Sports

Too Legit to Quit

Exclusive: UFC’s Lorenzo Fertitta and Dana White on the biggest sports deal in history — and where the mixed-martial-arts giant is headed 8/22/2016 8:00 AM Eastern

When the ultimate fighting championship brings its action-packed brand of mixed martial arts to New York City’s Madison Square Garden for a pay-per-view event in November, the organization — which just a year ago was still banned from exhibiting in New York State due to its violence — will have finally KO’d all of the ghosts of its checkered past.

 

UFC has established itself as arguably the fastest growing sport in the country under the leadership of chairman and CEO Lorenzo Fertitta and president Dana White. If there were any doubters, the value of the UFC was made clear with its $4 billion sale last month to talent company WME-IMG — the most expensive sale of a sports organization in history.

 

The WME purchase was more than a validation of the blood, sweat and tears Fertitta and White poured into building the UFC after acquiring the once-shunned franchise from Semaphore Entertainment Group for $2 million in 2001. It’s also a bet that WME-IMG will give UFC the muscle to expand its media and promotional footprint to even greater heights.

 

The two executives have successfully turned a moribund combat sports franchise into a multibillion-dollar, multiplatform sports conglomerate. Fertitta positioned the UFC as a legitimate sport and got it sanctioned in all 50 states, and White built the UFC brand on-screen with major pay-per-view events and as host of the FS1 reality competition series The Ultimate Fighter

 

Top UFC fighters such as Conor McGregor, Ronda Rousey, Jon Jones and Anderson Silva have helped transform the sport from niche play to mainstream pop culture. The popularity of these and other fighters has helped UFC draw big audiences for its pay-per-view events, and set has ratings records for live televised fights on Fox and FS1 under a multiyear, multimillion-dollar deal with Fox Sports that expires in 2018.

 

Fertitta and White, the 2016 Multichannel News Sports Executives of the Year, recently spoke to programming editor R. Thomas Umstead about UFC’s success and its future plans for growth in international distribution and on the technological front. An edited transcript follows.

 

MCN: When you guys purchased UFC back in 2001, did you ever foresee the franchise becoming as valuable, financially and brand-wise, as it is today?

Dana White: We were really confident. I always believed in this and I always thought it would be huge, and I wasn’t shy about telling people.

 

MCN: What are the differences between the sport then and now?

Lorenzo Fertitta: Obviously, the biggest difference is when we purchased it this really was a venture deal. There was really no sustainable business that was in place in 2001 when we made the decision to purchase it. What’s different now is that we have a full infrastructure in place and a full team that has helped us over the last 15 years that we have built up now that is in offices around the world.

This is a fully sustainable, fully functional global sports enterprise. Obviously, it’s much different from the entity that we bought for $2 million dollars in 2001. We are essentially sanctioned and allowed and broadcast all around the world, whereas prior to that we weren’t actually allowed on cable from a pay-per-view standpoint. When we bought the company we were only allowed on, I think, [satellite-TV providers] Dish [Network] and DirecTV, so a lot of barriers have been broken. There has been a massive foundation that’s been built. The brand is in the best position it’s ever been.

 

MCN: The sport initially had trouble getting sanctioned in the states because of its perceived in-ring violence. How did you convince the states over the years that this was a legitimate sport and should be sanctioned?

LF: I’ll take that. Previous to being involved in the UFC, I spent four years on the Nevada State Athletic Commission, so during that time I learned a lot about the health and safety issues regarding fighters. I spent a lot of time with the Nevada Medical Advisory Board that reported to the Nevada State Athletic Commission and tried to learn as much as possible.

Once we bought the company, the UFC was already sanctioned in the state of New Jersey. [Former New Jersey State Athletic Commissioner] Larry Hazzard, a longtime regulator in New Jersey, actually had a background in martial arts and had a good understanding of what the sport was and was willing to go ahead and let it happen. So the foundation was in place.

From there, we just took a very methodical approach with our regulatory team, which now includes Mark Ratner, the ex-executive director of the Nevada State Athletic Commission; Lawrence Epstein, our COO; and Kirk Hendrick, our chief legal officer. We just went through a process of methodically sitting down with every state, talking to legislators, talking to athletic commission members, telling them exactly what the sport was, what the health and safety record was — all the things that we had put in place to address the health and safety issues.

And just over a period of essentially 15 years, we went from two states regulating the sport, in New Jersey and Louisiana at the time, to where we are today with all 50 states in the U.S. as well as every province in Canada and, for the most part, everywhere around the world.

 

MCN: The last state to fall was New York earlier this year. How big a deal was that for the UFC in terms of building its brand and value?

DW: New York is huge, obviously. It’s the media capital of the world and it has Madison Square Garden. We’ve always loved hitting these different milestones throughout the UFC’s history and, obviously, New York and MSG are really big for us. Not to mention the fact that it has taken so long, there’s pent-up demand that makes it even bigger.

 

MCN: The UFC has one of the youngest skewing audiences in all of the major sports. Why does this franchise have such great appeal with millennials?

DW: I think there are a lot of different reasons for that. First of all, when we were growing up, your parents would put you in karate or Taekwondo or something like that. This is the new martial art that children are taking all over the world, so that’s number one. Number two, I think that these millennials consume content faster. They take in a lot more information than we did when we were younger. With sports like boxing you can punch to the head and the body, but in the UFC you can kick, punch, knee, elbow, go to the ground and grapple — it’s faster and it’s more exciting. It’s three rounds instead of 10 rounds or five rounds instead of 12 rounds. It’s just a faster, more exciting sport.

 

MCN: Was the UFC’s appeal to younger viewers the catalyst for you guys to finally break through and secure a major television deal with Fox Sports?

LF: Really the first driver for us was when we did the original deal with Spike TV, where we went in and essentially did a time buy to put The Ultimate Fighter on. [The series aired on Spike from 2005-11 before moving to FX and, eventually, FS1 under UFC’s deal with Fox Sports.] That was really, obviously, our breakthrough moment, and when you look at the trajectory of our business — whether it’s revenue growth or profitability — it actually started right after that happened.

So getting a platform like Spike, for it to allow us to be able to show our product to the masses, really was key. And I think obviously our success that we had on Spike led to other, traditional sports broadcasters to want to carry our product, which eventually led us to doing a deal with Fox Sports, which I think took us to the next level in various different ways.

But in addition to that, as you mentioned before, the fact that millennials are really attracted to our product, one of the things that we embraced early on was making sure that we had a digital strategy and making sure that we provided our product on every platform possible, whether it was traditional pay-per-view, basic cable TV, now free-to-air broadcast, as well as … an OTT product in Fight Pass, in addition to having once again a very robust digital/social strategy. I think that’s one of the things that really has allowed us to grow and be consumed by millennials.

 

MCN: Do you see in the future the opportunity to fully develop a robust OTT service where you’re offering exclusive content to your fans on the Web, much as World Wrestling Entertainment has done with its WWE Network?

LF: We look at it as an additive to all of our strategies from a distribution standpoint. So while WWE has been very successful in putting all of their primary content over the top, it’s been great for them, we have taken a little bit of a different route. We like continuing to have a valuable pay-per-view franchise, which we are obviously going to continue on with. We also like having our deal with Fox Sports where we are getting license fees on both basic-cable and broadcast television and we like providing product on an OTT platform. We want to be able to generate revenue on every platform and not necessarily just one.

 

MCN: While the UFC franchise was growing in popularity over the years, its stars really didn’t begin to transcend the sport, so to speak, until recently with the emergence of Conor McGregor, Ronda Rousey, Jon Jones and Holly Holm.

DW: I don’t know if that’s necessarily true. People say that a lot, but I don’t believe that. If you look back and you look at where we were back in 2001/2005/2008, we had Chuck Liddell, Tito Ortiz, B.J. Penn, Randy Couture, Rich Franklin [and] Matt Hughes all in that era.

Then the second wave of guys started coming through with the [2007] purchase of [Japan-based MMA company] Pride Fighting Championships. We had Anderson Silva, Wanderlei [Silva], Shogun and [Antonio Rodrigo] Nogueira. We introduced all of those guys and they became stars.

Then you go into the next phase. We have Ronda, Conor, Joanna Jedrzejczyk, Robbie Lawler ... the list goes on and on. I think if you look at how big the UFC was back in 2005, Chuck Liddell was as big a rock star as I’ve ever seen in any sport.

 

MCN: But they didn’t necessarily get on the sports pages of the major newspapers back in the day. Now these stars are in popular culture — movies, TV shows and what have you. So you’re saying that that happened back in 2005? I think more people know today’s UFC stars than the sport’s stars a decade ago.

DW: I’ll say Chuck Liddell opened the doors. When we first bought the UFC in 2001, we’re out there talking to all these sports editors of the major newspapers. The guys who were in a power position back in 2001 were stick-and-ball guys. Those guys didn’t want to hear about the UFC and didn’t care about the UFC.

Then you look at the work that we did from 2001 to what we’ll call 2010. All these younger-generation kids that grew up watching Chuck Liddell and the B.J. Penns and the Matt Hughes all started to get into these positions where they were assistant editors or editors of the publications, and that’s when everything really started to change.

LF: Also we continue to invest in the UFC brand and make the platform bigger. When the platform and the brand becomes bigger, it allows for our athletes to become crossover stars, because more people are interested when you’re getting exposure on Fox Sports, and when you have deals with Globo down in Brazil and Televisa in Mexico and British Telecom in the U.K. The platform makes a big difference.

 

MCN: How do you deal with the controversies that often crop up surrounding your fighters?

DW: That’s the fight game. Things aren’t always going to work the way you want them to. Listen, one of the things that we have is a deep roster. We’ve got a deep roster and, not to sound arrogant, but I think we’re the best. And at crunch time, when it comes to pulling stuff together and putting another fight together all the time, I say all the time to my team — this is what we do, so let’s do it. Let’s fi x it.

When the Jon Jones thing happened at UFC 200 (he was dropped from the main event after a potential violation of anti-doping agency rules), we got Anderson Silva in there quick. Not many people could pull that off . Most would have to cancel their event and we don’t do that.

 

MCN: How much did the Fox Sports TV deal help expose the UFC to a broader audience?

DW: It was huge. And it’s a testament to the fact that the sport is still growing.

If you look at the way the NFL has grown over the last however many years, that’s what’s going to continue to happen with the UFC. I say it all the time and I’ll say it again — everybody likes fighting, man. We continue to put on the best fights with the best fighters and we continue to grow the sport, the brand, and make everything bigger every year.

LF: Ultimately, it’s like any other business. It’s about providing a great product that the consumer wants … it’s as simple as that. That’s what we’ve done. We match up the fights and the fighters that the consumers want to see; we provide a great value, whether it’s pay-per-view or obviously a ton of value when you’re watching it on free TV. You just live by those rules and we’re able to build a very successful franchise.

 

MCN: The Fox deal comes up at the end of 2018. Are you already thinking about what the next step is for the organization, and would you look at or would you entertain other partners along with Fox going forward?

LF: Yeah. I think it’s always a process of analyzing what the marketplace is. I think one of the big benefits that we have is that there are no major sports rights coming up over the next five years, so the UFC is essentially the only major sports platform that is going to be available for the various media companies here in the U.S. to be able to bid on. And I think that puts the UFC in a great position.

There is no question about it that it’s a product that generates eyeballs, consumers. Our advertisers want to get the millennials that we’re drawing, and it puts us in a very enviable position.

 

MCN: What are some of the challenges UFC faces over the next couple of years?

LF: Honestly, I think one of the big things for us is continuing to forge ahead and grow in the international markets. There is an interesting thing that’s going on. There seems to be a real supply and demand imbalance right now, meaning that there is just more demand right now than we have been providing in the marketplace, particularly in Europe.

If you look at it, I think 10 or 11 of our last [international] events have sold out. And when I say sold out, I mean within the first day and many times before we even announce who is fighting on the card. So the UFC brand is red hot in Europe, and it’s just a matter of trying to figure out how we scale that going forward in an efficient and responsible manner.

I think the same thing obviously can be said for Latin America and Brazil. We built a tremendous business down in Brazil. Even though the Brazilian economy has just absolutely gone into the tank, we continue to have a tremendous amount of demand down there. We just did an event with 45,000 people, so our business continues to grow down there. You look at some huge opportunity in Asia, particularly China. I think it’s going to be a big focus of the company.

 

MCN: How about on the technology side? You guys offered virtual reality with UFC 200. Do you see the UFC continuing to be on the cutting edge of new technologies as we go along?

LF: Absolutely. A lot of times, whether it was the early days of digital, whether it was OTT or whatever, we just always wanted to be on the forefront. We are risk-takers and now we’re broadcasting in 4K and we’re working with some different VR companies. And if the opportunity presents itself, I would expect that we will be on the forefront of that relative to sports.

 

MCN: Do you think that the sports industry considers the UFC as a major sport in this country? Has it earned the respect of the sports industry as a whole up to this point?

DW: [Laughter.] I mean they should. We have definitely turned a lot of heads; you know what I mean? We definitely woke a lot of people up and I don’t know if they’ve changed their mind, but if they didn’t, whatever, who cares. We’re gonna keep plugging along and doing what we do.

LF: We just did the largest deal in the history of sports. I think they probably should. People talk about the big four [the NFL, NBA, Major League Baseball and the NHL] I think you gotta start talking about the big five and adding the UFC in that conversation.

 

MCN: We talked a bit about The Ultimate Fighter. Do you see any other opportunities to launch any other series outside of the live fights you’re televising from the octagon?

DW: I think now, being hooked up with WME, I think we’re going to be able to do more. I have tons of ideas for TV shows all the time. Now they’ll actually get on TV.

 

MCN: What does WME bring to the UFC? Can you talk about that?

DW: This is what they do. If you look at Frank, Lorenzo and I, when we got involved in this business we weren’t television or sports guys. We’ve never done any of that stuff. The thing about us is we were huge fight fans and we knew exactly what we wanted. We knew the product we wanted, we knew what we wanted it to look like, and we knew we wanted to put on the best fights that you could possibly put on. That’s what we knew. So that’s what we started with and then we started to learn the rest.

And we’ve done a pretty decent job for three guys that have never done any of that and aren’t media guys. [WME co-CEOs] Ari Emanuel and Patrick White-sell are media guys. This is what they do. This is what they are good at, this is what they drive to work and do everyday. So I think this brings so much to the table. Then, if you look at the [IMG] side, with production in other countries and everything else, once we get this thing dialed in, it’s gonna be awesome. I am excited for this next phase.

 

UFC: Tale of the Tape

Facts and figures about the fastest-growing franchise in TV Sports

 

• Zuff a LLC buought UFC from Semaphore Entertainment for $2 million in 2001.

• Last month, WME-IMG bought UFC for $4 billion, the biggest sports franchise deal in history.

• UFC produces 42 live events annually around the world.

• The median age of UFC’s fan base is 37.8, the youngest of all other major professional sports leagues in the United States.

• UFC struck a seven-year, multimillion-dollar television pact with Fox Sports in 2011 that, for the first time, put live UFC fights on broadcast television. The deal has produced record-setting ratings for cable network FS1.

• UFC launched its Fight Pass over-the-top subscription service in 2013, offering live fights and library programming.

• The UFC counts 5.8 million Twitter followers, 5 million Instagram followers and 3 million YouTube subscribers.

SOURCES: UFC, Multichannel News research

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