Friday, December 29, 2017

How to Burn Four Billion Dollars: The Tailspin of the UFC


Whenever I write about the UFC, I should add a standard apology to those who are reading my blog with an eye toward the area of my expertise: finance, and in particular financial risk management. But I have enjoyed mixed martial arts (MMA) since its inception in the mid-1990's, (I also love Brazilian Jiu Jitsu, which I have been active in over the same time period), and find the current missteps in UFC fascinating. Watching the UFC, by far the largest MMA organization, in its tail spin from the incredible height of its purchase by WME-IMG for $4 billion is becoming  more interesting than watching its fights.

The UFC was a failing enterprise in the 1990's, and was salvaged in 2000 by the Las Vegas Fertitta brothers for $2 million. They each cleared over half a billion from the sale. The president of the UFC, a former personal trainer, Dana White, pulled in a similar amount, plus or minus (actually, minus) a few hundred million.

Even at the time of the acquisition in 2016 the purchase price was met with skepticism.  But they did have some marquise talent, most notably Ronda Rousey. Her run is over. Not a surprise, because MMA demands many fighting skills, and there are thus many ways an up-and-coming athlete can find to break through an opponent's style, which in the case of Rousey was superb grappling without a base in stand-up fighting.

So, anyway, how is it going? Ronda is gone with no other women in a position to take on anything approaching her role. Dana and crew have latched onto Connor McGregor, a brash fighter who is both flamboyant and good in the octagon as the next big draw. They went all-in with McGregor by setting up a fight with Floyd Mayweather, the undefeated boxing champion. The fight pulled in $600 million, netting a hundred million plus for each fighter. This is the point that the UFC went full-stop into entertainment business, and as I wrote in a recent post, it is the point where it jumped the shark.

Now it is not clear that McGregor will fight again in the UFC. But with the hope he will come back and defend his title, and because now entertainment trumps sports, he continues to hold the title even though he has not defended it for over a year.

The number of viewers is languishing. FOX's recent title match was the second most-watched UFC event this year, but also was the fourth-lowest on FOX to date, with two million views (though it peaked above three million during the title bout). A UFC Christmas event drew 350,000 viewers, a tenth of the draw of last year's.

Meanwhile, it looks like the entertainment complex is doubling down after the McGregor-Mayweather spectacle by suggesting Mayweather will meet McGregor in a MMA fight.  If their boxing match was a joke -- Mayweather carried him for ten rounds to give the fans their money's worth before leveling him -- this would be a farce. It would be like arguing that a 41 year-old version of Lionel Messi should spend a few games as a linebacker in NFL football because in American football, among other things, they kick the ball. Mayweather is not stupid; we will never see him in the UFC, but that it would be put out there even for a second to tantalize the UFC fans is a measure of how entertainment value is dominating substance.

And, to top it all off, I hate to say that MMA is getting boring. Maybe the push toward entertainment at all costs is reducing the focus on athletic elegance. Or maybe the nature of MMA, which requires skills in a wide set of fighting styles, kickboxing while standing, jiu jitsu when on the ground, and wrestling and judo for the takedowns, leads to a jack-of-all-trades and master of none, and for those who are familiar with the best of each of these disciplines, a sport that is less than the best is inevitably going to come to seem crude.

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