How UFC became a $4b business

By Alexander Speirs

New Zealand is one of the largest consumers of mixed martial arts globally.
New Zealand is one of the largest consumers of mixed martial arts globally.

Fighting is big business, and the king of the mixed martial arts hill is coming to New Zealand. The UFC - that's the Ultimate Fighting Championship - looks set to play to a capacity crowd at Auckland's Vector Arena on June 28.

The UFC has evolved from barely legal brutality to one of the world's fastest-growing sports organisations.

New Zealand is one of the largest consumers of mixed martial arts globally, with Sky TV holding an effective monopoly on both local and domestic content.

"We've long held New Zealand on our radar," said Tom Wright, the UFC's managing director for New Zealand, Australia and Canada. "It just takes time. This year we will have 49 events around the world and next year we will push into the 50s".

For a sport as inherently violent and controversial as mixed martial arts, which combines elements of kickboxing, jiu-jitsu and wrestling among other combat sports, UFC is gaining real traction with a mainstream audience as its fan base soars.

"When was the last new sport that came along which has made a truly global impact? The thing with fighting is that it's universal. People get it. It's easy to understand and it's an extremely visceral sport," said Wright.

But it almost wasn't to be. Zuffa acquired the UFC back in 2000, with the organisation fighting for survival. Casino tycoons Lorenzo Fertitta and Frank Fertitta III bought out the faltering promotion for US$2 million at the insistence of high school classmate and fighter agent, Dana White.

"They invested at least US$50 million of their own money before it started to turn the corner," explains Wright. "It was a massive investment and it came with a huge amount of risk, but that's classic entrepreneurship.

"It takes time to build a sport. All of the sports I grew up with from hockey to football to baseball to basketball, they've all been around for over 100 years. The UFC really just turned 13. They've been around for 20 years but the original shows weren't a sport, they were a spectacle."

Upon acquisition, the Fertittas installed White as president. He fought for mainstream attention as the company went deeper into the red. Their big break was with the launch of their reality TV series, The Ultimate Fighter, which brought the sport into the national spotlight.

As popularity soared, so too did pay-per-view sales. The late 2000s saw the organisation continue to prosper, buying out competitors while crushing others as they monopolised the market. In 2011 the organisation signed a seven-year, US$100 million ($116 million)-a-year national broadcast deal with Fox, placing the UFC alongside the four major American sports leagues at the top of broadcast sports.

Today the business remains privately owned, with White recently valuing the business in the Financial Times at US$3.5 billion, well ahead of the likes of the New York Yankees, Manchester United and the Dallas Cowboys in terms of franchise valuation.

A shift in business model has seen the UFC raise its stock substantially overseas during that period.

There were not many options with both pay-per-view and network TV unrealistic outside of primetime. To bridge the gap, the UFC developed Fight Pass, a subscription-based online service to show the events live in North America.

The online platform has made places like New Zealand viable for events. The public has responded, with UFC officials tipping a gate record for Vector Arena.

Business of brutality
*UFC owned by: Zuffa LLC
*Acquired: 2000
*Cost: US$2.5 million
*Current Valuation: US$3.5 billion

Key revenue streams
*US pay per view sales: US$334 million from 6,075,000 sales
*Fox Television deal: US$100 million
*Tickets sales: US$54 million
*Fighters under contract: 467 (4 Kiwis)

- NZ Herald

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