UFC PPV Business Article
Jun 19, 2006 17:48:15 GMT -5
Post by LWPD on Jun 19, 2006 17:48:15 GMT -5
Courtesy of Multi Channel.com
Ultimate Fighting Pins PPV To the Mat
By R. Thomas Umstead 6/19/2006
This past April over 200,000 cable and satellite viewers plunked down $40 to watch heavyweight champion Tim Sylvia defeat Andre Arlovski in the first round of their pay-per-view fight.
Never heard of Tim Sylvia? Just ask most males between the ages of 18 and 34.
Sylvia isn’t boxing’s heavyweight champion — that distinction is split between Wladimir Klitschko, Nicolay Valuev and Hasim Rahman. Sylvia is the heavyweight titleholder for the mixed martial arts franchise Ultimate Fighting Championship, arguably the fastest-growing sport in the country.
The UFC, a franchise Sen. John McCain once referred to as human cockfighting for its often violent, “no-holds barred” action, has evolved into a multimedia juggernaut that is threatening to surpass boxing and pro wrestling as the PPV industry’s undisputed revenue champion.
The sport, in which athletes box, wrestle, grapple, kick and use other martial arts moves inside a referee-supervised octagonal ring, has carved out a unique niche that has delivered consistent PPV performances to cable and satellite providers.
The UFC is averaging between 200,000 and 350,000 buys each for its 10 PPV events a year, according to PPV executives familiar with the franchise. UFC officials refuse to reveal specific figures.
That’s on a par with the 350,000 buys generated by Home Box Office’s Floyd Mayweather-Zab Judah fight in April, but well below the 875,000 garnered by the premium service’s May Oscar De La Hoya-Ricardo Mayorga PPV bout. Pro wrestling outfit World Wrestling Entertainment Inc. averages about 300,000 buys for its 11 monthly pay-per-view events, but has drawn more than 1 million buys each of the last three years for its annual Wrestlemania.
The UFC, owned by Las Vegas-based private company Zuffa LLC, has taken a page from the WWE and built a loyal following on basic cable. Its popular reality show The Ultimate Fighter, is one of the most viewed original series on testosterone-heavy cable outlet Spike TV, according to network officials.
Not too shabby for a franchise that itself was bloodied and on life support at the turn of the century. “Most smart businessmen would have never bought the UFC when we bought it,” Zuffa president and co-owner Dana White said of Zuffa’s $2 million purchase of the franchise from pay-per-view event veteran Robert Meyrowitz in 2001. White would not reveal current revenue figures for the UFC, but was quoted last year in the Las Vegas Business Press that the business has “increased 20 times” since buying the franchise.
“Not only was it a dead business, the previous owner had stripped the company of basically all the ancillary income,” White said. “And obviously there was the baggage and stigma attached to it that we had to overcome.”
Indeed, there was plenty of baggage to go around. While the UFC and combat sports events were a PPV revenue darling in the mid 1990s, its aggressive marketing message of unsupervised, “no-holds barred” action proved to be its undoing.
The sight of grown men applying chokeholds, elbow smashes, roundhouse kicks, and closed fist punches to their opponent’s blood-soaked faces was too much for some politicians — and eventually cable operators — to take.
In 1996, McCain began a successful lobbying effort to have the UFC events barred in every state. By 2000, the sport was virtually banned across the country. Cable operators similarly imposed a distribution boycott of the sport due to the political backlash.
Even White said he was initially appalled with the sport’s violence.
“We had basically thought the same thing that everyone else thought about it: It’s barbaric and a freak show, with guys rolling off the barstools and fighting,” White said. “But as we started to learn about it and meet some of these athletes, we realized that these guys are incredible athletes, college educated, and really got into it and it became a serious passion with us.”
Once Zuffa purchased the franchise from Meyrowitz, it immediately imposed rules to make the sport more appealing to state athletic commissions and cable operators. The sport has outlawed such moves as eye gouging, biting and kicks to the crotch. Much like boxing, the UFC emphasized weight classes and allowed referees to stop matches at their discretion.
In 2001, Zuffa was able to convince boxing-friendly athletic associations in New Jersey and Nevada to sanction UFC fights. That same year, In Demand LLC began to distribute UFC events. Currently, 22 states sanction UFC events, according to White, and the company’s events are fully distributed across cable and satellite.
White said the sport needed a television vehicle to expose the UFC and its athletes to a broader audience. So the UFC decide to create a reality show. The Ultimate Fighter, which pits two teams of fighters with the winner getting a UFC contract, debuted on Spike TV in January 2005.
“Reality was hot at the time and [The Ultimate Fighter] turned out to be our Trojan horse,” White said. “In effect you’re watching Ultimate Fighting without watching Ultimate Fighting,” he said. “You get caught up in the storyline and eventually that interest spills over into the actual events.”
The show lured viewers — especially young men — to the network. After averaging 1 million and 1.9 million viewers during its first two seasons (January and August 2005), respectively, the show’s third season, which ends this week (June 22), has averaged 2.2 million viewers, according to Spike TV.
“We initially believed the [Ultimate Fighter] would appeal on three different levels,” said Brian Diamond, Spike TV senior vice president of sports and specials. “The hardcore [UFC] fans would come and watch it because there’s a scarcity of free [UFC] programming available; guys who love sports might check it out and become fans of the sport, and our general viewership of guys who might not have an interest in sports may get into the drama side of the reality show. Lo and behold, we put it on and it resonated and continues to do so.”
White said the popularity of the sport and Ultimate Fighter has also helped drive rabid fans to the company’s Web site (www.ufc.com), to the tune of 2 million unique viewers a month, according to UFC. This past May UFC began offering $1.99 downloads of vintage fights as part of its UFC On Demand broadband video service, although White would not reveal specific buy or revenue details.
The seemingly overnight success of the UFC and the mix-martial arts category has not been lost on PPV category’s heavyweight leaders. “I think UFC is an interesting sport that’s doing well right now,” said HBO Sports president Ross Greenburg.
WWE chairman Vince McMahon also recognized the UFC’s efforts, but warned that the franchise’s momentum could fade if Zuffa fails to build new, marquee stars for the sport.
“It could be difficult for [UFC] going forward because they’re in a situation much like boxing where they don’t control the outcomes of their events,” said McMahon. “They don’t quite know what they’re doing in terms of building characters.”
But White said UFC’s momentum won’t be pinned down by a lack of star power anytime soon. He added the Ultimate Fighter reality series will continue to unveil up and coming superstars, whose careers fans will be able to track through its live events.
“The bottom line is that this isn’t a fad,” White said. “People who watch this are much like boxing fans and I believe they will stick around and watch this just like they watch boxing over the past 100 years. It’s not a fad or peaking, but its continuing to grow.”
Over the past 25 years, the pay-per-view industry has treated viewers and distributors to a number of memorable and lucrative events ranging from high-profile heavyweight boxing events to Woodstock revivals to high-brow operas. Multichannel News programming editor R. Thomas Umstead highlighted five events that helped define the category and, in some instances, paved the way for technological innovations taken for granted in today’s television universe.
____________________________________________________________
All-Time (Revenue) Champ
Arguably, no one person has had a greater influence on the history of pay per view than “Iron” Mike Tyson. For more than a decade, Tyson has literally carried the PPV business on his broad shoulders.
The top three highest-grossing PPV events of all time and five of the top six most lucrative events involve the charismatic but troubled heavyweight fighter. His 2002 fight with Lennox Lewis is still the highest grossing pay-per-view event of all time, drawing $103 million in revenue.
And it was Tyson’s 1988 fight with Michael Spinks that convinced operators to outbid the established closed-circuit business for the rights to marquee boxing events.
The often ferocious and unpredictable Tyson was tailor-made for the fledgling pay-per-view industry: At his peak he was an exciting, knockout puncher who appealed to hard-core boxing fans and casual sports fans alike. In his later years, he became more of a sideshow than fighter, who drew more headlines outside the ring than inside the squared circle.
Love him or hate him, Tyson still remains PPV’s undisputed champion.
Lighter-Weights Weigh In
Prior to September 1999, only heavyweight fighters named Tyson and Holyfield were able to break the mythical 1 million pay-per-view buy mark. While boxers in the lighter weight divisions, such as junior welterweight champion Julio Cesar Chavez, were big PPV draws, no fighter under 200 pounds could captivate boxing fans and casual sports fans like the heavyweights.
That was until Golden Boy Oscar De La Hoya and popular welterweight champion Felix Trinidad stepped into the ring in 1999 and made PPV boxing history.
The two fighters proved that size really doesn’t matter and drew 1.25 million buys and more than $65 million —- an unprecedented mark for a non-heavyweight fight.
While the slick and polished “Golden Boy” De La Hoya would lose the fight on a controversial decision, he would eventually replace Tyson as the category’s biggest draw.
“When we do events like Trinidad and myself it’s not just about the boxing fan but it’s about bringing in the general public to PPV,” said De La Hoya. “We showed that there’s a big interest in a [non-heavyweight] fight.”
Shock Jock’s “Miss” Hit
No non-sports personality has had a bigger influence on the pay-per-view industry than the self-proclaimed “King of All Media.” In 1993, Stern literally shocked the cable industry with his raunchy, vile, obnoxious — and hugely successful — Miss Howard Stern Show, which aired live on New Year’s Eve.
Stern shredded the PPV event marketing playbook and persistently promoted his pay-per-view show over his syndicated radio show, which ultimately reached more potential viewers than traditional cross-channel ad avails and direct-mail marketing tactics employed by operators.
The result was a record $14 million in revenue — still the highest grossing non-ring sport or music event of all time.
Stern would return to transaction-based television more than a decade later, this time taking full advantage of cable’s video-on-demand platform. Stern partnered with In Demand LLC to create Stern TV, a subscription VOD service that offers the video version of the shock jock’s often bawdy Sirius Satellite Radio broadcasts.
While it’s too early to gauge Stern TV’s success, one thing can be said about the shock jock: He knows how to market himself.
Olympian Feat: That’s The Ticket
The mere mention of NBC and Cablevision Systems Corp.’s 1992 pay-per-view Olympics Triplecast event is sure to send chills down the backs of PPV veterans involved in the unique and comprehensive undertaking.
On paper, the industry’s attempt to distribute live Olympics events from Barcelona, Spain on three PPV channels was a major flop. Operators weren’t enamored with having to clear analog channels during a time when channel capacity was scarce. And most consumers — already unfamiliar with PPV technology — didn’t understand the concept.
But the approximately 250,000 viewers who did pay $125 for the package experienced a high-quality, visually entertaining presentation that served as the precursor to NBC Universal’s current multichannel Olympics offering over its broadcast and cable networks.
The ability to watch live sports events concurrently on different channels also paved the way for the creation of DirecTV Inc.’s “NFL Sunday Ticket” out-of-market professional football package in 1995.
With nearly 2 million subscribers, the satellite-exclusive package — which offers live every National Football League regular-season game — is arguably the most valuable and successful of the professional and college sports PPV packages available today.
At the time, the package gave DirecTV a distinct advantage over channel-locked cable operators. Today it provides DirecTV with a platform to showcase interactive features like the ability to watch up to three games at one time.
Wrestling With Success
Since the first Wrestlemania pay-per-view event in 1985, the franchise has generated more than $1 billion in revenue for operators and satellite providers.
World Wrestling Entertainment Inc. chairman Vince McMahon skillfully leveraged the WWE’s weekly basic-cable and broadcast shows into powerful marketing machines for the company’s monthly PPV events.
Each year those efforts culminate in an annual Wrestlemania extravaganza that not only showcases the WWE’s stable of stars like Hulk Hogan, The Rock, Stone Cold Steve Austin and John Cena, but also draws celebrities from the sports and entertainment world.
And the 21-year old franchise keeps steamrolling on. The last three Wrestlemania events have all surpassed the 1 million buy mark.
The franchise has also grown to become a significant part of the WWE’s ancillary businesses as well. The events have been among the top-selling WWE DVD releases and are a major component of the WWE’s 24/7 subscription VOD service.
“Nothing on PPV has the marketing machine that we have — it’s a combination of broadcast, cablecast and syndication content all promoting PPV,” said McMahon. “It’s one of the reasons why the staying power of Wrestlemania has been so extraordinary when everything else on [pay per view] has come and gone.”
Ultimate Fighting Pins PPV To the Mat
By R. Thomas Umstead 6/19/2006
This past April over 200,000 cable and satellite viewers plunked down $40 to watch heavyweight champion Tim Sylvia defeat Andre Arlovski in the first round of their pay-per-view fight.
Never heard of Tim Sylvia? Just ask most males between the ages of 18 and 34.
Sylvia isn’t boxing’s heavyweight champion — that distinction is split between Wladimir Klitschko, Nicolay Valuev and Hasim Rahman. Sylvia is the heavyweight titleholder for the mixed martial arts franchise Ultimate Fighting Championship, arguably the fastest-growing sport in the country.
The UFC, a franchise Sen. John McCain once referred to as human cockfighting for its often violent, “no-holds barred” action, has evolved into a multimedia juggernaut that is threatening to surpass boxing and pro wrestling as the PPV industry’s undisputed revenue champion.
The sport, in which athletes box, wrestle, grapple, kick and use other martial arts moves inside a referee-supervised octagonal ring, has carved out a unique niche that has delivered consistent PPV performances to cable and satellite providers.
The UFC is averaging between 200,000 and 350,000 buys each for its 10 PPV events a year, according to PPV executives familiar with the franchise. UFC officials refuse to reveal specific figures.
That’s on a par with the 350,000 buys generated by Home Box Office’s Floyd Mayweather-Zab Judah fight in April, but well below the 875,000 garnered by the premium service’s May Oscar De La Hoya-Ricardo Mayorga PPV bout. Pro wrestling outfit World Wrestling Entertainment Inc. averages about 300,000 buys for its 11 monthly pay-per-view events, but has drawn more than 1 million buys each of the last three years for its annual Wrestlemania.
The UFC, owned by Las Vegas-based private company Zuffa LLC, has taken a page from the WWE and built a loyal following on basic cable. Its popular reality show The Ultimate Fighter, is one of the most viewed original series on testosterone-heavy cable outlet Spike TV, according to network officials.
Not too shabby for a franchise that itself was bloodied and on life support at the turn of the century. “Most smart businessmen would have never bought the UFC when we bought it,” Zuffa president and co-owner Dana White said of Zuffa’s $2 million purchase of the franchise from pay-per-view event veteran Robert Meyrowitz in 2001. White would not reveal current revenue figures for the UFC, but was quoted last year in the Las Vegas Business Press that the business has “increased 20 times” since buying the franchise.
“Not only was it a dead business, the previous owner had stripped the company of basically all the ancillary income,” White said. “And obviously there was the baggage and stigma attached to it that we had to overcome.”
Indeed, there was plenty of baggage to go around. While the UFC and combat sports events were a PPV revenue darling in the mid 1990s, its aggressive marketing message of unsupervised, “no-holds barred” action proved to be its undoing.
The sight of grown men applying chokeholds, elbow smashes, roundhouse kicks, and closed fist punches to their opponent’s blood-soaked faces was too much for some politicians — and eventually cable operators — to take.
In 1996, McCain began a successful lobbying effort to have the UFC events barred in every state. By 2000, the sport was virtually banned across the country. Cable operators similarly imposed a distribution boycott of the sport due to the political backlash.
Even White said he was initially appalled with the sport’s violence.
“We had basically thought the same thing that everyone else thought about it: It’s barbaric and a freak show, with guys rolling off the barstools and fighting,” White said. “But as we started to learn about it and meet some of these athletes, we realized that these guys are incredible athletes, college educated, and really got into it and it became a serious passion with us.”
Once Zuffa purchased the franchise from Meyrowitz, it immediately imposed rules to make the sport more appealing to state athletic commissions and cable operators. The sport has outlawed such moves as eye gouging, biting and kicks to the crotch. Much like boxing, the UFC emphasized weight classes and allowed referees to stop matches at their discretion.
In 2001, Zuffa was able to convince boxing-friendly athletic associations in New Jersey and Nevada to sanction UFC fights. That same year, In Demand LLC began to distribute UFC events. Currently, 22 states sanction UFC events, according to White, and the company’s events are fully distributed across cable and satellite.
White said the sport needed a television vehicle to expose the UFC and its athletes to a broader audience. So the UFC decide to create a reality show. The Ultimate Fighter, which pits two teams of fighters with the winner getting a UFC contract, debuted on Spike TV in January 2005.
“Reality was hot at the time and [The Ultimate Fighter] turned out to be our Trojan horse,” White said. “In effect you’re watching Ultimate Fighting without watching Ultimate Fighting,” he said. “You get caught up in the storyline and eventually that interest spills over into the actual events.”
The show lured viewers — especially young men — to the network. After averaging 1 million and 1.9 million viewers during its first two seasons (January and August 2005), respectively, the show’s third season, which ends this week (June 22), has averaged 2.2 million viewers, according to Spike TV.
“We initially believed the [Ultimate Fighter] would appeal on three different levels,” said Brian Diamond, Spike TV senior vice president of sports and specials. “The hardcore [UFC] fans would come and watch it because there’s a scarcity of free [UFC] programming available; guys who love sports might check it out and become fans of the sport, and our general viewership of guys who might not have an interest in sports may get into the drama side of the reality show. Lo and behold, we put it on and it resonated and continues to do so.”
White said the popularity of the sport and Ultimate Fighter has also helped drive rabid fans to the company’s Web site (www.ufc.com), to the tune of 2 million unique viewers a month, according to UFC. This past May UFC began offering $1.99 downloads of vintage fights as part of its UFC On Demand broadband video service, although White would not reveal specific buy or revenue details.
The seemingly overnight success of the UFC and the mix-martial arts category has not been lost on PPV category’s heavyweight leaders. “I think UFC is an interesting sport that’s doing well right now,” said HBO Sports president Ross Greenburg.
WWE chairman Vince McMahon also recognized the UFC’s efforts, but warned that the franchise’s momentum could fade if Zuffa fails to build new, marquee stars for the sport.
“It could be difficult for [UFC] going forward because they’re in a situation much like boxing where they don’t control the outcomes of their events,” said McMahon. “They don’t quite know what they’re doing in terms of building characters.”
But White said UFC’s momentum won’t be pinned down by a lack of star power anytime soon. He added the Ultimate Fighter reality series will continue to unveil up and coming superstars, whose careers fans will be able to track through its live events.
“The bottom line is that this isn’t a fad,” White said. “People who watch this are much like boxing fans and I believe they will stick around and watch this just like they watch boxing over the past 100 years. It’s not a fad or peaking, but its continuing to grow.”
Over the past 25 years, the pay-per-view industry has treated viewers and distributors to a number of memorable and lucrative events ranging from high-profile heavyweight boxing events to Woodstock revivals to high-brow operas. Multichannel News programming editor R. Thomas Umstead highlighted five events that helped define the category and, in some instances, paved the way for technological innovations taken for granted in today’s television universe.
____________________________________________________________
All-Time (Revenue) Champ
Arguably, no one person has had a greater influence on the history of pay per view than “Iron” Mike Tyson. For more than a decade, Tyson has literally carried the PPV business on his broad shoulders.
The top three highest-grossing PPV events of all time and five of the top six most lucrative events involve the charismatic but troubled heavyweight fighter. His 2002 fight with Lennox Lewis is still the highest grossing pay-per-view event of all time, drawing $103 million in revenue.
And it was Tyson’s 1988 fight with Michael Spinks that convinced operators to outbid the established closed-circuit business for the rights to marquee boxing events.
The often ferocious and unpredictable Tyson was tailor-made for the fledgling pay-per-view industry: At his peak he was an exciting, knockout puncher who appealed to hard-core boxing fans and casual sports fans alike. In his later years, he became more of a sideshow than fighter, who drew more headlines outside the ring than inside the squared circle.
Love him or hate him, Tyson still remains PPV’s undisputed champion.
Lighter-Weights Weigh In
Prior to September 1999, only heavyweight fighters named Tyson and Holyfield were able to break the mythical 1 million pay-per-view buy mark. While boxers in the lighter weight divisions, such as junior welterweight champion Julio Cesar Chavez, were big PPV draws, no fighter under 200 pounds could captivate boxing fans and casual sports fans like the heavyweights.
That was until Golden Boy Oscar De La Hoya and popular welterweight champion Felix Trinidad stepped into the ring in 1999 and made PPV boxing history.
The two fighters proved that size really doesn’t matter and drew 1.25 million buys and more than $65 million —- an unprecedented mark for a non-heavyweight fight.
While the slick and polished “Golden Boy” De La Hoya would lose the fight on a controversial decision, he would eventually replace Tyson as the category’s biggest draw.
“When we do events like Trinidad and myself it’s not just about the boxing fan but it’s about bringing in the general public to PPV,” said De La Hoya. “We showed that there’s a big interest in a [non-heavyweight] fight.”
Shock Jock’s “Miss” Hit
No non-sports personality has had a bigger influence on the pay-per-view industry than the self-proclaimed “King of All Media.” In 1993, Stern literally shocked the cable industry with his raunchy, vile, obnoxious — and hugely successful — Miss Howard Stern Show, which aired live on New Year’s Eve.
Stern shredded the PPV event marketing playbook and persistently promoted his pay-per-view show over his syndicated radio show, which ultimately reached more potential viewers than traditional cross-channel ad avails and direct-mail marketing tactics employed by operators.
The result was a record $14 million in revenue — still the highest grossing non-ring sport or music event of all time.
Stern would return to transaction-based television more than a decade later, this time taking full advantage of cable’s video-on-demand platform. Stern partnered with In Demand LLC to create Stern TV, a subscription VOD service that offers the video version of the shock jock’s often bawdy Sirius Satellite Radio broadcasts.
While it’s too early to gauge Stern TV’s success, one thing can be said about the shock jock: He knows how to market himself.
Olympian Feat: That’s The Ticket
The mere mention of NBC and Cablevision Systems Corp.’s 1992 pay-per-view Olympics Triplecast event is sure to send chills down the backs of PPV veterans involved in the unique and comprehensive undertaking.
On paper, the industry’s attempt to distribute live Olympics events from Barcelona, Spain on three PPV channels was a major flop. Operators weren’t enamored with having to clear analog channels during a time when channel capacity was scarce. And most consumers — already unfamiliar with PPV technology — didn’t understand the concept.
But the approximately 250,000 viewers who did pay $125 for the package experienced a high-quality, visually entertaining presentation that served as the precursor to NBC Universal’s current multichannel Olympics offering over its broadcast and cable networks.
The ability to watch live sports events concurrently on different channels also paved the way for the creation of DirecTV Inc.’s “NFL Sunday Ticket” out-of-market professional football package in 1995.
With nearly 2 million subscribers, the satellite-exclusive package — which offers live every National Football League regular-season game — is arguably the most valuable and successful of the professional and college sports PPV packages available today.
At the time, the package gave DirecTV a distinct advantage over channel-locked cable operators. Today it provides DirecTV with a platform to showcase interactive features like the ability to watch up to three games at one time.
Wrestling With Success
Since the first Wrestlemania pay-per-view event in 1985, the franchise has generated more than $1 billion in revenue for operators and satellite providers.
World Wrestling Entertainment Inc. chairman Vince McMahon skillfully leveraged the WWE’s weekly basic-cable and broadcast shows into powerful marketing machines for the company’s monthly PPV events.
Each year those efforts culminate in an annual Wrestlemania extravaganza that not only showcases the WWE’s stable of stars like Hulk Hogan, The Rock, Stone Cold Steve Austin and John Cena, but also draws celebrities from the sports and entertainment world.
And the 21-year old franchise keeps steamrolling on. The last three Wrestlemania events have all surpassed the 1 million buy mark.
The franchise has also grown to become a significant part of the WWE’s ancillary businesses as well. The events have been among the top-selling WWE DVD releases and are a major component of the WWE’s 24/7 subscription VOD service.
“Nothing on PPV has the marketing machine that we have — it’s a combination of broadcast, cablecast and syndication content all promoting PPV,” said McMahon. “It’s one of the reasons why the staying power of Wrestlemania has been so extraordinary when everything else on [pay per view] has come and gone.”
