What investor documents tell us about the UFC's past – and its future https://t.co/EwqNMzjq4P
— MMA Junkie (@MMAjunkie) October 31, 2016
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.
Pay-Per-View (PPV) revenue continues to be the driving force of the company, accounting for 39% of the company’s record-setting $609 million in revenue for 2015. The previous best year was in 2013 when the UFC accrued $516 million. In 2014 the UFC generated $450 million in revenue. The drop in revenue affirms the importance of star power and the impact that PPV revenue has on the organization. According to MMA Junkie, 53% of the PPV cards in 2014 had significant changes and many of the biggest PPV draws were removed from PPV programming because of injuries.
The percentage of revenue coming from PPV revenue has decreased over the years. The television deal with FOX, increase in sponsorships, and licensed items has diversified the sources of income for the UFC.
One of the latest methods to increase profits has been to decrease costs in the form of large layoffs within the UFC and limiting the curb the expense habits of the highest leaders in the organization. The recent plans have expected to save the company $27 million annually.
Also of note is the cost cutting applied to marketing strategies that the UFC used to get to the current level of success. For example, the budget for The Ultimate Fighter was cut in more than half, going from $27 million to $10 million. WME-IMG now expects to use their current assets and marketing efforts as the driving force of the UFC.
WME-IMG will make $250 million in “earn-outs” if they are able to reach financial goals over the next two years. The new owners need to increase the EBITDA (Earnings Before Interest, Tax, and Depreciation) to $275 million in the next year from the previously reported $170 million recorded from June 2015 to June 2016. In the second year, the owners need to increase the EBITDA to $350 million.
Fighter pay has been a big concern for fighters for the last few years. Many of the fighters claim that they are not being fairly compensated for the value they provide to the company. With WME-IMG attempting to eliminate costs as much as possible it is unlikely that we will see the conditions for fighters to improve anytime in the near future. It is possible that WME-IMG is looking to increase the payout to fighters through sources other than fight purses, such as increased sponsorship dollars and exposure.