The UFC Has Become One of The Most Profitable Businesses on Earth. Here's How They Did It | Men's Health Magazine Australia

The UFC Has Become One of The Most Profitable Businesses on Earth. Here’s How They Did It

In 1996, US Senator, former presidential hopeful and, it’s worth noting, Vietnam veteran John McCain famously decried Mixed Martial Arts as a pastime on a par with “human cockfighting”. It was a bloody spectacle, he stated, a brutal, no-holds-barred display of barely caged aggression. It needed suppressing.


Two decades later, the Ultimate Fighting Championship is the cock of the walk. The increasingly acceptable face of two people knocking lumps out of each other – within the confines of strict parameters, of course – is dominating arenas, airwaves and agendas. In lieu of the tribal tattoo T-shirts once associated with the sport, the UFC is freshly suited, booted and primed for a corporate takeover of the sporting middle ground. And that’s just the fighters.


As its popularity rises like a front kick, you wouldn’t bet against the Las Vegas-based MMA promotion going the distance to become a globally supported athletic pursuit. To a degree, it already has. By the time you read this, demand for tickets to the slated UFC event on these shores in November will most likely have outstripped supply. A similar event staged in Melbourne last year drew a crowd of 56,214 – the largest ever UFC attendance. The 20-odd thousand seats for 2011’s UFC 127 in Sydney sold out in 22 minutes – equalling the fastest sell-out in UFC history. With great popularity comes great profitability, and plainly the UFC is cashing in.


The Slow Burn

In 2014, Forbes, the American business magazine and universal arbiter of worth, named the UFC the tenth most valuable business brand in sport at $1.65 billion.


However, the fight club’s president and charismatic impresario Dana White, a former boxing trainer and bouncer who looks pretty handy himself, begs to differ. In an interview with the UK’s Financial Times newspaper in March 2014, White put its true value at a punchier $3.5 billion. “Some would say more,” he said with characteristic bombast. “We have numbers.”


Indeed, White’s “numbers” proved to be conservative, with the organisation being sold just days after UFC 200 to a new ownership group for a staggering $4 billion – the largest single sale in sports history. The numbers are now undeniable: the UFC has done exceedingly well for an organisation that essentially began life as a way to settle the age-old pub argument over who would win out of a martial artist or a boxer.


Indeed, “organisation” would have been a rather imperious word to describe the first UFC event in 1993. Held in Denver and drawing a global audience of just 90,000 via pay-per-view, the eight-man tournament proudly trumpeted that “There are no rules!” and displayed as much regard for weight categories as a Rocky film. (Interestingly, the original business plan pitched it as a real-life version of the notorious computer game Mortal Kombat.)


In the first bout, a kickboxer swiftly dispatched a sumo wrestler with a kick to the face while he was on the ground. You can see the “fight” on YouTube, but not the fragments of teeth buried in the victor’s foot, an injury with which he fought on for the remainder of the night.


“I remember watching it with my friends and not really knowing what we were looking at,” recalls Michael Lunardelli, senior business unit director at Reebok Combat Training. “It was fascinating, but it was pretty violent and it didn’t have the rules and regulations that it has today. I lost interest in it after a short period of time because it was too rough, even for me.”


Lunardelli’s and Reebok’s interest in the UFC have since been rekindled to the tune of a US$70-million six-year agreement, announced in December 2014, to provide uniforms, not just for the fighters but also their trainers, seconds and corner men. The move is part of Reebok’s savvy pivot away from the softer sports-fashion sphere and towards what Lunardelli calls “tough fitness”.


Whether unable or unwilling to compete with brands such as Nike in more sanitised sports markets, Reebok has instead lent its brand equity to – and profited from – newcomers such as UFC, CrossFit and Tough Mudder. It’s a mutually beneficial arrangement that’s left both parties smiling. “Our partnership with Reebok was a really important step for us in terms of bringing a level of professionalism to our field of play,” says Tom Wright, general manager for UFC operations in Australia, New Zealand and Canada.


The equation is simple: the UFC gains mainstream legitimacy, Reebok gains underground kudos. Both score a very sizeable amount of cash.

Backing the Underdog

Despite introducing such sanitising measures as rounds, weight classes and gloves (as well as outlawing things like kicking a man in the face when he’s down), the UFC was a pariah outfit, near-bankrupt and on the ropes when it was bought for US$2 million in 2001 by casino owners Lorenzo and Frank Fertitta.

But with Lorenzo’s background as a member of the influential Nevada State Athletic Commission in their corner, they gradually ground and pounded their way to legality, ratifying the sport territory by territory. By 2006 UFC events were hitting a million buys on cable TV.

The real game-changer in terms of mainstream visibility came in 2011 when the UFC signed a seven-year deal with Fox Sports. “Fox covers the UFC in the same way that it covers the other big American sports,” says Gareth A Davies, the long-serving, long-haired boxing and MMA correspondent for the UK’s Telegraph newspaper.

Unlike some of his fellow chroniclers of pugilism, Davies followed the UFC from the first and has become one of its most authoritative voices. “You only have to go around American bars now and the UFC is on TV along with the NFL, NBA, MLB and so on. It’s become normalised because it’s there all the time. That deal has been so significant in making it one of the big players in the sports world. It’s a genuine contender.”

Now with the US conquered, the UFC has set its sights on global domination.

All of which is a clear sign that the UFC has cleaned up its image problem and its down and dirty past. “We’re ambitious. We want to help elevate the UFC and have it thought of in the same realm as the other major sports,” says Lunardelli. Certainly, the trailer-trash chic of its earliest stars’ attire and the accompanying riot of sponsor logos wasn’t helping to challenge any preconceptions of the sport as a chaotic free-for-all. “It was a bad look for everybody,” says Lunardelli. “I think even a lot of the fighters are happy that it’s cleaned up, to be honest with you.”

Sartorial standards have risen outside the octagon too. The trademark tailoring of Conor McGregor, current UFC poster boy, is as brash as he is. Even so, it’s a marked step up from snapback baseball caps and provides an effective contrast to his ink-stained chest piece, depicting a gorilla feasting on a human heart. Then there’s the notably articulate Canadian welterweight Rory MacDonald, who is so dapper that Vice’s Fightland channel filmed him suit shopping. The signifiers seem to say: thuggish, moi?

“There are some great characters who largely are very educated,” claims Davies.

“A lot of them are university grads.” He cites the example of Chuck “The Iceman” Liddell, whose explosive striking style, handlebar moustache and mohawk made him one of the best-known fighters of the mid-Noughties. Less well known is that Liddell graduated from university with a BA in business and accounting.

Over the past 15 years, the UFC’s value has blown up by a staggering
2000 times, from $2m to $4bn

Blood Money

Not all the fighters are happy with the UFC’s shiny new image, though. Former featherweight champ Jose Aldo is one example. “It sucks, but what can we do?” he said of the Reebok deal, before unfavourably comparing the new outfits to those worn by the Mighty Morphin’ Power Rangers. However, most objections have not been aesthetic but economic.

While the revenue from the deal is divided among the athletes according to their standing, some have argued that what they gain does not make up for what they lose in individual sponsorships. Although these are not expressly prohibited under the new Reebok deal, its terms do make it difficult. Branded kits have to be worn not just on fight night but for the week preceding, which is prime time for sponsor exposure.

The UFC counters that any hits taken in the short term will more than pay off in the future as the organisation becomes even more attractive to bigger, richer sponsors. “The deal is definitely going to help us elevate our commercial proposition to the benefit of all fighters,” says James Elliott, the UFC’s vice-president for Europe, the Middle East and Africa. “I can understand some of the comments from the fighters. But this is ultimately the best thing for the business and therefore our roster.”

The Reebok deal has also thrown light onto the fighters’ earnings in general.

Few people know the precise figures involved, but wages are understood to be comparatively low. While competitors can collect a $50,000 bonus for best knockout, submission or fight of the night at an event, their base pay might be as little as $6000 a match. Top AFL players wouldn’t lace up their boots for that amount.

A boxer can expect as much as 85 per cent of the revenue from a fight. In the English Premier League, 70 per cent of the money goes to the players; in the NFL, NBA and MLB, it’s around 50 per cent. Lorenzo Fertitta has said that the UFC’s proportion is “not far off”, but after polling industry sources, ESPN put it at maybe 10 per cent.

In its own defence, the UFC cites the costs involved in building the young sport and getting it legalised around the world. It has to act as both promoter and TV producer – infrastructure that doesn’t come cheap. Besides, as MMA matures, it argues, so will the rewards. Ronda Rousey – one of the highest-paid female athletes on the planet – is a prime example.

White has said he intends for the UFC to become as big globally as soccer, which is the obvious comparison that the Reebok deal invites – and not just because you can now buy a shirt bearing the name of your favourite fighter. As every cash-strapped fan wearing their team’s latest jersey knows, kit brings lucrative new revenue streams flooding in; while Reebok makes the shirts, what’s to stop the UFC finding additional sponsors? “We’re always looking for new commercial partners to come on board and that’s something that’s factored into the plan,” says Elliott.

“Again, it’s something that will help generate increased revenue for everybody involved.” And why stop at shirts: what about selling the naming rights to a UFC stadium in, say, Vegas? “We have some exciting things planned in the future,” says Elliott. “I can’t reveal what those are yet. But it’s going to be an interesting few years, that’s for sure.”

Conor McGregor is signing a contract worth $100m – that’s on a level with any mainstream sport.

Breaking Ground

One of UFC’s greatest strengths has been not what it has leeched from other sports, but its own ability to innovate – to roll with the punches. Ironically, one of the assets that has best equipped it for future expansion into the mainstream was acquired as a consequence of its initial marginalisation.

“The UFC grew digitally because it was pushed underground after being banned in America in the Nineties,” says Davies. Where other sports played whack-a-mole trying to keep footage offline, the UFC increased its YouTube views by a billion minutes in the space of a year. While the NFL and NBA tried to ban their athletes from tweeting in the hours before a game, the UFC was handing out cash rewards to fighters who were performing best on their social channels.

Despite her shock loss to Holly Holm in Melbourne last November, Rousey recently became the most followed female athlete on social media, with – at the time of writing – almost 22 million fans across Facebook, Twitter and Instagram. The UFC’s own followings have grown, too, by 57 per cent (Facebook), 78 per cent (Twitter) and 770 per cent (Instagram) over the past two years. Meanwhile, its streaming Fight Pass service is booming. The UFC’s finger on the digital pulse is, according to Wright, “one of the fundamentals behind our growth. If you make it easier for your fans to find your content and engage with your athletes then you’ll grow a strong fan base.”

Another arena in which the UFC is ahead of the curve – and gaining wider recognition – is drugs testing. In April last year, it hired Jeff Novitzky, a former agent for the US Food And Drug Administration. “We basically gave Jeff a blank sheet of paper and said, build us the most comprehensive anti-doping policy in professional sport,” says Wright.

The program Novitzky created is now entirely run by the US Anti-Doping Agency. “We don’t know when they’re going to test, we don’t know who they’re going to test,” says Wright. “They have full and complete management of the anti-doping policy. So there’s no conflict of interest for us.” The inglorious removal of Jon Jones from his title-unification bout with Daniel Cormier in the days leading up to UFC 200 was conclusive proof the program doesn’t play favourites.

Decisive action has also been taken on another sporting hot topic: after Irish lightweight Joe Duffy suffered a suspected concussion in training a week before UFC Fight Night 76, he was sent for testing and, despite being the main draw, promptly withdrawn. “That just shows how responsible the UFC is,” says Davies. “One man’s safety was more important than having a headline event.”

In many respects, the UFC has transcended mere promotion to become a media company in its own right. This has been advantageous while the sport hasn’t benefitted from press coverage in the same way as, say, boxing. But that outdated view is being refreshed, according to Davies. “It’s a generational shift,” says the fight sports veteran.

“There’s a traditionalism about boxing that makes a lot of the journalists who cover it slightly suspicious of MMA. I would say about 20 per cent of the old school are interested in the UFC. But that’s changing. My experience is that the younger boxing journalists also want to talk to me about Ronda Rousey’s defeat to Holly Holm and Conor McGregor’s latest movements. Some of the great writers – Norman Mailer, George Plimpton, Bud Schulberg – have been attracted to boxing. But as time goes on, the library on the UFC will grow, and it’ll be only a matter of time until there’s a form of mixed martial arts in the Olympics.”

US$700M – The reported value of Fox Sports’ deal with promoters Zuffa LLC, UFC’s parent company

Heavyweight Contender

From spit and sawdust to TV rights and anti-doping commissions, the UFC has come an awfully long way. “Our sport is a truly global sport,” says Wright. “Our content is available in 150 countries around the world, in 30 different languages, in 1.2 billion homes right now. We’ve got athletes from every corner of the world.”

But despite the quantum leap it has made since its inception, the organisation is still engaged in a period of what marketeers call “education”. The upside of that is, like a loosely applied rear-naked choke, there’s still potential to exploit.

So how much bigger could the UFC get? What remains in its way? “Some people are never going to be into fight sports,” Davies admits. “But when the UFC talks about global domination and wanting to be as big as football, they’re not kidding around.”

It’s perhaps not as fanciful as it first sounds, especially when you drill down to grassroots level. “MMA is one of the fastest-growing sports in the world and it’s inspiring an increase in the uptake of combat-style training,” says Lunardelli.

This is something that he knows better than most because Reebok is selling the gear. “Our research found that 35 million people globally were training like fighters; 40 per cent of them had started in the past 12 months. That was conducted over a year ago, so the number may have grown since then.”

To paraphrase singer Carl Douglas, soon everybody could be Ultimate Fighting – especially with the organisation rolling out a network of UFC gyms internationally. The sprawling UFC Gym in Alexandria in Sydney’s inner south being one of the pioneers.

So how big could the UFC become in Australia? Wright smiles: “Talk to Dana White and he’ll tell you he wants the UFC to be the number one sport in Australia – and, hey, it’s great to have those kinds of goals. Realistically, there are certain sports that are always going to be the number one sport in a country – in Canada that’s hockey, in Brazil it’s soccer, in the US it’s American football.

We can aspire to be the number one sport in those countries, but that’s unrealistic. It’s not unrealistic, however, to be a top four or top five sport in those countries – and that’s definitely my goal for Australia.” 

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