UFC/WEC: Absorption Problems?

September 3, 2009

Whenever the possibility of a UFC/WEC merger is broached, one of the major arguments militating against a union has been the purported inability of UFC to absorb another two weight classes’ worth of talent (along with, presumably, some lightweight fighters).  The point is that UFC already has difficulty giving all its contracted talent the typical three or four fights a year, an argument which has had until now a certain cogency to it.  In MMA, however, the times are constantly a-changin’, and with Dana White’s stating that UFC plans as many as three shows a month in 2010, the question might not be whether a UFC/WEC merger is viable, but rather whether it’s a business necessity.

First, although the absorption problem is a legitimate issue under the current schedule, it’s an issue whose primary negative effect is on the lower-level fighters, and not the promotion.  In other words, from a fan perspective, it’s difficult to argue that we don’t get to see fighters fight with enough frequency.  Indeed, the pattern seems to be that UFC delivers a couple of months worth of star-laden events, which are then followed by more lackluster cards, as the top talent takes a rest.  I’ve made the argument that that’s exactly what’s happening in September and October, and I’ll state again that the UFC 104 undercard — aside from its main event — would be worthy of prelim status on a good ppv night.  This is a problem that will only be exacerbated by any increase in number of UFC events in 2010.

Moreover, it appears that UFC 102’s numbers will provide further evidence that pay-per-views without title fights (or lacking at least a major grudge match between fighters fans view as superstars) are seen as skippable events.  After pulling in approximately 2,500,000 total buys for UFC 100 and 101, Dave Meltzer’s latest Wrestling Observer Newsletter reports that 102’s first projections place it at a disappointing 435,000 buys.  As Meltzer notes, this bodes ill for UFC 103, which is headlined by a non-title Vitor Belfort/Rich Franklin fight, and which also goes head-to-head with the Mayweather/Marquez ppv.

Beyond 103, though, which after all is just one night, one lesson is self-evident: as many pay-per-views as possible, ideally all of them, should be headlined by a title fight.  The corollary is just as obvious: absorb the WEC’s 145- and 135-lbs. divisions into the UFC, providing two more titles to be defended on pay-per-views.  With those divisions under the UFC umbrella, unless UFC goes overboard in stacking cards with multiple title fights, it should have little difficulty in providing at least one title fight per ppv.

UFC has 211 fighters under contract, or at least that’s how many fighters are listed on its website.  By my calculations, assuming there are 36 shows in a calendar year, UFC ideally (i.e., each fighter fights three or four times a year) would have somewhere between 200 and 265 contracted fighters.  If we assume that the lower level guys fight three times a year, whereas the higher level talent leans towards four fights per year, it seems that UFC could easily absorb 40-50 WEC fighters.  When you take into account various business factors, again, absorption becomes almost a necessity.

Almost a necessity.  WEC’s biggest obstacle might be its poor brand recognition; as Kelsey has noted, it’s the reason “we’ve yet to see a WEC PPV.”  Although it seems that most expect Versus to end up back on DirecTV after a reconciliation, there are currently 6,000,000 fewer people with access to Versus than there were last week, which is simply not beneficial to WEC brand marketing. 

One solution — and perhaps an even better one than a straight merger —  would be to re-brand WEC as UFC, which would immediately increase recognition of its fighters.  This provides Zuffa with the ability to maintain separate brands, and yet it could quite easily place the bigger 135- and 145-lbs. fights on UFC pay-per-views.  The biggest obstacle to re-branding WEC as UFC is Zuffa’s contract with Spike television, which gives Spike exclusive access to UFC on basic cable.  It seems to me, though, with so much money on the line, that there has to be a solution permitting WEC to re-brand as UFC that would be acceptable to both Zuffa and Spike.

Whether UFC attempts a straight merger or something along the lines of a re-branding, as Mixed Martial Arts prepares to enter its third decade with an ever increasing number of shows each month, the UFC/WEC status quo cannot be maintained.  Something’s gonna give in 2010.

Interview with WEC's Harris (Part II)

September 2, 2009

Last week, MMAPayout.com had the chance to chat with WEC General Manager Reed Harris in regards to a variety of topics. It wasn’t really your typical question and answer interview, but more a meandering conversation between two MMA enthusiasts.

Below, part two of the interview further discusses the talk of a merger between the UFC and WEC, the WEC’s relationship with its fighters, and the influence that Lorenzo Fertitta has had on the business.

Enjoy.

KP: You guys see your place then as a solid number two, but from a strategic planning standpoint, how do you plan to grow the company in terms of your ratings – maybe getting into the PPV and stuff like that?

RH: Because of the fact that I believe the sport has a long way to go as far as growth, I think that being a solid number two could put us in a really good spot – as far as viewerships, PPV, etc.

Our strategy is to build those lighter weight divisions; and, as you know, in boxing and in other combat sports, a lot of times the lightweights are very, very popular. That’s where we’re going. We’ve got Faber, Brown, Torres, and Bowles. We’ve got a lot of guys – Benavedez, Cruz – that are coming up. We’ve got guys like Fabiano and Jose Aldo that are in the mix now, and we’re building those divisions. I’m hoping in the next couple of years with our strategy of doing more shows and also going to possibly Mexico and Canada, I think we can build our company into a very profitable one. And that’s the goal, to become profitable; which, we’re on our way to doing and are doing.

KP: A lot of the conspiracy theorists – and that wasn’t the point of the merger article article…

RH: I’ve read your site since the beginning, and I was told about it, but I haven’t had the chance to read it yet. I just skimmed over the first few paragraphs, but I’ll go read it when we’re done.

It’s just, from a business standpoint, why would we – do you think it would add a lot of value to the UFC to bring in the WEC fighters? I don’t think it would.

KP: I do; even just looking at it from the perspective of the importance of title events. The UFC has five titles right now, and if you were to add 135 and 145 – that’s two additional titles. The numbers have shown that title fights are significantly more popular than non-title fights, and the UFC has been doing a greater proportion of non-title fights recently just because they’re ramping up the number of events they’re doing. Two more titles and 4-5 more extremely marketable fighters like Torres, and Faber, and Bowles, and Brown, and Aldo and all these other guys in the mix, it may add value.

However, as you say, the counter to that is how do you pull it off logistically?

RH: Right. You’ve got another 30-40 guys to add to your roster; and you can’t just have title fights, you’ve got to have all the fights, all the preliminary fights.

Plus, I think I mentioned to you that we have a really good deal with Versus. I don’t think they’d want to give that up.

KP: Now, the only thing that I wonder is whether, from a growth perspective, you may outgrow Versus at some point down the line.

RH: I think – hopefully! – Versus will grow with us. As we get bigger, there is certainly the PPV option for us and I think that’s where we’re headed. Certainly, we’re not going to look at the kinds of numbers that the UFC is looking at right now, but there is a comfortable place for us in the PPV world where we can do two or three PPVs a year and do superfights, etc. That would certainly help the company’s bottom line.

KP: What would be an acceptable buyrate for you guys, to make you profitable? Given all the failures that Affliction and EliteXC have had with their PPVs?

RH: The PPV numbers are something we don’t discuss, but we believe we’d do very well.

I can tell you that most of the things I read that, when it comes to events and stuff, aren’t accurate. I don’t mind talking to you about it. There’s certainly a business side to this and we look at things very carefully, and that’s one of the reasons we’ve been successful.

KP: That’s the problem from my position, managing a business website and there’s a great deal of information asymmetry between you and myself. Where you know everything and me, I know very little. It makes the job tough. [Laughs]

RH: That’s the way we want to keep it by the way! [Laughs]

I read your stuff and normally it’s pretty well thought out, but if you ever have time I’d like you to do a story on why the WEC should continue. There are two sides to look at with an argument like this. One side is could it possibly help an organization like the UFC and the other is, what would be good for the sport? I think there’s no question that having – even though there are other organizations like Strikeforce – the WEC building these other weight divisions ultimately, in the long run, is really good for the sport.

KP: I would agree with that. If you guys get to the point where you’re a very, very successful number two; the point where you can start increasing some of the payouts and some of the undisclosed salary to really make these guys at the level of the UFC counterparts, that’s going to help the lighter weights in thinking, “I can make this my career and become a full-time fighter.” Certainly that’s where there is some real potential for growth in the sport.

RH: The thing that a lot of guys don’t understand about my fighters is that I’ve never lost a fighter over pay. Guys like Miguel and Urijah, you have to remember that, first of all there wasn’t really even a division for these guys to fight in a couple years ago – we created that. I can tell you that how we take care of these guys, and the way we take care of these guys, they’re doing very well. Urijah will tell you that.

I think that what people misunderstand is that I have a lot of interviewers that ask fighters things like, “would you like to make more money?”

And, really, the only thing that bothers me, and I had this argument with Steve Cofield over at ESPN about this, is I said look, “I’m under contract with these guys.” We’re under contracts that span 18 or 24 months or whatever with these guys. When I sign those contracts, those guys were completely happy with those deals.

The problem is things have changed: the sport has gotten bigger, the WEC is bigger, and guys have gotten bigger. But, I think you’ll agree that there’s a combination of events that made that happen; one of them being that we promoted that person. We also understand that it’s also based on the performance they’ve contributed. I’ll use Faber as an example, Urijah has certainly performed very well and that’s one of the reasons he’s very popular, but also we promoted him. So it’s kind of a mutually beneficial thing: to build a fighter and make him a household name.

It is a business though and we have contracts that we have to abide by. I could just hold them exactly to the contract and pay him exactly to the contract, but instead we as a company make a decision to do bonuses et cetera. I think that’s very fair on our part. We’re trying to do the right thing.

I can tell you that I have fighters that are completely elated when I give them bonuses because it’s completely unexpected. They are undisclosed, though, and it’s not something that I will discuss as far as who gets what – I don’t want to discuss anybody’s payroll or any type of compensation in the company.

KP: Can you tell me how you come up with those undisclosed bonuses? Is there a formula or is it just at your discretion: you talk it over with the matchmaker and other executives and you come to a figure.

RH: There is a formula – plus we look at the event that’s taken place, etc. – but I’ll tell you that Dana and Lorenzo Fertitta are very generous. They told me the day I started, when they bought the WEC, the fighters are the most important aspect of this business. I’m telling you they’re very generous in a lot of ways – they surprise me all the time.

KP: They take a lot of heat over it, too. People only see the disclosed figures, assume that’s all there is, and they go crazy over it.

RH: Well, yeah, and how do you think it makes them feel? Where Lorenzo and Dana have just completed a WEC event where they gave a number of bonuses to people, which they didn’t have to, and then they go back on Monday and they read all the criticism.

People need to understand that there is a reason why people want to fight for the WEC and the UFC. If we were not doing the right thing, this business would not be successful.

KP: You’ve exuded the patience too, and a lot of people don’t have that patience. They see the success of the UFC and WEC, but they don’t see exactly what you brought up, that there were no lightweight divisions before you guys came along; there were no substantial places to fight; and after five years the UFC was down $40 million, until they broke out with the reality series.

RH: And you know the guy, I’ll tell you, one of the things that people don’t talk about much is Lorenzo. The guy was $40 million in debt and he calls Dana and says, “let’s keep it going” when they had that discussion about selling. Imagine the balls that it takes to do that! That guy is singlehandedly responsible for where the sport is today – he and Dana both, and Frank too, obviously.

I’ve been in business for many years, involved in pretty high-level real estate developments, and I know what it takes to make decisions like that. There’s a certain kind of guy that can do that – most guys can’t, they run for cover when things aren’t going well – but not Lorenzo and those guys.

They really put it all on the line, all out there. They said, “look, this thing has a future! So let’s keep it moving and keep it going.”

KP: Well, I don’t want to take anymore of your time. Thanks so much for speaking with MMAPayout.com, and I look forward to speaking with you again!

RH: No problem, my pleasure!

Interview with WEC's Harris (Part I)

August 28, 2009

MMAPayout.com recently had the chance to chat with WEC General Manager Reed Harris in regards to a variety of topics. It wasn’t really your typical question and answer interview, but more a meandering conversation between two MMA enthusiasts.

Below, part one of the interview largely discusses the business consequences of the WEC’s decision to postpone WEC 43, a bit of their strategy for 2009, how the organization plans to separate and distinguish itself from the UFC, and sets the record straight about the merger talks.

Enjoy.

KP: Everybody has focused on the reasons why you’ve cancelled the event but from a business perspective, what were the consequences for the WEC in cancelling the event? In terms of some costs or obligations to the venue, the city, hotels, flights, and things like that.

RH: Certainly there were a lot of discussions with the venue and there were also some fairly significant costs to postpone the event. So, it was something that we didn’t do lightly.

The main issue for us was that this fight had a lot of implications for us in terms of future events. We want to have the winner of this fight, fight Jamie Varner, and we felt that if we substituted someone in for Ben Henderson then it would almost as if we really couldn’t do that fight as an interim belt.

The anchor for the entire show was going away, and not only that but there are also other injuries on the card that I really can’t discuss. The notifications of those injuries all happened for us within a 24hr period. One of the other guys on the main card got injured and these are the type of injuries where, like in Henderson’s case, the doctor said, “look if you can take 2-3 weeks off you can be fine.” It wasn’t a break for him, it was a sprain.

KP: You looked at the consequences of cancelling the event – some of the costs, venue discussions, and those are pretty big – but on the other hand, the consequences of moving forward with the event, without Henderson and Cerrone, were also pretty extreme and not just for 43, but for future events.

RH: The focus of this show was to build the lightweight division. Obviously we’ve done a really good job with our 135 and 145 divisions, so now we want to start building the lightweight division at the end of this year; and, also adding the 125lbs. division. But without that [Henderson vs. Cerrone] fight, it almost kind of deconstructed our entire plans as far as what we want to do.

It was a tough decision, but we decided that if we could postpone it, we would bring the entire card back; meaning that none of the fighters are going to suffer as far as losing fights. And, the other thing we did is we talked to the fighters themselves – all the fighters on the card. I didn’t receive any real push back from any of them in terms of the delay and how it might affect their training. Some of the guys had to look at their schedules. For example, one of our guys, Eddie Wineland, is a fireman and he had to look to see if he was available, but he said, “Yeah, I’m good for the 10th.”

One of the things we’ve been doing for 3-4 months – I’ve said this publicly – is that we’ve been talking to Versus about going to Saturdays for our shows. We want to do that and versus was working on that for us, for either the November or December show. So we then came back and said, look we can make that work in October as well. In fact it was one of the only dates we could get: October 10th.

KP: Well, it makes a lot of sense in moving to the Saturday, not just because it’s a great “fight night,” but also because you’ve got the NFL on Sundays in the fall which is really tough to compete with I should think.

RH: Yeah, very tough! We don’t want to do that! You know, the stuff we do actually makes sense! [Laughs]

And I’m being totally honest with you when I say, I’ve never had a discussion with anyone from Versus about the TV thing. I can tell you that we’ve seen this – the DirecTV and Versus posturing – with FOX and Comcast last year. Comcast was saying that FOX was being unreasonable, and FOX was saying, “if you ever want to watch American Idol again, call Comcast and complain.” The whole thing was just a positioning thing for negotiation of payments.

Versus has really been a great partner for us, and our goal is to work with them to get as much exposure as we can.

KP: Has there ever been a consideration on the WEC’s behalf to move to bonafide network TV like CBS, FOX, ABC, etc.? The UFC has been hesitant largely because of the rights fee issue, but is the WEC in a better position to accept an offer from one of these networks? Especially considering it might provide the perfect platform to build the WEC brand and ready the company for PPV events.

RH: We’re always open to discussing anything, regarding business. However, I can tell you that we’re in a really good situation with Versus and I really don’t see that changing. They’ve been a great partner for us, and we’re actually in the process of actually working through another deal with them. I doubt seriously if that would change.

KP: The UFC has a lightweight division with BJ Penn and so many of the great fighters there, it really begs the question: do you feel as though the WEC operates in the shadow of the UFC and how do you steer the WEC away from that and build your own brand and separate yourself from the UFC?

RH: Well, to be honest, I’ve always felt like we’ve operated in the shadow of the UFC, because they cast a large shadow. What we’ve done though, and this was Dana’s idea, was to focus on the lighter weights which would allow us to focus on coming out from that shadow and also build a unique brand – something home to the best lightweight fighters in the world. I think we’ve done that over this last year or so.

The 155 division, we’re in the process of building, and we’ve actually signed new people which I can’t really discuss right now and we’re constantly looking for new talent.

If you talk about fighters in general, BJ Penn was fighting in Hawaii before UFC picked him up. My goal is to find the next BJ Penn that’s at a gym somewhere here in the United States or abroad, working out, building his record, and looking at an organization like the WEC.

We’ve done this with 35 and we’ve done this with 45 – we’ve got the best divisions in the world in those two weight classes. We control almost all the fighters, in those classes, that are ranked in the top ten. So, that’s our goal for the 55 division and soon also the 125lbs division, focus on those four divisions, and build our brand that way

KP: I’ve noticed other things too: the blue octagon, different commentators, and the different feel of a WEC event.

RH: I think our events are pretty dynamic. Our fighters are faster and they tend to be in really, really good shape. The fights are faster and more aggressive; and that’s kind of where we’re going with our brand. If people tune into our show, they’re going to see the best fights in the world.

MMA is a big sport and one of the things we’re trying to do is have meaningful fights and meaningful divisions. When you look at one of our cards, one of the reasons we wanted to save that fight because it had implications for the future, but also, if you look at the undercard, we’ve got guys at 155 fighting for contention spots. I think one of the things that we do differently – and the UFC – than a lot of the other organizations is that we’re not just doing one-off fights. To have our guy fight a guy that nobody has ever seen fight in our organization before – all of a sudden they’re fighting for a title.

KP: There was talk of a UFC-WEC merger – and it came from Dana White…!

RH: Here’s what Dana said! We talked about it. He was asked at a Q&A: had they ever talked about merging the UFC and WEC. He said, “yeah we’ve talked about it,” but I can tell you that we talk about everything.

We’ve had all kinds of discussions about how to best position the WEC and there’s absolutely no discussion at this time about merging us with the UFC. You look at it mathematically and it would be impossible for them to do it with their current roster already at about 200 people.

To get those guys the fights they need – typically you need to get 3-4 fights a year – is tough. That’s one of the reasons why we eliminated the heavier weight classes, we couldn’t during 6-8 shows keep our guys busy. Now that we’re going to 10 shows next year, with four divisions, it will allow us to keep all those guys. And the thing is, you can’t just do title fights, you have to do other fights to build the division and also build the contenders for the belt.

I’ve had a number of discussions with Joe Silva about it and there are absolutely no plans at this time to merge the two companies. The sport is big enough to support two organizations, wouldn’t you agree?

KP: Well, I think that’s up for debate in terms of having mainstream two organizations. I think, right now, the market has proven that it cannot support more than one UFC.

RH: I think you’re right, because I think the UFC will always be the dominant force and the biggest. But, I think the WEC certainly has the potential to be a close number two – our television ratings are very good and we’ve got huge ratings down in Mexico. We are from a numbers standpoint, the number two organization in the world right now. We’re out gating and out televising any other company out there.

Exploring a Possible UFC-WEC Merger

August 17, 2009

The talk of a potential merger between the UFC and the WEC has increased dramatically over the last few weeks, thus MMAPayout has decided to explore the idea and potential consequences of such a deal.

Since Zuffa bought the WEC in 2007, the idea has been to run the company as a completely separate entity to the UFC and develop the brand as a stand-alone product that featured some of the world’s best smaller fighters – that’s why the company dropped its 170, 185, and 205 division in 2008.

While Zuffa has more or less succeeded making WEC the home to most of the world’s top bantamweight and featherweight fighters, it hasn’t been able to grow the brand into a wildly successful, highly profitable brand like the UFC. It’s by virtue of that poor brand recognition that we’ve yet to see a WEC PPV; and therein lies the problem.

It’s sort of become a vicious, self-fulfilling cycle for the WEC: they lack the brand recogntion to host PPV and major television events, events that would in turn help to boost their brand. To a certain degree its hard to fault the WEC because they’re really getting the short end of the stick in terms of human and financial capital; the UFC is simply too big and growing too quickly to leave much for the WEC to work with.

And so, without the strong PPV buys or the backing of a major network – in addition to lacking the support structure that the UFC enjoys – the money, nor the exposure, is available to the world-class athletes that the WEC does employ. The feeling is very much that fighters like Mike Brown, Miguel Torres, Brian Bowles, Urjiah Faber, Jose Aldo, and Donald Cerrone in co. deserve more.

Enter the UFC-WEC merger discussion.

Pros and Cons

+ Fighters like Torres, Faber, Brown, Bowles, Aldo, and the rest of the emerging WEC talent would be given a much larger stage to showcase themselves and their fighting talent. An increase in exposure would give these fighters an opportunity to earn a greater following, and thus increase their earning potential (both from a compensation standpoint and a sponsorship standpoint).

+ Two new divisions within the UFC would supply the organization with enough top-end talent to better fill the main card portions of PPVs and Spike TV cards. The PPV and rating numbers seem to support the idea that non-title fight events are seen as second tier; by absorbing the WEC, the UFC is giving itself two additional belts and a host of new talent to help fill those main cards. If the UFC is looking for consistency in its PPV numbers, it must work to eliminate the UFC 95 and 96 cards that don’t feature a title defense or an incredibly interesting match-up. Even the UFC 101 main cards that really only feature two draws of any interest need to be eliminated. The two new divisions would also help matchmaker Joe Silva make last minute replacements to cards that would otherwise be victimized by last-minute changes (UFC 85 comes to mind).

+ Likewise, the UFC could use two new divisions to spur the expansion of other content offerings such as its UFC magazine or UFC unleashed and knockout series. If the magazine, for example, is looking to move from a bi-monthly to a monthly edition in the next couple years, more fights and fighters will greatly help that transition.

– However, the UFC already has enough trouble giving its current roster the standard 3-4 fights per year; adding more fighters would complicate things even further.  Sure the champions and top-end talent will find fights, but what about the lower-level guys or developing prospects?

– Higher fighter turnover is likely to result from an influx of even more fighters into the UFC. If you thought the fighter turnover was bad now (McCrory and Leites just the latest of known UFC fighters to get the axe), then just wait until the UFC adds 40-50 more guys.

– There are also a lot of talented industry people working for the WEC currently – what of their jobs?
 
– What happens to obligations with Versus?

A Potential Solution

At the time Zuffa bought the WEC, the UFC didn’t have the capacity to absorb the entire organization; so in hindsight, it was probably the correct play on Zuffa’s part to operate the WEC as a separate entity. At the very least, it gave Zuffa the opportunity to try and duplicate the success they had with the UFC.

Now, the UFC is a far larger company than anyone probably envisioned even two years ago, and the WEC’s growth has been less than flattering for a parent company used to expanding at a breakneck pace. Not only is there not enough human or financial resources necessary to make the WEC a major player, but it would appear as though the WEC seems destined to forever linger in the shadow of its sister company.

The question then becomes, if the WEC really isn’t taking off, then why not bring the best of the organization over to the UFC? The idea being that parts of the WEC could potentially add more value as a part of the UFC than as a separate entity; transfer the best WEC fighters, its video library, and some of the management personnel to the UFC in order to help round out the organization. Then move to address some of the potential pitfalls of the merger.

It’s not as if the UFC is really adding a ton of fighters, either. If you take the top 20 guys in both the bantamweight and featherweight divisions, plus 5 of the top lightweights from the WEC, that’s just 45 contracts.

The UFC is growing at such a quick pace – both domestically and internationally – that it likely wouldn’t surprise anyone if they were to host 24+events in 2010, and more in following years. Those events are going to need quality main events – many of them title defenses – and having seven divisions full of champions and contenders makes that a lot easier. It also bodes well for the future of the 135 and 145 divisions if prospective fighters know that they can earn a healthy living as an MMA fighter in those categories.

In order to address the 3-4 fights per year issue, the UFC would probably have to use some combination of roster cuts in other divisions, while also tacking on 1-2 more fights to every undercard in order to push everyone through to their 3-4 fights a year. Not much of a stretch considering we’ve already seen the UFC fill big cards (UFC 99 in Germany had 12 fights at one time).

Also consider that the UFC seems to have revisited its policy on exclusivity to some extent. They’ve allowed Houston Alexander to fight on the next Adrenaline card, which is something they really haven’t done in close to three years. It’s another tool they can use to alleviate some of the roster stress they organization might experience with added WEC fighters.

In the end, a simple comparison is all that’s necessary to realize that the long run benefit of adding potential PPV draws like Torres, Brown, Faber, Bowles, etc. far outweighs the short-term cost of paying for a few extra fight purses on every card.

Unfortunately, there’s no way to address the rampant turnover that exists in the UFC – it’s a necessary evil from the organizations perspective (as unpopular as it may be with the fans). While it’s regrettable that fighters are sometimes signed and released quickly, their marketability is forever improved having fought in the UFC. It also helps the sport, believe it or not, to have a host of former UFC fighters because they’re seen as legitimate options to anchor the fight cards of smaller promotions.

Another Option?

If, for whatever reason, a merger isn’t possible it would be well worth Zuffa’s while to canvas network television at any cost.

I say this for two reasons: 1.) even if they had to take a bad deal in the short term, the resulting gains in popularity would almost certainly garner them a better deal in the future, and 2.) it’s really a trojan horse of sorts, because Zuffa can still use the WEC programming on network TV to push viewers to their UFC PPVs which generate the bulk of the company’s revenues.

Even if Zuffa receives nothing in terms of rights fees, they’re still going to be ahead in terms of the exposure that might lead to potential WEC PPVs, better television deals in the future, or in-programming UFC content advertisements that push viewers to UFC content. Zuffa and the WEC would simply need to ensure they retained some semblance of production control in order to run the sponsorship and advertisement set they need to.

Food for thought at any rate.

Did Zuffa Turn Down a $1.2B Offer in '08?

July 13, 2009

According to the UFC, 473 million TV households in more than 60 countries now have access to its programming; that kind of reach was enough to get White and his partners a $1.2 billion offer to sell the UFC about a year ago, which they ultimately turned down, according to White.

– from Time.com

SEE: The Million Dollar Question, More Details on Dana’s Major Announcement, Bertelsmann Media?

IFL Taps Out

July 25, 2008

While it was long expected, official word came Thursday of the demise of the International Fight League. Joe Favorito, IFL’s Senior VP of communications, contacted the press with the final word. To Wit:

I apologize for this mass email but I wanted to take a second to let you know that as of July 31 my role at the IFL will be no more as the company goes into its final stage of being sold and/or closed down. We are very proud of what we did here in just over two years, building a brand from nothing into something that people in the industry and outside of the industry actually noticed, and I enjoyed working with so many different people and helped tell some great stories. At the end of the day sometimes the finances don’t make sense, but it certainly wasn’t for lack of trying. The good news is I think we have gotten all our good junior people placed in some great spots, so we are pretty proud of that. Even our interns landed in good places.

While he didn’t explicitly name the suitor, MMAPayout.com has reported earlier that the UFC was deep in negotiations to buy the IFL and since that time the UFC has purchased the contracts of the Miller brothers.

Brandweek succinctly made the case for the financial nosedive that precipitated the announcement:

Although financial figures were not disclosed, analysts put the IFL’s market value at $1 million at best. …… After an IPO stock offering in late 2006, analysts put IFL’s value at more than $500 million.

In late 2007, however, co-founder and CEO Gareb Shamus …..was moved to a role as consultant and was replaced by Jay Larkin, the IFL’s president and COO. This year, the IFL’s concept of having five-man teams and playoffs was scrapped in favor of “camp” alignments. IFL stock also dropped from a high of $12 per share to about 3 cents.

To paraphrase the old saying, The IFL made a small fortune in their time…… in that they took a big fortune and through mismanagement and bad decisions turned it into a small one. Jay Larkin made all the right financial move during his tenure as head of the IFL, but by that time the die had been cast.

If Larkin has a non-compete clause in his contract that would preclude him from any further role in MMA for an extended time period. Industry chatter prior to the UFC negotiations had EliteXC also being a suitor, with acquiring Larkin’s acumen at the executive level being seen as one positive for ProElite possibly making a deal, in addition to the tape library and fighter contracts.

Analysis of Reported Zuffa Acquisition of the IFL

July 21, 2008

Last week MMAPayout.com published a report from HDNet’s Inside MMA that the IFL is expected to eventually be purchased by the UFC. While the IFL is attractive acquisition target because of its potentially undervalued assets, namely its roster of talented young fighters and a 400+ hour video library. However, it does not have much to offer the UFC that it does not already have.

The UFC is already stocked with a majority of the sport’s A-level fighters and has enough B and C level talent to make a plenty of compelling match-ups. Nor does it need the IFL’s stock of fight footage. With over 80 PPVs, 7 seasons of cables most popular MMA reality show and the occasional “free” SPIKE TV fight night, the UFC easily has the deepest archive of quality fights.

It seems that the company’s primary motivation in purchasing the IFL is to keep the company out of the hands of one of its competitors, such as EliteXC who was rumored to have strong interest in the company. This wouldn’t be the first time the company has purchased other promotions for purely competitive reasons, it previously purchased the WEC in order to block a competitor from a deal with the Versus Network and reportedly purchased Pride at least in part to keep it out of potential rivals hands.

The UFC’s gain may be best understood in terms of EliteXC’s loss. The acquisition of the IFL by ProElite would greatly bolster its talented, but thin roster, while the tape library would add more hours to one of the largest MMA libraries in the world thanks to the company’s M&A binge last year.

With a reported asking price of between $750,000 and $1 million, purchasing the IFL is a small price to pay for Zuffa to block its competitors, particularly when it can pick up several talented fighters and the footage to promote them in the process.

Bertelsmann Denies Interest in UFC

June 18, 2008

Whatever today’s major announcement is, it does NOT appear to be a sale of the company, particularly to Bertelsmann Media as was rumored yesterday. A spokesperson for Bertelsmann denied that the company has any interest in acquiring the UFC according to a report from Germany’s GroundandPound.de.

In an interesting trivia note, Bertelsmann is apparently already a former owner of the UFC. According to former SEG employees, BMG, a Bertelsmann subsidiary, reportedly had a financial interest in SEG at the time it owned the UFC. At the time SEG was a production company that mainly did music programs and BMG was a German media company that had bought RCA and Arista Records.

Special thanks to Willy Steinky and Tim Leidecker of G&P for sharing their report with MMAPayout.com.

Jay Larkin Talks IFL/EliteXC

June 6, 2008

The ratings from EliteXC’s network debut on CBS seem to indicate the sport passed its profitability test with flying colors.

Since the business of broadcasting is often a game of imitation and spin-off, fans of the sport should be the beneficiaries. All of those channels too afraid to test the waters in regard to MMA programming could now dive in head first.

The real race is between content distributors and content providers to decide who will pair up with whom.

One group looking for a dance partner is the International Fight League.

In his last conference call with the media, the groups CEO, Jay Larkin, told reporters the league was for sale and that they were actively pursuing partnerships with other organizations.

In this interview with MMAPayout.com Larkin discusses a wide range of topics from a possible Kimbo Slice/ Roy Nelson fight, to the WWE’s interest in mixed martial arts.

The league broke into the sport with an unpopular team format, which they have since dropped, though even some MMA hardcore fans still think the league is filled with Silverbacks and Pitbulls.

Despite some very exciting fights featuring their cast of talented fighters including Wagnney Fabiano, Roy Nelson and Ryan Schultz, the league has yet to catch on with MMA fans old or new.
The key points are summarized below, however, the entire 24-minute interview is available for download.

Here’s what Jay Larkin had to say (paraphrased from the interview:

  • The fights were “crap.”
  • A lot of buzz from TV networks about bringing more MMA to network television.
  • Even though the fights were awful and the show ran over, it was still a success because of ratings.
  • Feels there is still reticence about the blood being spilled during the shows.
  • Conversations with TV networks and sponsors are on-going.
  • Conversations between Larkin and EliteXC President Gary Shaw did actually take place, but Roy Nelson/ Kimbo Slice were not specifically talked about.
  • Nelson/ Kimbo came about because Nelson called out Kimbo before the fight.
  • After Kimbo’s performance, Shaw probably would not put Kimbo in a cage or a ring with Roy Nelson for any reason or any amount of money.
  • Fans probably won’t be willing to pay for a Kimbo PPV, but is a good draw on free or cable TV.
  • Kimbo is probably the biggest draw in MMA.
  • The IFL will continue to follow its philosophy of using “rising star” fighters, as opposed to promotions like Affliction who are spending big money on big names.
  • Since the CBS show, the IFL has received a number of offers from potential partners or buyers.
  • The IFL is looking to do more than just raise capital. The best thing for the IFL would be to consolidate with another fight promotion, or to team up with a media company interested in adding MMA to their menu.
  • Rumor is Vince McMahon is not an MMA fan, but Shane McMahon is. However, rumor is at this point the WWE has decided not to enter the sport.
  • The original planning for the upcoming NJ fight card, was looking to craft an ethnic based fight card, like the world of boxing, hoping to draw the Russian and Polish communities, but that style of card fell through due to lack of talent.
  • The IFL will largely concentrate its live event presence along the eastern seaboard, using its strategic domestic and international broadcast partnerships to reach an international audience.

The entire audio interview with Jay Larkin is posted for download.

All audio interviews posted on MMAPayout.com are the sole property of Andrew Falzon and may not be rebroadcast, retransmitted or reposted without the express consent of Andrew Falzon.

IFL Puts the Hex on MMA; Looking for New Partners

May 12, 2008

Last week the IFL announced its plans to debut a new fighting surface later this year. The six-sided ring will be called the Hex. The ring verses the cage is a hotly debated topic in the MMA community as far as each surface’s affect on competition and safety, however, the IFL’s move is clearly about branding.

Traditional over-sized boxing rings say boxing, kick boxing, maybe even professional wrestling, but definitely not MMA. The cage says MMA, but maybe more specifically the UFC. The Hex seems to be a compromise designed to solve both branding problems, a surface clearly distinguishable from boxing and the rest of MMA and entirely unique to the IFL.

I still think MMA happens in a cage and other things that aren’t seen as MMA happen in a ring, despite how many sides it has. The cage produces a visceral reaction that is a negative for IFL CEO Jay Larkin, but is a positive for the 18-34 male demographic that watches the sport. The only convincing argument against the cage and in favor of the ring was the idea that mainstream partners, television and otherwise, were uneasy being associated with the violence imagery of a cage. With CBS and Budweiser in the cage, that argument appears to be losing steam pending a major setback.

The biggest “news” of the press conference was Larkin’s public declaration that the company is actively shopping the embattled company. “Are we actively looking for a partner or a sale? The answer is, yes,” Larkin stated on the call according to MMAWeekly.com. “We entertain phone calls and questions almost on a daily basis from potential investors, potential buyers, people who want to get in the MMA business, people who are already in the MMA business.”

Larkin also continued to push his bleaker, some would say more realistic, view of the current state of the MMA industry:

This harkens back to something I’ve been saying consistently, is that I do believe the MMA world is a fractured world, and the way to make it a healthier, stronger, and a mainstream sport and industry, is through consolidation and roll-up. There’s just too many little groups out there who are fighting over the same meatless bone.

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