Blogging about the Ultimate Fighting Championship (aka UFC) as a business, its marketing strategies and how it has become the most successful mixed martial arts organization to date.
Although the UFC would want nothing more than to sell more than 1 million pay-per-view buys per event, I believe it is close to impossible with their current sales model. First of all, their revenue is based on single-transaction purchases made from events they schedule on a specific calendar date. For example, if a casual mixed martial arts fan saw that his favorite fighter is fighting on an upcoming UFC card, he only needs to purchase that one event and is not pressured to buy the next upcoming event. As I have explained in my previous blog post, this pay-per-view model does not work in most countries all over the world, which limits the UFC's profit margins.
The World Wrestling Entertainment (WWE) is a sports entertainment organization that also used to run on a pay-per-view model. However in 2011 they introduced a subscription-based video streaming service which includes every programming they offer. This move was a success, as they now have over 2 million subscribers that pay on a monthly basis. Guaranteed revenue is what the UFC needs, and if they follow the WWE model I believe they can real a broader target market.
The WWE Network lets you watch all WWE content for one flat monthly rate.
The salary of mixed martial arts fighters vary, from Connor McGreggor's $3 million show money for his fight with Nate Diaz in UFC 202 to Donald Cerrone's $170,000 in that same event. Keep in mind that these fighters have to pay managers, their gym and sparring partners, as well as medical expenses that their promotion's medical insurance will not cover. In order to break even, most fighters obtain sponsorship from a variety of different companies.
Donald Cerrone wearing shorts with sponsors.
However with the new uniform policy of the UFC, fighters are no longer able to wear apparel with their corresponding sponsors. Due to signing a multiple year contract with Reebok, the UFC now requires fighters to compete in Reebok "Fight Kits" in an attempt to standardize the uniform policy of its fighters.
Donald Cerrone wearing the Reebok "Fight Kit". Notice the lack of sponsors.
The UFC does share its earnings it receives from Reebok, however the fighters still make more money wearing shorts or gear with their sponsors on them. In a Yahoo article written in May, 2015, Cerrone reveals that he stands to lose at least $60,000 in sponsorship earnings as a result of him not being able to step out with his sponsors on his shorts.
There is the argument that the UFC-Reebok deal legitimizes mixed-martial arts as a sport on the same level as NBA, NFL, and MLB; however in the time that the deal was made in the year 2015 and present day, I would tend to disagree. The shorts and shirts is not what makes the fights exciting, it's the fighters themselves. The people that will pay to watch Ronda Rousey or Jon Jones were not concerned about whether or not they are wearing brand-name shorts they recognize, they watch because they were enticed by the fighting style, the trash talking, and the entertainment value MMA fighting brings that no other sport can deliver.
The UFC as a mixed-martial arts (MMA) promotion makes its profits mainly through Pay-per-view reveneus, which is what my main topic is about. However the MMA promotion also earns revenues through different channels. The UFC has a variety of licensed merchandise to include clothing, memorabilia, and even video games. However what has emerged in recent years are gym franchises licensed by the UFC themselves. I live in New Jersey, and a new UFC Gym recently opened near my area. The gym is named "Frankie Edgar UFC Gym", named after a very famous New Jersey native fighter. Since they were giving away free passes, I decided to give the place a try. The gym was very spacious and had everything a normal physical fitness gyms would have such as weights, aerobic machines, and swimming pools. However what made the UFC Gym different was that it was also a mixed-martial arts school.
Front Entrance of UFC Gym
There are plenty of martial arts schools around my area if you wanted to train in a specific craft. However who wouldn't want to train martial arts in a gym that is owned by a famous fighter if you are a UFC fan? Creating a gym franchise is a brilliant idea on the UFC's part, as not only does it offer fighters a different avenue of earning money while they are not competing, but it also serves as a marketing tool for upcoming events.
I didn't get to visit the gym during the opening day, but had I gone I would've been able to meet some famous fighters that I definitely would have wanted to meet.
I entered the UFC gym and after signing some papers was allowed to work out for the day. The gym had plenty of weights for everyone, as well as a myriad amount of treadmills if you wanted to do some cardio work. There was also a replica competition cage, which I'm sure people are allowed to spar in if they wanted to (with some supervision by a staff member).
The gym also offered kickboxing classes as well as Brazilian Jiu-Jitsu classes for any level. Each day according to the schedule had a class almost every other hour, ranging from 5am in the morning to 9pm at night. Not only that, but the gym was also open 24 hours a day. If I wasn't already a member of another martial arts gym, I would highly consider joining this gym.
In this week's blog post I will be talking about the over-saturation of UFC events and the resulting cognitive dissonance UFC consumers feel as a result. The Ultimate Fighting Championships has become the leader in distributing mixed-martial arts events around the world. The UFC primarily make their profits from pay-per-view revenues; however in 2011 the UFC was able to sign a deal with FOX Sports Media to a 10 year, 100-million dollars per year contract. The deal enabled the UFC to distribute fight events to millions of households of varying demographics. As a result, however, the UFC needed to create more events per year, spreading the stars and talent into multiple events instead of stacking events with multiple stars. In the year 2010, the UFC hosted 24 events, and by 2014 the UFC was hosting 46 events.
UFC Reached a peak of 46 events per year in 2014
Is more necessarily better? In my opinion the more events the UFC host, the less exciting each event becomes since they are not able to utilize the more popular fighters in the same card. Hard-core MMA fans will always watch UFC events regardless of how little star-power it has. However in order to sell pay-per-views the UFC need casual fans to want to buy the events, and it becomes harder to do so when your talent is spread thin. The Super Bowl is one of the most-watched event in television every year because it is an annual event. If the Super Bowl happened 10 times a year, it would not be the success it is today since people would not think it is must-watch TV; the same can be said about UFC events.
BT Sport is the largest sports media distributor in the UK
Ever since the success of the "Ultimate Fighter" show in the USA, the Ultimate Fighting Championship has shown astronomical growth both domestically and globally. However, the distribution model for countries outside of the USA is very different. The UFC largely makes its profits from pay-per-view buys, but this model is not very popular for other countries, especially for emerging markets like the Philippines, China, and Europe. In a perfect world, the UFC would want global marketing standardization of their products as they would stand to make more money from pay-per-view. Realistically, however, a UFC fan in the Philippines is not gong to spend $50 to watch an event, especially when the UFC is now producing atleast two shows a month.
In order to distribute their product in a way that would reach the most amount of consumers, the UFC signed distribution deals with media companies throughout the world. For example, the UFC in 2016 signed an exclusive deal with BT Sports, the largest sports media distributor in the UK until 2018. In doing so, the UFC is able to reach a vast amount of households in the UK, which in turn helps them sell tickets when they hold shows in various locations in the United Kingdom.
Another way in which the UFC is adjusting to a growing global market in their industry is by creating products catered specifically for that region. The "Ultimate Fighter" a show where young unknown talents compete for a UFC contract, has become so popular that the UFC decided to create a season of the show in different countries all over the world. By creating a show in specific countries of a said market, the promotion is able to foster local talent and enable these fighters to garner national interest in their respective country.
