearly $500,000 in the first six months of 2009. They’re a company planning to host a series of vintage car shows in the future; that’s hardly the same expertise needed to target, attract, and cater to the MMA demographic.

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