By Charles Jay
UFC ON FORBES IS A BIG DEAL - BUT HOW BIG A DEAL IS THE UFC?
Mixed martial arts is featured in the May 5 issue of Forbes.
On the cover.
The headline is “Ultimate Cash Machine,” and it is superimposed over a photograph of the Fertitta brothers - Lorenzo and Frank - with sort of menacing, half-shaven looks. Underneath it - “How two casino moguls turned a violent fight club into a billion-dollar sports empire.”
We can debate another time, I guess, about whether one can truly be a “mogul” when one has essentially inherited their situation, but suffice it to say that what these gentlemen have managed to accomplish is indeed Forbes-worthy. I know a lot of you don’t read Forbes, but take my word for it - it’s a big deal.
In terms of revelation, the cover story itself was something of a disappointment, although for those readers unfamiliar with either the UFC or MMA, it might have been quite shocking to find out, for example, that a UFC event on pay-per-view can do as well with the key 18-49 demographic as, say, last year’s Ohio State-Michigan football game.
The story also has some background on how Station Casino Inc. was started by the father, Frank Fertitta Sr., and how the sons transformed the company, taking it public and taking it private again, and in general how there could have been $44 million available to pump into the UFC enterprise.
If they got most of the guts of the story from Lorenzo (i.e., if they didn’t do a lot of research on the internet or speaking with MMA “insiders” who were outside the bounds of the UFC), it is understandable that details are a bit sketchy as to how the UFC was somehow unsanctionable under the ownership of Bob Meyrowitz but perfectly acceptable under the control of Zuffa, the Fertittas’ holding company.
Naturally, there is the implication that Zuffa and the “new” UFC pioneered standard rules that made the sport more palatable to the so-called establishment, something that has come to be called the “Zuffa Myth.”
And then there’s the tale - well-worn by now - about how desperate the Fertittas were to sell after presumably blowing the aforementioned $44 million. I know it adds color to the success story we see now, but I wonder how much of it was embroidery.
One of the themes centers around how much the UFC might be worth. The brothers claim that they have received offers that are in excess of $1 billion. Maybe that’s true, but it got me wondering as to what the buyer would be getting in such a transaction.
This wouldn’t be like selling a company lie Coca-Cola or General Motors - ongoing concerns for years that are “corporate” in every sense of the word, distancing themselves from the cult of personality, seemingly giving the impression that they run on auto-pilot, with nameless, faceless power behind them.
I would think that a tremendous portion of the value in a company like the UFC, outside of the brand itself, would not necessarily be that which is intrinsic in the company, but instead what is contained in the creative imagination and vision of the Fertittas and Dana White. In other words, the management is largely responsible for the value, and without these guys in the picture that value would seem to get considerably lower. And I do believe that this is the case with the UFC to a much greater extent than it is with the vast majority of companies that would carry a billion-dollar price tag. I mean, if Vince Lombardi had owned the Green Bay Packers and wanted to sell out, what good would it do you to have paid top dollar for the team if he wasn’t going to be around to coach it? He takes a lot of the value you paid for with him.
And this doesn’t even address the fact that ongoing operations might continue to dip; to use the figure that is represented in the Forbes article, IFC controls 90% of the MMA industry. Well, that figure should be trending a bit downward if it isn’t already, simply by virtue of new entrants into the marketplace. Under ownership that was NOT part of the group that built the 90% position in the first place, one could expect that the figure would diminish just a little bit.
So maybe these guys are in a bit of a quandary - to an extent, they may have gotten too successful for their own good, because from a discriminating buyer, they may never really get what they think it’s worth.
Of course, that’s a quandary I wouldn’t mind having.
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