The Recession Is a Convenient Excuse
by Michael Rome on Dec 6, 2008 7:06 PM EST
in MMA News
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PrintWhile the recession is a good reason for slowing live ticket sales to UFC and boxing events, I am not sure it is actually any kind of excuse for buyrates. If the show tonight is below expectations, it will be blamed on the recession. Similarly, the UFC has tried to blame the Lesnar-Couture buyrate on the recession. I don't buy it.
First of all, the real number, which looks like it is 775-800k, is an incredible buyrate. If you compare the buzz for that fight to the anticipation before Liddell-Ortiz II, it's really not even close. I don't know anybody in the MMA press that really believed the show was doing 1.2 million buys. The UFC did not do a good job hyping the event at all, and it probably would have done 650-675 if not for the major ESPN push.
The movie industry so far is having an amazing fourth quarter despite the recession:
"Movie theatres are seeing double-digit growth in box office revenues and high single-digit growth in attendance so far this quarter..."
It's not as if this year is just loaded with hits and last year wasn't. Escapism is a big part of any recession, and just like families will go to movies because it's cheap, the same 4-5 people splitting a fight is not that expensive. It may lead to some doubling up or going to bars, but I don't believe the recession will have a significant effect on pay per view purchases.
It does create a convenient refrain though. If De La Hoya tonight does 2 million buys, it will be an "amazing number especially considering the recession." If UFC 92 does 400,000 buys, it can be blamed on the recession. Hollywood is famously counter-cyclical because people rely on entertainment during recessions to get away from reality. It is happening again this time. I don't believe we have any reason yet to suspect the fight industry is being affected any differently.
According to the National Bureau of Economic Research's much-publicized report, the United States has been in recession since December 2007. Thus, a record year on PPV obtained without top names like Liddell and Couture for the most part was done during a recession. The UFC will likely crack 5.7 million total buys this year, all with a higher price than the year before, setting a significant revenue record for the sport. I don't think it's a superhuman feat, but if we're really taking that outlook then an entire year of buyrates needs to be assessed taking that into consideration.
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recession
i agree with your argument to a degree. I think your giving the UFC a little too much credit for the size. If I ask 100 random people if they saw The Dark Night and then asked the same 100 random people if they saw Couture vs Lesnar fight, or even if I asked them if they had even heard about it you would get 2 VERY VERY different answers. You’ll see a movie preview on every single channel a million times a day. You certainly won’t see that kind of promotion for any UFC fight. Even boxing has a much bigger and brighter history along with a much larger fanbase. I just don’t think using these two comparisons really work. . So I agree that people are using the recession to make excuses, but the success of boxing and the movie industry showing the reason why its not the recession I disagree with. Good read reguardless
I don’t think the size of the potential audience is relevant to Michael’s point though. The comparison is between movie sales before the recession and those after. Or UFC/boxing PPV buys before and after.
Movies, boxing PPVs and MMA PPVs can all be grouped into a similar category. Your spending your disposable income to watch a show for a limited period of time. If there was a large dip in movie ticket sales, it would mean that people are hunkering down for the recession and not spending their money as freely. Since they aren’t, it bodes well for other, similar kinds of entertainment…like boxing/MMA fights. It’s likely that those PPV numbers will not be affected by the recession either.
You cannot split up the cost of movie tickets like you can PPV costs though. The interest in MMA is not directly comparable to PPV numbers in tight money situations, as more people are watching each PPV now probably.
at the same time if you are comparing liddell vs ortiz II to Lesnar vs Couture, I think there are way too many variables to make them comparable. Liddell and Ortiz have very different star power as compared to Lesnar and Couture. There was a ton of animosity and shit talking which always leads to interest and Liddell was on a 6 fight win streak. Plus look at the other people on that card:
Michael Bisping
Chris Leben
Thiago Alves
Gabriel Gonzaga
Christian Wellisch
Yushin Okami
I just think Liddell vs Ortiz II had a lot more going for it.
ricker did make a good point about the articles intent. It’s just hard, because movies don’t cost $40. So they are still affordable even on a tight buck. And not everyone splits the cost of a PPV. I don’t even have friends that like MMA. I’m sure I’m not the only one.
things will change. I watched the Ultimate Fighter 3 finale today on my TIVO and the event looked tiny compared to where we are at now. It was at the Hard Rock Hotel and the crowd was so much smaller as was the actual venue. That wasn’t that long ago. In a few years I think the UFC will start hitting the 1 million mark. It just needs time. If i asked my mom who Oscar De La Hoya is she would say he’s a boxer. If I asked her who Randy Couture is she would say, who?? The sport just needs time.
there is a non-trivial difference between the cost of a movie ticket and the cost of a PPV for a lot of people. one benefit though is shared PPV viewing. it’s hard to know how PPV numbers will shake out. one the one hand, a single person might not buy the PPV any more. on the other hand, groups of people may band together to buy a PPV instead of, say, going out for the night. hard to know which effect is bigger.
Exactly, I wouldn’t doubt that UFC 91 was probably the most viewed PPV ever, however there were more eyeballs per PPV bought than before. MMA night parties seem to be cropping up more often with my friends, and the allure of paying less money to see the same event AND be able to hang out with friends outweighs the increased price of buying it on my own.
Now when people are less afraid of a bad economy and aren’t as tight with their money then a lot of people who went to viewing parties might rather watch things in their own home.
On that note, I think that people’s knowledge that we had a bad economy this year was more of kniwing a fact, and recently (especially for me) feeling the bad economy closer to home.
A lot of the effects of a recession, and the extent of said effects, depend on the nature and the severity of the event. The troubling aspect of this particular downturn is the magnitude of the deflationary pressures that exist. It’s a difficult problem to address, especially when the financial system is crippled the way it is. Naturally, people aren’t willing to put money at risk when their returns on various investments are negative, because prices across the board are collapsing.
Entertainment, as long as it doesn’t involve consumers to spend large amounts of cash, would seem to be a decent place to be. I just don’t see a recession being a catalyst for growth in PPV buys as some might have you believe. I think the UFC will be doing pretty good if they can maintain their position. It’s easy to fear the worst, given the economic climate and the attention it’s getting. The UFC seems to be set up well for this circumstance. I would guess they’ll be fine as long as people adjust their expectations a bit.
Errors
There are some flaws with your argument. First of all you skip over economic psychology. For instance the recession began in December of 2007 yet data wasn’t ready till 2008 to inform the public of the recession. Thus the announcement is a lagging indicator of current economic effects. Due to this lag time the early months of 2008 were indeed part of the recession but since the recession was unknown psychological drops in spending hadn’t occurred yet.
Secondly the banking crisis was glossed over in the article. While it started in early 2008 with the ‘credit crunch’ in September the financial system almost collapsed. For a period of time in 2008 the system was critically wounded yet attempted to operate within pre-housing collapse conditions. Also the frozen credit markets are not accounted for, markets that only thawed when central banks around the globe began inject direct liquidity as well as nationalizing many branches. The effect of such drastic action is not known.
While the point about distraction entertainment is valid it doesn’t indicate a ‘healthy’ economic situation. For instance Wal Mart, Heinz, Kraft, Coke and other ‘low price’ goods/realators taht historically do good in economic down turns are doing fine right now. Yet Target and other perceived high-end, or at the least higher-end stores/products are hurting significantly. Movies and sports fall into these categories. But Hollywood is rebounding do to households reigning in discretionary spending to extremely low levels.
The real question is can sports that depend upon fifty dollar PPVs, and seats that cost hundreds (in the NFL’s case thousands) of dollars afford less patrons. While the NFL/NBA and other large sports have huge television and advertising contracts the UFC does not. The UFC does have a dedicated niche fanbase and a brand name. Personally I don’t think the recession will significantly hurt Zuffa but that doesn’t mean we shouldn’t watch for signs of economic tightening reflective of what is occurring throughout the globe.
watchkalibrun.com
People don’t spend less because they think there’s a recession. People spend less because they’re in a bind, (i.e. making less, lost their job). In a recession, bonuses go down or one of the spouse lost his or her job. These are the conditions that force people to cut back, not the fact that the news media report that it’s a recession. So the fact that we’ve been in a recession already, the forces that act upon people’s spending habits go on with or without the realization of the recession.
The conclusion that the UFC has performed well in a recession is absolutely valid.
While I partially agree with you, I believe there is validity to what zakw8456 is saying. No doubt, an individual who loses his or her job will have less to spend. That’s the extreme end of the spectrum. However, people tend to spend less when they feel like they aren’t as wealthy as they once were or fear there financial well-being could take a hit. It’s the “wealth effect” in economic terms. Normally, this theory is referred to when people feel more wealthy and, in turn, spend more. It’s the same thing in reverse. Psychology is a huge factor in financial markets and consumer behavior. Generally, fundamentals win out at some point, but periods of fear and periods of mania cause markets to overshoot both ways before things settle.
by Cannon Jacques on Dec 7, 2008 2:48 PM EST up reply actions
Not sure how I feel about the topic in general, but there is no doubt the economy is having far reaching effects.
As for teh movie industry, i found this snippet…
“Revenues for the year are at $8.7 billion, slightly ahead of the pace last year, when Hollywood ended up with record receipts of $9.7 billion. However, that reflects higher ticket prices, because actual attendance is down 4 percent, according to Media By Numbers.”
Eliot Marshall: Bader won. Like I said in the episode, I'm not going to make any excuses. It's my job to be able to deal with when somebody's doing that. It's not his job to change up his tactics.
http://eliotmarshall.com/
Of course, doing things like going to a movie are often times seen as an escape from reality, so it may be worth the $10 to forget your $20,000 credit card debt, lol.
Eliot Marshall: Bader won. Like I said in the episode, I'm not going to make any excuses. It's my job to be able to deal with when somebody's doing that. It's not his job to change up his tactics.
http://eliotmarshall.com/
Yeah, but you may have to close your eyes when pull out the plastic to pay for that movie ticket…if you want to drive that debt from your mind. Lol.
by Cannon Jacques on Dec 7, 2008 2:51 PM EST up reply actions
It’s rather tenuous to say that “the recession actually started in 2007” and bolstering the PPV buyrate performance point – when really we’re only being told that we were in a recession with a 20/20 look.
While I’m not privy to the actual numbers, I imagine consumer spending is not impacted by a recession until consumers are bombarded by the fact that they are actually in a recession. I’m sure not that many people in the early portion of 2008 were cutting spending, whether we were in a recession or not, because they didn’t know the “boom was officially over”.
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