The UFC’s rumored sale comes after its most profitable year ever. A reported $600 million in total revenue, and apparently $157 million of that was pure profit, just over a 25% margin, according to Dave Meltzer. Yet, with the return of stars like Brock Lesnar and Georges St. Pierre, 2016 is shaping up to be an even more profitable year.
If reports of the UFC sale- for 4.2 billion dollars- by Jeremy Botter of FloSports- are true, and it is seeming all but certain that they are, then the Fertittas are cashing out at just the right time. The casino moguls bought the UFC brand for just 2 million in 2001, which would mean they made over a two hundred thousand percent profit in fifteen years. Dana White is not only making hundreds of millions off the deal as well but also being offered an ownership stake in the new company to stay on in his current role. Speculation abounds that the Fertittas are interested in acquiring a football franchise, but perhaps they simply want to expand their casino business in Las Vegas and need capital to play with. Either way, the venture, after bleeding over thirty million dollars in the pre-TUF era (according to Zuffa), has turned out to be an extraordinary and unique success story.
The fight game is a volatile business, something the Ferttitas have long worked to mitigate. The UFC no longer makes the majority of its money off PPV sales. Estimates from Bloody Elbow writer Steve Nash put the revenue stream from PPV buys in the Fox era at around 30%, however, which is still nearly a third of the revenue. After Brock Lesnar left and stars like GSP and Anderson Silva exited the top of the fight game, there was a lull in interest. 2014 was a down year for the company, although they still saw revenue growth, but also had many pundits questioning the viability of the PPV model for the future. The UFC responded by investing heavily in its most promising personalities. Ronda Rousey and Conor McGregor emerged as the two big attractions of 2015, pushing the company to its most profitable year ever. But unlike the WWE, the UFC can’t script its fight results. Ronda lost her title just as she was becoming a household name, and McGregor suffered his first UFC defeat earlier this year in the second-biggest UFC PPV of all time. Building value on humans who partake of the chaos of cage fighting is equivalent to making castles out of sand. Sooner or later, the tide of time will wash it away, and it must be constructed anew.
Rousey will likely return for one or two more fights, and probably break PPV records when she does, but her future beyond that is highly uncertain, especially if she loses again. With financial security assured, and lucrative options outside of fighting, the first female combat sports superstar has all but exited the fight game, only one or two acts away from closing the curtain on that stage of her life.
Meanwhile, the notorious Irishman, who has even more long-term potential, is at about even odds to suffer another loss to Nate Diaz, which will certainly damage his stock. Brock Lesnar had his drawing power cut in half after his loss to Cain Velasquez. Anderson Silva lost 40% of his after the second Weidman loss. Diaz and McGregor’s rematch at UFC 202 will almost certainly do huge numbers, perhaps even exceeding their first fight, but a lot rides on Conor’s ability to get the win, and Diaz has shown he is a tough stylistic out for the 145-lb. champ. With the uncertainty surrounding his willingness to cut to 145 to defend his featherweight belt, Conor’s long-term future is shrouded in uncertainty.
All of this makes the Fertitta brothers’ call a really wise one long-term. Knowing when to sell is perhaps the most vital investing skill to have, and they are getting out just as the business seems to be cresting, ahead of a pending anti-trust lawsuit, looming legislation in the form of the Ali Act, and the loss of their top stars. To potential investors, however, 2016 is shaping up to be an even better year than 2015. Let’s do a little math on it: there were 13 PPV events in 2015. 2016 is set to have one fewer at 12 (thanks to 196 being scratched and rescheduled after both Werdum and Velasquez pulled out from injury), but so far is on course to exceed 2015’s numbers anyway.
So far, we have PPV numbers for three events in 2016: 195, 196, and 197 (All number are via Dave Meltzer of MMAFighting). In 2015, the company posted a really strong start to the year, with Jon Jones vs. Daniel Cormier pulling 800K buys, Anderson Silva vs. Nick Diaz doing 650K, and Ronda Rousey beginning to reach the tipping point of superstardom against Zingano at 600K. All together, that is 2,050,000 units. That was the UFC’s A-team, representing their best lineup possible at the time. In 2016, Lawler vs Condit did better than expected at 300K buys, McGregor vs Diaz (with a co-main of Holm vs Tate) crushed it at 1.5 million, and Jones vs St. Preux pulled between 375-450K, rounded to 400K for the purposes of our estimates. This was also the best possible lineup for the UFC, with the exception that 197 took a hit from Daniel Cormier’s injury. So far, 2016 is ahead of 2015 thanks to the astronomical numbers of McGregor-Diaz, adding up to 2,200,000 units.
2015 did have one additional PPV event, but also featured two that bombed, the two headlined by Demetrious “Mighty Mouse” Johnson. Those two events only did 115K and 125K, respectively. So far, 2016 has not had a below-average PPV. We don’t have official numbers for UFC 198 and 199, but Brazil mega-card 198 and two-title-featuring UFC 199 certainly did not bomb, probably pulling at least average numbers of between 300 and 400K each. If we project those results against last year’s UFC 185 and 186, 2016 is still ahead by around 100,000 buys, representing over 5 million in revenue.
But 2015 closed out really strong, right? Yes, without question. The story of the second half of 2016 was the parallel rise of McGregor and Rousey. Last summer saw Rousey pull 900K against Bethe Correia, right after McGregor’s PPV debut did 850K. The fall was relatively quiet before the duo came back to score 1.1 and 1.2 million buys to close out the year.
This year will top that, handily. UFC 200 is up next. The show is headlined by Jones-Cormier 2, the strongest title fight the UFC has on deck, and in the co-main event the PPV king, Brock Lesnar, returns for a one-time fight against Mark Hunt. The rest of the card is stacked all the way down, with Meisha Tate, Amanda Nunes, Jose Aldo, and Frankie Edgar fighting for belts, while a plethora of recognizable names including Velasquez, Hendricks, Dillashaw, Zingano, Mousasi, and Northcutt pack out the rest of the night’s fights. Pulling from a wide variety of demographics, marketed extremely heavily, and with the added novelty boost of Brock Lesnar’s return, the event is projected to do somewhere around 1.5 million buys.
UFC 201, headlined with two title fights and the ever-violent Robbie Lawler, will probably do between 250-350K. UFC 202 is the real story. McGregor’s rematch with Nate Diaz will do huge business. Whether or not it will surpass the first fight is up in the air. 196 had the advantage of a co-main event of Holm vs. Tate, which pulled in a different audience. However, the fact that Diaz, the underdog, won, does help to boost interest. Rematches historically do draw greater interest when the initial outcome was unexpected. Anderson Silva’s second fights with Chris Weidman and Chael Sonnen did almost double what their first bouts did, and GSP’s second battle with Matt Serra also did better numbers than his first. Even if the second fight only matches the first one, that is still 1.5 million buys. It looks like the UFC is stacking the undercard with some fantastic matchups, so fans will have no excuse not to buy it. It will be interesting to see if it surpasses UFC 200.
Either way, UFC 202 closes out a potentially record-setting summer for mixed martial arts, probably doing in the neighborhood of 3.6 million units across four events, well ahead of the 2.4 million 2015 posted over the same season.
The fall kicks off with Miocic vs Overeem for the heavyweight title in Cleveland, a strong event boosted by the debut of CM Punk vs Mickey Gall. It will be interesting to see what interest CM Punk’s debut draws, so long after his signing and WWE days. The event could do anywhere between 250-400,000 units. Stipe isn’t a big draw, but it is the heavyweight title, and CM Punk’s effect is unknown.
UFC 204 isn’t announced yet, with speculation that it could be Michael Bisping against Dan Henderson in Manchester. If so, that could draw a lot of interest. Henderson has a lot of name recognition, and Bisping talks endless trash. I have no idea what that fight would draw in terms of PPV value, but it could range up to half a million buys.
UFC 205 is the New York debut in Madison Square Garden. Lorenzo promised his biggest names for this card, and my best guess is “biggest names” means Jon Jones and the return of Georges St. Pierre. Jones will probably be the preferred choice to headline regardless of the result at UFC 200 in his home state (trilogy anyone?), and several locals like Weidman and Frankie Edgar will probably make appearances. The UFC need to find the right opponent for GSP, but my hope is that they finally make the fight against Anderson Silva, perhaps in the co-main. There are a number of belts that will be free for defense by this time as well. If this is indeed the card St. Pierre returns on, and Jon Jones is also able to fight, this event likely pulls another million buys.
That leaves just one event left in the year. It’s so far out that all speculation is just that, pure speculation, but it is possible UFC 206 could be the biggest of all. Ronda Rousey hasn’t fought in over a year, but if Tate defends her title at UFC 200, this could be her return. Rousey vs Tate 3 could break every record there is. In addition, Conor McGregor will be due to make his return to close out the year, especially if he gets the win against Diaz. Even if he does not, he will still need to drop back down to 145 to defend his belt. Of course, neither could end up fighting again before the end of the year, or both of them could. Even if neither does, 2016 will already be ahead of 2015 by 1.2 million units by these projections, which means no matter what, in terms of PPV revenue it will still go down as the biggest year in company history.
Which isn’t a bad way to go out, really.