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SBJ/May 23-29, 2011/Leagues and Governing Bodies
Battle-tested UFC set for next fight
Ten years of proving itself has positioned it for pivotal TV talks
Published May 23, 2011, Page 1
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The UFC president scanned a cluster of undercard fighters to his left, then made eye contact with Randy Couture, who at age 47 was about to enter the octagon for the 25th, and likely final, time. When Couture made his first UFC appearance 14 years ago at a civic center in Augusta, Ga., it was in front of about 5,000 spectators who, 24 hours earlier, weren’t sure whether a county judge would block the event. In Toronto for UFC 129, more than 7,000 showed up for the weigh-in. A two-day fan expo that featured fighter appearances drew upward of 30,000. More than 55,000 were at the fight.
“Believe me, every one of you, when I tell you … you have never been in anything like you’ll be in tomorrow night,” White told the assembled fighters, describing the sensory assault that awaited them — massive screens, chest-rattling music and screaming fans. “We here at the UFC have done our job. As big as it all is, it means dogshit if you guys don’t perform.
“It’s a big night for all you guys.”
Headlined by Canadian fight star Georges St-Pierre and supported by Couture, UFC 129 drew the largest crowd ever for the company, reported as 55,724, more than double the record of 23,152 set in December. With a gate of $12.075 million, it also dwarfed the previous high of $5.4 million set in 2009. The economic engine that drives the sport, pay-per-view TV, generated at least $40 million from about 800,000 buys.
The next night, perched at the front of a sofa in White’s backstage suite, the billionaire casino owner who bought the UFC 10 years ago for $2 million swirled a stout, celebratory vodka.
A decade in, Fertitta still remembers the exact words of Bob Arum, the godfather of boxing promoters, who, like Fertitta and his older brother, Frank, is a prominent Las Vegas
Lorenzo Fertitta (top) and Dana White (above, center) have spearheaded the UFC’s growth.
“You can go back and pull it up on the Internet,” Fertitta said. “Please, go back and look. Bob basically ridiculed us, which really hurt me.”
That Fertitta still remembers Arum’s exact words, when he said them and who he said them to nine years later speaks to the chip he and White carry on their broad and battle-scarred shoulders, even after all the hurdles the UFC has cleared. The company eclipsed $400 million in revenue last year. A sport that was an outlier when he bought it is now regulated in 45 states, with a global footprint that includes Europe, Asia, South America and Australia. It is proving it can land blue-chip sponsors that will help expose it to the masses.
Still, this will be a pivotal six to nine months in the evolution of the UFC, which is shopping its next U.S. TV rights package with an eye toward broadening its reach. Its deal with Spike TV, which includes signature reality series “The Ultimate Fighter” and a slew of other UFC programming, expires at the end of the year. Nothing on its radar — not international expansion or online distribution or the emergence of a star on the mainstream sports landscape — is as important as that unfolding negotiation.
Fertitta and White frequently sound as if they have something left to prove.
“The Fertittas are losing oodles and oodles of money,” Fertitta said, quoting Arum a second time, then shaking his head. “You know what? 55,000 people just showed up tonight in Toronto.
“So I guess we were right.”
• • •
On the stage at the weigh-in, as cameras flashed and fans raised cell phones high to capture video, Fertitta recalled the first weigh-in he attended after buying the UFC. It was at the Trump Taj Mahal, on the boardwalk in Atlantic City, in February 2001. White was there. And the fighters. There was at least one representative of the state athletic commission.
“That was about it,” Fertitta said, scanning the announced crowd of 7,113 that nearly filled the minor league hockey barn.
Ten years later, there is bedlam. Hysteria. Frenzy. You pick the word, they all fit the scene as St-Pierre — known simply as GSP in the sport and across Canada — takes the stage … to be weighed.
Parachuting in for an event in Toronto is like taking the earth’s temperature at its core. UFC executives say they know from pay-per-view sales and other data that, per capita, Canada is the nation where they have the most fans and Ontario is where the sport is most popular. They estimate that they are 2½ times bigger in Canada than they are in the U.S.
55,000-plus packed the Rogers Centre in Toronto for the UFC’s biggest success to date.
“If we walked around Toronto and said to people, ‘Do you know what the NBA is? Do you know what American football is?’ Everybody would know,” White said. “Everybody would not know what UFC is, or even what MMA is.
“We’ve got our foot in the door of mainstream. We’re pushing. But are we mainstream? Hell no. Not yet.”
Sanctioned only in New Jersey a decade ago, MMA events now are regulated in 45 of the 48 states that have athletic commissions — all but New York, Connecticut and Vermont — and all across Canada. It has been an arduous fight the entire way. So has acceptance on widely distributed, broadly watched television networks and in the mainstream advertising community.
They have fought their way in, boardroom by boardroom. The sponsor roster for “The Ultimate Fighter” includes Burger King, Miller Lite, Dodge, the Marines and Edge shaving gel, a solid core of mainstream advertisers that use the show to reach young males.
The UFC fan base looks much like many would expect it to, based on data from Scarborough research. Its avid adult fans are 78 percent male, and 53 percent of them are 18 to 34 years old. Only 18 percent are college graduates, a number that is pulled down by the fact that 24 percent are 18-24, thus many are still in school. Economically, they look much like the general population. Their buying habits are what you would expect from a demo that skews young.
The fan profile the UFC shares with sponsor prospects, compiled via Harris Interactive, shows fans to be 63 percent male and 56 percent 18-34, with 26 percent earning household incomes of $30,000 to $60,000 and 31 percent between $60,000 and $100,000.
The size of the MMA fan base is formidable and growing. Based on surveys taken January through April, the polling firm Luker on Trends, which conducts the ESPN Sports Poll, estimates that about 30 million Americans age 12 and older are avid UFC fans, with 42 percent of those falling in the 12-34 bracket. About one-third of males 18-24 and one-fifth of those 25-34 said they were avid MMA fans.
In the four years that the Sports Poll counted MMA fans, the avid segment — the one that matters most to sponsors and TV networks — grew steadily from 12.7 percent of respondents to 13.9 percent, even as the avid base for many sports has remained flat or declined. Last year, the avid fan base of MMA in the U.S. trailed only pro and college football, pro and college basketball and Major League Baseball. And that’s from the larger fan pool, not just under-34 males.
When Rich Luker founded what would become the ESPN Sports Poll in 1993, he didn’t include MMA among the sports it tracked. About a decade ago, he began to hear young males mention it during focus groups. Now, they mention it frequently and speak passionately.
Luker acknowledges that which is impossible to ignore: that UFC holds a prominent place among young males. But he remains skeptical about its staying power, questioning its ability to hold on to the fans it has added outside of its core.
“The curiosity factor draws a lot of people in,” Luker said. “We’re in that window right now with UFC. It reminds me of poker and professional bull riding. There was a window where curiosity drove people’s interest. But you just don’t hear about poker being hot any more.
“We predict this will not be a long run.”
Luker points to a red flag that he says the UFC shares with bull riding, poker and even NASCAR, which has seen casual fans drift away in recent years. An inordinate share of those who express a strong interest in MMA are not avid sports fans, Luker said.
“The pedigree of engagement in sports is not near what you find in the traditional sports that we track,” he said. “So they’re not going to have the same sort of stable duration of fan base.
“If UFC can take what they have and keep it pure … it is the kind of thing that some people will seek out. But this is not a mainstream sport. And it won’t be.”
The collection of sponsor logos in the octagon at UFC 129 was mostly outside the mainstream. At the center of the mat was Bud Light, which for the most part has gone it alone as a big brand sponsoring the sport beyond its popular reality show. There was TapouT, provider of a high-profile line of MMA-inspired apparel. There was Xyience, an energy drink from a Las Vegas-based company that has been a UFC sponsor since 2006, paying a seven-figure annual rights fee. There was N.O.-Xplode, a product from the official nutritional supplement of the UFC. There was Toyo Tires. And there was Harley-Davidson.
While those sponsors benefit from a connection to the UFC’s rabid fans, they aren’t doing much to take the sport beyond the people who already are watching.
The UFC has made that a priority in pitches to sponsor prospects in recent months.
This week, it will announce another major crossover sponsorship, landing Edge Shave Gel to a deal that will include a national promotion that puts the UFC and five of its fighters, including welterweight B.J. Penn, on packaging and advertising. It also is closing in on a long-elusive deal with a U.S. automaker, sources said.
“The conversations we’re having now are with larger companies that are looking to us to help sell their products,” said Mike Mossholder, vice president of marketing partnerships for the UFC. “And that is when you become mainstream. You’re going to see us on packaging with Fortune 100 companies, the kind of companies you think of with all the big leagues and the Olympics and World Cup. You’re going to see our fighters and our brand at [convenience stores] and grocery and mass merchandise in ways that you haven’t seen before.
• • •
A half-hour before the first preliminary fighters of the night entered the octagon, as the Rogers Centre seats slowly began to fill, Mossholder held court at a high-hat table on the suite level, flanked by a long spread of hors d’oeuvres. He joined the UFC in January after holding similar positions at Las Vegas Motor Speedway, Churchill Downs and the Miami Dolphins. He is at home in a stadium suite outlining all that a sports property can offer a potential sponsor.
“We have some of the same things that the other properties have, but we also have some key differentiators,” Mossholder said. “We find that those are really resonating.”
The quest for young males has been a recurring theme in the advertising community for the last decade. The UFC has them in spades. That’s the obvious play.
But there are other, less obvious, behavioral aspects that have resonated with sponsor prospects of late.
The night before UFC 129, Mossholder dined with a guest: the chief marketing officer of a Fortune 100 company.
They spent more than half of the two hours discussing social media, Mossholder said. In the last five months, as it has ramped up the content it offers via social media, the UFC has added 800,000 Facebook fans, bringing it to 5.3 million.
“What we’ve added in [five] months is double what they have, total, as a company,” Mossholder said. “There are a lot of companies that know they want to do something in social media but they’re struggling to figure out what it is. When we start talking about our numbers and how they can attach to our content, we have their attention.”
The NBA is the Facebook king among the sports leagues, with 8.6 million fans. But the UFC has a stout lead on the rest. As of early this month, the NFL had 3.1 million, the NHL 1.6 million and MLB 400,000.
Another distinction that has resonated with some sponsors is the UFC’s pay-per-view. While pay-per-view always will deliver a smaller audience than other TV mediums, it gives the UFC a point of distinction. Pay-per-view audiences cluster. The UFC says its typical home pay-per-view sale delivers an average of 8.8 viewers. Many fans gather for pay-per-views at bars and restaurants, including national chains such as Buffalo Wild Wings and Hooters. The UFC says it is in about 5,500 bars in North America.
The latter explains why the first blue-chip sponsor to fall for the UFC was A-B, which signed on in 2008 and renewed through 2014 earlier this year. Unlike boxing, which sells by the fight, the UFC sells its pay-per-view schedule to commercial clients by the year. Of late, the UFC says it has ramped up the quantity and quality of promotional items it makes available to those who show the fight.
When the UFC was courting A-B four years ago, its powerful and esteemed head of sports marketing, Tony Ponturo, wanted no part of the property. “To say Tony was against it at the beginning would be a massive understatement,” said Lawrence “Ike” Epstein, executive vice president and general counsel of the UFC. But, intrigued by the demo and the crowds that gathered for pay-per-views, he agreed to give it a chance. The deal promised little from A-B. But, over time, the brand became more and more engaged.
The renewal the two signed earlier this year will include a national promotion and create UFC-themed packaging.
“We believe the [A-B] renewal was much bigger for us than getting them in the first place,” Epstein said. “Getting them to step up was big. And then we delivered. We absolutely delivered for Bud.”
In a recent meeting, a CMO from a potential sponsor told Mossholder that UFC fans’ habit of gathering for pay-per-views drove the brand’s interest.
“The reason you’re in the room right now is because of that clustering number,” the CMO said. “I get it. I want that clustering.”
The company has been testing with UFC in recent months, Mossholder said. He said he is optimistic that it will lead to something larger.
“When you can be a good advertising medium and ultimately be able to sell somebody’s product and they see incremental growth in shelf space or sales volume, that’s when you’ve hit the mainstream,” Mossholder said. “People want to attach themselves to us to sell their product.”
The ranking sports guy at Spike tells those who are curious about MMA the same thing that the UFC preaches: They have to go to an event.
“In an age of digital wonder, where everybody has a BlackBerry attached to them, it really comes down to a face to face,” said Brian Diamond, senior vice president of sports and specials for Spike TV. “We see it time and time again. If you get an advertiser or sponsor or agency to an event and they see it in person, the majority of the time they are a changed person.”
That’s because it is not necessarily what they thought it would be.
Many sponsors understand and expect that, and most will get past it if they’re convinced a sport will help them sell their product. The greater resistance has come not because of the violence within the UFC, but because of perceptions about those who follow it.
“I looked at the numbers and said this doesn’t make any sense, because those numbers didn’t look like what I had seen with my own eyes,” Johnston said. “What I found out was that there was this very visible minority that had locked onto a very over-the-top T-shirt design, with talons and blood and bedazzled jewelry. That fan we get closely identified with represents 18 or 19 percent of our fan base. But they’re so doggone visible.”
Fertitta’s pitch to Johnston was that he wanted him to come in and help clean up an aspect of the business that they had neglected — the lifestyle element — which had in many ways come to define the image many had of the UFC.
“If you weren’t wearing a gold foiled T-shirt with talons and blood, you weren’t UFC,” Johnston said. “Lorenzo and Dana saw what it was becoming and they were ready to puke.”
Under Johnston, the UFC has worked to focus more on attributes like athleticism, competition, disciplined training and respect, leading with the components that make it more like mainstream sports. At the Fan Expo that attracted 30,000 people in two days, one booth gave fans the chance to sample a UFC-licensed personal trainer that allows fans to build their own workouts and train with UFC stars by using a PlayStation or Wii. But the exhibit space was dominated by nutritional supplements, energy drinks and apparel companies, and also included a paintball facility and a tattoo shop.
It remains to be seen whether the UFC can attract and keep new fans without alienating the core that was attracted by MMA’s counterculture cred.
• • •
Fertitta stood, arms folded, at the back of a section of ringside seats at Rogers Centre on the night before the fight, watching as the broadcast and operations crew went through walkthroughs that simulated each fighter’s trip to the ring. Before long, White joined him. The walkout is an integral, often electrifying, part of the show at a fight. The UFC tinkered with various formats over the years but, inspired by memories of Mike Tyson, White reverted back to the simplest of presentations: A long, stalking walk through the crowd.
You would think it would be simple enough to capture this on camera, but White and Fertitta obsess about it, demanding hours of rehearsal on the day before a big event. When a crew member who was standing in for Couture began his walk a few beats before the fighter typically does, White shook his head.
“Too early,” White said. “What the [expletive] are we here for if we’re not going to get it right.”
White does this before every event, as he has from the beginning, most of the time joined by Fertitta. They sometimes tinker with a camera angle or edit music. Before UFC 129, White didn’t like the acoustics, complaining that after about three hours of rehearsals he felt like he’d been punched in the head a dozen times. He sent his top production lieutenant back to the arena to work on it some more the next morning, then went to join him at noon.
“You can’t micromanage everything, but you have to own certain things,” Fertitta said. “The most important thing we can control is what that production looks like. And there will never be a day that either Dana or myself doesn’t approve every single aspect of that. We will never let go of that control.”
That could be an issue for some network sports departments, which employ legions of production specialists and have their own view of how things should look on their air. It hasn’t been a problem for Spike.
“I always say, ‘Spike is not a sports network; Spike is a network that has sports,’” said Diamond, who cut his teeth at MTV during its formative years. “We’re not NBC or CBS, where we have a division of a few hundred people and trucks at our disposal. We have connections to the live event world, so we can do it. But, like everything else we do [with UFC], there’s a certain level of comfort we have with them.”
Though their relationship has been peppered by the jousts that mark any marriage, management at the UFC and Spike are quick to credit each other for their respective successes. The UFC was bleeding money, with no indication that it would turn it around, when Fertitta decided to take one last flyer seven years ago, pledging $2 million to produce a 13-part reality series that would follow a group of aspiring fighters, with the winner receiving a UFC contract. Spike signed on to air “The Ultimate Fighter,” which catapulted both the sport and the network.
The finale of the first season, which featured the first MMA event to air live outside of pay-per-view, drew 2.6 million viewers. In the seven years since then, live season finales have drawn audiences that typically land between 1.7 million to 2.5 million, often winning their time slot in key male demos.
Spike promotes the UFC heavily, stringing together hours of programming as a lead-in to “The Ultimate Fighter” and in the run-up to each pay-per-view. UFC executives appreciate that level of devotion from a male-oriented network that is available in 99.8 million homes, but they also wonder aloud where the sport might be if it got more exposure on the networks that attract mainstream sports fans, such as the stables at Fox Sports, ESPN or Comcast.
“Certainly, we think it would help expand our audience base if we were on a cable channel that was more broadly watched,” Fertitta said. “That’s something that we’re thinking about. We’re trying to figure out where we’re going to land. There’s certainly no lack of interest, I’ll tell you that, because people see the ratings. They see the numbers we produce. Whether they get the sport or not, they get the numbers.”
The match with Comcast, which last year aired two UFC events on Versus and this year will air four, is particularly intriguing. Not only does Comcast have Versus — which could parallel what Spike has done, albeit in about 20 million fewer homes — but it also has several assets that UFC sees as valuable to its growth: a large mothership network in NBC; various niche channels on which to promote its lifestyle elements; Comcast SportsNet, to promote to mainstream sports fans in key markets such as Boston, Philadelphia and Chicago; and a large stake in the cable business, which would give it a greater motivation to forward UFC’s core business, pay-per-view.
“What we don’t need is for somebody to just put us on a time slot, like a sitcom, and then not do anything else,” Epstein said. “What we want is a partner to promote us across all those assets that a major broadcast network has. They’ve all got a morning show. News magazine shows. Cable channels. All the things they can use to cross- promote. If you get the right package of assets you can help the sport grow.”
As he watched rehearsals in Toronto, White flashed back through a list of moments that have propelled the UFC to this point. There was the swallowing of several competitors, most notably the purchase of Japan-based Pride for $70 million and the recent acquisition of Strikeforce for $40 million. There was the out-of-nowhere emergence of “The Ultimate Fighter” on Spike. The globe-trotting that has taken them into Europe and Australia and, soon, to Brazil.
And there was Toronto, the night when a tick over 55,000 would show up for a show.
Shortly after finishing up breakfast at a boutique hotel in Toronto on the morning of UFC 129, Epstein compared it to the moment when a band knows it has hit it big, crossing over from arenas to play a stadium.
“I feel like we’re on the cusp of a lot of amazing things,” White said. “You think the last 10 years was something? Wait till you see the next 10.”