Tag: pay-per-view

CagePotato Presents: A Comprehensive Breakdown of the UFC’s PPV Numbers (And How They Can Improve Them)


(“We will open the bidding for a UFC 149 pay-per-view purchase at $49.95. Do I hear $49.95? What if I said I’d thrown in this *authentic* jersey, completely free of charge? $49.95…anyone? OK, how about ten bucks?”) 

By Oliver Chan

Recently, after reading 12OzCurl’s article (well, just the opening paragraph) I came to a realization that the only reason why I’m here is because I’m Asian and Benny figures that must mean I’m good with numbers. So break out your abacuses…this shit is about to get real.

Today’s class? Variable pricing and whether or not this system should be adopted by the UFC in regards to the pricing of pay-per-view events. I’ll wait for everyone to decide whether or not to skip this article and go straight to the “Hot Potato” links.

Still with me? Probably not. But anyways, here we go.

For those that don’t know, Variable Pricing (or Dynamic Pricing as it is called) has been the main pricing strategies for airlines and hotels on how they price their own inventory.  Recently, the San Francisco Giants adopted this form of pricing in order to better optimize ticket sales for their events. The strategy is similar to that used by the hotel and airline industry where prices go up and down depending on current market conditions and historical trends. Did it work? Hell yeah it did. By using sell-out history from past games based on opponents, starting pitchers, weather, day of the week, evening versus afternoon, and of course, current supply, the Giants were able to significantly increase their ticket sales revenue to such a degree that other franchises are looking to adopt similar methods to pricing their games.


(“We will open the bidding for a UFC 149 pay-per-view purchase at $49.95. Do I hear $49.95? What if I said I’d thrown in this *authentic* jersey, completely free of charge? $49.95…anyone? OK, how about ten bucks?”) 

By Oliver Chan

Recently, after reading 12OzCurl’s article (well, just the opening paragraph) I came to a realization that the only reason why I’m here is because I’m Asian and Benny figures that must mean I’m good with numbers. So break out your abacuses…this shit is about to get real.

Today’s class? Variable pricing and whether or not this system should be adopted by the UFC in regards to the pricing of pay-per-view events. I’ll wait for everyone to decide whether or not to skip this article and go straight to the “Hot Potato” links.

Still with me? Probably not. But anyways, here we go.

For those that don’t know, Variable Pricing (or Dynamic Pricing as it is called) has been the main pricing strategies for airlines and hotels on how they price their own inventory.  Recently, the San Francisco Giants adopted this form of pricing in order to better optimize ticket sales for their events. The strategy is similar to that used by the hotel and airline industry where prices go up and down depending on current market conditions and historical trends. Did it work? Hell yeah it did. By using sell-out history from past games based on opponents, starting pitchers, weather, day of the week, evening versus afternoon, and of course, current supply, the Giants were able to significantly increase their ticket sales revenue to such a degree that other franchises are looking to adopt similar methods to pricing their games.

For the actual pricing of live events, this really doesn’t make any sense. The UFC really isn’t in the same spot on a regular basis for this type of pricing to make sense. Any city the UFC visits, it is considered a major event and will most likely sell out regardless of any other variables that may come into play. Since live events are constantly moving from one city to another, there is no localized sample of potential buyers to track buying trends in order to utilize a dynamic pricing strategy. However, this could be applied to pay-per-view pricing for events.

Before I go any further, here’s some numbers calculated from 2008-2012 that you may find interesting.

Average PPV Buy Rate = 526,470

Average PPV with Title Fight = 605,114 (+15% over average)

Average PPV with Non-Title Fight = 385,000 (-27% over average)

Average PPV Buy-Rate Featuring TUF Coaches = 940,000 (+79% over average)

Average PPV Buy Rate with Main Event Cards Affected by Injuries = 405,357 (-23% over average)

Average PPV Buy Rate Featuring Heavyweight Bout in Main/Co-Main Event = 748,182 (+42% over average)

 

(*List compiled based on fighters with a minimum of 4 or more appearances in the main or co-main event)

Whether you blame the injury curse of 2012 or the influx of UFC events over the course of the year, last year has seen a tremendous a decrease in pay-per-view buys. Since 2008, the UFC saw a steady increase in buys up to 2010 before dropping 27% in 2011.  The following year, there was an additional 27% percent from 2011-2012. Overall, since 2008, where the total pay-per-view buys that year was over 9 million, the UFC has seen a 42% decrease in buys over the past 2 years.

Could there be an issue with supply and demand? Absolutely. In both 2008 and 2009 fans saw a total of 20 events (both free and pay-per-view) and 2010 had 24. In all three years, the ratio of PPV vs. free events was roughly 3:2. Flash forward to 2012, and you’ll see a total of 32 to events and the ratio of PPV to Free events shift to roughly a 2:3 ratio.  Last year we saw a total of 18 free events compared to 14 pay-per-view events (it would have been 15 if it wasn’t for you know who not wanting to fight you know who and pissing off you know who…oh, how that seems like ancient history now). Still, the number of pay-per-view events last year was less than the number of free events. Why bother paying for an event, when there are plenty of other events being featured on free TV? Add in Bellator on Spike and the World Series of Fighting on NBC Sports and now the UFC has even more competition to deal with. You could also argue that the new deal with Fox may have resulted in the UFC cannibalizing themselves with all the events on Fox, FX, and FuelTV.

One thing the UFC has done right is airing international events on free TV and not on PPV. The numbers show that events not held in the North American continent are more likely to be 44% lower than the 5 year average. Those “marquee” events in Brazil, Japan, and Abu Dhabi? They also netted numbers below the PPV average.

There are a few things to note here (or “limitations” as we in the scholarly world like to say). All of these numbers are provided by the UFC and are rough estimates as opposed to actual numbers. That said, it’s safe to assume that these numbers, while just estimates, provide a good baseline for this study.

Could dynamic pricing work for PPV events? Possibly. Of course, there is the logistic nightmare of having to reprice events based on injuries that may occur leading up to the date. There’s also the perception that the UFC may be “cheapening” their image by pricing certain events lower than others. How this may affect certain fighter contracts that receive a percentage of the PPV buys is also something to take into consideration.

All things considered, should PPV events featuring non-title fights be priced the same as those that do feature a title fight? After all, in such cases where a title is on the line, more is at stake and could be considered a higher value compared to those where a title is not.  Should Mir vs. Cro Cop be priced the same as Lesnar vs. Velasquez? Should the heavyweight main-event fights be priced higher than the lighter weight divisions? If Penn vs. Diaz was priced lower, would they have netted a buy-rate closer to the average? Would main-events featuring Frankie Edgar be better off priced at a discount rate compared to other events (you’re still my boy, Frank)? How will the new Fox Sports 1 and Fox Sports 2 affect the current rate of free vs. PPV events for the UFC?

At the end of the day, the ultimate question will be what will the consumer be willing to pay for what event? In other words, would you be willing to pay more than $44.95 for GSP vs. Diaz this weekend? How much will you pay for UFC 161?

Too much math for you, ‘Tater Nation? Head hurtin’ a little? How about this to help decompress your brain?

(PS – Shameless plug:  Help me raise money for Nick Newell’s favorite charity, Tap Cancer Out, by visiting my fundraising page here)

Six Reasons Why MMA is Going to Change Forever in 2013


(Do women in the UFC represent a new path to the future, or business as usual? Photo via Esther Lin/MMAFighting)

By Brian J. D’Souza

There have been many landmark events in MMA history — the inception of the UFC in 1993, the debut of The Ultimate Fighter in 2005, the fall of PRIDE in 2007, and the acquisition of Strikeforce in 2011. As 2013 gets underway, it’s already becoming apparent that the sport is undergoing a series of events that will change it forever.

THE DISSOLUTION OF STRIKEFORCE

On March 12, 2011, Zuffa acquired Strikeforce. Although the San Jose-based promotion was subsequently stripped of many of its best fighters, television network Showtime opted to renew their broadcast deal with the promotion — until now. The January 13, 2013 show headlined by Nate Marquardt vs. Tarec Saffiedine will be the promotion’s death knell, as the name “Strikeforce” takes its final resting place in the cemetery next to Affliction, WEC, PRIDE, Elite XC, BodogFight, and the IFL.

There were obvious benefits in Zuffa stringing Showtime along as a broadcast partner of the increasingly-diluted Strikeforce brand: It kept Showtime from seeking a new promoter, independent of Zuffa, to partner with. Currently, promotions like Shark Fights, Legacy Fighting Championship, Invicta FC, and Xtreme Fighting Championships are in the running as potential broadcast partners for Showtime. For the winning promotion(s), mainstream television exposure on CBS might also be possible, just as CBS aired Strikeforce events in the past.

However, no matter which promotion Showtime airs, the most significant component of the deal comes down to what brand-name fighters can be acquired to get better ratings and more subscribers for Showtime.

THE RISE OF BELLATOR


(Do women in the UFC represent a new path to the future, or business as usual? Photo via Esther Lin/MMAFighting)

By Brian J. D’Souza

There have been many landmark events in MMA history — the inception of the UFC in 1993, the debut of The Ultimate Fighter in 2005, the fall of PRIDE in 2007, and the acquisition of Strikeforce in 2011. As 2013 gets underway, it’s already becoming apparent that the sport is undergoing a series of events that will change it forever.

THE DISSOLUTION OF STRIKEFORCE

On March 12, 2011, Zuffa acquired Strikeforce. Although the San Jose-based promotion was subsequently stripped of many of its best fighters, television network Showtime opted to renew their broadcast deal with the promotion — until now. The January 13, 2013 show headlined by Nate Marquardt vs. Tarec Saffiedine will be the promotion’s death knell, as the name “Strikeforce” takes its final resting place in the cemetery next to Affliction, WEC, PRIDE, Elite XC, BodogFight, and the IFL.

There were obvious benefits in Zuffa stringing Showtime along as a broadcast partner of the increasingly-diluted Strikeforce brand: It kept Showtime from seeking a new promoter, independent of Zuffa, to partner with. Currently, promotions like Shark Fights, Legacy Fighting Championship, Invicta FC, and Xtreme Fighting Championships are in the running as potential broadcast partners for Showtime. For the winning promotion(s), mainstream television exposure on CBS might also be possible, just as CBS aired Strikeforce events in the past.

However, no matter which promotion Showtime airs, the most significant component of the deal comes down to what brand-name fighters can be acquired to get better ratings and more subscribers for Showtime.

THE RISE OF BELLATOR

Free of any contractual obligations to Zuffa, Spike TV is now free to air Bellator on the network, which they’ll begin doing next week. With its tournament-style format, a planned reality show, recruitment of new talent, and investment from media conglomerate Viacom, it seems that fortunes may change for Bellator in 2013.

Most importantly of all, Spike TV used to be the home of the UFC. Since Spike has been airing the back-library of the UFC for the last year, Bellator can take advantage of brand confusion and piggy-back off of the UFC’s former audience.

THE VALUE OF FREE AGENTS IN MMA

Former Bellator fighter Hector Lombard was bought by the UFC with a rumored price-tag that included a $400,000 signing bonus, a $300,000 purse per fight, and per-per-view participation points. Bellator fighter Eddie Alvarez is reputed to have been offered a UFC contract with a $250,000 signing bonus, $70,000 to show and $70,000 to win, as well as pay-per-view points and a vague promise thrown in about an intended title shot.

How does this compare to the typical pay scale in the UFC? UFC lightweight champion Benson Henderson earned just $39,000 to fight and $39,000 to win against Nate Diaz for the UFC on Fox 5 show in December 2012. Bendo has to be fuming at the thought of Alvarez being granted the option of making multiple times the money Bendo currently earns as champion of the biggest organization in the world.

The Zuffa fighters who are signed into long-term contracts for low money and tiny increments in pay with each win don’t really have any options. But the fighters signed to short-term deals or with just 1-3 fights left on their contracts can tempt fate by seeing what the new Showtime MMA promotion or Bellator would be willing to offer them. Zuffa usually has to pay only slightly more than their competitors in order to maintain control over the fighters. Thanks to increased competition, some fighters might actually be able to get more money than before.

THE PAY-PER-VIEW MARKET

Zuffa faced hard times in 2012 due to the retirement of many prominent UFC stars. Add injury woes to the equation, and 2012 was yet another year of disappointing pay-per-view receipts for Zuffa. 2011 had already marked the first year that PPV revenue declined.

It’s easy to point fingers like Zuffa has done at Jon Jones over the cancellation of UFC 151. Jon Jones, originally slated to meet Dan Henderson in the main event of UFC 151, refused to face Chael Sonnen on short notice. Zuffa knew that without at least one major star on the card, the pay-per-view would tank, and pulled the plug on the event.

In truth, whether you like him or hate him, Jon Jones is one of the few new stars who can carry the UFC forward through the next decade. The light-heavyweight belt has been held by a variety of revolving-door champions since Chuck Liddell, the last dominant champion, lost the strap to Quinton “Rampage” Jackson in 2007. Jones has drawn good numbers, like an estimated 700,000 for his rivalry with Rashad Evans at UFC 145. Like Calvin Candie from Django Unchained, Zuffa doesn’t really have to respect their fighters in order to profit greatly from them — and there seems to be no love lost between Dana White and Jon Jones.

The pay-per-view market is so important to Zuffa that Dan Henderson was passed over for the title shot he had already earned in favor of Chael Sonnen, coming off a loss to Anderson Silva, being gifted with a title shot against Jon Jones.

With no official rankings or mandatory contenders in mixed martial arts, fighters like Dan Henderson and Johny Hendricks will just have to wait their turn to fight for the title — assuming they ever get one.

WOMEN IN THE UFC

Next up is the highly-touted UFC arrival of Strikeforce 135-pound champion Ronda Rousey, who will square off with Liz Carmouche at UFC 157 in February. While this fight is certainly a watershed moment for gender equality in the sport, the UFC’s underlying motivations are nothing new. Rousey is like Gina Carano before her — a valuable asset who can headline shows, sell pay-per-views and tickets (although perhaps not as many as other major UFC stars, at least at this stage).

Zuffa is smart not to leave a 6-0 champion who has finished every fight via armbar for another promotion to use. That would be like leaving money on the table, something Zuffa is not exactly known for doing. If female fighters begin to connect with MMA fans on a larger scale — which they’re already doing, if Invicta FC’s growing audience is any indication — the UFC could find itself with a brand-new revenue stream.

Next up on the equality platform, watching Dana White scream, “Do you wanna be a fucking fighter”? at the next batch of female UFC hopefuls when they question why their “exhibition” matches on The Ultimate Fighter don’t pay anything.

THE RETURN OF THE FEDERAL TRADE COMMISSION?

The FTC’s investigation into Zuffa was closed in February 2012. That doesn’t mean that the case won’t be reopened at a future date. Until Showtime or Bellator make a successful bid for the pay-per-view market in MMA, the UFC is the dominant monopoly in the sport, period.

It’s not unheard of for the government to attempt to investigate combat sports in the US: The International Boxing Club (IBC) had a stranglehold over boxing in the ’50s, until the United States Department of Justice declared the organization a monopoly and ordered the IBC’s dissolution in 1959.

There are many UFC fighters who might welcome an FTC investigation with open arms, especially if new laws were enacted to improve their bargaining position with the organization. Many fighters just want to see some transparency, as they are curious about the promotion’s revenue from television licensing, merchandise and other streams that Zuffa earns off their backs.

CONCLUSION

2013 could be the biggest year yet for changes in mixed martial arts. As the sport continues to grow, profits continue to rise. Only a select few have been able to capitalize on the upward trends for the sport, but this could be the year that shifts the balance of power between different stakeholders.

The promotions, television networks and fighters who are keenly following business forces and who understand how to create value will be the big winners at the end of the day. A lot is at stake, and there isn’t any room for failure in this sport.

MMA is on the verge of many developments that can transform the nature of the sport forever.

***

Brian J. D’Souza is the author of the recently published book Pound for Pound: The Modern Gladiators of Mixed Martial Arts. You can check out an excerpt right here.

UFC 153 Pay-Per-View Buys Confirm That Squash Matches Are Totally Hot Right Now


(We’re sorry, Stephan, but unless those things are actual guns, you’re getting your ass kicked tonight.) 

In the days leading up to UFC 153, many of you (and by you, we mean the entire MMA Interwebz) had some less than favorable things to say about the pairing of Stephan Bonnar and Anderson Silva. As if the bookies hadn’t told us all we needed to know, the general consensus among fans seemed to be the evening’s main event was a “travesty, a sham, and a mockery” that “blasphemed the great sport of MMA” and was a “completely meaningless squash match” whose “insulting pairing” would be reflected in “the abysmal pay-per-view numbers it receives.” And those were the favorable comments.

But for every fifteen of you complaining, there were apparently five or more of you who were forced to stifle your true excitement over this matchup like a pedo at a tee-ball game, because if the early numbers are any indication, squash matches featuring unstoppable killing machines are the new superfights. According to several reports, the pay-per-view numbers for UFC 153 are in the range of 340,00 to 410,000 buys. These numbers not only exceeded expectation, but are not that far below September’s squash match of the month featuring Jon Jones and Vitor Belfort, which managed to clear over 450,000 buys despite having those little guys that no one cares about fighting in the night’s co-main event.


(We’re sorry, Stephan, but unless those things are actual guns, you’re getting your ass kicked tonight.) 

In the days leading up to UFC 153, many of you (and by you, we mean the entire MMA Interwebz) had some less than favorable things to say about the pairing of Stephan Bonnar and Anderson Silva. As if the bookies hadn’t told us all we needed to know, the general consensus among fans seemed to be the evening’s main event was a “travesty, a sham, and a mockery” that “blasphemed the great sport of MMA” and was a “completely meaningless squash match” whose “insulting pairing” would be reflected in “the abysmal pay-per-view numbers it receives.” And those were the favorable comments.

But for every fifteen of you complaining, there were apparently five or more of you who were forced to stifle your true excitement over this matchup like a pedo at a tee-ball game, because if the early numbers are any indication, squash matches featuring unstoppable killing machines are the new superfights. According to several reports, the pay-per-view numbers for UFC 153 are in the range of 340,00 to 410,000 buys. These numbers not only exceeded expectation, but are not that far below September’s squash match of the month featuring Jon Jones and Vitor Belfort, which managed to clear over 450,000 buys despite having those little guys that no one cares about fighting in the night’s co-main event.

While the numbers for UFC 153 might not be that outstanding at a glance, first consider that aside from Anderson Silva, UFC 153 was essentially deprived of the kind of star power that casual fans are willing to fork over 50 dollars for, thanks in no small part to our friend the injury curse. The co-main event featured Dave freaking Herman for Chrissakes. Jon Fitch was on the main card, you guys. Jon. Fitch. These are not factors that normally add up to UFC gold, yet thanks to the power of one genetically-enhanced cyborg from the future and the pure enthusiasm of Brazilian fans, UFC 153 managed to come out with better numbers than UFC 147 and 150 combined.

So although we may never get the Silva/Jones superfight we’ve always wanted, enough of us will keep tuning in for the mere opportunity to watch either one of them beat the shit out of a hapless opponent. Based on these numbers, we estimate that Jon Jones vs. Chael Sonnen will do upwards of 24 million buys, receive it’s own television spin-off, and return to theaters in stunning 3D in 2014. And the Ferris wheel keeps on a spinnin’.

No wonder Silva doesn’t want to fight Chris Weidman or Michael Bisping; their chances of not being completely embarrassed out there lie just outside the fan’s interest range. Andy knows that we want to see him keep his hands at his sides, evade then shuffle back to where his opponent just tried to hit him, and deliver one-shot knockouts at the drop of a hat or not see him at all. You know what your audience likes, Joe, now set up the Silva vs Kyle Maynard super-squash-match-extravaganza that we have all been begging for!

–J. Jones

Sign of the End-Times: UFC 150 Pulls an Estimated 190k Pay-Per-View Buys


(“Sorry Frankie, but based on the terms of your pay-per-view bonus scale — as clearly stated in your contract — you actually owe us $10,000.“)

It wasn’t just UFC 150‘s live-gate that fell way below expectations. According to a new report from Dave “Doom ‘N’ Gloom” Meltzer, last weekend’s Edgar vs. Henderson 2 card pulled in an estimated 190,000 pay-per-view buys. Judging by the MMAPayout.com Blue Book, that would make UFC 150 the second worst-performing UFC PPV since February 2006. And what’s the #1 worst-performing card of the last six years? The UFC 147: Silva vs. Franklin 2 show from just two months earlier, which took in only 175k buys. (UFC 149: Faber vs. Barao didn’t fare much better last month with a modest 235k buys.) Sorry Fric and Frack, Christmas has been canceled this year.

A couple caveats:
Keep in mind that there was a technical issue on Saturday night where DirecTV subscribers were unable to order the UFC 150 broadcast by phone or computer, although they could still order it via their remotes, according to reports. Plus, Bendo vs. Frankie ran up against the penultimate night of the 2012 Olympics, which may have stolen a few more viewers.

That being said…


(“Sorry Frankie, but based on the terms of your pay-per-view bonus scale — as clearly stated in your contract — you actually owe us $10,000.“)

It wasn’t just UFC 150‘s live-gate that fell way below expectations. According to a new report from Dave “Doom ‘N’ Gloom” Meltzer, last weekend’s Edgar vs. Henderson 2 card pulled in an estimated 190,000 pay-per-view buys. Judging by the MMAPayout.com Blue Book, that would make UFC 150 the second worst-performing UFC PPV since February 2006. And what’s the #1 worst-performing card of the last six years? The UFC 147: Silva vs. Franklin 2 show from just two months earlier, which took in only 175k buys. (UFC 149: Faber vs. Barao didn’t fare much better last month with a modest 235k buys.) Sorry Fric and Frack, Christmas has been canceled this year.

A couple caveats:
Keep in mind that there was a technical issue on Saturday night where DirecTV subscribers were unable to order the UFC 150 broadcast by phone or computer, although they could still order it via their remotes, according to reports. Plus, Bendo vs. Frankie ran up against the penultimate night of the 2012 Olympics, which may have stolen a few more viewers.

That being said…
We’re talking about a UFC event featuring a damned title fight. Granted, Frankie Edgar has never been one of the UFC’s more bankable stars — his two headlining appearances against Gray Maynard in 2011 drew 260k and 225K buys, respectively — but maybe that should have spurred the UFC to stack the supporting card with a few more big names. Instead, UFC 150 featured a passable co-main of Donald Cerrone vs. Melvin Guillard, and some watery bullshit underneath.

While BloodyElbow is taking the UFC apologist stance — “Hardcore fans buying 200,000 for the ‘smaller’ PPVs and clearing 750,000-1,000,000 for the 3-5 ‘mega-shows’ a year while building the brand on Fox…is working fine,” according to Brent Brookhouse — I tend to disagree. This was not the goal the UFC had in mind. They wanted growth, plain and simple, not a different-yet-still-effective business model. Fans are indeed voting with their wallets. And if PPV cards can vary so wildly in terms of quality, star-power, and excitement level, you’ll start seeing more fans become cautious with their money.

What do you think? Is the fact that the UFC just pulled their two lowest PPV totals in recent history cause for alarm? Will it send a message to the UFC to change their card frequency — or the fighters they use to headline a card? Or is this really all just part of the plan?