Humble Beginnings

Combat sport fans around the globe undoubtedly consider Ultimate Fighting Championship (UFC) the premier brand within the highly profitable world of mixed martial arts (MMA). For those not familiar, the privately-owned company started out in 1993 by setting up a tournament aimed at determining the world’s most effective martial art in a fight. Since the inaugural event over 300 UFC events have taken place, and the popularity of what was once considered a niche sport stands at an all-time high.

Success has not always come easily for UFC, a company threatened by sanctioning troubles and near bankruptcy in its earlier days. By 2001 a $2 million offer to buy the struggling company was of course quickly accepted. The new ownership team of the Fertitta brothers and childhood friend Dana White acted swiftly to change the fortunes of UFC, implementing effective advertising, marketing and distribution deals that grew the company and popularity of the sport in general. Mainstream coverage soon became commonplace, and so the company evolved into a truly global enterprise worth millions and then billions of dollars.

UFC’s meteoric rise to the top came at the expense of rival promotions, some of which were purchased and absorbed along the way. The likes of World Extreme Cagefighting, Pride and Strikeforce each succumbed to the UFC juggernaut and opted to take handsome pay-outs to cease operation.

UFC’s most recent milestone event, ‘UFC 200’ showcased the amounts of money involved in the fight business. For starters, the pay-per-view broke Las Vegas UFC records by drawing 18,202 fans for a live gate of $10.7 million. Not including bonuses and sponsorship, purses for the athletes involved amounted to the highest combined payday in UFC history, reaching nearly $7 million. Returning star attraction Brock Lesnar alone accounted for $2.5 million of that sum. Although PPV buys have not yet been released, it will not be surprising if they too are record-setting.

Reebok Shakes Things Up

Sponsorship has always formed an integral part of UFC (and combat sports) as fighters supplement their guaranteed fight purses with income from external entities. In exchange for displaying a brand logo upon their attire amongst other commitments, fighters improve their earnings drastically. In the case of less popular or less successful fighters, such sponsorship is necessary to survive in a predominately results based business. For brands, a high level of exposure is gained at a relatively small price.

UFC shifted the sponsorship paradigm after agreeing a landmark deal with sportswear giant Reebok in 2015. The six-year deal effectively eliminated individual sponsorship opportunities through the implementation of a new company-wide uniform policy. Under the terms of the policy, Reebok exclusively produces kits for all athletes under UFC contract. Lorenzo Fertitta, UFC CEO and co-owner at the time labelled it “the biggest non-broadcast partnership that our company has ever signed”, his words signaling the deal’s significance.

What may sound like bad news for individual athletes, actually is not. Make no mistake, UFC is a star-driven entity, so it is in the company’s best interests to keep athletes happy and well compensated for their work. Many athletes in fact stand to benefit from the Reebok deal, due to the redistribution of sponsorship revenue amongst the roster through a tiered pay-out system. Now a fighter’s official ranking on weigh-in day dictates the level of sponsorship income received, with champions earning the most, followed by the No.1 to No.5 ranked fighters, No. 6 to No. 10 ranked fighters and so on. Essentially sponsorship income is guaranteed for a larger number of fighters, no matter their place on the card.

To sweeten the deal further, in addition to flat sponsorship income, fighters are designated a personalised kit also available for fans to purchase, with 20% royalty fees due back to the respective fighter. The idea that more time will be spent training as opposed to searching for sponsorship surely suits the fighter, especially those finding it difficult to attract lucrative sponsors.

Fertitta also endorsed the deal as a way to introduce a uniform look to proceedings, something not usually associated with the organisation because of what Fertitta describes as “a mish-mash with various different sponsors, different looks, brands, and styles". Moving forward, it is thought that consistent presentation will reflect UFC’s stature and is likely to attract major global brands akin to those ordinarily associated with the European football (soccer) leagues. According to Fertitta, the UFC promotion naturally attracts higher level sponsorship compared to individual fighters, and so uniform sponsorship has the potential of improving the perception of MMA and individual athletes simultaneously.

Cashing In

Over a year has passed since the ground-breaking Reebok contract paved the way for a new business model within the fight industry, and unsurprisingly its effects have been substantial. UFC’s pulling power has significantly increased, UFC’s athletes are benefiting from tiered sponsorship income and overall the promotion’s status as a modern marketing powerhouse is firmly established. All in all, recent business decisions at UFC headquarters have quite literally paid off, as exemplified by the company’s staggering $4 billion price tag. Talent agency WME-IMG recently had no qualms in acquiring the company at this tremendous valuation, in a move that unquestionably garners the attention of the entire sporting world.

Reports suggest Dana White personally stands to profit from 9% of the $4 billion sale, which translates to roughly $360 million. The Fertitta brothers owned 80% of UFC, so they take home a relatively weightier sum as a result of the largest sale in professional sports history. In a twist, White will be continuing on as UFC president for the next five years, picking up 9% of profits each year, with incentives to further grow the business. In total White’s salary is expected to be at least on par with the commissioners of other U.S. sports including the NFL and NBA.

Only through effective ownership and leadership can a business (and sport) turnaround from the brink of extinction, therefore it is hard to deny Dana White & Co their plaudits. Under their rule the popularity of UFC and MMA experienced a resurgence, lucrative advertising and distribution deals generated millions and a ground-breaking sponsorship model in conjunction with Reebok signalled an ability to continually innovate and evolve. To quote veteran octagon announcer Bruce Buffer, “It’s time!” for the former UFC owners to cash-in on a job well done.