WSJ: UFC pushing through to reach event quota, earn $750M

Photo by JIM WATSON/AFP via Getty Images

Wall Street Journal says “big money” is behind UFC’s efforts to host events during a pandemic.

“I don’t give a shit about the coronavirus.”

That was Dana White before the World Health Organization (WHO) classified COVID-19 as a global pandemic. When things got even worse, and cases and deaths skyrocketed, the UFC President still sang the same tune and remained as defiant as ever.

USA quickly blew past China, Italy and Spain in confirmed cases, and as of this writing, has the third most deaths with almost 13,000. Every other sporting event has been cancelled. Doctors have called for an indefinite suspension of all combat sports, and athletic commissions said they wouldn’t sanction fights during this pandemic.

Through all this, White has blamed the media, downplayed the seriousness of the virus, and vowed he won’t “run and hide” from the coronavirus.

To skirt government mandates and travel bans, White reportedly plans to “start cranking” out shows in tribal land exempt from California’s coronavirus guidelines, and on a private island outside the US for international fights. There won’t be ticket sales and fans allowed on these events.

So why go through all these lengths instead of listening to medical experts and waiting it out? It certainly wasn’t “for Khabib vs Ferguson” because the UFC is going forward without it. Is it “for the fans” that need normalcy now? To “feed families”? To show that he can “pull stuff off” and prove doubters wrong?

It could be a combination of those, but according to the Wall Street Journal, the UFC also has about 750 million other reasons to continue.

According to the reputed business outlet, “big money” is behind the UFC’s “controversial effort to keep fights going.” They’ve noted their 1.5 billion contract with ESPN, and their $2.3 billion in debt from the sale of the company.

The Wall Street Journal cites Brandon Ross, a media analyst at LightShed Partners, who estimates that the UFC could earn around $750 million by simply putting on their contracted number of events this year.

“I’d be surprised if they can’t fulfill their contract,” Ross said. “Disney is paying UFC no matter what… all the UFC has to do is put the show on to get a minimum payment.”

They cite that with the ESPN contract, the UFC is “required” to complete 42 shows in 2020. They’ve so far hosted just eight shows this year, meaning they’ll have to put on the remaining 35 events.

“The current deal is thought to be $150 million for the year for ESPN, another $150 million for the year for ESPN+, and $200 million guaranteed by ESPN for PPVs, with an upside if an events sells well,” Bloody Elbow’s business analyst John Nash said, explaining the UFC’s current contractual revenue.

“They also are thought to be getting around $100 million a year now for sponsors, over $100 million on international broadcast rights, and millions more on licensing fees. Almost all of that is contractually guaranteed.”

By simply putting on UFC 249, Nash estimates that the UFC will get well over $20 million “no matter how much — or little — it sells.” That’s a far cry from the UFC’s previous business model from years past, where they relied heavily on the PPV buy-rate.

In 2011, PPV buys accounted for 45% of the UFC’s revenue, and contractual revenue was just at 25%. During the Fox-era, that number flipped, with contractual revenue jumping to 45% and PPV buys accounting for only 30%.

As both Nash and the Wall Street Journal noted above, in this current ESPN-era, the UFC now relies heavily on those contracted deals. Even with PPV buyrate being reportedly lower than previous years, White boasted about 2019 being the biggest year in UFC history. The company’s record breaking revenues were reportedly at $900 million for the year.

So while the UFC likely won’t be able to reach last year’s record numbers, they’re still set to make massive money — even when losing out on other revenue streams on these closed-door events.

They’ve postponed three shows due to the coronavirus, and to make it all up and meet their quota, it seems like they’ll have to “start cranking” and hosing shows “back to back to back,” as White alluded to.

The UFC has already willingly passed on waiting for the highly anticipated Khabib Nurmagomedov vs Tony Ferguson match up, just to continue with UFC 249. If the reports are accurate, they’ll have just a little over eight months to put on 35 events. Hundreds of millions are on the line, so don’t be surprised if they focus more on quantity instead of quality.

“Right now they are losing the live event revenue, which is ticket sales, site fees and live event merchandise sales, as well as commercial pay-per-view sales (bars and theaters),” Nash explained. “So if they can keep holding events, they might not make as much as they would if they could have live audiences, and their PPVs might not sell as much if they didn’t have to worry about travel bans making certain matchups impossible, but they could still generate a lot of revenue for themselves — even on a mystery island.”