MMA Universe

Bad Left Hook provides us with Manny Pacquiao’s commercial for his sponsor, State Street Produce. The message is positive but the commercial is questionable.

Here it is:

Payout Perspective:

It would be interesting to hear from someone in the advertising/marketing industry to tell us your thoughts about the commercial. The actual message by Pacquiao is clear as to why he wants to be associated with the brand. But the concept seems to be lacking. He’s in an open ship container with a heavy bag and then he runs to another and needs help to unlock it. And then, he’s interviewed with sunglasses on. I really think the last 5 seconds of the video (with Pacquiao and all the kids and Pacquiao giving the tag line) is all you needed.

By the way, if you want your MMA tie-in, one of the kids helping Pacquiao opening the container in the video is wearing a jiu jitsu gi.

There hav been questions about whether Pacquiao’s brand has peaked. State Street Produce is one of the bigger deals Pacquiao has and it will be interesting how successful it will do. As most know, the HP tablet, one of Pacquiao’s other major endorsements, has flopped. Its not all Pacquiao’s fault there, but one wonders about his draw as an actual pitchman for products. He seems to have an engaging personality and not afraid to be a showman (e.g., his singing, movie career) so it should follow that he’d be a good person to represent a brand.

Ad Week reports that all ad inventory for Saturday night’s UFC on Fox event has been sold. Media buyers indicate that a 30 second spot for Saturday night cost “north of $100,000.

Via Ad Week:

Media buyers say a 30-second spot in The UFC on Fox cost just north of $100,000. Among the marketers advertising are Anheuser-Busch, the Casio G’zOne Commando smartphone, and the U.S. Marine Corps. Two studios–20th Century Fox and Warner Bros.–have also made buys.Velasquez and Dos Santos will begin trading blows at 9:35 p.m., following a half-hour setup by host Curt Menefee, UFC president Dana White, and announcer Joe Rogan. Fox will not throw to commercial between the first and second rounds, electing instead to keep its cameras on the octagon.

The $100,000 number is double the amount that was previously reported. In a survey, Ad Age stated that Fox typically receives about $50,000 per 30 second spot on Saturday night.

Payout Perspective:

All signs point to a big night Saturday. The price per spot for Saturday indicates that mainstream advertisers are intrigued by the potential for the UFC to draw the casual fan in key demos. Of course, the skeptic may argue not to look too deeply into the price considering that Fox usually does not  run live events as part of its Saturday night lineup. With a start time of 6pm/9pm (PT/ET), its interesting that the UFC has indicated the fight will not start until 35 minutes after the hour. Its obvious that there will be a lot of run up to educate the casual fan but it seems like the UFC could include another match in this hour.

Television is inherently competitive. There are a limited number of viewers and nearly limitless viewing options. Those that succeed do so on the basis of consistent and engaging content that drives viewership. Thus, the latest shift in the industry towards dual revenue (advertising and carriage fees) is born as much out of a necessity to fund the acquisition of premium content as it is to hedge against the volatility of advertising revenues.

If the business objectives of these networks are to increase ad revenue, increase households, and increase the fee per household, then sports properties may help them achieve success. The last few years have seen ratings increases across several sports properties and many of these broadcasts are even setting records of one kind or another (e.g., Superbowl XLIV, NBA Finals, or Olympic hockey). This is why NBC paid $820 million for the 2010 Winter Olympics, why ESPN just paid $2 billion for a single season of MNF, and why the rights fees will continue to escalate over the next few years.

Where does UFC fit into all of this? The UFC offers a relatively inexpensive product, but delivers a somewhat comparable audience in the key demographics. Yes, there are concerns about the violence of the sport and general brand alignment between any of the networks and the UFC. However, the potential value the UFC could provide to a network is going to be hard to pass up. This is especially true if one or more of the big leagues goes to a lockout next year (the NBA being most likely) and networks are left scrambling for sports content.

Hence, I’d like to take a look at the potential candidates for the UFC’s next television network (once its deal expires with Spike at the end of 2011):

ABC/ESPN

The UFC and ESPN have engaged in talks before. In fact, according to Dave Meltzer, the two were close to an agreement last year, but talks ultimately fell through due to money. The UFC is willing to give ESPN pay-per-view caliber shows, and in return expects some sort of comparable rights fee. However, ESPN is much less certain about the property; younger employees are in favor of the sport and some of the older employees remain staunch boxing advocates who believe the UFC doesn’t align well with the Disney-owned ESPN brand. Perhaps the most important point in all of this is that ESPN doesn’t need the UFC. The World Wide Leader in Sports has more than enough properties to satisfy its viewers. ESPN can afford to pass on this round and then simply overbid a little in four years if the UFC is hot enough.

NBC-Comcast

This week the FCC approved the merger between NBC Universal and Comcast. Speculation is that NBC-Comcast is going to put together a sports network (in what may or may not be Versus) to challenge the ESPN-dominated cable sports marketplace. I expect the first few years will be quite lean until the network has an opportunity to bid on some of the bigger properties that will again become available. In the mean time, properties like the NHL and UFC will prove attractive.

The network has kind of been in a holding pattern with this merger announcement, but I suspect we’ll start to receive more news in the coming months. I wouldn’t be surprised if this new sports network, should it materialize, is quite aggressive in acquiring the remaining properties (NHL, UFC, college sports rights, etc.). It’ll certainly be interesting to see how it handles the UFC on Versus cards this year. That should provide us with some insight as to how committed NBC-Comcast is to the UFC moving forward.

FOX/FX

MMAPayout’s Robert Joyner was the first to write about the possibility of FOX and FX entering the sport of MMA in 2009. At that time, FX was rumored to be looking for a sports property to complement its original programming lineup. Joyner hypothesized that MMA could provide the perfect vehicle to deliver a solid audience in the key demos while also aligning with some of FX’s edgier content. Then news broke late last year that Bellator had secured FX as a broadcast partner for its 4th season. While this deal ultimately fell through, it certainly helped to fuel further speculation of FOX/FX’s interest in MMA.

The FOX/FX package is intriguing. FX provides a solid cable foundation for the UFC with its solid original programming content, including the highest rated cable show on TV in the M18-49, Sons of Anarchy (H/T: TVbytheNumbers) that would provide the perfect lead-in, exit, or target promotion audience. FOX provides the UFC with a good broad exposure play 3-4 times per year and the ability for FX to cross-promote during NFL or NASCAR programming.

Spike TV

The UFC’s home for the past seven years isn’t out of the picture yet. The UFC has had tremendous success on the network. Spike was the only network willing to gamble on the UFC (what did they have to lose, some may argue). However, don’t believe for a second that sentiment will have much of a bearing on this decision. If anything, the argument in favor of Spike has more to do with the value it brings to the UFC from a promotional perspective. No other network is going to provide the UFC with as much advertising, promotion, or flexibility as does Spike TV. Thus, I pose the following question: is it better to be a big fish in a small pond or a small fish in a big pond?

Ultimately, I think the UFC chooses to move to a bigger pond. Yet, that does not exclude Spike from being involved at all. Perhaps the UFC enters the market having over-estimated the appetite for its product. Maybe it re-signs with Spike for a larger dollar figure and alters/removes the cable exclusivity clause that might allow it to jump on another opportunity should one come to pass. It’s possible.

The PPV vs. Rights Fee Trade-Off

Approximately 75% of UFC revenue is event-related. The UFC wants to ensure it doesn’t lose out on substantial PPV money by moving to a network (or ESPN). Hence, this issue is one of getting a large enough rights fee plus other boosts in business that the loss in PPV dollars from those televised events is immaterial.

The exact size of the rights fee the UFC is looking for is unknown, but it’s not hard to determine a ballpark figure. If the UFC is looking to use the rights fee as a way to offset the lost PPV revenue, then the size of the rights fee ought to be a significant portion of the estimated value of those events as PPV cards:

Assume 4 events per year If you use the absolute worst PPV of 2010, UFC 109 at 215,000 buys, then the opportunity cost is 215,000 x 4 x $49.99/2 = $21.5 million or $5.3 million/event If you consider the likely strength of 4 events, say two title events at 600,000 buys and two non-title events at 325,000 buys, then the opportunity cost is 1,850,000 x $49.99/2 = $46 million or $11.5 million/event.

If the opportunity cost of moving a UFC PPV event to a broadcast network is roughly $11.5 million/event, then it’s likely the UFC is asking for at least $5 million/event. I’m not sure the UFC will be able to get even $5 million from a network given some of the reservations that industry people still have about the sport. Although, if one is willing to set aside the sport’s imagery issues, there is an interesting value comparison to be made between the UFC at say $5 million/event and MNF at $117 million/game (I’ll leave for another time!).

The rights fee is one way of reducing or eliminating the above opportunity cost, but it’s not the only way. Increased exposure as the result of a broadcast television platform will undoubtedly boost PPV and merchandise sales. The value of sponsorships is also likely to increase given the national exposure of the platform and the likely increase in viewership of all other non-broadcast network events. Moreover, I also tend to think that moving four events to broadcast television and away from the PPV calendar may act as an artificial constraint in supply. The UFC would essentially be giving fans fewer cards to spend the same amount of money on.

However, if I come back to the numbers once more, it’s clear that eliminating this opportunity cost is a tough proposition. The UFC would have to make up roughly $46 million over (what I assume would be) 12 PPV events per year, which translates into roughly 150,000 more PPV buys per card or a 20% increase on its average PPV event of 600,000. The UFC has grown its PPV business at 23%, 26%, and 14% over the last three years, but it has largely done so by increasing the number of events, not the average event buy. Thus, it seems a stretch that it can push its event average to 750,000 PPV buys within the first year (or even two years) of a broadcast network deal.

Perhaps a more realistic figure is a 8% increase in average PPV buyrate, which would mean an extra 50,000 PPV buys per event (or a push of the average to 650,000 per event). This would still leave the UFC with a $30 million gap to fill through some combination of rights fees, increased merchandise sales, and new sponsorship agreements. The UFC could probably add $5 million in merchandise and another $5-10 million in new sponsorships sales, but rights fees would need to cover the remaining $15-20 million gap. It’ll be challenging.

This is Dana White’s “right deal”, and when you consider there are still other ways to expand the UFC’s reach (digital, marketing partnerships, etc.) the UFC doesn’t seem interested in risking this guaranteed PPV. Then again, there are some that would suggest the UFC should sell high, lest things cool off in the next few years, it’s unable to command anything close to what it can today, and has few remaining options to expand outside of TV.

The Domino Effect

What sort of impact might the UFC’s decision have on the rest of the industry? This is an interesting question. If the UFC stays put, the landscape doesn’t change a whole lot. But, if the UFC leaves Spike TV, it’s more than possible that we see someone jump to Spike. I can’t see Spike wanting to get out of the MMA business given the success it’s had. Plus, it’s an attractive platform for a young MMA promotion looking for an experienced partner that will provide ample support and broadcast flexibility.

Viacom is the parent company that owns both Spike TV and MTV2. If the UFC leaves Spike, might Viacom attempt to shift Bellator over to Spike TV in order to fill the gap? Bellator’s weekly, but seasonal content could provide Spike with the programming consistency it desires. The tournament format is also an intriguing promotional angle with which Spike can leverage to better sell what is likely to be an inferior product to the UFC. I doubt the ratings for Bellator on Spike are even close to what the UFC was able to do, but they could  prove to be adequate.

Credits

I feel obliged to acknowledge Adam Swift for his help with this article. This is all largely the product of many rambling conversations we have had back and forth over the last several months and years. Adam truly has one of the best perspectives on television in the entire MMA industry (not to mention one of the best minds for the business of MMA, period).

Welcome to another edition of Payout Perspective! This week we’ll be taking at look at UFC 125: Resolution which was held on January 1, 2011 at the MGM Grand in Las Vegas Nevada. The event featured a lightweight title fight between Frankie Edgar and Gray Maynard, but the likes of Chris Leben, Brian Stann, Thiago Silva, and Clay Guida also appeared on the night.

Edgar vs. Maynard Ends in Draw

Frankie Edgar and Gray Maynard put forward a fight of the year candidate on the very first day of the year in their five round back and forth battle that featured a remarkable comeback by Edgar who was absolutely trounced in the first round. In the end, the fight was incredibly close and the decision of a draw was probably appropriate. Regardless, I think we’d all agree that this fight demands a rematch and the draw should facilitate that.

Dana White sent word through VP of Production, Craig Borsari, that Anthony Pettis would get the next shot at Frankie Edgar. White is probably looking to capitalize on the mainstream attention that Pettis garnered with his incredible kick two weeks ago at WEC 53. The promotional value of that kick is significant and there’s no doubt the UFC will be able to leverage it further on the PR front in the lead up to a title fight. Imagine Pettis doing a SportsCenter interview on the Wednesday morning before the fight; he’s introduced, talks about the fight, ESPN shows the clip, and then he’s asked to comment further. It will prove to be very effective (although it will need to be supported by a solid integrated promotional campaign).

I doubt very much that this is the absolute final decision, because there’s a strong argument to be made for giving Gray Maynard an immediate rematch: the fans want to see this score settled, a rematch would do bigger business than the first fight, the winner would certainly see his stock elevated to new heights, and few actually believe that Pettis can put up the same type of fight as Maynard. However, in this case, what is to be done with Pettis? He’s got the WEC belt and that unification needs to happen at some point (unless they just scrap the idea altogether. It doesn’t make sense for Pettis to fight someone else (and most probably lose). And, I’m not sure the UFC wants to see an exciting fighter like Pettis sitting on the sidelines for 8 months, either. Tough decision. Perhaps the UFC just scraps the unification idea altogether (they didn’t give Condit an automatic shot).

(Edit: Ariel Helwani tracked down Dana White late Saturday night. White has had a change of heart and Maynard will get the next shot.)

Regardless, I think they use the next lightweight title fight as the co-main event at UFC 129 to bolster that fight card and bring a little bit of added promotional press (either in the form of the Pettis kick or the Maynard rematch).

Stann KOs Leben

Brian Stann beat Chris Leben at his own game on Saturday night. It was an impressive display of precision and punching power, yet this style of fighting is often a very risky game of who can strike first. Stann will need to take on a more well-rounded opponent in his next fight to prove he deserves to be considered amongst the contenders in the division. While he’s asked to fight Wanderlei Silva, he’ll likely have to find a different opponent as Silva seems to be all but committed to fighting Chael Sonnen in the next few months.

Stann is an intriguing fighter because he’s got knockout power and some of the finer marketing attributes that could help make him an ambassador for the sport moving forward. In particular, the combination of his soft spoken, polite mannerisms and his military past make him an ideal regulatory asset. He’s definitely one to watch.

Prelims Broadcast on ION TV, Spike, Versus “Counter Program”

The UFC struck a deal with Ion TV to broadcast three live preliminary fights from UFC 125. The major draw of Ion is that it’s available in 100+ million households, but it’s hard to assess how well the UFC was able to leverage that fact on account of the following:

We don’t know how much advertising was done on the network prior to the broadcast Many of the digital cable companies on the West Coast listed the program as starting at 9pm instead of 6pm Those that did tune in at the right time were greeted by a blank screen for the first minute or two Spike TV and Versus were both showing Zuffa-related content at the time of the preliminary fights (Spike had UFC’s Best Submission and Versus had Best of the WEC)

It seems clear that this Ion TV deal was less about expanding the UFC’s reach through network television and more about providing its existing fan base with an opportunity to watch the preliminary fights.

The UFC’s deal with Spike expires at the end of this year and it’s no secret that the UFC is looking to upgrade to a bigger and better network. This is going to make 2011 quite interesting because I don’t think we’re going to see nearly the same type of support for the UFC on Spike as we have in the past (e.g., preliminary card slots, live weigh-ins, etc.). Thus, you have to wonder what type of impact it’s going to have on the UFC’s ratings (and that’s the point if you’re Spike; to negatively impact the UFC’s negotiating leverage with other networks).

If you’re the UFC, you have to be careful here. This is the type of situation that can turn very ugly, very quickly. UFC brass must keep its composure because it doesn’t want to jeopardize the quality of its programming in a war of words or bad gestures.

UFC 125 Dominates Twitter

The following were all worldwide trending topics at some point during the night: UFC125, Frankie Edgar, Gray Maynard, Brian Stann, Chris Leben, Clay Guida, Grispi. Moreover, UFC125 was the topic trending topic in Brazil, Canada, the United Kingdom, and the United States at the end of the Edgar-Maynard bout.

This all leads me to wonder what type of buyrate the fight did. My own expectation was 400,000 given the headline and New Year’s day sports competition. However, the incredible response online leads me to believe it might have been higher. We’ll see in the next few weeks. Certainly, I think we’d all agree that the fight helped raise the profile of guys like Edgar and Maynard. If and when a rematch happens, it will sell.

Sponsorship Watch

MusclePharm made a surprising return to the Octagon at UFC 125. The company had previously failed to pay the money owed to Zuffa from its sponsorship of the WEC in 2010 (something in the range of $300,000). However, Zuffa sold that outstanding debt to a collections company and now it appears that MP has been given the okay to resume fighter sponsorships. It’s interesting to me that Zuffa has allowed them back in. There are any number of potential explanations as to why, but regardless, this is a good thing for the fighters (something the UFC is often criticized for).

Harley Davidson was the presenting sponsor of the UFC 125 Prelims on Ion TV. This is surprising to me because HD has gone through a leadership shake up recently and I’ve heard rumblings that its uncommitted to renewing with the UFC when the deal expires this year. Keep your eye on this situation moving forward.

Edit 2: I’d earlier commented that Tapout was not officially a part of the fight card, but this was incorrect. The brand did have some bumper signage on the top of the Octagon. It also continues to sponsor fighters, which has never been disputed. Please forgive the mistake.

The larger point still stands that Tapout has become much less active as an official UFC sponsor in the last few months. I suspect this reduction is due to ABG’s acquisition of Tapout (along with Hitman and Silver Star) and some reformulation of the marketing strategies for each brand. It may also be the result of a renegotiation between Zuffa and ABG that’s looking to explore new possibilities for a greater partnership. I’d expect an increase in activation quite shortly; an involved UFC-Tapout partnership is highly mutually beneficial. Perhaps the only way it doesn’t happen is if the UFC can swing a deal with a larger apparel company like Under Armour. UA is an incredible fit for the UFC, and it could provide the brand with a very competitive strike against the competition (Nike, Adidas, etc.). However, at this time, consider this just speculation.

Anthony Pettis became a worldwide trending topic on Twitter on Thursday, December 16 when in the 5th round of his WEC lightweight championship fight he leapt from the ground, pushed off the cage, and delivered a roundhouse kick to the face of a stunned Ben Henderson and dropped him to the floor.

Naturally, my reaction was “Nice kick. I wonder how much it’s worth?”.

Payout Perspective:

I’ll point out that the promotional value of the Pettis kick depends on the assumptions made. It’s nearly impossible to come up with an accurate number because there are so many factors that influence a UFC PPV event purchase decision. Yet, I always enjoy estimating the value of fights and performances simply as an exercise to further my understanding of how the fight game works. So, let’s have some fun and play with it a little:

UFC

The promotional value of this kick to the UFC will be determined by a number of things: increased interest in the UFC, its PPVs, its live events, it’s television events, and its merchandise. However, for simplicity’s sake let’s just look at the number of people influenced by Pettis to watch his next fight. In this case the short term is far easier to estimate than the long term (just know that the more success Pettis comes to have, the more this kick will continue to add value to the UFC in the future).

I’ll start with asking a simple question: how many people were watching the fight last night? We’ll know in a few days, but the peak viewership was likely in the 500,000 to 750,000 range. Now let’s make two assumptions:

1. Nearly everyone that saw last night’s event has been motivated to watch Pettis his next fight.
2. The UFC will get 1 PPV buy from every 10 of those fans (this is consistent with the notion of 10 fans per viewing party)

This gives us 50,000 to 75,000 PPV buys as the result of Pettis’ performance (the kick being the last thing that most fans remember is very influential here). The calculations then are as follows:

- 50,000 x $49.99/2 =  $1.25 million
- 75,000 x $49.99/2 =  $1.9 million

*Note: under the terms of the UFC’s agreement with PPV companies, it receives approximately half of that $49.99 (although I understand that the UFC is starting to earn a more favorable term here).

Now, it’s here that we need to adjust our estimate based on the likelihood that those watching the WEC show are the types that buy UFC cards every time out. In other words, how do we know those 500,000-750,000 fans watching WEC (most likely semi to hardcore fans) aren’t the types that buy every PPV anyway? It’s a valid consideration. So, let’s assume that 50% of those watching the WEC card would have been on the fence as to whether to buy Pettis’ next fight. The new estimated value of the kick is then probably closer to $625,000-$950,000.

MMAPayout.com’s Jason Cruz rightly points out that the UFC will use this kick in a host of future promotional videos, Spike TV Countdown Shows, ESPN SportsCenter, and other PR efforts in order to convince casual fans that missed the fight that Pettis is a dynamic and exciting fighter worthy of challenging for the belt. It’s plausible, depending on how much they push Pettis’ kick and dynamic abilities that this could translate into as few as 25,000 PPV buys or as many as 50,000 more. This adds an $625,000 to $1.9 million to the value pie.

Thus, we arrive at an estimated short term promotional value of the kick at between $1.25 million and $2.85 million.

Pettis

The value to Pettis is harder to determine. Immediately he received a $10, 000 bonus for fight of the night. I’d also venture to guess he’ll be given a sizable discretionary bonus from Zuffa (anywhere between $10,000 and $50,000). However, in moving to the UFC, we have to be careful to separate the extra value Pettis will receive as the result of that kick from what he would have received just because of the move itself.

The easiest way to estimate this is perhaps to just take a percentage of the UFC’s value. The UFC typically pays out ~20% of its gross revenue to the fighters and this translates to anywhere between $250,000 to $570,000 over the medium term. I say medium term because there’s going to be a lag between what the UFC earns due to Pettis and what Pettis earns due to himself (as the result of contracts that lock him into a certain compensation set for a period of time).

Don’t forget sponsorship value too. Pettis will be a hot commodity for his fight with the winner of Edgar vs. Maynard.

Conclusion

The kick was incredibly impressive. It’s moments like that which make this sport so incredible. It’s also more support for the idea that the key to developing PPV draws is finding those with immense and entertaining fighting ability. All the charisma and good looks in the world cannot match the selling effect of a beautifully timed jumping roundhouse kick off the fence. It all starts and ends with fighting ability. Everything else comes second.

Perhaps the only thing I would have changed is the fact that it happened in the WEC. Imagine the value of that kick if it happens in the UFC (or even for the WEC in an earlier show). I also think this kick (and the card as a whole) is demonstrative of the value the WEC’s divisions will add to the UFC.

Welcome to another edition of Payout Perspective! This week we’ll be taking a look at UFC 124: St-Pierre vs. Koscheck II which was held at The Bell Centre in Montreal, Quebec on Saturday, December 11th. The event was headlined by the much anticipated welterweight title showdown between Ultimate Fighter Season 12 coaches Georges St-Pierre and Josh Koscheck. The card also featured the likes of Thiago Alves, Joe Stevenson, Mac Danzig, and Stefan Struve.

GSP dominates Koscheck, now looking at Shields

Georges St-Pierre used a stiff jab and a few nasty left hook combinations to fracture the orbital bone of Josh Koscheck on the way to a dominant unanimous decision victory on Saturday night at UFC 124. He put on a clinic, as they say, with his masterful use of the jab and superb head movement to avoid Koscheck’s overhand right. It was truly a performance in which St-Pierre cemented his legacy as one of the best fighters of this era and undoubtedly the best welterweight of all-time.

St-Pierre is likely to face Jake Shields next. Dana White seemed to be most in favor of this bout. However, if you look around at the list of contenders, it’s hard to justify any other bout. St-Pierre has defeated the who’s who of the 170lbs. division, including Koscheck (2), Fitch, Alves, Penn (2), Hughes (2), Hardy, and Serra. Here we see the business side of the sport coming into play. Jon Fitch is probably the most deserving of the next shot from a wins perspective, but he’s failed to impress in any of his latest victories. He’s not the UFC’s only option – and certainly not the most appealing – so why would they give him a shot? If he keeps good to his word and puts on a dominating performance against BJ Penn in February, he’ll likely be next up for the WW defense in Fall of 2011.

Naturally, there’s been some talk of GSP fighting Silva, but, it will have to wait at least until after Silva fights Belfort in February and GSP fights Shields (likely in April). A fight between St-Pierre and Silva would undoubtedly be the most important fight in UFC history, although there’s no guarantee  it would break 1.6 million PPV buys. I could see the UFC using a fight like this as a center piece to a brand new integrated marketing campaign; something to help push it further towards mainstream acceptance with the goal of leveraging the fight and the marketing campaign towards obtaining a solid network television deal. The timing is certainly right.

UFC 124 attendance and gate

The UFC pushed the media all week with the message that UFC 124 was going to have the biggest attendance and live gate in UFC history, but sadly only one of those came true. The official attendance set a new record with 23, 152 people cramming The Bell Centre in Montreal. However, the official gate slightly underperformed at $4. 586 million. It should be noted that $4.6 million is still an excellent gate (my how far this sport has come to look at things and say a gate like that actually underperformed!).

Fight Week

Most casual fans make their purchase decision the week of the fight and these are the types of consumers that can make the difference between a fight selling 600,000 buys or 1.6 million buys. Therefore, as I’ve said many times before, fight week is the most critical time for any PPV in terms of promotion. There’s nothing in this sport that adds to the short-term bottom line like a good fight week campaign. Therefore, let’s take a look at some of what we saw this past week:

ESPN has shown an increasing commitment to the UFC and this was definitely on display this week. The fight week SportsCenter interviews and MMA Live coverage that have become commonplace over the last six months were accompanied by the first MMA-related SportsCenter commercial featuring Georges St-Pierre. Additionally, ESPN also released a viral video on Youtube that showed GSP teaching two college mascots how to fight. SpikeTV debuted its Countdown to UFC 124 program on Monday, December 6th at 7pm EST/PST and garnered 470,000 average viewers. It’s a solid but unspectacular number. However, Spike has switched up its strategy in recent months and this Countdown show now plays so often that it’s the aggregate number of views across the entire week that truly counts. In Canada, Rogers Sportsnet led the way with its usual stalwart programming featuring Showdown Joe Ferraro and his MMA Connected series. Sometimes I believe that American fans don’t realize how significant Sportsnet’s coverage of MMA really is. They were the first major sports network in the world to give MMA primetime love and they back this up with a host of online and behind the scenes content that isn’t matched anywhere else. TSN also jumped on the bandwagon with considerably more coverage on its SportsCentre (notice the spelling) and almost three full days worth of Off The Record coverage of UFC 124, including a special preview show on Saturday night. The preview show was solid as it featured interviews with both fighters and a good 5 minute clip with Cain Velasquez that took viewers through a typical fight day routine for the average fighter.

UFC 124 fight trailer featuring music by Jay-Z and Rhianna

The UFC has experimented with the use of mainstream music in its promo trailers over the last few years, but UFC 124 is the first time I can remember the company ever using music for a publicly released trailer that didn’t also contain some sort of co-promotion. The UFC did the video with 50 Cent for UFC 91 but that was just spliced fight video into 50′s regular music video. UFC 124′s trailer did not include anything from Jay-Z or Rhianna except the music.

I’ve said for a while now that one of the keys to the UFC’s impending mainstream acceptance will be smart and proper integration with popular culture. Music definitely helps them do that. Don’t get me wrong, I love the UFC’s Stemm intro, but that music only appeals to a very small subset of people. I can remember seeing Craig Borsari mixing up a “Welcome to Atlanta” version of the intro for UFC 88 on Dana’s Vlog a few years ago, but we never saw that on the PPV. Hopefully this latest Rhianna mix is a sign that the UFC is willing to pay the royalties necessary to use these songs in its promotional content.

UFCVote.com

The UFC unveiled UFCVote.com at UFC 124 in which fans were allowed to pick the winners of fight of the night and the $100,000 bonus checks. In what was clearly a pilot thrown together to test the idea, the UFC learned that it’s probably not the best idea to put hundreds of thousands of dollars in bonus money into the hands of biased fans. That’s because the fans chose the main event as the FON by an overwhelming margin despite Riddle vs. Pierson probably being the more spirited and entertaining bout.

UFCVote.com is a great idea, because it allows the brand to further engage the fans and give them a say over part of the product. This is especially relevant in a climate where many fans have criticized the UFC for its pay of the fighters (though I find it odd that, in light of this fact, the majority still elected to give more money to the fighters that were already set to make the most on the card).

I don’t believe the UFC ought to get rid of the idea altogether. Instead the UFC should modify the award by separating it from the FON and creating a distinct fans fight of the night honor worth $5,000-$10,000 per fighter. The UFC could further develop the existing website to allow fans to rate each fight on a scale of 10; the highest rated fight wins (perhaps you exclude from eligibility the main event guys). The additional upside to this idea is that the UFC could further sell a ton of inventory to what is likely going to be a highly trafficked website. Then, if it wanted to go one further, it could even take the winning fight from each PPV event on the year and compile them for an end of the year Spike special. The special could be used to review the year that was and determine the fans’ ultimate fight of the year (of course, you’d sell this to sponsors, too).

Sponsorship Watch

I criticized Boost Mobile for its involvement at 123, but I thought it did a better job at 124 of integrating its brand into the broadcast. They brought us the Judge’s Call, were a part of the UFCVote.com, and were generally visible throughout the fight card.

There’s been much ado this week regarding the UFC’s fighter sponsorship policies and how they influence fighters financially. If you haven’t jumped in on the debate yet, I suggest you take a look.

UFC 131 announced for April 30th at the Rogers Centre

Earlier in the week, the UFC announced it will host its very first show in Ontario on April 30th when it plans to visit Toronto’s Rogers Centre and absolutely smash the North American attendance and gate record. The Rogers Centre is the enclosed baseball stadium where the MLB’s Toronto Blue Jays play (formerly known as the Skydome), and it actually sat upwards of 70,000 for a Wrestlemania show a few years ago. It’s likely the UFC is going to opt for a smaller seating configuration (40,000), not because it couldn’t fill 68,000 but more because it wants to make sure every fan can see the action. The nature of the UFC’s cage has always detracted from the live experience; this would really come into play for fans sitting in the very upper deck, a mile away from the action inside of a black cage.

There’s no shortage of news or information available regarding the UFC’s growth from a pay-per-view or gate perspective, but there’s considerably less information where the growth of its fan base is concerned. I suspect this is the case because the UFC is a relatively new sporting phenomenon that’s yet to gain the requisite level of acceptance that would make it worthwhile for survey companies to collect the data from consumers needed to produce relevant information on the fan base. However, the times are changing and we’re now beginning to see some information emerge related to the demographics and psychographics of the UFC fan.

Today, we’ll be taking a glimpse at the age and gender demographics of the UFC. I’ve also included information from the NFL, MLB, NBA, NHL, NASCAR, and MLS to provide some context to the overall sports landscape, which will help to put the UFC’s current fan base into perspective – both its strengths and shortcomings.

The following information was mined from the Simmons Research Database.

Notes and Definitions

The title of this article and its subject matter should not imply a bias towards the UFC. The survey was simply conducted in a manner that quizzed its respondents on a variety of topics, including their interest in professional sports leagues. I’ll remind you that while the interest in a league implies a larger interest in the sport, this is sometimes not the case. There are many “fans” that are interested in the UFC but not other MMA; likewise there are “fans” interested in the NFL but not college or high school football.

Thus, the “fan” is defined as someone that is “very”, “somewhat”, or “a little bit” interested in the league in question. These are obviously subjective terms open to a very large spectrum of interpretation, which is why I’ve also set out to compare these figures against the “avid fan” – someone that is “very” interested in the league in question.

I’ll also caution that the following sets of information are just estimates based on data in the Simmons Database. Other polls and databases have also produced similar information (e.g., ESPN Sports Poll and Scarborough) to support some of the analysis done below. However, I encourage everyone to read the following a natural level  skepticism.

Americans 18+

The size of the UFC fan base in the United States is estimated to be approximately 31 million people. You can see below how this compares to the size of the general fan base of the other major sports played in the US over the last three years. Note that the UFC was the only property to experience growth in its fan base of the last three years.

The size of the UFC avid fan base in the United States is estimated to be approximately 11 million people or 35% of the overall fan base. Note, again, that the UFC and the NHL were the only to properties to grow their avid fan bases over the last three years.

The avid fan as a percentage of all fans gives us an interesting look at how competitive the UFC is among most sports properties. The UFC has been able to match the avidity of most sports properties with the exception of the NFL. The NFL is the sports league model in many respects, but the way it has managed to engage its fans is what truly allows it to generate revenues far greater than any other league. Engaged fans are more apt to receive and comprehend advertiser and sponsor messages. When these television networks and corporate sponsors are evaluating a property they look to how well a property can engage its fans (or what opportunities they have to engage those fans). Thus, one of the mid-to-long term objectives and challenges for the UFC moving forward is to increase the level of avidity in its fan base to levels beyond 35% and into the 50% range.

I mentioned above the tremendous growth that the UFC has enjoyed over the last few years and the following comparison really puts that into perspective. It’s only over a three year period, but this is the only data we have and that’s largely because the UFC has only become a relevant commercial entity in the last 3-4 years.

Some might argue that 30% growth is meaningless considering the UFC didn’t start out with a lot to begin with, but I reject this counter argument. The UFC owns an interest level commensurate with lower tier sports leagues like the NHL and MLS; no one would dismiss the fan bases of those two leagues as insignificant.

Americans 18-34

The 18-34 demographic – specifically the M18-34 demographic – is always a very important consideration in any fan base analysis, because it is probably the most coveted target audience in the world. Those within the 18-34 demographic possess relatively high levels of disposable income and a demand for luxury goods, but also lack many of the serious financial or family commitments of other demographics.

The numbers for the UFC here aren’t that far off from the NFL or MLB, yet the discrepancy in required sponsorship investment is stunning. If a brand determined that its image was somewhat aligned and fit well with that of the UFC, it could literally own the UFC consumer for $5m/year in sponsorship fees and another $5-10m in activation. Compare that to $100m/year that Bud Light just dumped on the NFL or the $75m/year that Verizon just spent on the NFL.

Is it a risk? Sure. But what isn’t in this day and age. If we’ve all learned one thing in the last 12 months, it’s that no sponsorship is risk-less. Tiger Woods is that case study. However, there remains a sizable opportunity here for a company to come in and completely own a category tied to this sizable demographic for an absolute fraction of the price a company would pay somewhere else. The only two things the company would need to do are a.) commit to activating and b.) find a group of people that know the sport well enough to formulate the right activation plan (I think there are a few people around that might fit that mold!).

Men and Women

Dana White stated some time ago that the split between male and female UFC fans is somewhere in the range of 56-44, but the numbers below indicate that the split is actually closer to 75-25. How do we reconcile this information? I’d venture to guess that 60-40 is a good estimate for the split at live UFC events, but those events are not necessarily an accurate reflection of the entire fan base.

I’m not sure these figures come  as much of a surprise to anyone. MMA is a rough and violent sport that still possesses a brutal image in some circles of the larger population. It will be a while before it can eschew conflicts with this boxing paradigm through which most casual sports fans still view combat sports. However, a 60-40 split across the entire fan base seems inevitable at some point.

Estimating Global Size

The global size of the UFC fan base is difficult to estimate, because there are material components of the fan base not included in the above survey or that do not live in the United States. We must reasonably adjust for American children (12-17), Canadians, British, and other fans throughout the world.

The following is a bit of envelope math using the American 18+ interest level (13%) as a foundation for adjustment and should only be taken as a loose estimate for the purpose of framing a conversation regarding the UFC/MMA fan base.

Americans 12-17 at 13%: 800,000. This group accounts for approximately 8% of the American population and assuming the same overall interest levels between adults and children (which is conservative considering that the interest level for MMA is likely to be higher for youth) we arrive at 800,000. Canadians at 18%: 6,000,000. The sport has exploded in the country of 34 million people and the UFC’s interest levels in Canada far exceed that of the US in every demographic; 18% of the entire popular seems like a fair and conservative estimate, which gives us 6 million people. British at 8%: 5,000,000. The sport is slowly picking up speed in Britain, but still not close to enjoying the interest levels in Canada or the US. The World: 20,000,000. The rest of the world — including markets such as Japan, Korea, Brazil, Europe, Australia, and the Middle East — likely numbers into the 20 million range.

The above estimates would then put the global size of the UFC fan base at roughly 65 million. The growth potential is considerably higher, but that’s still a pretty solid number all things considered.

Mike Chiappetta of MMAFighting.com discusses the latest news regarding a possible UFC on Spike event for April 17th, designed to counter-program the Strikeforce on CBS card on the same day.

The UFC is in the process of laying the groundwork for an April 17 show to counter the Strikeforce on CBS offering, MMA Fighting has learned.

 

Though the company has not officially announced the event and it should not be considered a done deal, two separate sources with knowledge of the situation confirmed that the promotion has begun to ramp up its efforts over the last several hours and that Spike TV — the likely broadcast outlet for the show — has been informed of the decision.

 

…

 

Strikeforce’s show is planned for the Bridgestone Arena in Nashville, and will feature three title bouts, including a middleweight championship main event pitting current titleholder Jake Shields against former UFC star Dan Henderson. The show could reportedly be moved back a week to April 24 — which would result in a head-to-head battle with WEC’s first pay-per-view offering — but tickets sales for the Strikeforce event have already begun, and a change would also require a shift in the CBS programming schedule.

Payout Perspective:

Event scheduling in the month of April is quickly becoming a chess match of epic proportions as the UFC looks to make life difficult for Strikeforce on CBS, while Strikeforce considers the possibility of switching dates to avoid going head-to-head with Kimbo Slice (and do some counter-programming of its own; nixing the WEC’s debut PPV a week later).

I can kind of understand the desire of the UFC to crush its competition: monopolies can be beneficial in certain contexts. Moreover, the production quality and matchmaking at Strikeforce has been suspect at times, which might leave the UFC in the position of feeling like it has to be the sole flag bearer for the sport.

However, I’m also inclined to think that it’s currently to the UFC’s advantage to have MMA on network television – regardless of whom is producing it – because it generates interest and awareness for the sport. The Strikeforce production isn’t so awful that it’s a detriment to MMA; especially with match-ups like Henderson-Shields, Mousasi-Lawal, and Melendez-Aoki.

If I were the UFC, I’d develop a sneaky little ambush marketing campaign, and buy up $1,000,000 worth of ad space on CBS to promote the UFC brand. The UFC could advertise the WEC 48 PPV scheduled for April 24th and UFC 113 on May 8th; both of which would help confound the Strikeforce branding message on that night.

Sound crazy? It’s becoming a popular trend in the sports world; especially during the latest Winter Olympics. Further consider the fact that Mauro Renallo and Gus Johnson mention the UFC name on CBS more than they do Strikeforce. The UFC could really position itself to steal a number of those impressions on April 17th. The only roadblock to this plan might be CBS’s outright refusal to sell the ad space, but even at that, I have to think they’d sell if they knew they weren’t being counter-programmed.

Besides, the idea of counter-programming seems so inefficient. The cynic in me is inclined to believe that Fedor and M-1 may very well tear down Strikeforce regardless of what the UFC does. If not, big events that only garner $8,000 in merchandise sales or $350,000 in gate revenues, while paying out that much in fighter salaries (not to mention production costs), likely will.

Why spend all this time and money to counter-programming something that hasn’t proven to be sustainable in its newest form?

….

The current speculation is that the UFC has lined up Kimbo Slice to headline this April 17th card, possibly against Matt Mitrione of TUF 10.

The short-term benefit of a Kimbo headline is obvious, but I wonder how much damage it might do to the UFC’s long-term credibility. Kimbo sells for reasons other than his fighting ability; in fact, we saw over the course of TUF 10 and its finale that interest had declined somewhat – the cat was out of the bag regarding his skills. So, what does it say that the UFC would put him in a headlining position?

The UFC has worked very hard to cultivate its existing credibility with the mainstream media and fan base – of which, admittedly, there still isn’t as much as we’d all like. Why jeopardize that? Why put non-MMA fighters in a headlining position on an MMA card?

If Strikeforce wanted to promote Herschel Walker vs. James Toney, the UFC should have let them. No successful, long-term mixed martial arts endeavor will ever be built upon the backs of non-MMA fighters – this is a guarantee.

Now the UFC has been sucked into this high risk, high reward game that might end up backfiring on them and the entire industry.

Chuck Liddell and girlfriend Heidi Northcutt have made an appearance in what appears to be a viral marketing video for athletic apparel maker Reebok. The video is shot from the perspective of a peeper as the couple workouts out in a private gym without any clothing, except Reebok shoes.

Payout Perspective:

It’s a good approach for a brand that’s increasingly becoming a little more edgy in nature. The strength of the video is not just the fact that both are naked, but also that it sort of fits the party-boy image that Liddell has maintained over the last few years.

Obviously, it’s of additional interest to the MMA community because of Liddell’s involvement; and my feeling is we’re likely to see a lot more companies using MMA personalities in the future (although not necessarily in naked clips) for these types of campaigns. The fighters already have an edgy appeal and and the young consumer identifies with these cheeky videos.

David Broughton, Research Director at the Sports Business Journal, has summarized the latest findings in a sports sponsorship study that should provide even more incentive for brands to pair with MMA properties.

Are sponsors connecting with fans? If so, which fan segments have the strongest connection? For all the money sponsors spend on marketing, can fans correctly pick them out of a lineup? And which sports properties have the most sponsor-loyal fans?

 

Those are some of the questions we set out to answer by analyzing three years’ worth of sponsor loyalty studies conducted in partnership with Turnkey Intelligence. The studies, conducted since the summer of 2007, were designed to identify key trends such as fans’ recall of official sponsors, and trial and consumption of products.

 

Since beginning the studies, SportsBusiness Journal has published the results of 15 individual surveys of MLB, NASCAR, NBA, NFL and NHL fans. When we revisited all three years’ worth of data, we identified several top-line trends and behavior patterns among specific demographics.

 

The most visible trend we discovered was that brands can expect a better return on their sports marketing objectives if they target fans age 18-34, non-Caucasian fans, and/or households with kids.

 

For example, 59 percent of MLB fans in the 18-34 bracket were more likely to consider trying a product or service from an official sponsor, compared with only 36 percent of fans age 35 and older.

 

…

 

In fact, two-thirds of the fans who fit into all three of those demographic subsets — age 18-34, non-white fans, and living in a household with children — are likely to use a league’s official sponsor or product, compared with 43 percent of the fans who are age 35 and older, white and have no children.”

Payout Perspective:

Be sure to check out the full article at SBJ; it serves as a nice follow-up to the current trends piece that I posted a few weeks ago.

The appeal of the 18-34 demographic is a growing focus for many companies – especially in the current economy where much of the disposable income in family budgets has been squeezed out entirely. Not only does the 18-34 demo possess a great amount of disposable cash, but its also seemingly one of the most impressionable demographics. The growing potential for significant return on a sponsorship investment that targets these individuals is helping to off-set the perceived risk that a brand takes in associating itself with the sport.

Moreover, as organizations like the UFC and Bellator continue to target the hispanic demographic, the sports appeal to advertisers and sponsors is only going to grow.

Rampage Jackson makes a surprising appearance in one of the latest Nike commercials entitled the “Human Chain” alongside other Nike athletes including Maria Sharapova and Lance Armstrong.

Human Chain from NikeSportswear on Vimeo.

Payout Perspective:

Nike has traditionally been very selective of the athletes it chooses to associate with, so it’s somewhat surprising to see Rampage in one of their commercials given his history and the fact that there are probably safer endorsements out there in MMA.

There’s no telling whether the appearance is a sign of Nike jumping into the MMA market, endorsing Rampage specifically, or just a move to capitalize on MMA’s growing popularity while still maintaining an arm’s length relationship with the sport as a whole. Whatever the case may be, it’s encouraging that we’re starting to see a little bit of thaw in the attitude towards MMA – and its athletes – from some of these multi-billion dollar market cap companies like Nike and Microsoft.

Amy McCullough of the Marine Corps Times writes about the growing relationship between the UFC and USMC on the sponsorship level, and how the two organizations share a similar target demographic in young people aged 17-24.

MARINE CORPS BASE QUANTICO, Va. — The Marine Corps has formed a formal partnership with the Ultimate Fighting Championship that promotes more interaction between Marines and famed mixed martial arts fighters, and calls for a series of new recruiting advertisements that emphasize similarities between the two organizations.

 

The goal, Marine officials say, is to engage the UFC’s rapidly growing fan base of 17- to 24-year-olds by highlighting the Marine Corps Martial Arts Program and the parallel “sense of shared brotherhood” exhibited by Marines and pro fighters alike.

 

“The ideologies behind UFC and the Marine Corps now are very similar in a lot of ways — not just in the fighting techniques and mixed martial arts aspect, but … we both share that warrior ethos,” said Gunnery Sgt. Pauline Franklin, a spokeswoman at Marine Corps Recruiting Command. Pro fighters, she added, “are very intense people who like to push their limits, and they focus hard on training and believe in commitment, honor and courage.”

Below is the latest advertisement which attempts to highlight the similarities between the USMC and UFC

Payout Perspective:

MMAPayout.com has long advocated a greater degree of integration between the UFC and its sponsors, and the USMC clearly understands how to activate upon its sponsorship of the UFC. The more a sponsor can associate its own brand with the personalities and other artifacts of the UFC culture, the more successful it will be in attracting the attention of the UFC demographic.

It’s simply not enough to throw up a Bud Light advertisement, for example, during a TUF commercial break. A-B Inbev has to leverage that UFC theme in order to reach the UFC customer. Now, of course, there’s a question of funding – commercials and customized activation strategies are expensive – but that brings us back to the topic of current trends in sponsorship; being prepared not just to invest in a sponsorship, but also in the activation and evaluation of that sponsorship.

—–

The USMC article points out that this relationship wouldn’t have happened even just a few years ago, which is clearly a sign of the times right now. It’ll be interesting to see whether those that oppose MMA and yet support the war, will condone the USMC essentially using the UFC to recruit young people.

Here’s a look at the Affliction advertisement featuring Georges St-Pierre that appears on the back page of GQ’s February edition of the magazine.

Payout Perspective:

Brock Lesnar may be the biggest draw in the sport right now, but if St-Pierre continues to increase his profile with high-level sponsorships, magazine covers, and television appearances, it won’t be long before he becomes the biggest attraction MMA has to offer. He’s not a heavyweight, sure, but he’s one hell of a fighter and his appeal goes also transcends that mainstream divide – he has serious cross-over potential.

The UFC has long guarded against much of its content appearing on Youtube, but the following promotional video featuring Paul Daley appears to eschew that tendency. It’s a well-produced and effective marketing tool that the UFC should try to encourage in the future.

Payout Perspective:

I’ve never exactly understood why the UFC is so strict with its content usage on video sharing websites like Youtube. Some of the stuff that these fans put together is absolutely brilliant – like “This is Semtex” – and it’s essentially a free and very effective promotional tool for the organization. These videos are something to encourage, not frown upon.

The way social media is taking off, the UFC should be looking at leveraging the passion and creativity of some of these fans by establishing contests or other activation points around which it can build its brand and its fighters. Getting fans involved and letting them do part of the promotional leg work is never a bad thing.

Challenge some of these people to come up with the best UFC 111 trailer and then give them a free video game or some clothes or even a pair of tickets. Not only does that create some excellent content to help build the fights, but its the sort of thing that establishes a foundation for goodwill among the fans.

Note: The nice feature Youtube has implemented to provide users with an option to purchase the songs they’re listening to.

Jon Show of the Sports Business Journal reports that Leverage Agency and Top Rank plan to partner in what they are calling the first advertising and sponsorship upfront in the history of boxing.

“Before this, boxing was a lot of one-off opportunities,” said Ben Sturner, CEO of the Leverage Agency. “We’re coming with more robust marketing and creative opportunities to tie brands into the platform for an entire year.”

Under a multiyear relationship, Top Rank and the Leverage Agency are pooling sponsorship and advertising rights to 48 fights in 2010, including 12 pay-per-view events and 36 events on FSN or Fox Sports en Español. The 12 PPV events will feature three “super fights,” including Manny Pacquiao’s bout at Cowboys Stadium against Joshua Clottey on March 13.

The price of packages ranges from six figures for lower-profile logo placement and media buys on the Fox events to mid-seven figures for full presenting-style sponsorships of major pay-per-view fights. Inventory includes logo placement on Top Rank fighters, ring signs, banners, press conferences and weigh-ins, as well as in-broadcast integration and television and online ad units.

The three-hour event will be held at the Club Bar & Grill in Madison Square Garden. Organizers expect about 40 media buyers, brand managers and sports marketing executives to attend.

Payout Perspective:

It was only a matter of time before boxing promoters started to pool and package rights for a series of events. Fans like patterns and something they can consistently follow – part of the reason the UFC has been so successful – and for as tight lipped as the UFC can be with its information, it’s still far and away better at communicating with its fans on a daily basis. There’s a lot to be said for the continuity and flow of a series of events that help to attract not only repeat advertising business, but repeat customers.

Don Frye announced a few weeks ago that he intended to quit MMA in favor of pursuing a career in acting, and now we’re seeing the fruits of the UFC and Pride veteran’s labor with AT&T’s “One Step Ahead” movie/commercial.

Frye also recently made an appearance in the Johnny Depp headlined “Public Enemies,” and has two movies in post-production per IMDB.com.

Payout Perspective:

It’s great to see that Frye has transitioned from MMA into his second career of sorts. He’ll probably never win an Oscar, but he plays the tough guy and silent CIA agent role pretty well.

A career and livelihood beyond the cage is increasingly becoming a more important focus for fighters in today’s era of the sport. The money is now there that many of them do not have to work second jobs to pay the rent, but what happens when the fight checks stop coming in the mail? Will these fighters have the skills to pick-up and continue living the same lifestyle, or must they make other preparations?

It’s an interesting question that shouldn’t just be dropped on the lap of the promotions. Many will argue – and perhaps rightfully so – that the UFC or Strikeforce need to provide pensions and other forms of benefits, but the fighters, too, have a responsibility to look out for themselves. That first means seeking help and asking for advice, and then having the discipline and foresight to follow through on that advice.

The MMA money train doesn’t run forever, and fighters need to be prepared.

—–

The commercial is interesting not only because of Frye’s involvement – in which he plays a CIA type agent running around looking for this AT&T user with GPS – but also the way AT&T uses of Facebook to customize the web movie to each individual user.

It’s clever, but also a little invasive – the web movie requires that you log into your Facebook account through the website and share your information, pictures, and contacts with its database. Some will call it brilliant marketing and customer data mining…others will be concerned about the privacy issues.

In any case, this is one of the ways in which companies are trying to use social networking to find better information on their consumer. The MMA community as a whole might want to take notice; with a traditionally younger, more tech-savvy consumer, it could apply some of these techniques in its own marketing strategies.

MMAPayout.com has talked a lot about sponsorships in the past few months, but a great deal of that discussion has avoided fighter sponsorship in favour of those surrounding corporate sports properties. The Bud Light and Harley-Davidson deals within the industry naturally draw a lot of attention. However, in the long run, they are no more important than the sponsorships or endorsements that the fighters are receiving (e.g., GSP-Under Armour).

So, today we’re going to take a slightly more in-depth look at valuing sponsorships from the perspective of a fighter, and the kinds of implications those valuations have on their related corporate sports properties.

The Count Method

The count method is a tool used to value sponsorships that involves tracking the number of sustained appearances – or impressions – that a brand logo makes on television. Those impressions are then compared to the typical number of impressions obtained through an average commercial spot during that program. The cost of an average commercial spot is then used to value the sponsorship. 

The method is well-suited for MMA, because of the nature of fight gear sponsorship in relation to television visibility. However, a few adjustments need to be made in order to make the count method a viable valuation tool in MMA; chief among them is discounting the compared value of counted logo impressions to commercial spot prices. No logo impression, in aggregrate, is worth as much as the sustained number and quality of impressions that a commercial spot can generate. Therefore, it’s necessary to discount that compartive figure by as much as 95%.

Let me give you an example:

1. Fighter A is a main card fighter whose bouts have averaged approximately 9 minutes in length over the course of his 12 fight career. He wears board shorts to the ring/cage in which the main buttock sponsorship placement is typically impressionable for 3 minutes, on aggregate, each fight. His next scheduled bout will be televised on a card where the 30-second commercial spots are averaging $120,000.

• 3 minutes = 180 seconds
• 180/30 = the equivalent of six commercial spots
• $120,000 x 6 = $720,000
• $720,000 * (1-.95) = $36,000

This method provides a ballpark range as to how much the sponsorship is worth.

Other factors

As I alluded to earlier, there are other intangibles that must be accounted for (and which could possibly impact the discount rate):

1.) The definition of “impression” must be strict. An impression must only be counted if the brand logo is visible for a sustained period of time such that the consumer has the opportunity to identify it – i.e., the logo must have the opportunity to leave an impression.

Similar to the discussion we’ve entertained previously regarding assessing sponsorship ROI from a corporate standpoint, the clutter in MMA sponsorship really detracts from the ability of a logo to make a clear impression. Fighters and their management may have to begin making the difficult choices in cutting a few sponsors in favour of maximizing the potential return of their biggest clients (and in turn maximizing the price value they receive from those clients).

2.) The popularity of a fighter and his opponent will influence value. The discount rate should be adjusted to reflect dramatic differences amongst the popularity of fighters and their opponents. For example, GSP is always going to draw in more sponsorship money than most, not just because he’s currently the champion, but also because he has many levels of appeal that reach beyond MMA. Likewise, consider how the value of Houston Alexander’s sponsorships should change in fighting Kimbo Slice relative to the likes of James Irvin.

3.) The position of a fighter’s bout on the card will influence value. The size of program viewership grows from the beginning of a program until it peaks near the very end (or last match of the night). Thus, the deeper a fighter is set to compete on a card, the greater value his sponsorships ought to be worth.

4.) The live audience is also a consideration. It’s more of a bargaining chip than anything else, because while the sometimes 20,000 in attendance are watching, the logos are often far too small to make any sort of material impression count.

Endorsement Territory

There’s a distinction to be made between sponsorship and endorsement in MMA. Generally, a sponsorship agreement stipulates the exchange of payment in return for fight gear and banner representation for the client. However, often times an agreement goes further – especially for higher profile fighters – whereby they are asked to wear sponsored clothing to weigh-ins, press conferences, media events, or even appear in promotional material related to the product. 

Valuation of this kind is obviously more difficult, because it must factor in the number and intensity of different communication mediums used to generate awareness and brand image enhancement. Hence, at this stage it’s much less about logo impression as it is a fee for using the fighter’s likeness to boost said brand. 

Implications of Fighter Sponsorship Valuation

Much has been made about the UFC’s “sponsorship tax,” but the valuation above underscores the organizations point to a degree: small sponsors are getting very similar impressions to that of larger sponsors – with, what some would argue, better activation – but for much less cost. The idea of a tax is defensible, because it raises the price of admission for smaller sponsors that were getting way too good of a deal, and it protects the big time sponsors that the UFC depends on.

Where the sponsorship tax raises an issue is the seeming conflict between the traditional code of MMA and the current trajectory of MMA business. MMA has long operated within a small, community-oriented environment, but the growth of the sport is set to challenge that; taking care of the little guy, in some cases, may not be compatible with running a billion dollar business.

A recent study published by Scarborough Sports Marketing reveals some additional insight into what we already know about the MMA demographic:

MMA Fans are Avid Technology, Automotive and Retail Consumers
http://www.scarboroughsportsmarketing.com/

 

NEW YORK, Nov. 23 /PRNewswire/ — Mixed Martial Arts (MMA), a sport combining boxing and martial arts, is attracting young, well-established, high-tech consumers, according to sports fan research firm Scarborough Sports Marketing. Scarborough examined the shopping patterns, demographics and lifestyles of Mixed Martial Arts fans* and found that these adults are 51 percent more likely than the average American to be ages 18-24; 25 percent more likely to have a household size of three or more people; and 67 percent more likely to be male.

 

In addition to their youthful demographics, MMA fans have sound financials. They are 15 percent more likely than the average American adult to have a household income of $75k+ and 10 percent more likely to own a second home. They are selective investors and six percent more likely to have stocks or stock options in their household, and 33 percent more likely to invest online.

 

“In recent years, MMA, through UFC and Strikeforce, has moved from being an emerging athletic genre to more of a mainstream, established and competitive sport. In doing so, it has developed a young male fan base,” said Howard Goldberg, senior vice president, Scarborough Sports Marketing. “Sports marketing has proven its value through a difficult economic climate, and MMA can help marketers capitalize on their customers’ engagement with sports.”

 

In addition to being young, male and well-established, MMA fans represent a high-tech audience. They are not only well above the national average for current ownership of high-tech household items such as HDTVs, VOD service, video game systems and broadband Internet connections, but they are more likely to plan to upgrade their household wares. (see chart below for further details)

 

Beyond technology, the MMA fan base could also have appeal to automotive marketers. These fans represent 15 percent of all adults planning to buy a new pickup truck for their household during the next year, and are 85 percent more likely than the average adult to plan such a purchase within the next year. Other new vehicle categories appealing to the MMA fan include:

 

•Full-size Cars: MMA fans account for 18 percent of the market for potential new buyers** of full-size cars, and are more than twice as likely as all adults to plan this household vehicle purchase during the next year
•SUVs: MMA fans account for 10 percent of the market for potential new buyers** of SUVs, and are 19 percent more likely to plan this household vehicle purchase during the next year
•Luxury Vehicles: MMA fans account for 15 percent of the market for potential new buyers** of luxury vehicles, and are 84 percent more likely to plan this household vehicle purchase during the next year

 
Their household and personal shopping and buying patterns are also notable beyond technology and vehicles. The MMA fan is 15 percent more likely to live in a household that shopped at a furniture/mattress store during the past year, and 35 percent more likely to live in a household that shopped at a large appliance store during the past year. In the business-to-business category, MMA fans are 62 percent more likely than the average adult to be a corporate decision maker for overnight delivery services, and 37 percent more likely to make office equipment and supplies purchase decisions for their companies.

 

“From technology to automotive and household appliances to corporate delivery services, the MMA fan clearly represents a solid audience for a great diversity of marketers,” said Mr. Goldberg. “Those who begin leveraging this league’s fan base now will have unique opportunities to begin establishing brand loyalty within their ranks.”

 

Household Technology Profile of the Mixed Martial Arts (MMA) Fan

 

Mixed Martial Arts Fans
Mixed Martial Arts Fans who PLAN TO BUY
who CURRENTLY OWN (Index, (Index, 100=National
Household Technology 100= National Average) Average)
——————– ————————- ———————–
Computer 108 176
Digital Camera 118 152
DVR 108 229
DVD Player 114 155
Energy Saving
Appliance 129 151
HDTV 115 168
PDA (Blackberry,
etc.) 149 238
MP3 Player (i.e.
iPod) 144 189
Satellite Radio
Subscription 152 289
Satellite TV
Subscription 112 174
Video Game System 156 258
VoIP 161 226
Broadband 113 NA
——— — —

 

* “Mixed Martial Arts (MMA) Fans” are defined as those adults who watched Mixed Martial Arts on broadcast or cable television during the past year.

 

** Automotive “potential new buyers” are adults who plan to buy a vehicle within the next year

 

SOURCE: Scarborough Sports Marketing, Scarborough USA+ Study, Release 1 2009 (6 months)

 

About Scarborough Sports Marketing

 

Scarborough Sports Marketing (www.scarboroughsportsmarketing.com, www.scarborough.com, sports@scarborough.com) measures local and national consumer and lifestyle information by interviewing over 221,000 adults (18+) in 81 Top-Tier Markets, including all professional sports markets. Scarborough sports measurements include fan avidity; multi-media measures including sports viewing and listening; corporate sponsorship information including fans’ shopping and product/service usage; and leisure activities. Scarborough delivers twice-yearly updates of its local market reports to a diverse client base, spanning all major media, advertisers and their agencies. Scarborough Sports Marketing is a division of Scarborough Research, which is a joint venture between Arbitron Inc. and The Nielsen Company.

 

SOURCE Scarborough Sports Marketing

Payout Perspective:

The study helps to re-affirm some of the results previously brought to light by other studies, but goes further by suggesting that the MMA demographic, in addition to being quite youthful, is also typically more affluent than average. It follows then, that an interest in high technology and automobiles is also fairly high.

Sports Business Daily adds the following about the study:

Below are select demos for MMA fans. For example, 32% of MMA fans are between the ages of 18-29, while 8% of MMA fans have bought sports logo apparel on the Internet during the past 12 months ( Scarborough Sports Marketing ).

 

DEMOGRAPHIC	MMA FANS
AGE
18-29	32%
30-39	25%
40-49	22%
50-59	13%
60-69	6%
SPORTS EVENT/TEAM TICKETS INTERESTED IN BUYING NEXT 12 MONTHS
Full season tickets	5%
Individual game tickets	48%
Partial season tickets	7%
Not interested	47%
INTERNET USE PAST 30 DAYS
Cable TV network site	9%
Download/play video games	15%
Download/watch movies	13%
Download/watch TV programs	13%
Download/watch/listen to podcasts	5%
Fantasy sports	11%
Sports scores/updates	37%
ITEMS BOUGHT ON INTERNET PAST 12 MONTHS
Sporting event tickets	10%
Sports logo apparel	8%

 

What does this mean for MMA? The sport may be on the verge of a second wave of high profile sponsors within the next few years - everything from electronics to automotive companies - they ought to be looking at the sport as a way to reach concentrated numbers of young, wealthy individuals.

However, it needs to be said that sponsorship is a two-way street. In order to attract these sponsors, the sport and its promotions need to do more than just offer up a demographic – it’s all about reciprocity. MMA’s various properties will need to work hand-in-hand with these clients to add material value and deliver ROI. Specifically that means the following:

• Reaching out to potential sponsors to see what they need (target demographics, value-added metrics, and ROI)
• Finding creative ways to better link the sponsorship product with the property medium (i.e., improve the linkage between MMA and whatever product that’s actually sponsoring)

The Sports Business Journal released its highly anticipated “High Tech, High Stakes” issue this week, and there were a couple of very interesting pieces that caught the attention of MMAPayout.com.

In one of his articles, Eric Fischer looked at the potential for motion tracking technology to gain further acceptance and prevalence in sports television.

Motion tracking in sports in and of itself is not a new thing. Various forms of motion tracking — which draws its heritage at least in part from missile-tracking technology — have existed for years, and one specific version of it in sports, the Pitch f/x system from Sportvision and MLB Advanced Media, is now in its fourth year of active deployment. But thanks to sharply heightened investment in the space among several media and technology outfits and ever-increasing computing power, the wealth of data derived from digital tracking of player and ball movement is now mushrooming exponentially.

Jon Snow also documented some of the advancements in chroma key or “green screen” technology that allow sports properties to manipulate the playing surface or surrounding environment with advertisements.

“Eventually you’ll be able to get hyper-local,” such as targeting individual demographics within a certain market, said Sam McCleery, senior vice president of sales and marketing for PVI Virtual Media Services.

 

The main barrier to growth of the technology in the United States is gaining acceptance among leagues, teams and fans. McCleery expects virtual advertising will continue to affect the international market more than the domestic market.

 

“It will grow earlier overseas,” he said. “Will it grow bigger? I don’t know. But you will be allowed to do it over there before you will be allowed to do it here.”

Note: The Sports Business Journal is a subscription service. If you’ve got any kind of interest in sports business, it’s definitely worth the money.

Payout Perspective:

The potential for both technologies to add value to MMA broadcasts is quite high.

The motion tracking technology, pending further advancement, could be used to help analyze the velocity and power behind strike attempts. It might also enable an organization to re-create 3D models of certain exchanges between fighters in order to give the audience a glimpse into what truly transpired. Imagine the possibilities for this technology as a teaching tool and means for MMA to better engage the audience.

In fact, FightersOnline.com – a start-up company currently evaluating the potential of an online-based matchmaking and auctioning system – has already obtained a patent for optical measurement technology that would allow it to determine the velocity and power behind strikes.

However, it’s necessary to provide a caution: the technology still has a ways to go before it’s technically and financially feasible for an organization to adopt and implement with any sort of added value to the broadcast.

The chroma key or “green screen” technology is also very intriguing, because it could be used to customize in-ring or in-cage sponsorships ads. It would allow an organization like the UFC to provide greater value for its partners and sponsors by providing targeted advertisements through geographical segmentation. For example, someone watching Paul Daley vs. Mike Swick in the UK would see a different cage mat logo than someone watching the same fight in the US.

That’s a powerful marketing capability.

Furthermore, the idea that an MMA organization can segment its advertising audiences based upon geography could also be leveraged to aid the broadband content business model. It would allow for multiple versions of branded content, in which the UFC or another organization could sell advertising rights to online events on a regional or national basis.

Bill Gorman of TVbytheNumbers talks about the confusion that the NY Times is likely to create with a recent article stating that DVR playback is actually helping (and not hurting) commercial ad viewership.

Everyone is used to program ratings increases from “DVR viewing” being defined as the increase from Live+SD program ratings (which is available the day after a show airs) to Live+7 day program ratings (available about two weeks after a show airs), so people will point to this article by Carter and claim “See that increase from DVR viewing really *does* boost commercial viewing, it must be helping my show!” Sadly, that’s mostly wrong.

 

In fact there is almost no increase in commercial ratings after the Live+SD period.

 

In a recent conversation with a researcher at a broadcast network, I asked him “Given the fact that the public (and us) sees only Live+SD and Live+7 program ratings on a regular basis, how much of the increase between those two numbers could be assumed to benefit C+3 commercial ratings?”

 

His answer? 10%

 

So that 40% increase in program ratings from Live+SD to Live+7 for Dollhouse? It helped advertising revenue by 4%.

 

Not exactly time to break out the champagne.

 

Don’t be confused that additional DVR viewing beyond the Live+SD period is going to be a big help to your show, because it isn’t.

Payout Perspective:

It’s probably best that you run over to TVbytheNumbers and check out the article for yourself (including the Times article) to really get a feeling for how TV ratings are measured.

If you don’t have the time, I’ll try my best to synthesize everything, and then relate it all to why this is relevant to MMA:

• There are two types of ratings in the television world: commercial and program.
• Commercial ratings are used to buy and sell commercial advertising spots, but not often published.
• Commercial ratings are referred to in the C+3 format: live commercial viewership plus 3-day playback
• Program ratings are disclosed to the public in the form of Live + Same Day or Live + 7-day playback
• Live + SD is the live rating of the show plus any DVR playback until 3am of the following morning
• Live + 7  is the live rating plus any DVR playback over the next seven days.
• Generally, Live + SD is used as a proxy to gauge the undisclosed C+3 rating.

The problem - or source of confusion – seems to be that network PR people are touting an increase in the Live + 7 over just the Live ratings (when, in fact, the public hardly ever sees the Live ratings; they see the larger Live + SD). If the networks were to compare the Live + 7 increase over the more standard Live + SD, there’d be less of an increase. Therefore, as Live + SD is a proxy of C+3, it stands to reason that there’s also very little change in commercial ratings after the initial same day period (what amounts to by some estimates as only 10%).

Why is this relevant to MMA? A small increase in commercial ratings as a result of the DVR playback isn’t going to positively influence the price that networks are going to receive for ad spots during television shows like The Ultimate Fighter and CBS’s Strikeforce on Primetime card.

Furthermore, the idea that 46% of those watching DVR playbacks still watch commercials is a bit misleading according Robert Seidman of TVbytheNumbers.com.

The actual hard data I have seen is that around 75 percent of the commercials get skipped. But 100% of the people don’t skip 75% of the commercials 100% of the time, so you can still wind up with PR spin like ~50% of the people watch commercials during playback. That doesn’t mean that 50% watch 100% of the commercials though, and again, the actual hard data I’ve seen (mostly from TiVo) is that regardless of the percentage of viewers who wind up watching SOME commercials, around 75 percent of all commercials still get skipped/fast-forwarded through.

In other words, don’t believe the hype or PR spin.