MMMusings #1: PPVeconomics
MMMusings #1: PPVeconomics
The Price of PPVs has gotten out of hand... Along with profits for the UFC, floating Endeavors shitty margins and fueling the TKO group merger-spinoff cashgrab.
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I get it. It’s 2023. “Inflation”. It's the overarching reason why everything you see is getting more expensive, right? Well, maybe… I'm not an economist, but with respect to UFC PPVs, I can tell you good degenerates that something is amiss. The numbers don't add up… Let's take a look:
The year is 2015.
Gas is cheaper than water ($3.16 in CA - the highest in the nation) and noone outside of a Zoology department (or a Chinese wet market) has heard of a Pangolin. The UFC is fielding a very high quality product and legitimizing itself as a global powerhouse in sports entertainment, albeit still a niche one. The growth and profitability, however, were undeniable: $200-$250 million EBITA on $609 million in revenue — a EBITA/Sales rate of 33-41% based on those estimates (source) compared to current Entertainment industry averages (14.5%) and pro sports league leader NFL with 24.5% (source) the UFC was a cash cow back before the Endeavor acquisition, before the significant decline in fighter pay as a % of revenue began. Even then, athlete pay as a % of revenues were meager compared to most.
Aside— Some very astute analysis has been done on this, and I tend to agree with the perspective that the UFC prefers to market the organization over any fighter, and strategically utilizes its success and power position in the market to reduce the influence of its employees (or contractors or whatever you call them UfcBER), and consistently strengthen its negotiating position with talent all while driving top line and bottom line growth at rates fairly unheard of in the professional sports and entertainment industries for entities of this size. You could argue it was inevitable to achieve this growth, but it’s not like the UFC doesn’t have competition — they do, and they’re currently baring their teeth, but are far behind in terms of awareness, reach, influence, and revenue generation. That said, opportunities are there for competitors to make in-roads on the UFC’s dominance, and the outcome of the current fighter pay class action lawsuit could have wide reaching implications and massive repercussions for the UFC and its fighters. Additionally, Bellator’s reported impending implosion and/or sale to a competing entity (such as the PFL) could significantly change the competitive landscape, for better or for worse.
Back to 2015:
There’s a young lad from Crumlin, Dublin, Ireland lighting a fire among fight fans and casual audiences alike, inspiring a generation of followers in his wake. He’s just finished a world tour building hype for his challenge of Jose Aldo for the undisputed Featherweight title. After defeating Chad Mendes in an epic bout for the interim belt, Conor was facing Jose after a 14 month layoff due to an injury that postponed their meeting and gave Conor a shot at interim gold, and a chance to stay active while continuing to build his fanbase, earnings, and legend (if not exposed a clear weakness and obvious gameplan for victory). For $59.99, fans would get to see thirteen seconds of heated action resulting in the immaculate counter two down the pipe that ended Aldo’s legendary reign and truly minted the UFCs first & greatest global mainstream celebrity superstar.
The rest of the card? Weidman vs Rockhold for the 185 belt. Yoel vs Jacare. Demian Maia vs Gunnar Nelson. Blessed vs Lil Heathen to kick the main card off… Not to mention an undercard featuring a young Covington, Medeiros vs Makdessi, Kevin Lee and Urijah Faber. Absolutely stacked.
Next up for Conor would be back to back barnburners with Stockton’s own submission ace and attrition slugger, Nathan Diaz. Cut to priceless post-196 promo that lives in infamy (and also likely unknown to many fans today). After getting his L back, he was right back in the mix for a dismantling of Eddie Alvarez to become the trendsetting first ever double champ. Champ champ was born. This was a different time that most fans today may not remember, or haven’t even seen… peak UFC. For just under three twenty dollar bills per PPV.
Fast forward to 2023.
Dana and Ari are swimming in revenue and profit: roughly $1.3 Billion revenue, adjusted EBIDTA of $648MM, EBIDTA/Sales: 49.8% — an ~8 to ~16 basis point increase from 2015 (source). They’re setting up a blockbuster merger with the WWE and spinoff from Endeavor to make another boatload of cash fast, and are sitting in their hot tubs on their megayachts laughing until they choke on their champagne and caviar, because they fully expect you to fork over $79.99 to see Amanda Nunes trounce Irene Aldana to the tune of a 50-43 scorecard, and many of you (us) will do it.
I’m not even going to try to justify it. They had a heater of a co-main in Olivera vs Darioush, but followed up with the featured bout of Mallott vs Fugitt, and Ige Landewehr following a Barriault Anders opener. All fighters deserving of main card PPV spots, but not quite the matchups nor name value nor payscale as back in 2015.
Since Conor left MMA fans high and dry for two years while turning himself and the UFC into household names fighting the ultimate Money fight (and his red panty night), the price to value ratio for UFC PPVs has been steadily decreasing, quantity over quality being spoon fed to us from low production cost environments requiring minimal marketing budget to deliver positive ROI, with costs decreasing for the promotion but costs increasing for the consumer. The pattern was slow to emerge at first but accelerated steadily with limited exceptions over the years providing fans the rare reprieve.
As Stringer Bell once said, “Shit is weak, we gonna sell twice as much… we do worse, and we get paid more.”
Seems like Dana and Ari were listening…
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