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Georges St.-Pierre in a story about UFC for Report on Business Magazine - April 2011 cover
Georges St.-Pierre in a story about UFC for Report on Business Magazine - April 2011 cover

ROB Magazine

How the UFC plans to K.O. boxing Add to ...

Four years after the Zuffa buyout, the UFC was still an unmitigated financial disaster. Week after week, fights played to half-empty arenas, and pay-per-view sales-the lifeblood of combat sports-were lukewarm, barely topping 90,000 for many fights. By 2005, the partners' initial $2-million investment had ballooned into a $44-million deficit.

Salvation came from an unexpected place. Looking to build hype for its league, Zuffa swung a deal with the Spike TV cable network in the United States to carry The Ultimate Fighter, an hour-long series hosted by White. The premise was about as predictable as it gets for reality TV: Several UFC hopefuls live and train together in one house, each competing for a shot at the big time. For Spike, it was a no-brainer: The show would cater to its young-male demographic, and Zuffa would pick up the production costs on Season 1.

When the series became a surprise hit among mainstream audiences, it dragged mixed martial arts out from its shadowy Fight Club beginnings and into the living rooms of middle America. Big-name advertisers began to come aboard, no longer squeamish about attaching their brand to the UFC. Since 2007, the league has signed sponsorship agreements with Anheuser-Busch, Harley-Davidson, Burger King and Bacardi, among others. "We used to put tickets on sale before a fight and we would sell 20 seats," says White. "We were in the hole until Season 1 of The Ultimate Fighter."

Now in its 12th season, the show is central to UFC's global expansion strategy. Zuffa is in talks to produce adaptations in Europe, Asia and South America. Wright has plans to start production on at least one version of The Ultimate Fighter Canada. "We're having conversations with people about The Ultimate Fighter Quebec," he says with a chuckle. "You can imagine what that would be like, if we had a champion of Ultimate Fighter Quebec versus Ultimate Fighter Canada. I might take some shit in Ottawa for that one, but it certainly would be interesting."

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The shrewdest-and arguably most unexpected-business decision Zuffa made on its way to making outrageous amounts of money off MMA came in January, 2009. That's when the Fertitta brothers announced they had brought in new investors to their closely held private company.

For an undisclosed price, White and the brothers hived off a 10% share of the business to Flash Entertainment, a division of Mubadala Development, the investment arm of the Emirate of Abu Dhabi. The deal brought the first UFC match to the United Arab Emirates-to a crowd of 11,000 in Dubai-a place that has been MMA-mad since long before the UFC was created.

The transaction took White's stake down to 9%, while the Fertittas now own 81%. But it brought them something far more valuable: influence. "We're looking to go into China, we're going into India, and there are some things we need to get done over there, and these guys do business with everybody," says White. "Listen, if we pick up the phone and call China and say, 'Hey, we want to come over,' they may not care. But if Sheik Mohammed from Abu Dhabi calls and says, 'Our partners want to talk to you,' we get in a little quicker."

The move raised eyebrows in the finance world, since Zuffa had spent the previous two years batting away overtures from private equity players wanting a piece of the UFC action. "We've talked to everybody," says White. "You name it, every hedge fund has tried to invest. But usually when you go out and do stuff like that, it's because you need capital, and we don't. We don't need the cash. The reason we did the deal with Abu Dhabi is because these guys are good strategic partners."

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