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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.

DISCLAIMER

The information in this post is opinion only. In addition, and because this is my opinion, it is not intended to be (and is not) legal advice or an advertisement for legal services. This post provides general information only. Although I encourage interested parties to contact me on the subjects discussed in the article, the reader should not consider information on this site to be an invitation for an attorney-client relationship.  I disclaim all liability in respect to actions taken or not taken based on any contents of this post. Any e-mail sent to me will not create an attorney-client relationship, and you should not use this site to send me e-mail containing confidential or sensitive information.

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.
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“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.
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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

MMA Junkie reports that Dana White is taking over the company’s negotiations for a new deal with Showitme. Lorenzo Fertitta was the lead in the negotiations prior to Ken Hershman leaving Showtime for HBO.

White called Hershman a “deal blower” in an MMA Fighting interview with Ariel Helwani. With Hershman out of the picture and Showtime wanting to continue in the MMA business, White stated the negotiations “went really well.”

Payout Perspective:

This is an interesting development as most believed that Zuffa/Strikeforce-Showtime would mutually end its contractual relationship when the existing agreement ended. Perhaps Zuffa sees Showtime as a network it could keep Strikeforce Challengers or a “Challengers” type series if Strikeforce dissolves. Or, he wanted to meet the new team in charge of Showtime to gage a potential competitor in the MMA business. With UFC content heading to Fox, a contract with Showtime would mean Strikeforce will continue in 2012. But, with most of its top fighters rumored (or already in the organization) to be in the UFC, only Strikeforce Challengers may survive.

News broke last week that the UFC was planning to move the its PPVs back to a 7pm/10pm start time starting with December 30th’s UFC 141. In April at UFC 129, the UFC moved the start times up to 6pm/9pm to accommodate the east coast viewers.

In Jason’s perspective yesterday, he asked the question, “It would be interesting to know if the breakdown in PPV buys this year led the UFC to conclude that the 6pm start time did not influence PPV buys“.

I wondered the same thing, so I though I’d take a closer look at the numbers and try comparing buyrate averages leading up to the April 30th change to the subsequent events that followed.

So here I compared the buyrate averages from the 7 events prior to the change to the 7 events that followed.

UFC 121 to 128 covered the period between November 23 2010 and March 19 2011. The estimated average number of buys over this stretch was approximately 576,000. In comparison, UFC 129 to 135, which covered a time period between April 30 2011 through to September 24 2011 had an estimated 414,000 buys. That’s a decrease of 28% after the start time was moved up to 6pm/9pm at the end April.

NOTE: If we exclude UFC 121, we see a drop of approximately 17% after the change to 6/9pm (498k pre/414k post)

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Payout Perspective:

It’s hard to say for certain if this is the primary reason for the drop. There was a rash of injuries and health issues in the spring which effected main events and many argue that an over saturation of the product is causing consumer fatigue. But the move by the UFC signals they feel strongly that the change is having enough of an impact on their product that they are willing to revert back to the original start time less then a year after making the change.

Broadcasting and Cable reports that Showtime sports head Ken Hershman is leaving to take the vacant HBO Sports opening. Hershman will become the president of HBO Sports replacing Ross Greenburg.

Hershman will start his new position in January 2012.

What does this mean for the future of MMA on Showtime? Strikeforce CEO Scott Coker stated that he has talked to Showtime officials and the network wants to continue with MMA programming according to a report from MMA Junkie.

Via MMA Junkie:

Coker said the much of the same executive staff will oversee the remaining events Strikeforce owes to Showtime, which comprise three major events and three of the promotion’s Challenger series through February 2012.

Coker said it was possible that should Showtime renew, a revised TV deal could see fewer Strikeforce events on the channel.

Showtime has not named a replacement for Hershman.

Payout Perspective:

Does Hershman’s departure mean that Strikeforce is closer to extinction? Or, will Hershman’s departure mean Strikeforce gets a stay of execution? Earlier this week, MMA Payout made a compelling argument that Zuffa had muted any chance for Strikeforce success. Hershman did bring MMA to Showtime but Dana White has not been a fan of Hershman. If Showtime would like to continue programming MMA, Hershman’s replacement must have the same interest in the sport and see it through. If White decides to dissolve Strikeforce, it will be interesting to see if Showtime will continue to pursue MMA programming.

Zuffa created a subsidiary called Forza LLC to control Strikeforce who was taken over from Silicon Valley Sports and Entertainment in March of this year. Since then, there’s been much debate as too whether Zuffa/Forza will continue to operate the promotion or just kill it off.

Strikeforces’ television contract with Showtime expires mid-February 2012 and both sides have been relatively quiet as to the future the promotions programming on the network. However, UFC President Dana White recently commented on the Strikeforce/Showtime situation at the UFC 135 pre-fight press conference:

“Who knows what’s going to happen? The way this thing works is, it depends on Showtime. The ball’s in their court. They need to decide whether they want to keep Strikeforce around or not”

Showtime has yet to comment on their plans moving forward. They do have an option to extend the deal through 2014, however, the ball that’s been left in their court doesn’t have much of a bounce left.

Over the past 5 months Strikeforce had their top draws cherry-picked by the UFC, an impressive list that includes former Strikeforce heavyweight champ Alistair Overeem, former welterweight champ Nick Diaz and Strikeforce light heavyweight champ Dan Henderson. It’s almost certain the Strikeforce lightweight champ Gilbert Melendez will join them. By hollowing out the promotions champions, Zuffa’s actions speak louder then words and Showtime should be getting the message now loud and clear.

So is there even a business case left for keeping Stikeforce around in 2012? Using the publicly available data we took a closer look at the performance of the two Strikeforce ownership groups, Silicon Valley, and Zuffa/Forza. We sampled data from the last 9 events under Silicon Valley ownership, between October 9 2010 to March 25 2011 that included 5 major tier 1 events and 4 smaller tier 2 Challengers events. We compared the average TV Ratings, Attendance, Gate and Payroll to the first 9 events under Zuffa ownership, between April 1 2011 and September 23 2011 that included 4 major tier 1 events and 5 tier 2 events.

Payout Perspective:

In the midst of losing their top talent, the rough estimation is that Strikeforce has seen TV ratings dip 5%, attendance drop 32%, live gate profits down 11% and an increase of 26% in fighters payroll since Zuffa took control in March 2011.

From Showtimes point of view, the ratings are stagnant and Zuffa is (or has) impeded the ability for Strikeforce to improve upon their ratings. Showtime is drawing approximately 2.5 times more viewers with boxing programming then with Strikeforce. M-1 Global, who also broadcasts MMA events on Showtime will air their next to last event on October 14th. With no word on a Showtime/M-1 contract renewal, perhaps Showtimes focus will shift solely back to boxing leaving the MMA programming by the wayside.

For Zuffa, they’re in a position where they have just signed a huge network television contract for the UFC with FOX, which includes distribution on the cable channels FX and Fuel TV. Plus, Spike TV appears set to continue broadcasting UFC content, counter-programming or not, throughout 2012. So for Zuffa’s primary brand there’s no shortages on the television front. There has been zero push for Strikeforce since the ownership change and none look to be in sight. The numbers aren’t terribly good and there is no momentum, I see little benefit for Zuffa to continue their support for Strikeforce. It’s plausible they would continue to broadcast Strikeforce on Showtime in an attempt to help limit potential competition but I think if Showtime is to continue with MMA programming, it won’t be under the Zuffa/Forza/Strikeforce banner.

One important indicator as to how popular a product or service is at a given time with the general public is to measure the size of their Internet audience, or how many visitors their website receives.

We decided to take a look at website traffic statistics for UFC.com from the various leaders in the website analysis business. The hope here is get some better insight into the UFC’s popularity trending over the past year through the promotions online presence.

It’s important to keep in mind that data from these analytic sites isn’t 100% accurate, but it does expose some useful directional trends.

First we’ll look at the data from a Quantcast, who’s a media measurement and web analytics service that allows users to view audience statistics for millions of websites:

From the Quantcast measurements we see a fairly steady decline in traffic over the past year. In the latter part of 2010 the site traffic was trending around the million user mark. In early 2011, those numbers dropped off substantially and have since leveled out at around 500k over the summer.

Next is some analysis on the site from Google Trends. Google’s tool gives you insight into the traffic and geographic visitation patterns of popular websites and also allows you to compare data for up to five sites. We’ll simply look at just UFC.com:

With Google Trends we looked at the data up from the start of 2011 until August. Here, we can also see a decreasing traffic pattern emerge, albeit at a lesser rate then what Quantcast reports.

Keep in mind here, the differences we see in the amount of visitors reported by both Quantcast and Google is actually normal because they use different sources of information to build their measurements. What’s important here is that despite those differences there’s a consensus between the sites that visitor traffic is trending down.

Another web analytics service we looked at was Alexa, who’s toolbar plugin collects data on browsing behavior. Alexa takes all the websites in the world, and ranks them – putting them in order by popularity. They also measures web traffic on almost every website on the internet through their toolbar plugin:

With Alexa, we looked at data over 1 full year (Sept.2010-Sept.2011). Alexa doesn’t report the amount of visitors like Quantcast and Google, instead they estimated the percentage of global internet users who visit a website. Keeping in line with Quantcast and Google reports, Alexa also indicates a drop in visitor traffic over the past year.

So here we have three different independent analytic services that are all in one way or another indicating a decline in visitor traffic for the UFC.com website. It’s really no surprise though as these results are indicative of the kind of 2011 the UFC has had with PPV buyrate averages falling and television ratings on a bit of a decline. We can now see some decrease in the promotions Internet based audience.

It’ll be interesting to see if there is a rebound in website visitors as the year comes to a close. The UFC’s top two PPV draws of Brock Lesnar and Georges St. Pierre are set to fight and we’ll see the Velasquez/Dos Santos Heavyweight Championship for the debut on FOX which should generate lot’s of buzz and publicity. The year should finish off strong and all the numbers rebound, which isn’t only good for the UFC, but the fans as well.

LA Times reports that Alistair Overeem has signed with the UFC and will be taking on Brock Lesnar on the December 30th NYE show being held in Las Vegas.

“Brock is a big name, a dangerous guy, and this is a dream matchup,” Overeem told The Times on Tuesday, just after signing a standard UFC fight contract in the office of Chairman Lorenzo Fertitta. “Brock’s a big guy, an exciting wrestler with his takedowns.
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“I want to see this fight myself. Overall, I’m a different fighter. A striker, athletic, big. These are going to be two big trucks going at it on a collision course.”

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Payout Perspective:

Some notes from the announcement:

- The fight will be a 5-round non-title bout (PPV event). Overeem was stripped of the Strikeforce HW Title when he was released from Strikeforce just a few weeks ago.

- Alistair Overeem signed a multiple-fight standard contract, which means he is exclusive to the UFC and will not be allowed to participate in Kickboxing or Golden Glory events.

- It is expected that the winner of this bout will challenge the winner of Cain Velasquez vs Junior Dos Santos for the HW title.

- Overeem was offered a title shot against the Velasquez/JDS winner but Overeem didn’t want to wait that long.

- This event will take place on a Friday night, outside of the norm for the promotion who usually holds PPV events on Saturday nights.

- The UFC was looking to run the NYE show from Abu Dhabi this year from that same Friday night, but instead moved the event to Las Vegas on that same day.

- Yesterday night, the UFC announced that they would be heading back to Japan on February 26, 2012 and would be holding their event at Saitama Super Arena, which will be configured to seat 20,000 fans.  Alistair Overeem would be be one of their biggest draws if they could get him on that card along with “Kid” Yamamoto and Yoshihiro Akiyama to name a few.  Yushin Okami could also be used, but will have to bounce back after a crushing defeat to Anderson Silva in Brazil at UFC 134.

- With the addition of Lesnar vs Overeem, the UFC will most likely host a 1 million PPV buy event this year.  The last time they went through a year without hitting one was back in 2007. Last year, the UFC hosted 3 1 million PPV buy events, two which were headlined by Brock Lesnar.

Yesterday, the Culinary Workers Union Local 226 sent a letter to the Federal Trade Commission requesting that a formal investigation into whether business practices by Zuffa LLC, the corporate owner of the Ultimate Fighting Championship (UFC), violate U.S. antitrust laws.

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.

a) “Automatic renewal” contract provisions such as the “champion’s clause,” which extends the contract of an athlete who becomes a champion. Such clauses effectively prevent some athletes who sign contracts with Zuffa from becoming free agents and negotiating for higher pay.
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b) Exclusive negotiation and “right to match” clauses that lock athletes into negotiating with Zuffa for a period after their contracts have expired. These clauses diminish the ability and incentive of smaller promotions to bid for top mixed martial arts athletes.
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c) Merchandise and ancillary rights agreements that require athletes to forfeit their image and likeness rights “in perpetuity,” or forever. These far-reaching agreements deprive athletes of the freedom to make money from their own success and further bind them to Zuffa indefinitely.

Regarding the contractual restraints placed on the fighters by Zuffa, the letter states the following:

As a result of Zuffa’s contractual restraints, athletes who compete in the UFC are denied the freedom of movement available to athletes in other professional sports.  These restraints artificially prevent athletes from offering their services in a competitive market and from receiving a competitive market value for their services.
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These contractual restraints can have the effect of forcing some athletes under contract with the UFC to negotiate with one buyer, depriving them of nay real bargaining power and depressing pay below competitive levels. The Mixed Martial Arts Fighters Association estimates that professional mixed martial arts athletes received just 5.7% of total gate and pay-per-view revenues at five UFC events in 2009, while athletes who compete in other pro sports organizations receive 50% or more of revenues.
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In addition to impeding athlete mobility, these restraints have the potential to harm consumers by reducing the quality and supply of professional mixed-martial arts events. Indeed, Zuffa’s practice of requiring athletes to sign contracts that may automatically renew, or that allow Zuffa to match offers made by competing promoters once they expire, diminishes the incentive for other firms to enter the market and bid for professional athletes.  As a result, the market for mixed martial arts is artificially reduced, to the detriment of consumers and athletes.

The letter then goes on to point out court rulings that deem restraints on athlete movement as being anti-competitve.  The NFL’s “Rozelle rule”, which states that a team signing a free agent had to compensate the players previous team, is pointed out since the court held that this rule, by “imposing restraint virtually unlimited in time and extent”, was a violation of the Sherman Antitrust Act.

Professional sports leagues have sought to justify restraints on athlete mobility by arguing that such restraints are necessary to maintain a competitive balance among teams, and thereby maintain spectator interest. In some cases, courts have agreed. In American Needle v. the National Football League, the U.S. Supreme Court ruled that competitive balance is “unquestionably an interest that may well justify a variety of collective decisions made by the teams.”
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However, Zuffa does not operate as a professional league, and thus cannot justify its restrictive behavior as being necessary to preserve a competitive balance in mixed martial arts. Zuffa is a private limited liability partnership that promotes and produces professional mixed martial arts events for the benefit of its owners. The anticompetitive restrictions it imposes on athlete mobility serve no legitimate business justification beyond stifling competition and increasing Zuffa’s already dominant position in the market.

In addition to these contractual practices, Zuffa has refused to promote mixed martial arts events with rival promotional firms.  After Zuffa acquired Strikeforce, UFC president Dana White said the two companies would continue operating as separate entities. ‘Even when we own them, we don’t co-promote’, White said.  In 2009, Zuffa’s negotiations with Russian heavyweight Fedor Emelianenko collapsed, in part, because of Zuffa’s refusal to co-promote an event with another firm, M-1 Global.

The issues between the Fertittas, owners of Stations Casinos and Zuffa/UFC, have been well documented as of late. Back in 2008, MMAPayout’s Robert Joyner wrote a piece titled “Labor Politics at the Heart of MMA’s Impasse in New York”, which went on to detail the issues Zuffa has ad with the Culinary Union, claiming it as a big reason why the UFC has not been sanctioned in New York.

According to WCBS, the sole correspondence received by the Committee was from UNITE HERE, the hotel and restaurant workers’ union. The letter cited the American Medical Association’s opposition to the sport as well as the alleged concerns of policeman about teenagers emulating the sport on the streets. The union urged the committee to “fully explore” the “social cost” of sanctioning MMA in New York.
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UNITE HERE is a powerful force in the state with 90,000 members in New York. Last year the union spent $100,000 lobbying the Albany legislature and made more than $130,000 in political contributions to the Democratic and Working Families parties. That financial commitment dwarfs the UFC’s reported $40,000 in donations to New York Democrats.
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The union’s opposition to sanctioning is the result of its failed efforts to unionize the Fertitta’s Station Casinos in Las Vegas. The Culinary Union Local 226, the Las Vegas local of UNITE HERE, is the largest local of the union in the United States and it’s most politically potent. However, it has failed to crack into the locals casino market in the city, one dominated by Station Casinos which is the last major non-union company in Las Vegas.
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The family owned Station Casinos has long been staunchly open shop, but its relations with UNITE HERE took a turn for the worse with the company’s purchase of a union casino in 2000. Station fired 1,000 union workers and required them to reapply for their jobs. Only 150 were rehired according to union officials.

Dana White addressed Zuffa’s concern with the Culinary Union in an interview with MMAWeekly earlier this year:

This is where the rubber meets the road. The Culinary Union has been trying for years to unionize Station Casinos, but thus far, has been thwarted. This is why White believes they are using their vast resources – the Culinary Union boasts approximately 60,000 members – to stop the Fertittas from bringing their mixed martial arts business to New York.

Last week, MMAPayout reported that FOX had emerged as the front-runner in landing a TV deal with the UFC, which was first rumored on ESPN’s MMA Rumor Insider account. Today, Sports Business Daily announced that UFC and FOX have agreed on a seven or eight year deal worth as much as $90 million per year, which also includes 4 events on FOX TV.

Business Sports Daily reports:

As part of the deal, most of the weekly programming that UFC has on Versus and Spike TV will move to FX starting in January. That includes several fight cards, plus shows like the reality series “The Ultimate Fighter.” Fox-owned Fuel also will wind up with some UFC content. But rumors that Fox will rebrand Fuel as a UFC channel are not true, sources said. Fox was attracted to UFC programming, which has produced some of the highest viewership figures ­– and most attractive demos –­ on Versus and Spike TV.

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Payout Perspective:

Although this was reported by SBD today, no confirmation was given by the UFC.  Shortly after the story broke, Fox Sports announced that they will have “one of the biggest announcements in Fox Sports History” during their 1PM press conference scheduled for Thursday in Los Angeles with top executives David Hill, Randy Freer, Eric Shanks, and John Landgraf. Just a few hours later, Dana White announced on his Twitter account that he had arrived in Los Angeles with UFC LW Champ Frankie Edgar.

The deal consists of up to four events on Fox broadcast TV and shoulder programming on Fuel TV and FX.  It is speculated that most of the programming currently on Spike TV and Versus such as live MMA events and The Ultimate Fighter will be carried over to FX. Fuel TV is also said to be landing some UFC programming, though it will most likely be syndicated shows and specials.

SBD also goes on to report that “Spike ultimately passed over concern that its UFC shoulder programming stopped growing. Shows like “Unleashed,” “Knockouts” and “Countdown” averaged 1 million viewers in ’05″ while averaging only 492,000 viewers this year.

Another key note in the report is that Spike will still hold rights to the UFC library programming through 2012, which makes for a non-fluid transition from Spike TV to the FOX properties.

Many questions remain unanswered at this moment, such as whether the UFC was able to retain production control and which branch the UFC would fall under.  If you recall, the UFC was in talks with several networks from 2007 until now, and production control was always an issue.  The Fox Entertainment division was willing to give up production control at the time but not the Fox Sports division. From what we know so far, it appears that the UFC will land in the Sports Division, so if there were able to retain full production control, it would be a huge victory for the UFC. The other issue reported back in 2007 was that Fox wanted to buy a stake in the UFC as part of the deal, something the UFC was not willing to do at the time.

In terms of ratings, they will have to produce.  A source close to the FX/Bellator negotiations informed MMAPayout that FX and Fox were looking for a promotion that had enough stars in their roster that it would move the needle for them, as well as bring in the coveted 18-34M demo.  Balancing the FX and FOX cards while still maintaining it’s primary focus as a PPV company will be interesting to watch in 2012. In terms of ratings, FOX last Saturday night drew a 1.2 rating in the 18-49 demo, for 3.63 million viewers, where the highest rated MMA show on network TV so far has been EliteXC’s Primetime event featuring Kimbo Slice vs James Thompson, which drew an average of 4.3 million viewers and peaked at 6.51 million.

The monumental move also creates a domino effect within the MMA landscape, where if UFC is not able to negotiate keeping one of their brands on Spike TV (PRIDE, WEC, Strikeforce), Bellator would surely be moved from MTV2 to Spike TV to offset the loss of the UFC.  At this time, it is believed that Showtime will not renew their contract with Strikeforce, which will be up in the first quarter of 2012, which could mean that the UFC could be shopping Strikeforce over to Spike to prevent a Bellator move and to maintain rights to some UFC properties.  Other promotions such as Proelite look to also capitalize on the move, as Versus (NBC Sports) and Showtime/CBS will be left without a major MMA promotion on the networks.

With the latest deal, the UFC jumps over the WWE in terms of TV rights fees by upgrading their current Spike TV deal worth an estimated $35 million-a-year to FOX’s $90 million-a-year. The UFC will now be making nearly three times as much as they are getting from their current Spike TV deal. More on the overall TV landscape among sport properties can be found here.

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Current Sport TV Deals – Collegiate Sports, NHL, MLS, WWE, and UFC:

Pac-10: $250 million/Year (Fox/ESPN/ABC) … previously $60 million (Fox/ESPN/ABC)

Big Ten: $220 million/Year (ESPN/ABC)

SEC: $205 million/Year (ESPN/CBS)

NHL: $200 million/Year (NBC/Versus) … previously $77.5 million (Versus)

ACC: $155 million /Year (ESPN)

Big 12: $130 million/Year (Fox)

UFC: $90 million/Year [Meltzer] (Spike TV) … TV deals will be up after 2011 with Spike TV and Versus (4 events).

WWE: $70 million/Year (USA Network, 30-35 million/Year [Meltzer]) … With Syfy included, estimated at around $70+ million/Year.

MLS: $18.5 million / Year (ESPN2, $8.5 million/NBC Sports, $10 million[SBD]) … Asked for $20 million/Year (FSC)…. previously $3 million (FSC)

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NOTE: National Sport TV Deals Per-Year: MLB: $702M, NASCAR: $575M, NBA: $930M, NHL: $200M, PGA: $492M, & NFL: $1.4 Billion.

ESPN reports that Alistair Overeem was not released by Forza, LLC, the company that runs Strikeforce and is a subsidiary of the UFC’s parent company, Zuffa. Although Strikeforce exercised the right to terminate the final fight on Overeem’s contract, it appears that Overeem’s reps are willing to talk with the UFC.

Bas Boon, Overeem’s rep at Golden Glory, indicated that Overeem was “in a negotiation period with Zuffa.” While Boon did not discuss in detail, he “explained the fighter is bound to exclusive and separate 120-day negotiation and matching periods with the Las Vegas-based promoter (UFC).”

Via ESPN:

In addition to the exclusive negotiation period and, if necessary, a subsequent matching timeframe, a source with knowledge of Overeem’s contract said the fighter was not stripped of his Strikeforce belt and remains tied to the promotion via the so-called “champions clause,” a common passage in fighter contracts that allows MMA promoters to maintain contractual rights to titleholders after their deals expire.

Golden Glory issued a press release addressing the initial releases of the GG stable. In it, it also concedes to Zuffa and is willing to comply with the payment methods that were at issue. As a result, White has expressed interest in talking with GG about signing Overeem to return.

Payout Perspective:

This is a case of using the media to clarify an issue. Golden Glory’s press release set forth its side of the story regarding the release of the Golden Glory stable. Without the press release, most fans would believe Zuffa’s side of the story. For Zuffa, the press release allowed it to take a step back from its initial stance concerning the Strikeforce Heavyweight Champion. Although ESPN reports that Overeem was never let go by Strikeforce/Forza/Zuffa due to the exclusive negotiation period, this clause was never brought up in the initial Strikeforce release of Overeem.

Overeem’s retention makes sense for Forza as he is the one fighter of value  in the GG stable that White could use in the UFC. With the news that Golden Glory is willing to comply with Zuffa’s request regarding payment of fighters shows that Overeem’s management sees Zuffa as the most lucrative (and high-profile) place that Overeem could fight. Also, for Overeem, its likely that the best competition he could face would be in the UFC. Overeem could be the big star overseas as a MMA/Kickboxing/Boxing star but would be unknown to many casual American fans. He could be what the Klitschkos are to boxing. The best heavyweights in the sport, but not seen by American audiences. Overeem’s earning power (salary and sponsorships) could garner him much more in the UFC than it could in another organization. Of course, there is the matter of negotiating a salary that is the next big hurdle.