SBJ/June 11-17, 2012/In Depth

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  • UFC's global ambitions

    Dana White stood in a dressing room in the bowels of Philips Arena in Atlanta on a Saturday night in April, explaining why he needed two bags of IV fluids to get through a night watching other men fight.

    Food poisoning was the main culprit, he supposed. But his travel schedule deserved some of the blame, too.

    During a four-day swing earlier in the week, the UFC president flew from the company’s Las Vegas home to Stockholm for an event, then to Abu Dhabi for a meeting with investors, and then back to Las Vegas. He was home for two days before heading to Atlanta for UFC 145, then Miami for a morning and afternoon, and then on to Rio de Janeiro, where he helicoptered to and from a press conference before trekking back to Vegas — after mixing in a quick side trip to Los Angeles.

    “All the way to Brazil and we’re there for three hours,” White said, raising his brow and shaking his head. “The schedule is nuts.”

    Following White’s Twitter feed has become the fight fan’s version of “Where’s Waldo.” Tracking his trips back to their origin is like unraveling a ball of string.

    Vitor Belfort (right) of Brazil trains on Barra de Tijuca Beach in Rio de Janeiro in preparation for UFC 142 in January.
    Photo by: AP Images
    White long has been a captive of the company jet, crisscrossing the country to promote upcoming fights, shouting into microphones and handing out tickets on street corners. But hopping continents is a relatively new development.

    Other than a single show in London in 2002, the UFC did not take its circuit beyond U.S. borders in its first six years under the ownership of billionaire brothers Lorenzo and Frank Fertitta, who bought the company for $2 million in 2001. When they finally did go abroad, they stuck to the language they knew best. Their first eight events outside of North America, held from 2007 to 2009, all were in the United Kingdom or Ireland.

    But then the Fertittas and White started to notice that many fans were traveling to those shows from elsewhere in Europe, particularly from Germany. So they took a show to Cologne in 2009. In 2010, the UFC went outside North America four times, visiting three continents, with shows in London, Sydney, Abu Dhabi and Oberhausen, Germany. In 2011, it crashed its fifth continent with a fight in Brazil.

    This year’s schedule will include at least seven shows outside North America. White was cageside in Brazil in January, Japan in February, Australia in March and Sweden in April. Later this year, he’ll roll out another card in Brazil and one in England, and break yet more new ground, putting on a show at the Venetian Macao, a gambling mecca off the coast of mainland China.

    “Our philosophy is that every market is our market to go into,” White said, shouting to be heard over the pulse of the music before the main event at UFC 145. “Fighting translates everywhere. Everybody gets it. Everybody is into it. So we are going everywhere eventually. It’s just a matter of where we go first.”

    Plenty of fight in Brazil

    UFC Chairman and CEO Lorenzo Fertitta chuckles when he speaks of the way the Brazilian stars of the circuit who trained in Las Vegas used to look forward to returning home so they could fade into the crowd.

    Brazilian jiu-jitsu is core to the origin of the UFC. The circuit’s earliest events, held in 1993 and 1994, were tournaments pitting men of varied sizes and fighting styles in wide-open, often brutal, bouts, with the one who survived the gauntlet coming away as winner. Three of those first four tournaments were taken by Royce Gracie, a California jiu-jitsu artist
    who was raised in Brazil, where his father was said to have invented the style.

    The Gracies — and there are many of them — since have ascended as the first family of mixed martial arts, training fighters from all over the world.

    Yet, as Fertitta describes it, the popularity of jiu-jitsu as a martial art in Brazil did not immediately translate into popularity for MMA as a spectator sport there.

    “They’d have all the fortune and fame and they’d get mobbed wherever they went,” Fertitta said, describing the scene when fighters such as Anderson Silva and Vitor Belfort encountered rabid UFC fans in Las Vegas. “But then they could go home to Brazil and nobody knew who they were. It was a nice balance for them.

    “Our fighters kind of liked it. … Now, it’s become difficult for them.”

    A degree of that has come with success. The champions in three of the seven UFC weight classes are Brazilian: Silva, the middleweight champ since 2006 and consensus pound-for-pound No. 1; Jose Aldo, the featherweight champ since November 2010; and Junior Dos Santos, heavyweight champ since defeating Cain Velasquez in UFC’s debut on Fox seven months ago.

    Then there are old-school favorites Wanderlei “The Axe Murderer” Silva and Belfort, stars and coaches on the Brazilian version of the UFC staple “The Ultimate Fighter,” which debuted in March. And Mauricio “Shogun” Rua and Lyoto Machida, both of whom held the light heavyweight title in recent years.

    And there are more.

    That deep and successful lineup of competitors made Brazil a natural market for an event. But nobody — not even the chronically optimistic White — could have predicted what played out this past August when the circuit returned there for the first time in 14 years. With Anderson Silva headlining, UFC 134 sold out the 14,000-seat HSBC Arena in Rio De Janeiro in 74 minutes.

    That was no surprise. But the television ratings were an eye-opener.

    The UFC knew that Brazil was ripe for growth based on the number of Brazilian fighters and the passion displayed by Brazilian mixed martial arts fans who went to events in the United States, such as these fans who attended UFC 146 in Las Vegas.
    Photo by: UFC
    About 35 million viewers watched the show, which aired on the over-the-air network Rede TV, which has run replays of UFC events from around the world for years. Rede typically is the lowest rated of the five national networks in Brazil.
    On that night, it posted the highest rating of its 12 years on the air, 10 times better than its nightly average. Rede finished third in the time slot — 10 p.m. to midnight. For 14 minutes during the main event, it even drew a larger audience than Globo, the country’s dominant network.

    “That opened everybody’s eyes as to what the potential was in Brazil,” Fertitta said. “We immediately were the prettiest girl at the dance. We had every single network bidding to secure our rights.”

    Among them was Globo, which regularly doubles the audience of its nearest competitor.

    “They’re the 800-pound gorilla over there,” Fertitta said. “There couldn’t be a better place for us to be.”

    The first big fight to air as part of the Globo deal was Dos Santos’ upset of Velasquez for the heavyweight title in November, which also marked the debut of the UFC on Fox in the U.S. It drew an audience of 52 million.

    The UFC was back in Rio in January, with another sellout at HSBC Arena. This time, it pulled 16 million viewers in a broadcast window typically populated by insomniacs — 1 to 3 a.m. — good for a 70 share.

    With the sense that Brazil could percolate around all these champions, Fertitta elected last year to try something new there, taking what was the sport’s springboard in the U.S. — the weekly show “The Ultimate Fighter” — and building a Brazilian version.

    While ratings for “The Ultimate Fighter” have declined in the U.S., falling to an average of 1 million viewers per episode, the show airing south of the equator has fared markedly better. Broadcast on Globo, “The Ultimate Fighter: Brazil” has averaged 10 million viewers per episode since its debut in March, winning its time slot, Fertitta said.

    “One of the things you can’t overlook is that these countries are very nationalistic,” Fertitta said. “The country rallying around [Brazilian fighters’] success is one of the reasons we’re thriving there. You look at our success in Canada. … It doesn’t hurt that GSP (Georges St-Pierre) is one of the best fighters in the world.”

    Sizing up other markets

    Seeing “The Ultimate Fighter” format succeed in Brazil this year has caused the UFC to alter its international strategy, Fertitta said, striking deals to produce versions of the show around local talent in markets where it sees the greatest potential for growth.

    In April, the UFC locked down a deal in India with Sony Pictures Television subsidiary Multi Screen Media that includes a commitment to two seasons of a localized version of “The Ultimate Fighter,” featuring fighters from the region competing there. The Sony deal also put UFC events on the air in an appealing weekly time slot, as the lead-out from Indian Premier League cricket, which reportedly is watched by upward of 100 million viewers.

    Piggybacking the sport on the IPL fit with the UFC’s international road map of exposing its shows on the channels that
    UFC fighter Jon Fitch (left) presents Australian rugby player Jared Waerea-Hargreaves with a UFC champions belt during a media event leading up to UFC 127, which was held in Sydney in February 2011.
    Photo by: Getty Images
    people regularly turn to for sports. The UFC has eschewed selling its programming to what Fertitta calls pan-regional channels, such as Eurosport, which carry many different sports but don’t necessarily put them in front of the broader base of sports fans in a country.

    He doesn’t want to be what cricket is in the U.S. — available to viewers who diligently seek it out, but invisible to the vast majority of viewers, even sports fans.

    “That goes right back to our original strategy of being relevant within what the dominant sport is in that market,” Fertitta said. “We don’t have any aspirations to be or think we’ll ever be as big as the IPL. But I’ll take No. 2 in a massive market that’s growing.”

    Putting “The Ultimate Fighter” on in India will add something that the sport lacks, but badly needs in order to grow in the region: local talent. Unlike in Brazil, where homegrown talent is plentiful, the UFC must find and cultivate fighters in other areas of the world.

    Along with “The Ultimate Fighter: Brazil” and “The Ultimate Fighter: India,” the UFC has struck a deal to produce “The Ultimate Fighter: Australia.” It is close to announcing a Canadian version, and “The Ultimate Fighter: South Korea” will likely host its first event next year. The UFC also is working on a Spanish-speaking version that it could distribute throughout Mexico and Latin America.

    “It’s no different than what we did here in the United States starting in 2005,” Fertitta said. “We introduce the sport and the brand to everybody, and we’re not just showing the fights. They get to learn the backgrounds of these guys and understand the culture of the sport and learn about the ins and outs. And coming out of that show, not only do we have a winner, but we typically have six to eight guys who really are qualified to compete in the UFC.”

    Developing fighters from those countries will mean investing in more fights there. This year, the UFC likely will hold seven of its events outside North America. Next year, Fertitta expects to “scale that up to 20.” That would pencil out to at least eight fights in Brazil, five in Asia, five in Europe and two in Australia.

    “They may not all be of the magnitude of a stadium show of 50,000 or even an arena show of 20,000,” Fertitta said. “But it allows us to have a presence in all these markets on a consistent basis. At that point we can roll out the balance of our business plan, which includes all the ancillary businesses like licensing and merchandise, equipment, gyms, and all the multimedia strategies we employ in the U.S.”

    Fertitta began exploring China three years ago, at the same time he started looking into India. The UFC opened an office in Beijing in September 2010, hiring former NBA China managing director Mark Fischer to head its Asian expansion. It has cobbled together a dozen provincial TV deals across China in order to get exposure nationally, putting its distribution at 250 million potential viewers. It also streams its events on the nation’s top three portals.

    The UFC still hasn’t landed on a definitive strategy in China, Fertitta said. It has signed one fighter and regularly takes prospects to Las Vegas to train. It hopes to get a better read on the country in November, when it takes its first event to Macau.

    Track Dana White's global voyage.
    “It’s a stone’s throw across the water from Hong Kong, so it will attract a lot of people from there,” Fischer said. “But it’s also a two-hour flight from [1 billion] people. And it is a holiday destination. We can bring in a lot of influential people from mainland China to see their first fight and go back and spread the word.”

    Fischer compares the UFC’s current standing in China to that of the NBA there before Yao Ming emerged. The sport had been played there for upward of 100 years, so awareness of basketball was high. But until Yao became a star, few people paid attention to the NBA. Similarly, martial arts trace back for centuries in China. But familiarity with the UFC, or even MMA fighting, still is low.

    “The NBA was in China for 20 years before some of the big returns started coming in,” Fischer said. “It’s not going to take us that long. But we’re in the early stages here. We’re preparing a multiyear building strategy. Whether that’s three or four or five years, we believe the return will come.”

    This year, revenue from outside North America will represent about 10 percent of the UFC’s business, Fertitta said. But he estimates that these days he spends about 65 percent of his time and energy focused on international expansion.

    “I have to,” Fertitta said, “because that’s where the future is.”

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  • Boxing making most of TV opportunities

    Not long after he took over as the head of Showtime Sports in November, Stephen Espinoza noticed what seemed an inefficiency in the way the network spent its production budget.

    Fight cards typically featured upward of eight bouts, some of which turned out to be exciting fare showcasing up-and-coming talent. Yet only two of them made the network’s telecast.

    “We’re there with our crew and our equipment and it seemed a little bit silly to go through all that trouble and bring in trucks and personalities from out of town and only get a couple of fights of content,” Espinoza said. “And that’s especially so with authenticated [video on demand], where we have an almost limitless ability to store content and make it available to our subscribers. It didn’t make sense to me.”

    One of Espinoza’s first moves at Showtime was to approach promoters with the opportunity to air more fights if they built out better undercards, offering to put two or three of those fights on the multiplex channel Showtime Extreme as a lead-in to the main card on the flagship. The network has been able to offer more fights for only slightly more than it was spending, Espinoza said, by urging promoters to spread the payout more evenly across their cards.

    On June 2, Showtime took another step toward offering viewers more, airing a four-fight card on the main network, with a one-hour undercard lead-in on Showtime Extreme.

    “As a fan watching boxing, if you only got two fights and they were both quick endings, it could be really dissatisfying,” Espinoza said. “With U.S. Open golf, you’ve got all-day coverage spread among various networks. The concept that boxing was somehow different, in that the tolerance level was only two fights, it didn’t make sense.”

    HBO featured Brandon Rios in its new short series "2 Days: Portrait of a Fighter."
    Photo by: Getty Images
    Showtime’s expanded boxing offering is indicative of a recent uptick for a sport that, a few years ago, found itself with perilously few TV opportunities. In a two-month span in 2008, Spanish-language channel Telefutura canceled its weekly “Solo Boxeo” show, which provided 48 dates, and ESPN cut its fight schedule in half, axing its “Wednesday Night Fights” show.

    “Solo Boxeo” returned in 2010, but the outlook remained relatively bleak.

    Then, late last year, many in the sport sensed a turn.

    Hungry for programming to air on its rebranded sports cable channel, NBC Sports signed promoter Main Events to test launch a series called “Fight Night” that would air intermittently on Saturday nights, with Go Daddy as the presenting sponsor. A four-fight commitment quickly became five fights, and now it’s up to six, with plans for more.

    Not long after that launch, Golden Boy Promotions announced a multiyear deal with Fox, which will air 44 live events on Fox Deportes, with some clearing on Fox Sports Net and at least one card a month airing on Fuel TV, which airs a steady diet of UFC programming.

    “Boxing is good complementary programming for the UFC,” said George Greenberg, executive vice president and general manager of Fuel TV. “There’s a reason boxing has its troubles. But they do have a loyal and passionate fan base.”

    The network with the largest boxing budget, HBO, also has built out its schedule of late, mostly in the form of new shoulder programming. After repeated success driving pay-per-view buys with its high-gloss “24/7” shows, the network created “2 Days: Portrait of a Fighter,” a 15-minute short that documents 48 hours in the life of a boxer.

    The debut featured lightweight champion Brandon Rios. The second episode followed junior middleweight James Kirkland. Kirkland has fought regularly on HBO. Rios has a bout on the network on July 7.

    HBO also launched “Fight Game” with Jim Lampley, an interview show that promises to take aim at controversial issues in the sport.

    “We’re finding all sorts of creative ways to put these fighters in front of an audience and develop an interest level in them,” said Ken Hershman, president of HBO Sports. “That’s what our job is. The recent advent of all the shoulder programming has been a very substantial development here.”

    Last year, HBO attracted an average of 1.2 million viewers for its World Championship Boxing shows, an increase of about 10 percent over 2010. This year, Julio Cesar Chavez Jr. delivered 1.9 million viewers for WCB and Bernard Hopkins attracted 1.6 million. The first half of the year also figures to produce a pair of big numbers for HBO Pay Per View. Floyd Mayweather’s fight against Miguel Cotto last month was the second-highest-grossing non-heavyweight PPV event ever, bringing in $94 million on about 1.5 million buys. Saturday night’s Manny Pacquiao fight was expected to do at least 1.2 million buys.

    The audiences for “Fight Night” on NBC Sports Network have been far smaller — 264,000 viewers for the first card and 283,000 for the second — but only the NHL and IndyCar racing have produced larger audiences for the network.

    With payouts that are better than what ESPN and the Spanish-language networks offer, but lower than what fighters get on premium cable, NBC Sports Network has found an underserved middle ground. Thus far, promoters Kathy Duva and Russell Peltz have delivered pivotal and competitive matches, turning down fight managers who aren’t willing to risk a loss.

    Duva said she is willing to bring back fighters who get beat, so long as it was in an exciting fight against quality competition.

    “I’ve had more conversations with TV executives where they said, ‘Our viewers saw him lose, so they really don’t want to see him again,’” Duva said. “Can you imagine someone saying, ‘We saw the Yankees lose yesterday, so we don’t want to see them again.’ To make it interesting, people have to win and lose.

    “This is competition. That’s the point. If he couldn’t lose, there’s no point of putting it on television.”

    The show also has proved to be cost-effective content for the rebranded cable network. Along with airing the live telecast, NBC Sports replays the fight and sometimes gets its best rating of the day from them. The replays also air on
    Zab Judah was featured on NBC Sports Network as part of its “36” franchise.
    Photo by: Getty Images
    Comcast RSNs. NBC Sports Network also has used its burgeoning “36” franchise — which has taken viewers behind the scenes in hockey and racing — to raise the profile of fighters on the network. Zab Judah was featured before his fight in March. Last week, the network followed Eddie Chambers, who faces Tomasz Adamek this Saturday on “Fight Night.”

    “We like the fact that it leads to original programming,” said Gary Quinn, senior director of programming and acquisitions for NBC Sports. “Those re-airs have been doing fairly well. We get multiple bites at that apple, so it’s a great investment for us — one that has exceeded expectations.”

    The leading promoters in the sport all say they’ve noticed the uptick in demand for their content.

    “We have so much interest from networks and platforms who want to have boxing as content — it’s something we’ve never seen since I’ve been in the sport,” said Richard Schaefer, CEO of Golden Boy Promotions, whose company revived “Solo Boxeo” by bringing a cadre of sponsors to the show and now says it will do the same for the shows it promotes on the Fox channels. “A couple of years ago, we were out begging. Now, people are calling us.”

    Turnkey Sports Poll

    The following are results of the Turnkey Sports Poll taken in May. The survey covered more than 1,100 senior-level sports industry executives spanning professional and college sports.

    How much attention do you pay to the following properties now compared to five years ago?
      MORE SOME LESS
    Boxing 7% 41% 53%
    UFC 29% 39% 32%
    WWE 4% 32% 64%
     
    In your opinion, can the UFC get to the next level without being sanctioned to hold bouts in New York?
    Yes     46%
    No     35%
    Not sure / No response     19%
     
    Which of the following fight industry titans would you most like to have dinner with?
    Dana White, UFC     22%
    Oscar De La Hoya, Golden Boy Promotions     19%
    Vince McMahon, WWE     19%
    Don King, boxing promoter     11%
    Bob Arum, Top Rank     5%
    None of these     24%

    Source: Turnkey Sports & Entertainment in conjunction with SportsBusiness Journal. Turnkey Intelligence specializes in research, measurement and lead generation for brands and properties. Visit www.turnkeyse.com.

    There are several reasons. The proliferation of sports networks that want both live and repackaged content. The increased emphasis on Hispanic viewers. The willingness of fighters to sign for less money and fight more often.
    Top Rank President Todd DuBoef points to better packaging, thanks in large part to improved shoulder programming and increased promotion by media conglomerates such as Time Warner and CBS.

    “I always felt like there were 100 Polynesian islands out there in the sports world and boxing was one of them,” DuBoef said. “I’d see the other islands and they had fireworks and carnivals. And we were this island with muddy gutters and no electricity. For years, we just weren’t being presented right. I’d look over and say I wish we were like the NFL or basketball.

    “Well, we’ve finally got carnivals and Ferris wheels now. We’re out there presenting ourselves better, and the market is responding.”

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  • WWE tries a new script for movie making

    WWE Studios doesn’t want to become a remake of “The Money Pit,” where Tom Hanks and Shelley Long played a couple that plowed cash into renovating a dilapidated house. So the division is changing its own script in several major ways, according to Michael Luisi, president of WWE Studios.

    WWE no longer will go it alone when producing movies, but instead has taken steps to spread the risk and reduce its financial exposure. These include:

    ■ Co-financing movies with other producers and trying to recover some of its investment through such avenues as foreign pre-sales. WWE is working with established producers such as 20th Century Fox, Anchor Bay, Lionsgate and others.

    ■ Working with existing distributors to help circulate its movies worldwide.

    ■ At times, buying completed films that lack any WWE stars and co-branding them with WWE Studios. The first such

    “The Day” is among the movies WWE Studios will release this year.
    Photo by: WWE
    movie is “The Day,” a post-apocalyptic film that WWE bought, working with Anchor Bay, at the Toronto International Film Festival.

    ■ Concentrating on producing more PG-13 and R-rated movies in the genres of action, horror, thriller, science fiction and comedy, believing they hold more TV and international appeal. And its talent may not necessarily play the leads but take secondary roles instead.

    “The ongoing evolution is continuing to partner with what we consider to be some of the finest producers and distributors in the business,” said Luisi, who assumed his post in September 2011. “That allows us to participate in material not only that we’re developing, but that they’re developing. Part of the strategy is definitely to have a broader portfolio of movies, more at-bats in terms of the number of pictures, and to lower the investment risk in the pictures as well.”

    WWE Films began in 2002. It sunk about $100 million into its first six films, including the popular “The Marine,” with John Cena as lead, and “See No Evil,” which starred Glenn Jacobs, who performs as Kane in the WWE. WWE said that, combined, those movies will “generate a modest, single-digit rate of return.”

    The second phase of WWE Films began in September 2010 and the unit spent about $40 million producing eight films, including the comedy “Knucklehead” and “Legendary.” WWE said those films are expected to generate losses.

    Now, WWE Studios enters phase three under the new operating model, with plans to invest between $15 million and $25 million in 2012.

    The company’s latest earnings report shows the challenge ahead. Exact numbers are difficult to pin down because of complicated sales and distribution deals, but for the quarter ended March 31, WWE Studios had a loss of $1.3 million — still, an improvement over a loss of $4.1 million in the year-ago period.

    The WWE’s Big Show (Paul Wight Jr.) starred in “Knucklehead” and likes the company’s new business model.
    “I think it’s a great platform for WWE studios to build itself. To come out with a fledgling studio and compete with massive studios is a big, bold beginning,” Wight said. “Or taking films already completed, where a multimedia conglomerate can help facilitate a good relationship with getting the movie out, and help build the studio and name in the industry.”

    Bruce Goldberg writes for the Denver Business Journal, an affiliated publication.

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