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Finance / MMA / UFC

Investor Documents Outline Future Strategy for WME-IMG Led UFC

MMA Junkie has obtained a 58-page document provided by the UFC to new investors including the largest investor WME-IMG.   The document explains the revenue sources, past actions, and future strategies for the organization in order to convince potential investors that investing the UFC is a smart business decision.

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Entertainment Business / UFC

WME-IMG & UFC Betting Against Sports TV Rights Trend

When the WME-IMG paid $4 billion for the UFC they are making multiple bets on the future.  First, they are betting that they can market athletes so the revenue stream on a per athlete basis boosts the income of WME agents.  Second, that IMG can coordinate huge sponsorship agreements between corporations and the UFC.  Third, that the volatility in the industry between an inconsistent schedule and looming legal battles will work in the UFC’s favor.  Lastly, and probably most importantly, that when the UFC and FOX reach an agreement on a new television rights deal in 2019 will earn the UFC $400 million annually.

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Entertainment Business / UFC

The UFC & WME-IMG: Content And Global Strategy

The Hollywood Reporter did a feature on Ari Emanuel and Patrick Whitesell, the co-founders of the William-Morris Endeavor (WME).  In the feature Emanuel and Whitesell discuss the IMG acquisition, the possibility of going public, battling against others in the industry who believe they are over-extended, the WME-IMG content and global strategy in the future.  I’ve pulled out an excerpt that is enlightening on what WME-IMG might have planned for the UFC and some of the incentives behind the acquisition.

Emanuel describes China as a “pretty big puzzle to solve”:

WHITESELL: We feel like their footprint in Asia — I can’t go into a lot, but essentially what they want to do with content in that part of the world given their massive mobile footprint there — is really strategic. 

…China is a very important puzzle to solve, and if we solve that, then we’ve solved a pretty big puzzle for where the movie business for our clients is going and the television business is going. And sports.

Going to the original [Endeavor] premise in ’95, content is king. We have movies and television, and we have sports. So we have a solve for a bunch of those [Chinese] companies that is unique. You’ll see our foray into China that solves a bunch of their issues. They’ve made huge investments in distribution, and they’re going to need stuff to fill the pipes.

WME’s strategy can be described succinctly that “content is king.”  The company has been buying entities, representing athletes and content creators, and events in order to create more content for companies to distribute.

The UFC produces 40 live events a year and has a library with tens of thousands of hours worth of content.  There is also already an international market for the UFC with even more room for growth, especially in Asia, which is a key geographic region for WME.  Thailand held the first MMA fight in the country less only in the last couple months.

It is important to remember that the UFC is an event-based sports business first and foremost.  All the content is created around events, with twelve events a year making up the majority of the UFC’s revenue.  WME-IMG knows how to create sponsorship agreements, how to monetize content, how to coordinate with content distributors, and how to cross-promote different parts of the WME company.  An example given is Brad Paisley performing a free concert on Friday night before a bull-riding weekend, which enhances the event, creates a better experience for attendants, and makes sponsors happy.

One of the larger overarching themes of the article is how distribution has disrupted the business in Hollywood.  Netflix, Amazon, over-the-top channels, YouTube, and more companies are distributing content to subscribers across the world.  With so many different paths of distribution, content needs to be created on a level that can keep pace with demand.  All the distribution companies are looking to add more original content and acquire content that will differentiate them from competitors.  The value of content creators will only increase as more content is demanded by distributors and consumers.


The Future Of The WME-IMG UFC

On July 10th reports hit the web that the UFC sold for $4 billion making it the biggest transaction in sports history. For perspective, the Los Angeles Clippers were sold for $2 billion. The only sports entity that is considered to be in the neighborhood of a $4 billion valuation is the Dallas Cowboys. What differentiates the UFC from the Cowboys is that the team in Dallas is a part of a larger organization. When one owns the UFC they nearly own the entire sport.

Below is a summary of information and insights I have onto the possible future of the new WME-IMG UFC covering the new roles of the owners, the business acumen of the investors, the marketing power of WME-IMG, what the purchase means to athletes, what global expansion will look like, what the new revenue streams are, and what the biggest risk is to the sport:

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UFC Sold For $4 Billion

Rumors have swirled for the last two months that the UFC was being sold in the neighborhood of $4 billion.  Chris Maathuis at CBS KLAS-TV in Las Vegas, says the UFC sold for $4 billion to outside inverstors.  Dana White and Lorenzo Fertitta are scheduled to make an appearance at 5 am on KLAS-TV.

According to LasVegasNow:

“The new owners include an alphabet-soup partnership of WME (William Morris Endeavor), the internationally known talent agency,  IMG (International Management Group) a global sports and entertainment company based in New York, and MSD, a private equity group headed by Michael Dell.  Also involved as a strategic partner is KKR, a global investment firm.

According to persons familiar with the deal, Lorenzo Fertitta will remain as chairman of UFC for 6-8 weeks during the transition but will step down after that. UFC president Dana White, who currently owns 9% of the organization, will continue in his role with UFC and will have a smaller ownership stake.”

ESPN reporter Brett Okamoto had some texts with Dana White that he posted on twitter:

Ringside Analysis:

The UFC selling for $4 billion would be the biggest deal in the history of sports.  The company has come a long way from when the Fertitta brothers purchased the UFC in 2001 for $2 million.  Last year Lorenzo Fertitta told CNN that the UFC had made $600 million in revenue, so the sale is going for seven times the reported revenue.

There is a lot more money behind the UFC with the new investors.  Between one of the largest sports and entertainment marketing companies and private equity and investment firms that have billions more dollars behind it the sport, as Dana White says, will be going to the next level.  The extreme money and unparalleled expertise now running the sport could really push the UFC to the mainstream, a goal that the Fertitta brothers and Dana White have been saying since they bought the company.

Personally, I’m extremely excited to see where this sport goes.