Thursday, September 21, 2006

Death for His Ambition?

The rise of the Ultimate Fighting Championship in 2006 has been startling in both the altitude it has reached and the speed of that ascent. Even those who have believed in mixed martial arts for years did not predict that UFC would be able to increase its pay-per-view buys tenfold in a few short years. UFC and Dana White have reached a point where they can seemingly do no wrong. Indeed, there is little that can jeopardize UFC’s short and long term success. However, UFC needs to be prudent in its growth, because its greatest future enemy is its own ambition.

There are many pop culture fads that have a period of great success followed by a quick fall. A question on the minds of many observers is whether UFC’s 2006 success is sustainable. I am of the firm opinion that it is. Five years ago I was telling my friends that MMA could very well one day be the number two sport in the United States behind professional football.

MMA offers everything that makes sports great. It is the most pure of competition: hand to hand combat to determine physical supremacy. But it is likewise extremely cerebral. Fighters need to train in multiple styles, and success comes in knowing which strategy to employ against which fighters. Most importantly, for sudden excitement it has no match. A fight can end at literally any moment with the swing of a fist or the swivel of the hips into an arm bar. It was inevitable that if the American public were exposed to mixed martial arts, the sport would explode.

Also in UFC’s favor is their tremendous star making ability. UFC has created a stable of marketable stars from Chuck Liddell and Tito Ortiz to Georges St. Pierre and Rich Franklin. The sport sells itself, but the promotion has stars to boot. Moreover, the climate is changing in media perception of UFC. Major newspapers like the Washington Post have begun regular coverage of UFC events, and others will surely follow. Perhaps the biggest dominoes are the New York Times, the Los Angeles Times, Sports Illustrated, and regular coverage on ESPN. When the industry leaders give greater coverage to UFC, the smaller publications will follow.

With all of these positive external signs for UFC, it is strange to note that the company’s greatest threat comes from within. When a company has great success, it frequently goes to the heads of those running it. They develop false illusions of invincibility, and they make mistakes. In the realm of entertainment, this frequently comes in the form of overexposure.

From Roller Derby to Who Wants to Be a Millionaire?, enterprising entrepreneurs will overestimate the appeal of their product. Too much television is produced and the product no longer feels special. This phenomenon can occur with even the most popular forms of entertainment. The key is producing enough product to maximize profits without reaching the point of over-saturation where the profits on each individual event dip.

Dana White and UFC have great confidence in their product right now, as well they should. However, this has led to overzealousness as far as producing UFC shows. UFC is planning to run between 23 and 36 live events in 2006. This number is dangerously high. The latter number would signify a UFC event almost every ten days. It is exceedingly hard to make any individual event feel special when they come that close together.

UFC has made an important realization in the past year: main events sell shows. Just a few years ago UFC did not seem to grasp this, and would load up deep cards with well paid fighters when the third or the fourth fight from the top was simply overkill. UFC 43 was a perfect example, featuring a litany of stars at the time: Pedro Rizzo, Matt Lindland, Frank Mir, Vitor Belfort, Kimo, Tank Abbott, Randy Couture and Chuck Liddell.

In 2006 UFC has switched to a system where there will be a main event that sells the show, and a semi-main event of moderate interest. The undercards lack the sizzle that they once did. This has led to frustration among more hardcore fans, but it is a smart business model. If you have enough legitimate main events, you can run more frequently and feature watered down undercards while drawing identical business.

However, there are limitations to this strategy. First, there comes a point when the undercards are so watered down and the fighters so obscure that fans no longer view the UFC name as meaning anything. Right now UFC is able to sell the UFC name as a brand. That brand will draw a certain number of viewers that trust UFC means a good show. This explains the incredible disparity in interest and business in the United States between UFC 62 and Pride Final Conflict 2006. If over time fans start seeing fighters that don’t look like they belong, they will pick and choose more among the shows.

Second, weaker fighters frequently have less skilled and exciting fights. If the quality of the fights diminishes, there will be more disappointing pay-per-views that leave a sour taste in viewers’ mouths. Thus, as the UFC runs an increasing number of shows, the quality of fighters on any individual show will continue to drop. That is a problem even assuming UFC is able to come up with compelling main events each time around.

Of course, that leads into an additional problem. UFC doesn’t have enough compelling main events to run 23 to 36 shows in a year. That will lead to worse TV ratings for UFC specials and hurt the ability of UFC to point to its ratings as compared to other more mainstream sports. The greater danger, however, comes with pay-per-view events. The danger is not that there will be a drop in buys for the biggest shows. Chuck Liddell vs. Tito Ortiz will do huge business no matter how many shows they are running.

The risk will come with the lesser shows. UFC is at a point right now where they may be able to convince a significant number of people that every UFC pay-per-view is worth ordering. If they run 8-10 shows a year on PPV, they may be able to maintain a very high floor when it comes to PPV buys for years to come. Obviously the ceiling will not be reached for every show, but they will be able to rely on a consistently high number for even the lowest shows.

The floor a few years ago was around 35,000 to 40,000 buys. With 8-10 shows in 2007, it would not be unrealistic for UFC to expect a floor of around 250,000 to 300,000 buys. That is a huge profit for each show. However, if they run 12-14 PPVs in 2007, there will come a point when fans decide that not every PPV is worth getting. That will be particularly true if there are countless television specials that offer free fights throughout the year.

UFC should aim over the next few years to keep the number of regular fans that pick and choose between PPVs as low as possible. Instead, you want a larger base of fans that will order every UFC show just because it is UFC. The more shows UFC runs, the greater the risk that the bottom falls out on the non-marquee PPV fights. This is not a risk that UFC needs to take.

UFC right now is in a tremendous position, but if that trend reverses itself it is likely to happen quickly. Rather than take that risk, UFC should be more cautious in its growth. It takes greater confidence to take smaller steps. It shows that you have faith in the product over the long haul, and you don’t need to make every last dollar you can while the getting is good. With steady, sustainable growth, there is no stopping UFC. But if Dana White and Zuffa get greedy and try to grow too fast, they could find themselves wondering what could have been.

2 Comments:

Blogger Dave Ling & Franchise said...

Todd, if accurate this article is tremendous in terms of shock value (with the possibility of 36 live events) and with the notion that UFC could be preparing for a fall to the degree of roller derby.

Too much exposure is what kills boxing, too many no name fighters, too many belts, too much low quality product. UFC is also heading down that road if they're looking at any more then 12 PPVs and 4 UFNs a year. Those 16 shows plus the exposure of TUF and UFC: Unleashed is the ceiling for sustained interest. I've been watching UFC since UFC#2, I've been to Vegas to see a PPV, I'm about as much a fan as there is but 33 shows would kill it even for me.

Great article although I am pretty sure you could have written an entire essay on this issue.

10:43 AM  
Blogger Todd Martin said...

Dave reported the 23-36 number in the Observer a few weeks back.

11:43 AM  

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