From sideshow to staple, UFC sold for $4B
The Fertitta brothers bought the league in 2001 for $2 million and their dedication to marketing helped it go mainstream
“The fact that there’s no competition for talent . . . allows the UFC to control labour costs really nicely.” STEVEN SALAGA SPORTS ECONOMICS PROFESSOR, TEXAS A&M UNIVERSITY
In 2001 Frank and Lorenzo Fertitta, Las Vegas natives and heirs to the Station Casino fortune, purchased the Ultimate Fighting Championship for $2 million (U.S.). At the time that sum would have covered a year’s salary for two average NFL players.
On Sunday, the brothers sold their stake in the combat sports league to the talent agency WME-IMG for $4 billion, or enough money to buy two entire NFL franchises.
In-between those two transactions the company underwent explosive growth, its brand going mainstream and international. The UFC helped turn mixed martial arts from a brutal spectacle illegal in many places to a legitimate sport fighting for space alongside football and baseball on highlight shows.
Controversy still dogs the organization. UFC star Jon Jones was set to headline last Saturday’s pay-perview event in Las Vegas when he flunked a drug test, forcing organizers to summon a last-minute replacement to fight on their biggest card of the year.
But sports business experts say prices don’t lie, and that Sunday’s sale is a triumph of smart marketing and good timing.
“At $4 billion you can’t blame the Fertittas for getting out now,” says Steven Salaga, a sports economics professor at Texas A&M University. “We might be at the point where it’s peaked. We don’t know that, but I don’t think you can fault them for cashing out.”
When the Fertittas bought the UFC the company consisted of little beyond a brand name and a library of fight films. Growth didn’t come quickly, but a pair of milestone events helped propel the UFC from sideshow to sports staple.
In 2005 the company bought airtime on SpikeTV to air The Ultimate Fighter reality series, which introduced incumbent champions and future stars to a new audience.
Pay-per-view sales went from 105,000 for UFC 52 to 280,000 for UFC 53, the first live event following the reality series.
Six years later, the UFC signed a seven-year broadcast deal with Fox. That transaction guaranteed the UFC steady revenue independent of pay-per-view sales, while promising the large audiences sponsors love.
It also helped legitimize the sport, prompting more mainstream media coverage, while attracting the attention of companies like IMG, which represents several UFC fighters.
“It’s been exciting to watch the organization’s incredible growth over the last decade,” said WME-IMG coCEOs Ariel Emanuel and Patrick Whitesall in a news release. “We’re now committed to pursuing new opportunities for the UFC and its talented athletes.”
Beyond the $2-million purchase price, the Fertittas and their company, Zuffa LLC, poured millions more into marketing the UFC and lobby- ing for the legalization of mixed martial arts in key jurisdictions.
In August 2010, the Ontario government agreed to legalize the sport, and eight months later, 55,000 spectators packed the Rogers Centre for UFC 129. The event’s $12.1 million in gate revenue set a UFC record.
“Our goal has always been to put on the biggest and best fights,” White said in a news release. “I’m looking forward to working with WME-IMG to continue to take this sport to the next level.”
The UFC has also bought out competing organizations, creating a de facto monopoly in top-tier mixed martial arts and differentiating itself from the boxing industry in important ways.
Keeping most of the world’s top fighters under contract allows the UFC complete control over matchmaking. So where boxing fans had to wait six years to see Floyd Mayweather face Manny Pacquiao, the UFC can obligate its top stars to square off.
But Salaga points out that the lack of competition for elite fighters allows the UFC to keep salaries low. Where Mayweather and Pacquiao earned guarantees north of $30 million, UFC superstar Conor McGregor was guaranteed about $1 million for his last pay-per-view bout.
“The fact that there’s no competition for talent . . . allows the UFC to control labour costs really nicely,” Salaga says. “The purchasing company is buying into this market setup.”