The Savage Truth: What a UFC Sale Could Bring
Editor’s note: The views and opinions expressed below are those of the author and do not necessarily reflect the views of Sherdog.com, its affiliates and sponsors or its parent company, Evolve Media.
Rumors of an impending UFC sale refuse to go away.
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What kind of changes would be most transparent in the short term? Well, if the reported buyers are accurate -- WME/IMG, Dalian Wanda Group, Kraft Group and TenCent Holdings -- then an eastern focus could be something that happens pretty quickly. Let’s face it: mainland China and the rest of Asia are the last truly untapped markets for the promotional behemoth. Chinese partners with deep pockets and political muscle would certainly make for an easier expansion into continental Asia.
The UFC has had trouble getting into markets like the Philippines,
South Korea and, most notably, China. The company has run shows in
Manila and Seoul, but it has been shut out of Beijing and Shanghai.
Other than Macau, the gambling Mecca of Asia, UFC just hasn’t been
able to break into the world’s most populous country and its
massive market.
That failure was rumored to have cost former UFC Managing Director of Asia Mark Fischer his job in 2014. After working with the NBA in China, he was brought over to the UFC with high hopes for opening up the mainland to the fight promotion, but after years of little to no success, he was ousted. Now, for the first time in years, there may be hope for the company to finally get a beachhead in one of the most sought after markets in the world.
I find it interesting to listen to One Championship CEO Victor Cui talk about sports properties in Asia and how there is a void in the region that he and his partners are trying to fill. Cui has told me on multiple occasions that Asia, with its lack of sports franchises, is a perfect place to develop a combat sports league.
They don’t have a Dallas Cowboys or New York Yankees, a Manchester United or an FC Barcelona. Sure, Asians will follow their favorite local players when they head overseas to compete in soccer, tennis, golf, baseball and the like, but they don’t have any hometown franchises that have developed into big-time sports properties.
That is the void One Championship hopes to fill. They see themselves as the Asian equivalent to the UFC. They may be in direct competition sooner rather than later if this acquisition goes through.
It is a no-brainer for a company that hosts sporting events to want to make inroads into Asian markets. We’ve seen the NBA and MLB make big pushes to expand their brand awareness, and it’s not a surprise when you factor in the size of the population in the area. Billions of potential MMA fans are there for the taking.
The move into Asia may be more of a long-term goal as well. While I’m sure they would love to promote in Beijing or Shanghai in the immediate future, the real goal is to develop Chinese and other Asian talent that would drive more excitement and coverage of the sport within the area.
Outside of South Korea and Japan, there aren’t any truly elite fighters ready to compete at the highest levels of the sport. There are some countries that are much closer than others, but China, unfortunately, is nowhere near producing consistent UFC-caliber athletes and could be a ways off from doing so. The quicker UFC gets into the market with live shows, the sooner they can start developing fans and, eventually, fighters and gyms.
Some other potential changes -- not the kind most middle managers want to see -- could become reality in the short term as well. When private equity firms invest in companies, one of the first things they look at is the ability to streamline operations. In simpler terms, they cut the fat.
Vital low-level employees are usually pretty safe, as are high-value executives that make up the skeleton of the operation. The fat around the bone -- high-priced middle managers and non-integral employees -- are usually the first to go. It’s no wonder there are rumors of low morale at the Zuffa temple in Las Vegas.
While fighters are the locomotive that pulls the UFC train, I’m not so sure they should be too excited about their potential new bosses. Though they make up a big chunk of the company’s expenditures, I highly doubt anyone would buy something for $4 billion just to pay somebody more money.
Perhaps there could be a silver lining for the talent. There is no doubt the buyers have done their homework and seen that a number successful leagues have evolved from entities with powerful owners (capital) and subservient athletes (labor) into much more equal partners. Though we’ve heard time and again that equal negotiating footing would ruin sports, the inverse has become reality.
Free agency has been great for both athletes and owners, if you look at the values of sports teams around the globe. Most notably in North America, there is the NFL, where every team is now worth north of $1 billion. The sale of a pair of Los Angeles teams, MLB’s Dodgers and the NBA’s Clippers, elicited record bids in recent years, with both going for over $2 billion.
Equity is the name of the game for franchises, and the UFC will be no different. Sports are an expensive game; many teams and leagues will operate at a loss and still increase their valuations. Someone seems to think the MMA business is still flush with potential, or else we wouldn’t see multiple bids in the realm of $4 billion, a number that makes the UFC the most valuable franchise in sports.
Armed with the knowledge that their new property is going to need to have labor peace if they are going to realize a return on their investment, perhaps it is time for the fighters to realize they need to figure out a way to insure they get their fair share of the profits. Be it a fighters association, a union or some other means of collective bargaining, it is well past the time for these athletes to assert their rights. As I’ve said a million times before, they are the only ones that can do it, and the time is right for solidarity.
A fighters association wouldn’t be a welcome development to new owners, but what option would they have if faced with a united front? Some fighters obviously understand that this is a huge opportunity. No matter how unrealistic it may seem, John Kavanagh stating that Conor McGregor may well ask for a cut from the sale or an equity stake from the new owners shows that the better businessmen among the fighters are at least paying attention.
Collective bargaining assuredly wouldn’t solve all the ills that surround the long-running capital-labor relationship, but it would help align the UFC with the other big league sports. It would give fighters a say in a lot of things that are summarily decided for them now. If done right, it would create both transparency and equity for the men and women that make this sport what it is.
The alleged ownership group has a ton of experience representing talent across multiple fields (WME) and with the NFL Player’s Association (Robert Kraft). While that doesn’t automatically mean they will be happy to give up any piece of the pie, at least they have an understanding of how a potential relationship could function between ownership and their collective talent.
Last, but surely not least, is how the company positions itself for their next television contract. UFC will be the only game in town when negotiations kick off in earnest in 2018. All other major sports in North America have long-term deals that won’t be up for bids any time soon.
Positioning the UFC to land a historic TV deal will be one of the main goals of any potential new ownership group. The company has been the only real ratings engine for the floundering Fox Sports 1. Whether or not that translates to big bids from networks remains to be seen.
The cyclical nature of fight sports will be something ownership will have to consider. The sport is always going to ebb and flow based on the number and level of its stars. Understanding that building and nurturing those athletes, helping them grow their own brands and fostering an environment in which they can connect with fans, seems like a prudent way forward.
A change from the UFC’s brand-based promotional philosophy to more of a joint fighter-brand marketing approach might be the most significant change a new ownership group could make. I know a lot of this is probably wishful thinking, but I highly doubt we’re going to see “business as usual” over the long run.
If you look at the rumored price of the deal and UFC’s record profits in 2015, it doesn’t take a business genius to figure out the new ownership must see a ton of untapped profit potential. They are staring straight at a 25-plus times profit valuation. That means if the UFC did the same numbers in 2015 for the next 25 or so years, the company would eventually get an even return on their investment.
If this sale goes through, something is clearly going to change. What that is will eventually manifest itself. Until then, we can all just have fun speculating.
Sherdog.com Executive Editor Greg Savage can be reached by email or Twitter @TheSavageTruth. If you would like to have your question or comment answered in the weekly Postal Connections mailbag, please submit them by Wednesday evening each week.
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