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Why UFC is able to withstand the injuries that did a number on pay-per-view this year

While pay-per-views deliver, by far, the biggest one-night incomes of any UFC events, and UFC's pay-per-view numbers are down significantly this year, company revenue is said to have grown 50 percent in the past five years based on television deals around the world.

Stephen Pond
It's no secret injuries and drug test issues have done a number on the UFC pay-per-view business so far in 2014. It is all but a lock this will be the company's weakest year in that category since 2005, when the company debuted on television for the first time.

If this happened a few years ago, it would be disastrous. But thanks to the ability to garner significant television revenue, while it is still a blow, it is nowhere near crippling. Not all that many years ago, the UFC generated 75 percent of its revenue from pay-per-view and ticket sales to live shows. According to a cover article in the new issue of Sports Business Journal, that figure was 30 percent last year. This year it will be a far lower percentage than that. Between the FOX, Globo and Televisa deal, and countless others, television has replaced pay-per-view as the leading revenue stream.

But television still pales in comparison when it comes to individual event rights fees, the type of income the company can generate on pay-per-view. Before the law was changed to make such figures confidential in Florida, the only state where these numbers are public record, it came out that FOX paid UFC about $2.2 million for its April 19 show from Orlando, Fla., a live network special.

That's about the same as the company would generate for a show that does 85,000 buys, a level even its bottom shows have not hit yet. For a blockbuster like UFC 175, it would be roughly an $11 million hit putting a card like that on television. If a show does 1 million buys, or in the range of UFC 168, UFC can take in anywhere from $22 million to $27 million in one night, so the idea that pay-per-view is going away any time soon makes no sense.

But that isn't to say it won't change, particularly if bottom shows start hovering at that 85,000 level. It could also change if  television providers are willing to match a $25 million price tag and guarantee it for a blockbuster event. Right now there is no indication either of those things are happening, as it's hard to imagine a show could have more going against it than UFC 177 did, and it still is estimated at 125,000 buys.

Those economics are why we have so many television events, but the pay-per-view schedule remains at one a month, a schedule Dana White said recently was going to remain similar in 2015. We've all seen the repercussions of more shows. It means more unknown fighters on the roster, and less name talent depth on individual shows. But it's also why revenues are up 50 percent, according to the story, from 2009, a year UFC topped 8 million total buys on pay-per-view. That's a figure it won't reach half of this year.

UFC CEO Lorenzo Fertitta was quoted the day before UFC 178 for the story saying, "This year has been the most challenging year we've ever had. About 80 percent of the fights we wanted to put on got canceled for whatever reason. Injury, drug test, somebody had a baby, who knows. If it could happen, it happened in 2014. I can't wait to get to next year."

If plans go as expected, for UFC 182 on Jan. 3 to have Jon Jones vs. Daniel Cormier for the light heavyweight title and a Ronda Rousey vs. Cat Zingano women's bantamweight title defense, the combination should blow away any show in 2014. Whether it can hit UFC 168 figures depends on late hype, and would depend more on Jones and Cormier, since it's doubtful a Rousey vs  Zingano rivalry could reach the level of general public interest of Rousey vs. Miesha Tate last year.

The issue also published results of an August ESPN sports poll of 1,433 Americans ages 12 and older, listing MMA in with eight other major sports, NASCAR, NBA, College Football, Major League Baseball, Major League Soccer, the NFL, College Basketball and the NHL.

Of those nine sports, MMA -- and this would likely be far more UFC as the dominant brand -- has the youngest fan base. The average MMA fan is 34.9 years old. That's a positive, particularly since UFC is not that strong with children. MMA, more than most established sports, still hits strongly in a target group, males 18-49. It has far less of both an older and early youth fan base, by percentage, than any of the other established major sports in the U.S.

However, the MMA fan base considers sports viewing in general less of a priority than the other major sports, although all are bunched together closely and MMA fans place sports only slightly less of a priority than NHL fans.
Another aspect comes from its fan base. With the UFC drawing a younger fan base than other sports, its fans generally have less free time. They are either working full-time, or more than full-time, or combining work and school. The lesser number of teenagers, older fans who are working fewer hours, and retirees leaves their audience more juggling to fit MMA events into a tight schedule. The fan base has less free time than any sport besides the NHL.

Likely as at least a byproduct of that, MMA fans spent less time per week watching sports on television, usually averaging about six hours and 35 minutes per week. That's barely above soccer fans, who clock in at six hours and 26 minutes, and behind every other major sports league. That's significant also because unlike most sports, which have two or three hour television windows, most UFC events run five hours on television, and can run an hour more than that if you include prelims on Fight Pass. UFC fans, if they were to watch an entire event, are unlikely to watch hardly any other sports during a week. Baseball fans, on contrast, watch an average of nine hours and nine minutes of sports per week.

A positive is that the MMA fan base is far more likely to be working than any other fan base. Of the current MMA fan base, 15.7 percent are not working, which includes teenagers and young adults who are students, retirees, unemployed and stay-at-home parents. By comparison, soccer is second at 20.4 percent and NASCAR is 41.5 percent.

That's another byproduct of the age group it caters to, with few teenagers and few retirees. MMA has more white collar workers, by percentage, than any sport except the NFL, NBA and college basketball. They have more blue collar workers than any other major sport, and that's by a wide margin.

Where UFC is valuable to television is as an advertiser target for products appealing to men 18-49 and particularly the hard to reach 18-34 group. If a product is marketed toward that age group. While more people in that age group are watching NFL broadcasts, a sponsor would be paying far more to reach a larger audience that a product that appeals mostly to a younger audience. 

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