Monday, February 6, 2017

(Sports) MMA: Are the UFC in trouble?

The title question of this piece may seem like a silly question after the excellent year the UFC had in 2016 but under close scrutiny, the UFC has the makings of a company with a seriously uncertain future. 

On surface value alone, the UFC is in very strong position as it's by far the world's largest MMA promotion in over a billion homes across the world coming off a very strong 2016 which saw them become the most valuable sports promotion ever thanks to superagency WME/IMG leading a consortium to buy UFC parent company Zuffa LLC  for $4 billion. 

However, since WME IMG purchased the UFC, it's quite clear that their ambitions for the sports promotion differ wildly from former owners and brothers Lorenzo and Frank Fertita and current UFC president Dana White. The Fertita brothers and Dana White's  intentions from the outset was to make the UFC and MMA as sport a global force to be reckoned with that could compete with other global sports such as Soccer and domestic behemoths such as the NFL. 

While the UFC is nowhere near as lucrative as the NFL or soccer by any stretch of the imagination, it’s hard to dispute that the Fertitas and White haven't realized their ambitions for the most part as the UFC presides over one of the very few truly global sports on the planet. Two months before the sale, the Fertitas and White were looking to grow the sport even further this time by entering the very fertile Chinese market and according to a report by CBS Sports, were looking to sell a piece of rather than the whole business to do it 1. 

Much must have changed in those two intervening months as the Fertitas and White cashed their chips ending possibly one of the greatest success stories in modern American sport.    

Since WME IMG bought the UFC, the agency backed by silver lake partners have been less than forthcoming with their plans to take the UFC to the next level however their actions have spoken volumes. It wasn't long before WME IMG rung the changes as the UFC all but exited Canadian market and lost key and long term personnel including the excellent Joel Silva, long term commentator Mike Goldberg, PR man Dave Sholler and former Manchester City and head of operations for Europe, Middle East and Africa CEO Gary Cook as WME IMG looked to trim 15% of the UFC's workforce. 

No company cuts 15% of its workforce unless they're in trouble but given the UFC was largely bought with debt and are owned by a company swimming in debt itself, the layoffs make sense. Layoffs aside, he drastic cuts clearly signify the new owners intention to break from the company's long stated ambition for global dominance as the UFC will be by far the largest combat sports promotion in the world whether its active in Canada or Japan or not. 

WME/ IMG's plan to take the UFC to the next level are clearly centered around increasing the revenue the company sees in sports rights which is quite modest in an era where live sports rights is a boom market. Live sports content is by far the most valuable content available and networks are willing to pay a king's ransom for it in an age where TV audiences have never been so fragmented. 

With the UFC's 7 year broadcasting rights deal with Fox Sports (which was brokered by WME IMG's CEO Ari Emanuel back in 2011) set to expire next year, WME IMG will almost certainly look to renegotiate the deal for higher rights fees and will most likely get it as the deal has been an unmitigated success so far for both partiesThe UFC increasing its sports rights revenue is crucial to WME IMG and the UFC as it would significant ease the company's unhealthy reliance on PPV numbers.  However securing higher broadcasting rights may prove tougher than expected as networks, the principal buyers of sports rights, are reliant on the rapidly maturing pay TV market which is losing subscribers to SVOD giants Netflix and Amazon Prime. 

What this means for WME IMG and the UFC that the current boom for sport rights can't and won't last forever and  could damage WME IMG's plans to make a return on its very large and risky investment.  

However most of risk that WME IMG should be working overtime to mitigate lies with the stormy relationship the UFC has with its talent. WME IMG have been notably slow about improving the at times poisonous relationship the UFC has with its fighters which has soured since the WME IMG bought the company. Fighters pay has been a consistent issue that the UFC has either failed to address or outright antagonized which has seen the creation of organizations dedicated to negotiate a better deal on the behalf of fighters including the MMAAA, PFA and MMAFA. The UFC has so far managed to ignore these organizations and even lambast fighters for complaining about compensation but with fighters looking for a bigger piece of pie and ever more conscious of their worth to the promotion, WME IMG and the UFC can no longer brush aside calls for greater fighter pay or unionization as the promotion has become a more star driven operation.   

In the past, the UFC didn't have to worry about maintaining a cordial relationship with its talent as the UFC a stronger brand than most if not all its fighters on its roster. However, in recent years, this has become less true  and no fighter in the short history of the sport exemplifies this more than the mercurial UFC lightweight champion Connor McGregor.With the recent decline of Rhonda Rousey and the legal troubles of future hall of famer Jon Jones, The UFC has become increasingly reliant on McGregor who is by far the promotion's stand out star and, unfortunately for WME IMG and the UFC, no one knows this better than the charmingly cocksure Dublin native. 

The UFC has never dealt with a star like McGregor and of late its starting to show to with White publicly threatening McGregor as he continues to chase a fight outside the promotion with semi retired boxing superstar Floyd Mayweather. Why WME IMG hasn't stepped to mend the fractured relationship between McGregor and the UFC is inexplicable as they've effectively left the UFC, a company that has a storied history of alienating its top talent, to deal with a man their $4 billion bet hinges on.   

WME IMG has much more experience dealing with stars with a much bigger public profile than McGregor which makes their decision to leave White, a man whose naturally combative and used to getting his own way, to deal with McGregor, another man whose no stranger to conflict, certifiable. It seems at last that WME IMG have gotten the message when it recently invited the UFC's  roster to a retreat in Las Vegas.   While it will take more than luxurious surroundings and Las Vegas sun to heal the fractured relationship the promotion has with a growing number of fighters, it show that WME IMG are serious about fixing what has been the UFC's biggest blind spot for years on end. 

In sum, whatever over the next few months and years, it's most certainly going to be a white knuckle ride and The UFC would have it any other way. 


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