UFC Tournaments Are Coming, It's Just a Matter of When
UFC is expected to set a company record for single-night revenue on November 12, 2016. That is the night that Conor McGregor chases the UFC Lightweight (155 lb.) Championship at UFC 205 in New York City.
In digesting the previous paragraph, three things stand out. One: UFC's business model is largely based around massive revenue intakes for single-night events. Two: With rare exceptions, there is little to distinguish one UFC pay-per-view from the other. A new number pops up every month or so, some fights happen, and the company moves on to the next one. Three: A man who has never competed as a UFC Lightweight is about to challenge for the UFC Lightweight Championship.
Maybe there should be a fourth: UFC fans love it. UFC is having no trouble making money right now. Their business model works.
Does it work well enough, though?
UFC's new owners, WME-IMG, used a very large loan to purchase UFC: $1.8 billion, to be exact. The new owners are going to have to increase UFC's profit margins if they want to keep profits high and cover those loan payments.
One of UFC's moves to increase profits is already in motion: cost-cutting. UFC's top public relations man, Dave Sholler, is leaving the company after UFC 205, and it's not hard to guess why: WME-IMG is going to try to eliminated redundant jobs and have existing WME-IMG people handle that work.
The other side of increasing profits is increasing revenues. That means, principally, more pay-per-view buys and higher licensing fees from video games, television and merchandise.
WME-IMG isn't stupid, so they know that pay-per-view is a cyclical business and that UFC is a long way from creating a fan culture that triggers fans to spend hundreds of dollars a year on merchandise.
Video games and television are another story. Video game publishers and television networks are perpetually desperate for attractive content. And content licensing deals -- especially in television -- have been rising dramatically.
The problem is that the current UFC's profile as a content provider is less than stellar.
Look what UFC gives Fox Sports. Big Fox gets a decent Saturday night rating once a quarter and Fox Sports 1 gets a few hours of good-for-FS1 ratings on a couple dozen weekend nights.
UFC doesn't move the needle for Fox. Almost all of UFC's studio programming attracts very low viewership and UFC's audience has yet to show any propensity for sampling other sports after seeing ads on FS1's UFC broadcasts.
It's not like the NFL -- or even the NBA -- where audiences are vast, diverse and mainstream. Those are the audiences that cause television executives to pay the type of licensing fees that UFC's new owners are hoping for.
How, then, does UFC make its audience more vast, diverse and mainstream? Nobody knows, of course, but WME-IMG has to try something.
One thing that WME-IMG will eventually try is a tournament of some kind.
It is well documented that, under Zuffa, UFC management was opposed to MMA tournaments. Dana White came out against the idea of UFC tournaments in 2011 and long-time UFC booker Joe Silva took many of his matchmaking ideas from pro wrestling and boxing, which are two venues where tournaments have rarely been good for business.
WME-IMG, on the other hand, already owns two very successful properties that are tournament based: Miss Universe and Professional Bull Riders (PBR).
WME-IMG knows the advantages of structured championships. Any beauty queen has a path to being crowned Miss Universe and any cowboy can work his way into the Built Ford Tough Series by succeeding at lower levels. Fans of either event know what it takes for their favorites to win a championship. Fan engagement is often heightened as they follow the ups and downs of a known path to a championship.
UFC, on the other hand, has always had arbitrary paths to championships. Conor McGregor is getting a Lightweight championship shot in his first fight in the division. Eddie Alvarez had to win two consecutive fights over top Lightweights and pray that McGregor lost to Nate Diaz in a non-title Welterweight fight in order to get his.
People who value short term business spikes over long term stability have been, and will likely continue to be, opposed to WME-IMG adding some structure to UFC. In a structured promotion, a McGregor vs. Alvarez Lightweight Championship main event could've never happened in the way it's happening at UFC 205, and UFC 205 may create as much as $50 million in revenue (and, perhaps, up to $30 million in profits) in a single night.
That's cute, but that isn't going to get WME-IMG to where they want to be. UFC's new owners need to be doing something like what the U.S. Tennis Association is able to do with the U.S. Open. That tournament drew $253 million in revenue in 2013, which is the last year Forbes has numbers for.
An annual, tournament style competition could provide a large revenue spike for UFC. Television rights and merchandise alone could attract tens of millions of dollars, or even more if the event captures the interest of a broad spectrum of sports fans.
As for the details of a UFC tournament -- time period, number of fighters, qualification system, rules, prizes -- this blog will leave those to UFC's decision makers.
WME-IMG wants to grow UFC's business. In fact, they have to. There are fundamental limits to athletic competitions that book based on star power. UFC's new owners may realize that already or they may realize it in the future. The day will come, and when it does a company with the vision, awareness and experience of WME-IMG will add some kind of structured tournament to the UFC canon.
In digesting the previous paragraph, three things stand out. One: UFC's business model is largely based around massive revenue intakes for single-night events. Two: With rare exceptions, there is little to distinguish one UFC pay-per-view from the other. A new number pops up every month or so, some fights happen, and the company moves on to the next one. Three: A man who has never competed as a UFC Lightweight is about to challenge for the UFC Lightweight Championship.
Maybe there should be a fourth: UFC fans love it. UFC is having no trouble making money right now. Their business model works.
Does it work well enough, though?
UFC's new owners, WME-IMG, used a very large loan to purchase UFC: $1.8 billion, to be exact. The new owners are going to have to increase UFC's profit margins if they want to keep profits high and cover those loan payments.
One of UFC's moves to increase profits is already in motion: cost-cutting. UFC's top public relations man, Dave Sholler, is leaving the company after UFC 205, and it's not hard to guess why: WME-IMG is going to try to eliminated redundant jobs and have existing WME-IMG people handle that work.
The other side of increasing profits is increasing revenues. That means, principally, more pay-per-view buys and higher licensing fees from video games, television and merchandise.
WME-IMG isn't stupid, so they know that pay-per-view is a cyclical business and that UFC is a long way from creating a fan culture that triggers fans to spend hundreds of dollars a year on merchandise.
Video games and television are another story. Video game publishers and television networks are perpetually desperate for attractive content. And content licensing deals -- especially in television -- have been rising dramatically.
The problem is that the current UFC's profile as a content provider is less than stellar.
Look what UFC gives Fox Sports. Big Fox gets a decent Saturday night rating once a quarter and Fox Sports 1 gets a few hours of good-for-FS1 ratings on a couple dozen weekend nights.
UFC doesn't move the needle for Fox. Almost all of UFC's studio programming attracts very low viewership and UFC's audience has yet to show any propensity for sampling other sports after seeing ads on FS1's UFC broadcasts.
It's not like the NFL -- or even the NBA -- where audiences are vast, diverse and mainstream. Those are the audiences that cause television executives to pay the type of licensing fees that UFC's new owners are hoping for.
How, then, does UFC make its audience more vast, diverse and mainstream? Nobody knows, of course, but WME-IMG has to try something.
One thing that WME-IMG will eventually try is a tournament of some kind.
It is well documented that, under Zuffa, UFC management was opposed to MMA tournaments. Dana White came out against the idea of UFC tournaments in 2011 and long-time UFC booker Joe Silva took many of his matchmaking ideas from pro wrestling and boxing, which are two venues where tournaments have rarely been good for business.
WME-IMG, on the other hand, already owns two very successful properties that are tournament based: Miss Universe and Professional Bull Riders (PBR).
WME-IMG knows the advantages of structured championships. Any beauty queen has a path to being crowned Miss Universe and any cowboy can work his way into the Built Ford Tough Series by succeeding at lower levels. Fans of either event know what it takes for their favorites to win a championship. Fan engagement is often heightened as they follow the ups and downs of a known path to a championship.
UFC, on the other hand, has always had arbitrary paths to championships. Conor McGregor is getting a Lightweight championship shot in his first fight in the division. Eddie Alvarez had to win two consecutive fights over top Lightweights and pray that McGregor lost to Nate Diaz in a non-title Welterweight fight in order to get his.
People who value short term business spikes over long term stability have been, and will likely continue to be, opposed to WME-IMG adding some structure to UFC. In a structured promotion, a McGregor vs. Alvarez Lightweight Championship main event could've never happened in the way it's happening at UFC 205, and UFC 205 may create as much as $50 million in revenue (and, perhaps, up to $30 million in profits) in a single night.
That's cute, but that isn't going to get WME-IMG to where they want to be. UFC's new owners need to be doing something like what the U.S. Tennis Association is able to do with the U.S. Open. That tournament drew $253 million in revenue in 2013, which is the last year Forbes has numbers for.
An annual, tournament style competition could provide a large revenue spike for UFC. Television rights and merchandise alone could attract tens of millions of dollars, or even more if the event captures the interest of a broad spectrum of sports fans.
As for the details of a UFC tournament -- time period, number of fighters, qualification system, rules, prizes -- this blog will leave those to UFC's decision makers.
WME-IMG wants to grow UFC's business. In fact, they have to. There are fundamental limits to athletic competitions that book based on star power. UFC's new owners may realize that already or they may realize it in the future. The day will come, and when it does a company with the vision, awareness and experience of WME-IMG will add some kind of structured tournament to the UFC canon.
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