MMA Universe

Earlier today, Josh Gross from ESPN.com broke the news that the Federal Trade Commission has closed a non-public investigation into the UFC’s purchase of Strikeforce as of last week.

ESPN reports:

Documents published on the FTC website dated January 25, confirm the FTC’s Bureau of Competition conducted an investigation to determine whether the $34 million acquisition of Explosion Entertainment, LLC, by UFC’s parent company, Zuffa LLC, violated Section 7 of the Clayton Act or Section 5 of the Federal Trade Commission Act.
…
In closing letters issued to counsel for Zuffa and Explosion Entertainment, FTC secretary Donald S. Clark stated, “Upon further review of this matter, it now appears that no further action is warranted by the Commission at this time. Accordingly, the investigation has been closed.”

The full letter from the FTC is below (H/T: FightOpinion.com):

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
Office of the Secretary

January 25, 2012

Stephen Axinn, Esq.
Axinn Veltrop, and Harkrider LLP
1330 Connecticut Ave., NW
Washington, DC 20036

Re: Acquisition of Explosion Entertainment, LLC (Strikeforce) by Zuffa, LLC (UFC)
FTC File No. 111 0136

Dear Mr. Axinn:

The Federal Trade Commission’s Bureau of Competition has been conducting a nonpublic investigation to determine whether Zuffa, LLC’s acquisition of Explosion Entertainment, LLC may violate Section 7 of the Clayton Act or Section 5 of the Federal Trade Commission Act.

Upon further review of this matter, it now appears that no further action is warranted by the Commission at this time. Accordingly, the investigation has been closed. This action is not to be construed as a determination that a violation may not have occurred, just as the pendency of an investigation should not be construed as a determination that a violation has occurred. The Commission reserves the right to take such further action as the public interest may require.

By direction of the Commission.

Donald S. Clark
Secretary

The New York District Attorney and Attorney General filed separate motions to dismiss two claims in Zuffa’s lawsuit in New York City. While the lawsuits seek to dismiss only a portion of the UFC complaint, it appears that the defendants are leaving open a motion to dismiss the entire complaint in total at a later date.

Courtesy of the Fight Lawyer, the two motions are below:

Attorney General’s Motion to Dismiss(function() { var scribd = document.createElement("script"); scribd.type = "text/javascript"; scribd.async = true; scribd.src = "http://www.scribd.com/javascripts/embed_code/inject.js"; var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(scribd, s); })();

District Attorney’s Motion to Dismiss(function() { var scribd = document.createElement("script"); scribd.type = "text/javascript"; scribd.async = true; scribd.src = "http://www.scribd.com/javascripts/embed_code/inject.js"; var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(scribd, s); })();

Payout Perspective:

The crux of both arguments appear to be that despite Zuffa’s claims, the fact remains that New York had a rational basis for enacting the ban at the time it was drafted. And based on this, the statute was not vague and overbroad as it relates to the due process and equal protection claims. They cite to case law which supports the theory that despite changes over the years that may, arguably, antiquate a statute’s purpose, under a rational basis review of a law, so long as there was a rational purpose for it at the time of its introduction it is valid.

Both motions argue that the proper forum for Zuffa’s claims is with the legislature and that if Zuffa wanted to enact change, it should direct its efforts to the legislature.

Via the District Attorney’s motion to dismiss:

…as a proper exercise of judicial restraint, federal courts must uphold a statute that was rational when enacted, even when post-enactment developments cast doubt on the wisdom, logic, or providence of prior legislative decisions

It also argues that legislatures are given “substantial latitude” when it comes to enacting laws under a rational basis review of the law as “imperfections and even inequality must be tolerated.”

The defendants’ motions are persuasive and could set the dominoes in line if the court grants the motion to dismiss Zuffa’s claims. As indicated in its motions, both parties contemplate a further motion to dismiss the rest of Zuffa’s claims if it is successful with this motion.

The UFC released its response to ESPN’s feature on fighter pay. Dana White introduced ESPN’s full-length interview of Lorenzo Fertitta and called ESPN’s story “a piece of trash.”

The response video is what the UFC calls the unedited version of Fertitta’s interview which implies that ESPN edited its story to fit with what it wanted to portray. In the UFC’s response, Fertitta points out that some of the boxers featured on ESPN’s Friday Night Fights received $275 and that the UFC pays its lower tier fighters much more than that.

Seems like a good comparison but for the fact that the UFC and boxing structures are different. Also, ESPN’s role in its Friday Night Fights is not the same as the UFC’s.

Bad Left Hook sets us straight:

First of all, ESPN is not a fight promoter. This is an enormous difference. For a UFC card on FX, the UFC is pretty much in control of everything. ESPN just airs fights. They have the right to turn down a proposed fight, but that’s about it. Everything is really up to the promoters of the actual fight card.

Fertitta claims, and I’m sure he’s telling the truth, that someone fought on Friday Night Fights in a four-round bout for $275. What Fertitta doesn’t reveal — or perhaps does not actually know — is that anyone in a four-round fight that winds up on the broadcast, on TV, was positioned in a swing fight that was going to air only if there was time remaining in the two-hour time slot. There are no four-round fights purposely scheduled to air on ESPN’s series. A four-round fight is the lowest level of professional boxing, and frankly to call the majority of four-round bouts “professional boxing” is kind of a stretch; the fighters don’t often resemble what we’re used to seeing on TV, even from the middle-of-the-pack guys that get on ESPN or HBO or Showtime. It’s kind of like comparing high school football to the NFL most of the time.

Additionally, Scott Christ reiterates the sentiments I have had when the UFC-Fox deal became a reality:

UFC wants to play with the big boys in sports now. That means attention from big boy sports media, and that inevitably leads to criticism and a realistic assessment of their product and their business. The rah-rah days are dying, and it’s because of White’s ambition as much as anything else. He’s brought them here. Now they have to accept where they’re at and what comes along with that standing.

How much Zuffa revenue goes to fighters is another issue in the fighter pay debate. Dave Metzler points out that without the financial information the percentage of revenue going to fighters is a moving target:

In an attempt to use figures based on Zuffa’s percentage of an 800,000-buy show, which is the rough industry estimate on UFC 141, the $3.1 million live gate, using listed fighter pay, announced bonuses, estimates of unannounced bonuses, and percentages of pay–per-view revenue built into the main eventers’ contracts, give you a very rough figure of 28 percent going to talent. However, for the Jan. 7, Strikeforce show in Las Vegas, with a very small gate figure and a full roster of fighters to pay, that figure could easily have been in the range of 50 percent.

Metzler goes on to assert that pro wrestling, not boxing, is a closer business model to the UFC:

The closest business model to UFC is that of World Wrestling Entertainment, which is believed to pay in the range of 13-15 percent of its total revenue to its performers. While some will argue WWE is a form of performance art and not a real athletic competition – and thus the performers don’t deserve as much money – the dollars WWE derives from its performers, who take a legitimate physical pounding, is every bit as green as those which UFC makes.

Payout Perspective:

I think the UFC response (minus Dana White’s usual pleasantries to opposition) is compelling but it obviously has some flaws. From a purely PR standpoint, its a good response to the ESPN piece. What would have helped the UFC in its response is if the UFC had some up and coming fighters state how much they are paid and agree that its great. Realistically, I think the UFC could have done this because I’m sure some fighters are just glad they are getting a shot.  Having Serra, Liddell and Griffin talk is fine but they are all “company men”; well-established, past champions of the UFC.

If you didn’t read Metzler or Christ’s great piece over on Bad Left Hook, most people exposed to this debate would look at the UFC response and say, “Hey, that’s true. What about boxing’s pay?” But, its hard to compare the UFC to other sports league due to the difference in business models. The fact remains that with success comes scrutiny. ESPN, like every other TV investigative show, likely had an agenda when interviewing Fertitta. That does not necessarily mean ESPN is bad or “hates the sport.” But, it means that the UFC should be aware of the issues it now faces with more exposure.

The Fight Lawyer reports on the latest from the Zuffa lawsuit in New York. Notably, the New York AG and the New York DA will file a motion to dismiss on the issues of due process and equal protection but the First Amendment issue will not be contested in the motion.

On January 5, 2012 a status conference was held:

Minute Entry for proceedings held before Judge Kimba M. Wood: Status Conference held on 1/5/2012.  Defendants will submit a limited motion to dismiss addressing only the issue of whether due process and equal protection analysis requires the Court to determine whether there was a rational basis for the law at issue only at the time it was passed, or whether the Court must determine whether there is a rational basis for the law at present (in other words, whether the Court should take into account a change in factual circumstances that makes the law no longer rational, even if it had a rational basis at the time of passage). Defendants’ motion is due 1/27/12. Plaintiffs’ reply is due 2/17/12.Defendants’ response is due 3/2/12. (js) Modified on 1/9/2012 (tro). (Entered: 01/06/2012)

Payout Perspective:

It will be interesting to see the arguments in the motion. The minute entry appears a little confusing upon first read considering the court will consider whether a law can become constitutionally irrational. But, it appears that the Court will decide whether the MMA Ban is rational now based on the current state of MMA or whether it was rational when the law was introduced in 1997.  A breakdown of the due process and equal protection claims are 3, 4 and 5 in the lawsuit addressed here.

As the Fight Lawyer commented in his post, its a limited motion and there is no mention of the First Amendment claim.

One has to wonder whether the defendants believed that Zufffa’s First Amendment claim would survive a motion to dismiss at this point or whether its strategy is to prevail on its limited motion first prior to addressing the other claims in the lawsuit.

The lawsuit filed by Golden Glory against Alistair Overeem in Clark County, Nevada last week included the Golden Glory-Overeem contract.

As The Fight Lawyer points out, this lawsuit is not the same as Overeem’s lawsuit filed in Los Angeles in November. A summary of that lawsuit is here. However, both lawsuits relate to the contract dispute the UFC Heavyweight had with his former gym.

The contract attached to the Nevada lawsuit is interesting insight into the terms and conditions Knockout Investments (KOI) and Golden Glory (GG) had with Overeem. An initial impression is that it was not drafted by an attorney and has certain clauses which seem one-sided and unenforceable. Yet, we presume that Overeem signed the contract with knowledge of its terms.

Here are some interesting tidbits from the Nevada lawsuit:

- The 2007 contract with Overeem was set for 5 years. KOI/GG would receive 30% of essentially everything made by the fighter.

- In paragraph 34 of the Complaint, it states that Overeem receives $2.00 per view for views over $500,000 in the United States, Canada and online. Later in the Complaint, it claims that Lorenzo Fertitta told Overeem that the $1 million signing bonus was Overeem’s and that KOI/GG was “ripping him off.”

- The terms of the UFC contract also includes a $1 million “signing bonus” paid over the first 3 fights of Overeem’s contract. Overeem’s contract guarantees the first 3 fights and could “potentially” cover 8 fights. Here, it appears that the UFC has the option to pick up the additional 5 fights.

- In addition to the UFC-Zuffa contract, the Complaint indicates that there is a separate Merchandise Rights Agreement. No known value was stated although its believed to be in excess of $100,000.

- Overeem made $50,000 from sponsorships from his June 2011 fight with Fabricio Werdum. Of which, KOI/GG demand 30% or $11,000. In addition, Overeem did not pay KOI/GG its cut of Overeem’s fight purse for the Strikeforce fight. Basically, Overeem was paid for his June Strikeforce fight and withheld payment to KOI/GG because he believed that his then managers owed him money.

- Article 10 of the contract includes a monetary penalty for violation of the contract. A $10,000 penalty plus a $5,000 per day penalty for each day the contract is in violation. It also states that the fine “can’t be lowered by any legal authority.”

Here is a further explanation of the Nevada lawsuit from F4WOnline (subscription required):

Knock Out Investments claimed that due to Overeem’s existing five-year contract with them that was signed in 2007, they are entitled to 30%. 30% of [Overeem’s] pay between all the money he got for UFC 141 is $684,000, so they are fighting for a huge chunk of change. They also alleged Overeem never paid them their 30% from the 6/18 fight with Fabricio Werdum. Overeem had already, in November, filed suit against Knock Out Investments, claiming they owed him $151,000 prior to the Werdum fight based on fights he already had, and asked for a court order stating that due to that, his contract should be null and void. Prior to the Werdum fight, almost all of Overeem’s fight money, whether it was from Japan or previously with Strikeforce, was sent to Knock Out Investments and then after they got paid and took their cut, they paid their fighters. Zuffa, after purchasing Strikeforce, refused to continue that practice, stating that they were going to pay fighters and not management teams. At one point Zuffa even fired all of the Golden Glory fighters, including Overeem, because Golden Glory made the demand that they wanted the money to be paid to them. After firing a number of fighters, Overeem included, Golden Glory relented and agreed to let Zuffa pay the fighters. By that time Overeem had been fired and removed from the Strikeforce tournament, and at the time nobody knew the future of Strikeforce and Overeem would have been far more valuable on the UFC side.

“The reality is that a fighter is paid within 24 hours of the bout,” wrote Knock Out Investments attorney Roderick Lindblom. “Given past failure to pay management and training fees, there is serious concern on my client’s part that Mr. Overeem will simply walkaway with the money.”

An explanation of what occurred regarding the failure to recoup UFC 141’s payment is here. Essentially, a surety bond needed for garnishment after the order was issued was never secured.
Payout Perspective:

One has to wonder why Overeem agreed to some of the terms of the contract and whether he had his own legal counsel look over the contract. Notably, Overeem was granted a $1 million signing bonuses (spread over the course of 3 UFC fights) after he was released from Strikeforce. What interests most people with the terms of Overeem’s Zuffa-UFC contract is the PPV points he received for UFC 141. Its rare that the general public get to see the portion fighters receive for PPVs. One might assume that Brock Lesnar received more of a portion of the PPV revenue due to his status with the company.

The second biggest business story of the year shook the state of MMA. In March, Zuffa purchased its biggest rival, Strikeforce.

It was reported that the purchase price was $40 million which included some debt repayment by Zuffa for Strikeforce. The deal occurred as Silicon Valley Sports and Entertainment, main financial backer of Strikeforce, wanted to refocus its business on its NHL, the San Jose Sharks and other business. It is also believed that it may be trying to acquire an NBA team to San Jose.

Excellent coverage of the purchase is here and here is the text of the official Zuffa press release. Prior to Zuffa’s purchase, MMAPayout learned that there were other bidders for Strikeforce but Zuffa came up with the biggest monetary deal.

Prior to the purchase, Strikeforce was in the midst of its Heavyweight Grand Prix which was supposed to create interest in what was arguably the best divsion in the sport. Surely, Strikeforce execs were hoping for a Fedor-Overeem Final. Fedor’s upset loss to Bigfoot Silva made the GP less appealing. And, a futile effort to hold a card in Japan for its HW Grand Prix caused a delay in the tournament.

From the start, Zuffa stated that UFC and Strikeforce would operate separately although Zuffa execs (you know who) would provide input on its show starting with its April 9th show. The constant talking point was “Business as usual.”

But, that’s not the case as we’ve seen numerous Strikeforce fighters move over to the UFC. Notably, Strikeforce welterweight champ Nick Diaz. Other fighters such as UFC 141’s main eventer Alistair Overeem came over to the UFC after time fighting in Strikeforce. In addition, some Strikeforce staff were let go and replaced by Zuffa employees. Finally, Scott Coker has lost a lot of power in the new regime as it appears from interviews that he no longer has any say with the direction of Strikeforce.

Recently, Strikeforce and Showtime agreed to renew its television contract which was somewhat of a surprise considering the fact that many believed that Strikeforce would be consumed by the UFC.

It will be interesting to see the Strikeforce product in 2012. How will it compete, or complement the UFC product? Who is the face of Strikeforce? Certainly, a Gilbert Melendez and Mo Lawal would have fit in nicely with the UFC creating interesting fights. But, it appears that they will be in Strikeforce for at least the next year.

Links to MMAPayout coverage regarding the Zuffa-Strikeforce purchase can be found here:

- Zuffa Purchases Strikeforce, Agrees to Blockbuster MMA Deal

- Mystery Strikeforce Third Bidder, Early Signs Of Sale, & UFC Purchase Notes

- Exploring Why SVSE Walked Away from Strikeforce & MMA

This year Zuffa offered its 400 fighters in the UFC and Strikeforce health insurance beginning this past June. Zuffa is paying the premiums for all of its fighters under contract.

The accident-insurance coverage covers up to $50,000 (annually) of medical costs for each fighter. Its an unprecedented move to cover fighters and its a sign that the organization is moving in the right direction if it wanted to be thought of as a major league sport.

So far, fighters have taken advantage of the health insurance without any issues. Cub Swanson became the first fighter to utilize the health insurance one day after it went into effect.

While insurance may not be the most exciting business story of the year, it is one of the more important ones for the fighters covered.  A fighter’s health is very important from the business side of things as we know from this year’s constant reshuffling of main events. Insurance may alleviate some of the concern for the mid to low tier fighter that is concerned about what happens if they are hurt while training for a fight. While the $50K may not cover a serious surgery or procedure, it still helps with the  financial burden placed on fighters that likely fought without insurance prior to Zuffa’s coverage.  In a related story, this week, Combat Sports Insurance announced an accident-related insurance policy that would allow any pro MMA fighter to receive insurance for just “a little over $20  month.”

This year Zuffa offered its 400 fighters in the UFC and Strikeforce health insurance beginning this past June. Zuffa is paying the premiums for all of its fighters under contract.

The accident-insurance coverage covers up to $50,000 (annually) of medical costs for each fighter. Its an unprecedented move to cover fighters and its a sign that the organization is moving in the right direction if it wanted to be thought of as a major league sport.

So far, fighters have taken advantage of the health insurance without any issues. Cub Swanson became the first fighter to utilize the health insurance one day after it went into effect.

While insurance may not be the most exciting business story of the year, it is one of the more important ones for the fighters covered.  A fighter’s health is very important from the business side of things as we know from this year’s constant reshuffling of main events. Insurance may alleviate some of the concern for the mid to low tier fighter that is concerned about what happens if they are hurt while training for a fight. While the $50K may not cover a serious surgery or procedure, it still helps with the  financial burden placed on fighters that likely fought without insurance prior to Zuffa’s coverage.  In a related story, this week, Combat Sports Insurance announced an accident-related insurance policy that would allow any pro MMA fighter to receive insurance for just “a little over $20  month.”

The Culinary Workers Union Local 226 became one of the biggest opponents of the UFC in 2011. It has helped opposed the legalization of professional MMA in New York state and has requested that the Federal Trade Commission investigate Zuffa for possible antitrust investigations.

In late August, the union sent a letter to the FTC requesting that it look into Zuffa’s acquisition of several of its competitors:

The letter goes on to point out that since 2001, Zuffa has acquired four of its key rivals (Pride Fighting Championship, World Extreme Cagefighting, the World Fighting Alliance, and most recently Strikeforce earlier this year.  They also state that through some independent research performed in 2008, Zuffa controls 80-90% of the mixed martial arts market.

Specifically, the letter points out that Zuffa has preserved and strengthened its dominance in the market through their unwillingness to co-promote events as well as anti-competitive contractual restraints placed on their contracted fighters.

As most know, the union’s beef with Zuffa stems from the Fertittas ownership of its Stations Casino. A failed attempt to unionize the workers at the Stations Casinos is the reason why there is staunch opposition to the legalization of MMA in New York. Lobbying efforts by the Culinary Workers have stifled efforts for passage of legislation allowing the UFC in New York.

USA Today reported in October that the union contacted Anheuser-Busch to boycott the UFC for “a history of tolerating homophobic conduct.” In addition, the Union has done the following to get its message across:

• Backing anti-MMA legislators in New York.

• Calling on the Federal Trade Commission to investigate UFC parent company Zuffa, which the union accuses of using monopolistic tactics to thwart competition from other promoters of mixed martial arts.

• Launching a website designed to highlight White’s use of vulgar language.

It will be interesting to see how much more the Culinary Workers will go to lobby against the UFC. The recent Zuffa lawsuit is a way around the union and lobbyists opposing MMA. So far, nothing is being reported about an FTC investigation of Zuffa and we will see if 2012 gives us any findings from the FTC about Zuffa and the claimed anti-competitive practices.

Defense counsel for New York has made its appearance and were granted extra time to file its answer to the Zuffa’s lawsuit. The court will allow attorneys for the New York Attorney General and the New York County District Attorney until January 11, 2012 to respond.

As for the Zuffa’s Complaint, MMA Payout takes a comprehensive look at each cause of action.As many of you recall, Zuffa filed suit against the state of New York citing its ban on MMA is unconstitutional. We have taken a look at the complaint and break down Zuffa, et al.’s claims.

The thresh hold issue for Zuffa’s first and most noteworthy claim in this lawsuit is whether MMA deserves First Amendment protection. In its Complaint, Zuffa goes into detail as to why it believes MMA should be protected speech. Essentially stressing the “arts” in Mixed Martial Arts.

Via the Wall Street Journal:

While the arts are protected, no court has ever directly confronted the question of whether athletes have a First Amendment right to be seen in action, said Barry Friedman, a professor at New York University School of Law who is representing the plaintiffs.

In response to this novel argument, the Zuffa Complaint offers this:

“MMA fighters participate in live events for the same reason that an actor plays a crowded hall, a figure skater skates in front of thousands of live fans, a ballerina dances at Lincoln Center, and a band plays in a packed auditorium: because they want todemonstrate their skills before a live and appreciative audience, and interact with that audience during the event. (from paragraph 123 of the Complaint)

“Live professional MMA is not just a sporting event; it is also entertainment and theatre. (from paragraph 124 of the Complaint)

However, opponents will counter that allowing a professional athletic sport First Amendment protection will open the floodgates of litigation for other sports to file suit on these grounds. The implication is that the protection is unfounded and the result of allowing MMA this protection would cause a glut in the judicial system.

Friedman counters this argument as he states in the WSJ article that MMA should be distinguished from other sports as he compares martial arts to dancing.

Breakdown of Zuffa’s Causes of Action:

1. The Live Professional MMA Ban violates the First Amendment

In this claim, Zuffa argues that the Live Professional MMA Ban (“MMA Ban”) is a content-based restriction based on the perceived violent message. (paragraph 238). Zuffa points to the legislative history of the MMA Ban as reason to argue that the purpose of the ban was due to the violent content of MMA. (paragraph 240). Hence, Zuffa concludes that New York misperceives the proper message of MMA. (paragraph 242)

Here, Zuffa argues that since MMA is public entertainment, it is thereby protected by the First Amendment.

Assuming that the court agrees with Zuffa and that it should be protected under the First Amendment, we look to how a Court would analyze the MMA ban. Courts require that governmental regulation of speech protected under the First Amendment be “content neutral.” A “content neutral” law is one that applies to all speech regardless of its message.

According to Erwin Chemerinsky’s treatise on Constitutional Law (something that all law students are familiar with), the requirement that the government be content-neutral in its regulation of speech means that the government must be both viewpoint neutral and subject matter neutral. Viewpoint neutral means that the government cannot regulate speech based on the ideology of the message. For instance, a law cannot regulate against a political ideology but not regulate its opposing view. Subject matter neutral means that the government cannot regulate speech based on the topic of the speech. Thus, a law cannot inhibit one particular subject.

In these interpretations, the government is allowed to regulate speech if there is a legitimate state interest. Its plausible that New York argues that the ban was necessary due to the violent nature of the sport and the safety issues related to MMA.

2.  The MMA Ban is Overbroad and violates the First Amendment

In this claim, Zuffa argues that the MMA Ban is so broad that it regulates certain things that it cannot, by law, regulate. “A law is unconstitutionally overbroad if it regulates substantially more speech than the Constitution allows to be regulated and a person to whom the law constitutionally can be applied can argue that it would be unconstitutional as applied to others.”  (Chemerinsky)

Zuffa examines the language in the MMA Ban law and indicates how the law was drafted makes things such as attending a “UFC viewing party” or litigating this lawsuit illegal. Zuffa also cites other examples where the law can be construed broadly to make legal conduct and speech illegal.

3. The MMA Ban is Vague on the face of the law and violates the Due Process Clause

“A law is unconstitutionally vague if a reasonable person cannot tell what speech is prohibited and what is permitted. Unduly vague laws violate due process whether or not speech is regulated.” (Chemerensky)

Zuffa points to terms in the MMA Ban which it argues are vague. Zuffa recites relevant portions of the law in paragraph 260 of the Complaint

Section 2 of the Ban states that “[n]o combative sport shall be conducted, held or given within the state of New York.” N.Y. Unconsol. Law § 8905-a(2). Both criminal penalties and civil liability are imposed upon “a person who knowingly advances or profits from a combative sport activity.” § 8905-a(3)

Key terms, “combative sport activity” and “professional match or exhibition” which triggers the analysis for the ban are not defined in a way which would provides definitive guidelines.

Zuffa argues that the practice of martial arts at martial arts schools in New York may or may not be affected by the MMA Ban (paragraph 262). Zuffa concludes that there is confusion in the law regarding exemptions for martial arts schools and/or clubs.

In addition, while the triggering provision in the law appears to be whether an MMA match is a “professional match or exhibition,” the ban appears to restrict amateur fights. (paragraph 268).

4. The MMA Ban is Unconstitutional as it violates the Equal Protection rights of the Plaintiffs under the 14th Amendment

Similar to the first three causes of action, Zuffa argues that New York does not have a rational basis for its blanket ban of professional mixed martial arts in the state. It states that New York does not articulate the reasons for the ban. While safety and messages of violence may be interpreted as the reasons for the law, Zuffa contends that these reasons fall flat since other forms of martial arts are legal in New York and studies show that MMA is a safe sport. In addition, Zuffa argues that there is no rational reason that it bans MMA even though there are other violent forms of speech (i.e., video games, violent movies and music lyrics) that are not regulated.

5. The MMA Ban is Unconstitutional as it violates the Due Process Clause

This cause of action relates to the right that the Due Process Clause in the Constitution prohibits the government from “intruding on liberty without rational reason.” Here, Zuffa argues once again that the MMA Ban is vague and overbroad and does not address the purpose for the law.

6.  The MMA Ban Unconstitutionally restricts interstate commerce

This cause of action relates to what lawyers term the “dormant commerce clause.” State and local laws cannot place an undue burden on interstate commerce. Zuffa argues that the MMA Ban stifles interstate commerce on three fronts.

First, since the MMA Ban is only a ban on professional MMA and not amateur MMA, New York may have MMA training, gyms and exhibitions but New York bars out-of-state businesses from promoting professional events.

Second, the language of the law is so broad that “numerous interstate products and services” required for a live professional MMA event are barred from New York. Here, the argument is that the law does not address the perceived purpose of the law, which is to ban the “violent message of MMA” and improve fighter safety. Zuffa argues that there are no benefits to the ban and states that the ban has forced individuals to turn to “underground” MMA. It also indicates that if the perception of violence was at issue, New York could have found an alternative to a complete ban on MMA. The Complaint suggest it could have an age limit for attendance in live events.

Finally, Zuffa argues that the MMA Ban could have an “extraterritorial effect” on interstate commerce as the vagueness of the statute and uncertain enforcement may leave advertisers and merchandisers to limit its exposure in the New York market. As an extension, it could burden advertisers and merchandisers in neighboring states.

7.  2001 Liquor Law is Unconstitutional as applied to plaintiffs

This cause of action relates to Zuffa’s claims related to the MMA ban as the 2001 Liquor Law prohibits the sale of liquor at both professional and amateur MMA events. It follows that if the MMA ban is unconstitutional, the provision of the 2001 Liquor Law would be unconstitutional as well.

It will be interesting to see if counsel for New York attempts to dismiss Zuffa’s Complaint. The lawsuit attempts to break new ground in the area of First Amendment protection and with that, we may see a motion to dismiss this case before it gets anywhere.

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Chris Leben has been suspended by the UFC for one year for use of painkillers. Instead of dismissing Leben, it appears the UFC will assist Leben in trying to rehabilitate the middleweight.

According to the USA Today, Leben tested positive for Oxycodone and Oxymorphone on November 5th. Leben lost to Mark Munoz that day at UFC 138. Leben also tested positive for the steroid Stanozolol at UFC 89. Ironically, both tests, and fights, occurred in Birmingham, England.

For his part, Leben acknowledged his problem and released a statement through the UFC:

“I would like to make it known that I fully accept this suspension and apologize for embarrassing the UFC, my friends and family, and sport of mixed martial arts. I’m learning that I’m my own worst enemy sometimes. I can’t succeed in the Octagon or in life behaving this way. I’ve got to make some real changes over the next year and I’m going to focus on getting my life and career back on track. Again, I’m sorry to the UFC and fans that’ve supported me since my days on The Ultimate Fighter.”

Payout Perspective:

For as much as this is a personal problem for Leben, it is a public relations issue for the UFC. Both Leben and the UFC handled it with tact, openness and there seems to be hope that there will be a future for Leben in the UFC.

We have seen in the past the UFC dismiss fighters that have failed drug tests. In this case, while Leben is a repeat offender, the UFC has shown support for him. The fact that Leben released a statement through the UFC shows Leben has accepted his problem and is willing to receive help.

Via the USA Today:

“If he needs professional help, we are going to be there for him,” Zuffa President Dana White said Monday in a statement. “We want to see him succeed not only in the Octagon, but in his personal life.”

Perhaps its the fact that the UFC is now partners with Fox and there are more eyes on how the UFC handles drug testing issues. It could be the type of drug that Leben tested positive. Many professional wrestling fans realize that pain killers have been a major reason for the deaths of many performers. Certainly, the UFC could have released Leben citing his failed drug test and the fact that he is a multiple offender. Yet, from a public relations standpoint, it seems callous to drop Leben, an individual with a self-destructive past, without offering some type of help. It will be interesting to see if this will be the start of a UFC-type Wellness Program similar to the WWE program.

For more info on the subject, Fight Opinion has a detailed article with text of an interview Dr. Johnny Benjamin did with Mauro Ranallo on the use of pain killers in MMA.

Chris Leben has been suspended by the UFC for one year for use of painkillers. Instead of dismissing Leben, it appears the UFC will assist Leben in trying to rehabilitate the middleweight.

According to the USA Today, Leben tested positive for Oxycodone and Oxymorphone on November 5th. Leben lost to Mark Munoz that day at UFC 138. Leben also tested positive for the steroid Stanozolol at UFC 89. Ironically, both tests, and fights, occurred in Birmingham, England.

For his part, Leben acknowledged his problem and released a statement through the UFC:

“I would like to make it known that I fully accept this suspension and apologize for embarrassing the UFC, my friends and family, and sport of mixed martial arts. I’m learning that I’m my own worst enemy sometimes. I can’t succeed in the Octagon or in life behaving this way. I’ve got to make some real changes over the next year and I’m going to focus on getting my life and career back on track. Again, I’m sorry to the UFC and fans that’ve supported me since my days on The Ultimate Fighter.”

Payout Perspective:

For as much as this is a personal problem for Leben, it is a public relations issue for the UFC. Both Leben and the UFC handled it with tact, openness and there seems to be hope that there will be a future for Leben in the UFC.

We have seen in the past the UFC dismiss fighters that have failed drug tests. In this case, while Leben is a repeat offender, the UFC has shown support for him. The fact that Leben released a statement through the UFC shows Leben has accepted his problem and is willing to receive help.

Via the USA Today:

“If he needs professional help, we are going to be there for him,” Zuffa President Dana White said Monday in a statement. “We want to see him succeed not only in the Octagon, but in his personal life.”

Perhaps its the fact that the UFC is now partners with Fox and there are more eyes on how the UFC handles drug testing issues. It could be the type of drug that Leben tested positive. Many professional wrestling fans realize that pain killers have been a major reason for the deaths of many performers. Certainly, the UFC could have released Leben citing his failed drug test and the fact that he is a multiple offender. Yet, from a public relations standpoint, it seems callous to drop Leben, an individual with a self-destructive past, without offering some type of help. It will be interesting to see if this will be the start of a UFC-type Wellness Program similar to the WWE program.

For more info on the subject, Fight Opinion has a detailed article with text of an interview Dr. Johnny Benjamin did with Mauro Ranallo on the use of pain killers in MMA.

The Sports Business Journal released its results from its annual reader’s survey. While the UFC received some praise, the most telling result was whether sponsors should align its brand with the UFC.

According to the industry publication, of the 1,158 respondents to the question: “If you were a chief marketing officer, would you align your brand with the UFC?” 55 percent of the readers said it would not align its brand with the UFC. 28 percent of the respondent believed it would fit its demo while the other 16 percent had no opinion.

Another survey question indicates that its believed that sports sponsorship will increase slightly in the next five years.

Despite the result that many would not align its brand with the UFC, other responses were positive. Readers ranked the UFC third as a sports property/organization with the most potential growth. Of almost 1,500 respondents, 14 percent ranked the UFC behind the MLS and NHL. It also ranked fourth behind the NFL, MLB and the NHL as the most innovative property. It ranked ahead of the MLS and NBA.

Payout Perspective:

While the results do not define the future of the UFC, or MMA in general, the Sports Business Journal is regarded as an informative source in the sports industry. Its read by many mainstream sports people and I would gather that they are just being introduced to the world of mixed martial arts. The UFC-Fox deal certainly will help with the education and we will see how it will do in next year’s survey. While the UFC is receiving recognition for its growth potential and use of new media, it still seems as though skeptics are concerned about the violence in the sport. This could hurt with the future of landing mainstream sponsors despite its ties with Fox. With the belief that sports sponsorship will increase its spending in the future, the biggest hurdle that the UFC much face if it is to garner sponsors is educating a mainstream audience about its sport.

MMA Junkie reports that last week’s Strikeforce Challengers 20 on Showtime scored a lowly average of 143,000 viewers. The numbers indicate the lowest rating for the series as well as a 30 percent decrease from the previous Strikeforce Challengers edition which averaged 203,000 viewers.

The show received a 0.42 household rating (via Wrestling Observer, subscription required).

The show featured Ronda Rousey submitting Julia Budd with an armbar. Replays were gruesome as Budd’s arm was bent a way it should not have. In addition, Lumumba Sayers knocked out Antwain Britt in the first round.

Payout Perspective:

With Bellator and the UFC holding cards on Saturday night, Strikeforce Challengers seemed overlooked. This does not bode well for the series and we will see what impact the dismal ratings may have for the future of Strikeforce on Showtime.

Welcome to another edition of Payout Perspective! This week we’ll be taking a look at the UFC on FOX network debut headlined by the UFC Heavyweight Title bout between Cain Velasquez and Junior Dos Santos.

The event took place at the Honda Center in Anaheim, California and featured the HW title fight between Cain Velasquez vs. Junior Dos Santos. This was the only fight scheduled to air on the FOX network (60 minute time slot reserved from 9:00 pm-10:00 pm ET). The prelims portion was headlined by Ben Henderson vs Clay Guida, which aired on Facebook, FOXSports.com, and on Fox Deportes in the USA.  FOX Deportes aired Velasquez vs Dos Santos, Guida vs Henderson, and Garza vs Dustin Poirier. Facebook.com and FOXSports.com aired the rest of the prelims.

Fighter Disclosed Payouts

Note: that the money reported below is only the money required to be reported by the commission, which does not take into account undisclosed bonuses or “locker room” bonuses, as they are referred to in MMA.

Courtesy of MMAJunkie:

The total disclosed payroll for the event was $666,000.

Junior Dos Santos: $220,000 (includes $110,000 win bonus)
def. Cain Velasquez: $100,000

Ben Henderson: $60,000 (includes $30,000 win bonus)
def. Clay Guida: $40,000

Dustin Poirier: $20,000 (includes $10,000 win bonus)
def. Pablo Garza: $8,000

Ricardo Lamas: $20,000 (includes $10,000 win bonus)
def. Cub Swanson: $15,000

DaMarques Johnson: $28,000 (includes $14,000 win bonus)
def. Clay Harvison: $8,000

Darren Uyenoyama: $12,000 (includes $6,000 win bonus)
def. Norifumi “Kid” Yamamoto: $15,000

Robert Peralta: $16,000 (includes $ win bonus)
def. Mackens Semerzier: $8,000

Alex Caceres: $16,000 (includes $8,000 win bonus)
def. Cole Escovedo: $6,000

Mike Pierce: $36,000 (includes $18,000 win bonus)
def. Paul Bradley: $18,000

Aaron Rosa: $12,000 (includes $6,000 win bonus)
def. Matt Lucas: $6,000

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Attendance and Gate

MMAJunkie reports that UFC on FOX held at the Honda Center in  Anaheim officially drew 11,607 in attendance for a $1.07 million gate. 1,700 tickets were unsold and 1,743 were comps. The average paid ticket price was $108.70.

It was not a great event in terms of gate and attendance, but that was to be expected as the UFC purposely lowered the ticket prices to try and pack the event as much as they could to give the UFC on FOX event a great atmosphere. In terms of gate and average paid ticket price, it will probably be one of their lowest numbers for a domestic event with the caliber of fighters on the card.  These numbers reflect what typical Ultimate Fight Night or UFC on Versus events would do, though those have a considerably lower payroll and don’t typically have title fights with much smaller venues.  This event also had the benefit of being held in Southern California where Cain Velasquez won the HW title against Brock Lesnar and had the novelty of being the UFC’s first network TV event, so by those standards, not selling out has to be a bit of a disappointment.  On the other hand, the main event was going to be televised for free on Network TV and all prelims were streaming for free on Facebook, so it may not be as bad of a number as it seems.

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Ratings

MMAPayout reported this weekend that the UFC on FOX event on Saturday night averaged 5.7 million viewers (3.1 rating) and peaked at 8.8 million viewers. The demos were: M18-34: 4.3 (peak rating 7.19) and M18-49: 4.0.  This was the largest audience ever to watch an MMA event in the United States, breaking the record of 5.3 million (3.7 rating) by The Ultimate Fighter episode on Spike TV which featured Kimbo Slice vs Roy Nelson back in 2009.

Other notable high rating MMA shows include Ken Shamrock vs Tito Ortiz on Spike TV in 2006 which averaged 4.3 million viewers (3.1 rating) and UFC 75: Henderson vs Rampage in 2007 on Spike TV did 4.7 million viewers (3.1 rating).  The reason why the rating numbers don’t match the viewers is due to the increase of reach Spike TV has increased in the past few years.

On Network TV, the previous rating champ was the EliteXC Primetime event which featured Kimbo Slice vs James Thompson, which avaged 4.85 million viewers (3.0 rating).

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FOX TV Rating Breakdown (Quarterly):

- UFC on FOX (9:00 pm-9:15 pm): 5.25 million viewers

-UFC on FOX (9:15 pm-9:30 pm): 5.48 million viewers

-UFC on FOX (9:30 pm-9:45 pm): 7.09 million viewers

-UFC on FOX (9:45 pm-10:00 pm): 4.88 million viewers

- Overall: Average of 5.7M viewers watched the fight live or via DVR playback within the same day. (Nielsen)

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FOX TV Rating Notes:

- If you combine the FOX and FOX Deportes telecasts (one in Spanish, one in English), it would have received close to a 3.5 rating with 6.2 million viewers and a peak of 8.8 million and a M18-34 rating of 4.7. It is believed a peak close to 9 million was achieved combining both.

- The 4.3 rating in Males 18-34 beat every college football game this season except the LSU vs Alabama game on CBS.

- The 4.3 rating in Males 18-34 beat 65% of the playoff and World Series baseball games this season on FOX.

- The 4.3 rating in Males 18-34 was the third highest rated television show of the year for FOX Deportes.

- The show drew 1.7 million women over the age of 18.

- The median age of viewers for the telecast was 35 years old.

- The 5.7 million viewers was the most watched fight in broadcast on US television since HBO’s Lennox Lewis vs Vitali Klitschko back in 2003

- UFC programming delivered a total of 6.7 million impressions across all FSMG television networks.

- The peak of 8.8 million lasted as long as the fight did, which was 1 minute (fight started at 9:40 pm).

- By 9:45 pm, the viewership had dropped to 5.9 million. Kimbo Slice vs James Thompson peaked at 6.51 million and lasted for 10 minutes and 38 seconds. (Sports Illustrated) … about 25% of the audience had left at the end of the main event.

- UFC on FOX began with 5.2 million viewers and dipped as low as 4.4 million before viewership started to climb around 9:36 pm, as the fighters were starting to make their way to the Octogon. (Sports Illustrated)

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Fuel TV Ratings:

- Two Hour UFC Pre-Fight Show (4:00 pm-6:00 pm ET) averaged 77,000 viewers (0.21 rating) making it Fuel TV’s highest rated program of the year. The prefight show also drew an average of 58,000 viewers in the M18-49 demo, the largest since the network become nationally rated.

-The UFC prefight show ranked as a top 20 show in the time period for Men 18-34 (.29), performing about as well or better than widely distributed networks like History Channel (.31), USA (.25), SyFy (.19) and AMC (.13).  FUEL TV also performed well in the Men 18-49 demo (.31), close to or matching ubiquitous networks like Discovery (.36), Comedy Central (.35) and MTV (.31).

- The One-Hour UFC postfight show (7:00 pm – 8:00 pm ET) drew 37,000 viewers.

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FOX Deportes Ratings:

- Nearly 500,000 average viewers watched the event on FOX Deportes.

- The quarter-hour from 9:30 to 9:45 did about 900,000 viewers on Fox Deportes in Spanish.

- The Velasquez-dos Santos fight delivered a 3.9 coverage area HH rating, 487,000 viewers, and 352,000 A18-49 making it the highest-rated fight of any kind in Spanish language cable history.

- Saturday’s undercard coverage ranks as the second highest-rated fight-event in FOX Deportes history with a 3.4 HH rating, 365,000 viewers, and 237,000 A18-49 viewers.

- Saturday’s fight ranks as FOX Deportes’ highest-rated program since the Manchester United vs. Chelsea Premier League soccer match (5.0) on Sept. 18.

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Spike TV Counter Programming Ratings:

- Spike TV’s Saturday night telecast of “Dos Santos vs. Velasquez: Unleashed for the Heavyweight Title” between 9:00-10:00 pm ET drew 719,000 viewers and a 0.6 rating with Men 18-34. List of ratings for “Unleashed” episodes pre and post UFC on FOX are listed below:

- At 8:00 pm: Before UFC on FOX went live, “Unleashed” drew 923,000 viewers .

- At 10:00 pm:  After the UFC on FOX had gone off air, “Unleashed” drew 787,000.

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Brazil Ratings on TV Globo:

- The event peaked at 22M viewers in Brazil, and during the fight (1 minute), it reached a 20 rating and a 52% share (percentage of homes with TV’s). The ratings were above average for a Sunday morning. (Globo)

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FOXSports.com:

- Tallied 257,000 total live streams for the nine undercard matches, while all the UFC content during and around the event generated over 1 million streams.

- Other than Super Bowl related content, this was the biggest video event in FOXSports.com history.

Top Rated MMA Shows (Average Viewers):

- 5.7M viewers (8.8M peak), “UFC on FOX: Velasquez vs Dos Santos”, FOX (11/12/2011)
- 5.3M viewers (6.1M peak), “The Ultimate Fighter: Kimbo Slive vs Roy Nelson”, SPIKE TV (09/30/2009)
- 4.9M viewers (6.5M peak), “EliteXC Primetime: Kimbo Slice vs James Thompson”, CBS (05/31/2008)
- 4.7M viewers (5.9M peak), “UFC 75: Dan Henderson vs Rampage Jackson”, SPIKE TV (09/08/2007)
- 4.2M viewers (5.7M peak), “UFC: Ken Shamrock vs Tito Ortiz 3″, SPIKE TV (10/10/2006)

Top Rated MMA Shows (Ratings):

- 3.7 Rating, M18-34: 6.9, “The Ultimate Fighter: Kimbo Slive vs Roy Nelson”, SPIKE TV (09/30/2009)
- 3.1 Rating, M18-34: 6.0, “UFC: Ken Shamrock vs Tito Ortiz 3″, SPIKE TV (10/10/2006)
- 3.1 Rating, M18-34: 5.7, “UFC 75: Dan Henderson vs Rampage Jackson”, SPIKE TV (09/08/2007)
- 3.1 Rating, M18-34: 4.3, “UFC on FOX: Velasquez vs Dos Santos”, FOX (11/12/2011)
- 3.0 Rating, M18-34: 3.2, “EliteXC Primetime: Kimbo Slice vs James Thompson”, CBS (05/31/2008)

- What we can take from these numbers is how impressive Spike TV has performed over the last several years with UFC content.  The 3.7 rating with a 6.9 M18-34 rating is almost unheard of at the moment, and even the UFC on FOX couldn’t top that, although FOX has a bigger reach than Spike TV, which is the reason why viewership is higher for FOX with the same or lesser ratings.

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General Rating Notes:

- FOX scheduled the Velasquez vs Dos Santos bout to start at 9:40 PM, which was exactly when Stanford vs Oregon – a top 10 college football game – was going into halftime in order to acquire some extra viewers who may have been flipping channels.

- By starting at 9:40 p.m., if the fight went passed 3 rounds, it would go well past 10 p.m., when the local news was scheduled to start for FOX affiliate stations. At that point, a ton of new viewers would be watching the final rounds of what on paper expected to be an exciting fight a bump the ratings. A five round fight would have ended past 10:10, not accounting for reading the decision, nterviews, and wrap up, which would take you closer to 10:20.

- FOX was selling ads based on predictions of 4.5 million viewers, which means they easily met their goal (5.7 million). (Yahoo Sports)

- The strongest markets for the show were Las Vegas, Dallas, Phoenix, San Antonio, Tulsa, San Diego, Greensboro, New Orleans and Los Angeles. It aired in Las Vegas, San Diego and Los Angeles out of prime time.

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Storylines

- FOX Flexes Promotional Muscle for UFC

Sports Business Daily did a great story on the FOX’s promotional efforts heading into the UFC on FOX event.

The early returns have been strong, Fertitta said. The “UFC Primetime” preview show that Fox aired after its NFL telecasts two Sundays ago drew a 1.3 rating, which equates to about 2 million viewers. That about doubled the audience for similar UFC preview shows on Spike. Saturday night’s prime-time debut was close to sold out shortly after it hit the street, Fertitta said. Fox typically gets about $50,000 for a 30-second spot during its Saturday night programming, according to survey results published by Ad Age. ABC gets about $85,000 for spots on Saturday night college football.
…
While Fox Sports co-President Eric Shanks would not discuss specific rates for the one-hour, one-fight show, he said they exceeded expectations.
…
“The first fight out of the gate, there is tremendous interest,” Shanks said. “We had no problem selling at a good rate. And we haven’t even started the seven-year clock yet.”

-  Not Airing Guida vs Henderson Proves Costly for the UFC. Did they Have A Choice?

Guida vs Henderson was exactly the type of fight that would have drawn plenty of viewers for the UFC before the big HW Title matchup.  It had all the ingredients needed to build up a viewing fanbase and could have possibly served as their new version of Griffin vs Bonner, which propelled their popularity over on Spike TV.  It was an exciting and technical fight, which breath-taking back and forth between the two which resulted in a Fight of the Year candidate. It also lasted 3 rounds, which is exactly what was the dynamic needed to show to the new MMA spectators tuning in: a fight can last all 3 rounds or 1 minute, but it will be exciting either way.

The question is who’s call was this and did they have a choice? According to Ben Grossman from Broadcasting and Cable, “For those wondering, Fox did not have the rights to show the rest of the fights Saturday night on air, as Spike TV technically still owns those rights until the end of the year, so what turned out to be the best fight of the night – the one before the main event — was only available online.” I believe this is the reason why prelims, including the Guida vs Henderson fights were only shown to international viewers and on FOX Deportes, a Spanish broadcast.

-  Culinary Workers Union Picketing UFC Headquarters During Weekend

Over the weekend, the Culinary Workers Union was picketing UFC headquarters in Las Vegas and trying to mobilize people to send messages to FOX to cancel its TV contract with the UFC.  They have already made their voice clear sending a letter to the FTC regarding the UFC’s practices and also creating multiple websites highlighting Dan White’s past rants and vulgar language as well as “Unfit for Children” propaganda. The has also been activity by the union to back the anti-MMA legislators in New York as well as sending letters to major UFC sponsors encouraging them to drop the MMA promotion.

- Critiquing UFC on FOX Broadcast

Luke Thomas of MMA Nation had a great article on some of the things UFC and FOX can tweak in order to improve future broadcasts (10 Steps To Improving UFC On Fox Broadcasts) … Loretta Hunt gives her own opinions and suggestions on SI.com (Three thoughts on UFC on Fox 1). Having Dana White as an analyst in the post-fight wrap-up provided some cringe-worthy moments for fans, as both Thomas and Hunt mentioned. It has been a common complain heard from within the MMA media circle, how Dana White criticized Valasquez plan and questioned Dos Santos stamina, as he appeared nervous and angry at the outcome.

- Social Media Activity Backfires on the UFC

FightOpinion has done a great job documenting the Penn State sex scandal and how Forrest Griffin’s jokes on Twitter were not taken very kindly by various media outlets and anti- sex and child abuse organizations.  The Culinary Workers Union was also quick to point the controversy out on their anti-UFC website. Loretta Hunt was invited to NPR to talk about the matter. The segment’s title was “Misogyny in the UFC” (45 minute mark). Since

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Odds and Ends

- The UFC painted over the blood on the Octogon before going live on FOX, per FOX’s request.  Dana White said they wanted to go on air with a nice clean presentation package and that it had nothing to do with FOX reacting negatively towards blood on the mat.

- For a brief moment at the beginning of the UFC on FOX broadcast, FOX flashed the following message: “The following might be the most exciting live sporting event in the history of television, and it’s our duty to say: VIEWER DISCRETION IS ADVISED”

- Bellator purchased some ad spots during the UFC on FOX broadcast in the Florida market in order to promote an upcoming event.

- The next UFC on FOX event has been scheduled for January 28th, 2012 being held in the United Center in Chicago.

- The first UFC on FX event will take place on January 20th and will be headlined by Jim Miller vs Melvin Guillard. Sydney, Australia and Nashville Tennessee have both been rumored as potential sites to host the event.

- FOX Sports Media Group Chairman David Hill stated that FOX specials would be 90 minutes, airing from 8:30 to 10 p.m. on Saturday nights with two or three fights. The UFC on FX live cards will take place on Fridays and would be 2 hour shows. Fuel TV events will be 3 hours in length and will also air all prelims.

- UFC 2012 Target Schedule:  14 PPV events, 4 UFC on FOX events, 6 UFC on FX events, and a minimum of 6 UFC on FUEL TV events. The Ultimate Fighter will also have around 24 live events on FX, Friday nights.

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Mainstream Thoughts on UFC on FOX

- Notes And Thoughts About UFC On Fox (Broadcasting & Cable)

UFC on Fox could have gone better but it definitely could have gone much worse.  The fact of the matter is Saturday night showed that Fox is exactly what UFC needed, and UFC can be a major player for Fox, FX and whatever Fuel ends up being down the road, for a long, long time.

- Quick KO good or bad for UFC on Fox? (ESPN)

Fox Sports chief executive David Hill admitted he and president Dana White discussed the “tactics” of booking a single, heavyweight fight in hindsight, but added he was overwhelmingly satisfied with the product.
…
“It absolutely delivered everything I hoped it would,” Hill told ESPN.com. “I spoke to Dana and maybe, tactically, Dana didn’t play it the right way. But this is what you get in this sport. This is world heavyweight champion action.”

- UFC’s Fox debut neither home run nor strikeout (Yahoo)

Saturday night was a similar step, just on a larger scale. Instead of Spike TV, it was the Fox network. Instead of two unknown scrappers, it was the two best heavyweights in the sport..
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Unfortunately, MMA is unpredictable. As president Dana White said over-and-over in promoting the Cain Velasquez vs. Junior dos Santos heavyweight title match, the company’s live network TV debut on Fox, it could end in 30 seconds, or it could go five rounds.

- UFC’s network TV debut a success, despite lasting all of 64 seconds (Sports Illustrated)

That doesn’t go just for the Fox telecast, either. While the early undercard was playing out to a smallish crowd of diehards inside the arena, there was a brightly lit red carpet set up outside, where celebrities from MMA to the TV B-list — most from Fox programs, naturally — passed through a gauntlet of cameras, asked the same questions by every microphone wielder, smiling the same smiles for every lens. Inside, once the preliminaries were out of the way, the building had filled with a deafening roar, the octagon mat was cleaned of undercard blood stains. Don’t want to make a bad first impression with squeamish new viewers.

- UFC on Fox: What the Media Is Saying (Hollywood Reporter)

The bout lasted a little over a minute, with Dos Santos knocking Velasquez to the ground with a punch to the temple and a beat down that followed until the referee stopped the fight.
…
Reaction to the broadcast ranged from the humorous to the general consensus that Fox has a winner with the franchise.

- A few thoughts about tonight’s UFC fight … (San Francisco Chronicle)

No mercy, indeed. The heavyweight Junior Dos Santos/Cain Velasquez fight ends with Dos Santos knocking out Velasquez after just over a minute in the first round. I would say that was the second-worst case scenario with UFC’s historic first fight on network TV. (Worst case scenario by far was a gruesome injury.)

- Fight Night in America (Esquire)

The hype on Fox was nothing short of lunatic. Dana White, the bald genius UFC president and probably the smartest sports executive in the country, wore a black suit. So did Brock Lesner, and so did Alistair Overeem when they cut to him octagon-side, which doesn’t sound so good, as if we were going to look back in thirty years on them as the new Ali and Frazier, which doesn’t either. Junior Dos Santos made his ring walk to “Gonna Fly Now,” which is the theme from Rocky. Cain Velasquez walked into the cage, petrified, and they stared at each other and they kicked some little kicks and then, a minute into the kicking and the staring, Dos Santos sent a loopy and rather laughably slow right hook to Velasquez’s left ear. Velasquez dropped to the canvas and then Dos Santos went and hit the shit out of him eleven times. The referee took his sweet time to stop it. It was over. There was no blood. It wasn’t very exciting.

- Ultimate fighting is too brutal to be considered a sport, even if it’s on TV (Washington Post)

Excuse me, but ultimate fighting is not safer than cheerleading. I’ve watched some ultimate fighting. It’s a brutal sport. In fact, I don’t think ultimate fighting is a sport at all. It’s violence presented as entertainment..
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By showing fights on Fox, UFC is trying to turn ultimate fighting into a regular sport and to make kicking someone in the face as normal as shooting a free throw. Close to 6 million people watched the Saturday night fight. Fox plans to show more ultimate fighting in the next few months.

- Ultimate fighting is too brutal to be considered a sport, even if it’s on TV (Deadspin)

I’d planned to write something about the Cain Velasquez vs. Junior dos Santos fight today. But the fight lasted all of 64 seconds. Gotta feel for anyone who sat through eons of buildup only to make for the suds and miss the action. The UFC’s debut on Fox was a flop. A disappointment on a grand scale. A few leg kicks from Velasquez, one overhand right from Dos Santos and that was the end of it. Dunzo. The card in its entirety.

- UFC proves it’s here to stay (The Globe and Mail – Canada)

Rarely sticklers for journalistic purity, Fox used White himself as an analyst (Imagine Gary Bettman as the star of Coach’s Corner). Even as the main card tanked with headliner Cain Velasquez succumbing in just 64 seconds to challenger Junior Dos Santos, White and co-analyst Brock Lesnar kept pitching the gospel. White savaged Velasquez’s passivity. “I don’t understand why Cain wouldn’t go in for the shot, pressure him and not stay in his range. But what the hell am I? I’m not anybody’s coach or trainer.”
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Right. Resistance is futile. UFC is here to stay. Or, as our mother used to say, until somebody loses an eye.

- UFC Was Never Meant For Network Television (IBTimes – New York)

It’s not the management of the UFC that will prohibit the sport from moving forward. The UFC will continue to expand its brand name recognition, and people will continue to tune in and watch the big fights. Mixed-martial arts isn’t going anywhere anytime soon, and, therefore, UFC won’t be going anywhere either. But as for UFC being part of a dinner conversation in most American homes, that will never, ever happen. The sport is too volatile on too many levels.

- Dos Santos claims Velasquez’s UFC belt in Fox show (Chron)

The brief fight was the only event on a one-hour broadcast on Fox, which signed the UFC to a seven-year broadcast deal earlier this year. Any newcomers to the sport who tuned in got a taste of MMA’s violence, but not much else — particularly if they returned late from a commercial break.
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Or even if they blinked.

- All Up in the Videos (The Classical)

And that’s how a typical display of MMA’s chaotic nature and dos Santos’ signature power were recast as a bad, stupid thing—the natural result of Velasquez fighting foolishly against a one-dimensional foe—which in turn recast a heavyweight title fight as an anti-climactic scuffle pitting an idiot against some non-athlete. At the risk of belaboring things, the person doing this was the president of the UFC, whose job is supposed to be spinning any result into a story that makes the viewers care. I’ve followed the sport for over a decade, and even I was starting to wonder if I should keep caring.

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Social Media – Sports Business Circle Reactions After KO

- Michele Steele: “Huge night for UFC debut on Fox — hard to believe that UFC started w $2M investment 10 years ago, now $2 BILLION brand”

- John Ourand: “Wow. A knockout in the first minute?? Bad news for Fox. … What’s Fox’s filler programming now?”

- Bill Simmons: “UFC loses its network virginity to Fox and it’s over in under 90 seconds. Just like real life!”

- Darren Rovell: “UFC had the same problem years ago when ESPN put Chuck Liddell on SportsCenter & ESPN Mag. Then he lost in minutes.” … “If you’re a UFC newcomer, how do you feel after tonight? 46.2% less likely to watch, 32.4% more likely to watch, 21.4% have to see more.”

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Twitter and Google Trends

Social Media on that Saturday was quite peculiar. There were literally no sporting events trending on that day (usually some of the hottest trends occur during sporting events). “Bendo” and “Clay Guida” were all trend topics for the night.  In fact, airing all of the prelims on Facebook seemed to have hurt the buzz for the show as these were the only two topics to trend before the UFC on FOX broadcast.  During the event, #UFCONFOX, “Cain Velasquez“, and “Dos Santos” were all trending along with “Pacquiao” and “Marquez“.

In Google under the “Hot Searches” section, “Cain Velasquez vs Dos Santos” (#17) and “UFC on FOX” (#20) were the only two items in the top 20 relating to the event on November 12 while “Manny Pacquiao” and “Marquez” were 4th, 8th, 10th, 11th, and 14th on the list.  College Football’s “Oregon vs Stanford” was #16.

From looking at some of these social media trends, it can be speculated that having no fights on a TV platform in addition to the Pacquiao fight and the head-to-head college football game affected some of the UFC’s buzz going into the event.  It can also be assumed that although the ratings were good for Fuel TV’s standards, it did not help build up and carry momentum into the UFC on FOX event.  Facebook fights still appear to have very little effect on getting more viewers to order or watch the fights at this point.

Airing the fights on FX and carrying the audience over to FOX on their next event should pay dividends for them and create more social media buzz that could bring more eyeballs into their next broadcast.  Social Media was heavily underutilized for this event.

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Sponsor, Promotion and Marketing Watch

- UFC on FOX Sponsors in the Cage: Uncharted 3 (PS3 Video Game), Muscle Pharm (Supplements), Xyience (Sports Drinks), SafeAuto (Insurance), Marines, G’zOne (Casio Phone), Bud Light (Anheuser-Busch), UFC Undisputed 3 (Video Game- THQ), and the main sponsor of the event was Dodge (US Automobile).

UFC on FOX TV Spots: Assassin’s Creed: Revelations (video game), Tapout (with kids practicing MMA inside a cage, which was an interesting choice of a spot to expose to the mainstream audience considering recent debates on that subject), Sherlock Holmes: A Game of Shadows (movie), UFC 139 promo, Jack in the Box,  AMPM, & a GOOD number of local spots.

Cain Velasquez Sponsors: Dethrone (apparel), Milwaukee Tools, MicroTech, Oak Grove Technologies, Lugz (footwear), BSN (supplements), California Wheels, and AKA (gym).

Junior Dos Santos Sponsors: TOTVS, Gillette, Renato Saraiva, Analise, Team Nogueira (gym), Pretorian (apparel), Siciliano, Bony Acai (sport drink), and his own brand Cigano… all were Brazilian based sponsors.

Zuffa, LLC sued New York state on Tuesday for its ban of mixed martial arts in its state citing it as unconstitutional under First Amendment grounds. Zuffa, along with several notable UFC stars, are named plaintiffs in this lawsuit.

The Complaint is over 100 pages in length and the Causes of Action begin on page 84 after an extensive facts section.

Via the Wall Street Journal:

Zuffa LLC, which owns the UFC, filed a lawsuit Tuesday in U.S. district court against New York Attorney General Eric Schneiderman and Manhattan District Attorney Cyrus Vance Jr. seeking a declaration that the ban violates the First Amendment.

While the arts are protected, no court has ever directly confronted the question of whether athletes have a First Amendment right to be seen in action, said Barry Friedman, a professor at New York University School of Law who is representing the plaintiffs.

A key to Zuffa’s argument is showing that New York’s ban suppresses the content rather than it looking to the safety of the sport. (Via NY Times):

“The linchpin is convincing the court that the ban is aimed at the content of the entertainment as opposed to the safety of the fighters,” said Tom Kelley, a partner at Levine Sullivan Koch & Schulz. “Attempts to regulate entertainment based on its violent message have been largely unsuccessful.”

Lawyers interviewed in the NY Times article point to a recent Supreme Court ruling which struck down a California law banning certain video games the law deemed violent on First Amendment grounds. Zuffa attempts to make similar arguments regarding the governmental ban on MMA.

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Payout Perspective:

We will definitely have more on this lawsuit as we read through and analyze the causes of action in this 100 plus page Complaint. This is an interesting way to work around the New York ban. The causes of action are unique in how they argue the right for MMA in New York. If nothing else, the lawsuit could contribute to law in the area of freedom of speech and First Amendment rights.

Some interesting movement in the Chapter 11 Bankruptcy case of sport drink manufacturer Xyience. Last week, Forbes reported that Fertitta Enterprises was sanctioned by the Bankruptcy Court in Nevada for failing to provide certain information previously requested by the Bankruptcy trustee.

The sanctions stem from Fertitta Enterprises’ failure to provide e-mails from its chief financial officer which claim that it orchestrated the funding for Xyience during its bankruptcy proceedings. In addition to the sanctions, a motion for summary judgment has been filed by the trustee seeking an order that the Fertittas pay back over $945,000 and that Zyen, LLC does not have a security interest in Xyience assets.

Zyen, LLC loaned $12 million to Xyience in December 2007. The loan was secured by all assets of Xyience. Zyen, LLC was controlled by the Fertittas. The trustee alleges that this is a “loan to own” scheme. It occurs when a distressed entity must borrow money which it cannot repay and default is assured. The loan is secured by the assets of the entity so the lender will be able to foreclose and end up owning it.

Via The Las Vegas Review Journal:

…Chicago-based trustee David Herzog contends that the $12 million that Fertitta entities loaned Xyience in 2007 as it faltered financially came with such heavy-handed terms that it scared off potential buyers. As such, he (the trustee) will try to recoup damages that could lead to “potentially significant recoveries,” as described in court papers, at a trial now scheduled to start next spring.

Via Forbes.com:

In an Oct. 28 order, U.S. Bankruptcy Judge Lloyd King held that William Bullard, the chief financial officer of Fertitta Enterprises and a manager of Xyience, failed to comply with discovery requests for documents related to the company’s bankruptcy.

In addition to Bullard’s role with Fertitta Enterprises and Xyience, he is CEO of the Gordon Biersch Brewery/Restaurant chain. It is on the Gordon Biersch computer system where e-mails were found related to the Xyience bankruptcy.

More from Forbes.com:

The bankruptcy trustee lawyer, which oversaw the disposition of the 2008 Xyience bankruptcy, accused executives from Fertitta Enterprises of lying about the existence of e-mails which would have detailed how Fertitta Enterprises took control of Xyience with a $12 million loan.

Those documents include an e-mail to Lorenzo Fertitta one day before his firm lent the $12 million to Xyience, disclosing a potential $150 million buyout offer from Cott Corp. The buyout could have allowed Xyience to repay investors, who instead lost everything when the company defaulted and the Fertittas seized its assets.

In addition, the day that the Fertittas lent Xyience $12 million, it paid their Zuffa Marketing $4.5 million and paid another $1 million to Fertitta Enterprises.

The bankruptcy trustee filed a summary judgment motion seeking an order on two of the causes of action in its case against Fertita Enterprises and Zyen, LLC. The trustee is seeking an order which asks the court to order Fertitta Enterprises to pay the trustee in excess of $945,000 as a result of the alleged “loan to own” scheme. In addition, the trustee seeks to avoid the security interest granted Zyen, LLC in the transaction with Xyience. Thus, the trustee would not have to repay Zyen, LLC first if it receives money to distribute to creditors. A hearing on the motion for summary judgment will be heard on December 9th.

We will continue to monitor the case as it develops and report on any other court filings.

Since the initial bankruptcy, Xyience’s assets were purchased in a Chapter 11 proceeding and is one of the UFC sponsors. The current Xyience company has no relation to the bankruptcy proceedings.

The Sports Business Journal reports on Fox’s promotion in anticipation of the big debut of the UFC on Fox Saturday night. Notably, Lorenzo Fertitta stated that Zuffa will lose money Saturday night as it is virtually giving away an estimated $10-15 million PPV payday.

The UFC hopes that Saturday night’s fight will create “100,000 new pay-per-view buyers.” Despite forgoing the short term monetary gain in hopes of future success, Fox promises a “brand bomb” for the UFC in promoting the fight on Saturday night. Aside from its promotion across all of its networks, Fox is producing a two-hour prefight show on Fuel which will include “red carpet arrivals and interviews with celebrities, fighters and (Dana) White.”

Fertitta indicated to the USA Today that Saturday night’s fight was “a huge commercial” for future UFC events. The SBJ indicates that the UFC is giving up an $10-15 million PPV payday by featuring JDS-Cain on free television. Fertitta believed that this fight would garner about 800,000 PPV buys although other estimates had it at 400,000 buys. Its likely that the estimates reflect optimistic and conservative viewpoints for this card. Even if you take the 400,000 buys, its estimated that Zuffa would take a $8-9 million cut.
The promotion of the UFC on Fox has been most visible during the MLB playoffs and the NFL on Fox. Last week’s UFC Primetime on Sunday did remarkably well considering it went up against NFL games. NFL announcers are still trying to get used to promoting the UFC. Notably, during the Cowboys-Seahawks game yesterday, Chris Myers talked about Cowboy RB DeMarco Murray’s MMA training as helping with his NFL conditioning. As you may recall, Murray stated he would wear a UFC logo on draft day if he was voted to be on the cover of EA Sport’s NCAA Football game.

Some notable takeaways from the article (subscription required):

-Fertitta stated that Spike TV was a “launching pad” and Fox as “a bigger and better platform that could elevate the brand.”  A little jab at Spike TV which will have Bellator on its network in 2013.

-Fox typically gets $50,000 per 30-second spot for Saturday night programming according to Ad Age. By comparison, ABC, which airs college football Saturday night, receives $85,000 per 30-second spot. No word on how much Fox is charging for this Saturday night although Fox stated that it “exceed expectations.”

-Dodge will be on the mat as the primary sponsor. Anheuser-Busch and the U.S. Marines will also be sponsors. Warner Bros. and 20th Century Fox also bought spots for ads during the broadcast. These will likely promote movies for the upcoming holiday season.

-New sponsor deals will start in 2012. So, its unlikely we’ll see new sponsors or “one-offs” Saturday night.

Payout Perspective:

To say that this week is a big week for the business of MMA (and the UFC) is not hyperbole. Saturday night’s fight is a major stepping stone for the UFC and could determine the future of the business. Fox has been in full force in promoting Saturday night and it would be a major disappointment if the viewership did not reflect the amount of effort and money it is taking to promote this fight.

Standard and Poor’s has maintained Zuffa’s credit rating at “BB” based on the belief that the company’s strong EBITDA margin and healthy cash flow are sustainable over the “near-to-intermediate term” as Zuffa continues to grow and benefit from it’s well-recognized (UFC) brand and dominant market position.

On the other hand, the following S&P concerns kept Zuffa’s credit rating from being upgraded:

- Risk of revenue and EBITDA volatility given the company’s primarily event-driven business model

- Vulnerability to changing consumer preferences and susceptibility to variability in discretionary spending

- Management’s aggressive financial policy

- Although the UFC has a strong fan-base, in order to maintain their advantage, they need to continue to develop fighters that appeal to the 18-34 demographic.

- Preserve current regulatory acceptance of the sport. Fatal injury or change to the rules and regulations governing the sport and legal status could have meaningful impact to the company’s business model and long-term viability.

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Report Summary

UFC’s seven year TV deal with Fox Sports Media Group, replacing Zuffa’s current deals with Spike TV and Versus, offers more stable and favorable economics over the term of the TV deal in hope of potentially reducing Zuffa’s dependency on the more-volatile event based revenue. Zuffa should be able to deliver more content and potentially expand it’s audience through the vast distribution FOX provides, thus exposing content to a higher potential viewership base. During the first half of 2011, revenue and EBITDA were down against the comparable period in 2010. Reasons given: One less PPV event, as well as significant fighter injuries which contributed to lower PPV buys. Despite a weak first half of 2011, the report expects Zuffa’s total debt to EBITDA and coverage measures to remain in line with the rating over the term. It is expected that Zuffa owners will continue to pursue moderate distributions over time as the company continues to grow, which will likely preclude any meaningful sustained improvement to Zuffa’s financial risk profile. Nearly 75% of Zuffa’s total revenue is event based. The majority is composed of PPV buys and ticket sales. Remaining 25% revenue is composed of live and taped television broadcasts, sponsorship, merchandising, licensing, and content distribution deals. Due to the FOX television deal, it is anticipated that TV broadcasting may become a larger source of revenue, as they see this revenue stream as less volatile than event based revenue. Zuffa has been successful in expanding sponsorships and merchandising, which improves stability and strengthens their business model. Zuffa’s expansion plans are seen as a positive due to the potential of growing revenue from a more diversified fan base and broadening the acceptance of MMA. UFC expansion into the UK  several years ago was extremely volatile, and they have since taken a more cautious and measured approach in international expansion. Interestingly enough, the report points out that Zuffa could face increased labor costs in the future if fighters organize (union) and seek a higher share of revenue, which is the case for most major sports in the U.S. The acquisition of Strikeforce (along with the WEC) is believed to have strengthened the UFCs already dominant market position, as it continues to increase the number of fighters and title fights under the promotion. Liquidity: Zuffa has adequate sources to cover its needs over the next 12 to 18 months. Sources include cash flow generated from strong operations and it’s revolving credit. Uses of liquidity include minimal capital spending needs, modest amortization, acquisitions, and distributions. Debt: Zuffa had only $1 million of availability under its $50 million revolving credit facility as of June 30, 2011, which expires in 2012. $425 million term loan due in 2015. Payments for taxes are primarily distributed directly to the owners and additional dividend payments are limited by a restricted payment basket under the credit facilities. The expectation is that owners will likely continue to pursue max allowable distributions under the credit agreement.

Zuffa Credit History

November 2007 – S&P Cuts Zuffa Rating, BB to BB-
July 2008 – Zuffa Rating Goes Negative to Stable
July 2009 – Cuban Now a Zuffa Bond Holder
October 2009 – S&P Re-Affirm BB-, Slide Recovery Rating Down
December 2010 – S&P Raises Zuffa Rating, BB- to BB
August 2011 – Zuffa Maintains “BB” Credit Rating

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Payout Perspective

Typically, a rating of “BB” implies that Zuffa is less vulnerable in the near term, although it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions, which can result in failure to meet its financial commitments. On the other hand, it’s a credit rating of “stable”, which is not a bad place to be for a company who’s core business model is so volatile and can be affected by many market variables.

The international expansion efforts and the seven-year $100 million FOX TV deal help tremendously in bringing more stability into the UFC’s business model, but with that said, it still only accounts for 25% of their total revenue. In this regard, not much has changed since 2010 when Zuffa was able to match the event based revenue growth with the non-event based revenue growth, so we still have a 75-25 split in overall revenue. The hope here is that through the new TV deal, more mainstream exposure can come to the brand by creating more PPV draws, and opening the door for more stable revenue opportunities which can help offset the volatile nature of PPV based core business model.

The report points out that revenue and EBITDA for the first half of 2011 is down compared to the same period in 2010, though one less PPV was accounted for this year. The main reason given for the decline was injuries to UFC stars.  The problem with solely blaming injuries and correlating it to revenue is that you hope next year won’t be as bad but as we are starting to see on a year-to-year basis, injuries are part of the sport.  Fights and training camps take a toll on the fighters, so having a PPV star such as a GSP or Brock Lesnar can really only give you about 2 fights per year taking all the variables into account.  Injuries is an unknown that cannot be controlled or correctly estimated beforehand, so it will be interesting to see how if injuries becomes a hot topic again in 2012, as it has been for the past 2 years.

If injuries is the main component of declining PPV buys, then that brings up another issue.  It means that fans are only willing to pay to see fighters that they deem worthy of their hard-earned money. It also shifts the drawing power to the fighters instead of the UFC brand and product they offer.  It means MMA may not be enough anymore to get anyone outside of the MMA hardcore fanbase to tune in, and I’m sure that’s something the UFC hopes to address with the exposure the FOX TV deal brings along with its vast distribution platforms.

There has also been a lot of talk this year about the UFC or MMA peaking or plateauing, and pointing out declining PPV buys and TV ratings as a quick and easy measuring stick.  Oddly enough during a year when we’ve seen TV ratings decline or hit low points for the UFC and Bellator, both were able to sign TV deals with major media groups.  UFC signs a huge TV deal with FOX that not only gets their full support and puts them on FOX, FX, and Fuel TV, but it can now be linked to FOX and become synonymous to other mainstream sports they televise. FOX has been heavily promoting the first UFC on FOX event on all their high viewership sport programming including MLB’s World Series and Sunday NFL games. Bellator was just purchased by Viacom and looks to be moving on to Spike in 2013 after only getting roughly 150-180K viewers on average per event on MTV2. Again, Spike re-iterates that they will be sticking with them even through hard times as they have done with other programming.  They find themselves in a similar situation when the WWE left Spike and TNA was picked up as their replacement.  After a few up and down years, TNA has been getting great ratings for Spike as of late, a formula they hope to reproduce with Bellator after the UFC leaves at the end of this year.

What we are seeing here is that these media groups believe MMA has a ton of potential left, but at this point, it makes more sense for these media groups to either own or sign a very intimate contract with a promotion rather than having a licensing fee agreement for MMA programming such as Showtime, Spike, Versus, and CBS have done in the past.  Is more mainstream MMA content what we need for ratings and PPV buys to kick back up again or will it just add to the ever-growing free MMA content anyone can get from various TV and media channels?  Will an adverse effect shift UFC’s business core to be more TV dependent in the next few years? Can you really sustain a PPV core model in the long run? I have a feeling these questions will be answered in the next 5 years, as the FOX and Spike TV deals run their course.

It’s not realistic to expect that the UFC will outdo itself year-after-year, but it will be interesting to see how it can push itself off a potential stagnant stage and onto that next level as they have shown in the past with the Spike TV deal (TUF), the acquisition of PRIDE/WFA/WEC, and now signing the major FOX TV deal.

MMAPAYOUT QUICK THOUGHTS:

- Zuffa has significantly drained their revolver, which makes you wonder what kind of burn rate/overhead they have.

-The other interesting tidbit is Zuffa’s dividend distribution policy. On one hand, some people think its smart/prudent to protect your gains/investment. On the other hand, some people say if you really believe in this company long term and its a business your going to keep, why would you cash out all the money instead of putting it back into the company.

The UFC announced its bonuses for fighter tweets (via MMA Junkie). This past summer, it announced it would hand out quarterly bonuses for UFC-Strikeforce fighters for maintaining a twitter account.

Anderson Silva, Antonio Rodrigo Noguiera and Demian Maia each won $10,000 for being multiple winners in different categories. Silva, Big Nog and Maia won in “most followers” and “biggest percentage of growth in followers.”

Cristiane “Cyborg” Santos won $5,000 in the most followers category and Paulo Thiago won $5,000 for the biggest percentage of growth in followers.

In the “Most Creative” category, Joe Lauzon, Ben Henderson, Forrest Griffin and Joseph Benavidez earned $5,000 each.

Via MMA Junkie:

For the purpose of the UFC’s Twitter bonuses, all UFC and Strikeforce fighters are divided into four separate categories based on the number of followers they have at the beginning of the scoring period. The tiered system allows fighters such as Santos (13,000-plus followers) and Maia (94,000-plus followers) to compete along side superstars such as Silva (839,000-plus followers) and Nogueira (281,000-plus followers).

Payout Perspective:

As most can probably deduce, the Brazilians earned their bonuses based on UFC 134 Rio. Santos has not fought since June but is defending her title in December. It would be interesting to know what readers think of the most creative twitter winners.  Did the UFC get it right?

Are the bonuses less than it would have to pay a PR/Marketing agency? It certainly is a unique way to promote the UFC and Strikeforce. It also allows each fighter to create their own brand under the Zuffa umbrella. Zuffa has embraced social media and to have its fighters essentially serve as marketers for the company is very creative. It would be difficult to quantify and measure the value of Zuffa fighters tweeting but it definitely something to monitor next quarter.

And as others have done reporting on these twitter bonuses, you can find us at:  Jason Cruz (@dilletaunt), @MMASupremacy and @MMAMetrics