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

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.

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.