Could the Proposed $700 Billion Wall Street Bailout be the Event that Finally Slows the UFC Machine?
Mike had a great article on Monday in regards to how the impact of high ticket prices and a steady stream of shows is "bleeding Vegas dry." But it isn't just Vegas residents with aching pocketbooks.
We all know that the economy is in bad shape and if you've followed the news at all in the last week you know that the American taxpayers are very close to taking on a lot of added financial responsibility as we creep closer and closer to a 700 billion dollar Wall Street bailout. Getting beyond the politics of the matter and down to what matters to this site, what does this mean for the UFC?
With the current state of the economy we heard a lot of talk about how luxuries are the first to go from Joe Taxpayer's budget. Yet despite a housing crisis and severe devaluation of the dollar the UFC continues to pull solid live gates and do big PPV numbers. But, as taxpayers are given additional financial strain eventually something has to give. If things get worse eventually the entertainment dollars just won't be there and $50 monthly pay-per-view shows are just going to be too much for more and more people.
What would this mean for the UFC? I assume that it would mean a stronger focus on getting their shows on network television where advertising revenue would somewhat offset the money they would then be failing to make off of PPV buys. This could potentially turn a negetive situation for fans into a huge positive with more free cards, and would also allow the UFC to build up hype for broadcasts of a select few "elite events" on PPV (a Couture/Lesnar level event for example). $50 every three or four months is much less painful to the bank accounts of Americans struggling to get by than $200 in that same timeframe.
Then again, we've seen the UFC and major networks go 'round the carousel more than once with no substantial results. If the stubbornness of the UFC to give up some degree of their production leads to an inability to get on a network bigger than Spike and a continued expectation of fans to pour money into pay-per-view then it could turn out that the biggest threat to the UFC empire was never Elite XC or Affliction, it was the badly damaged United States economy.
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I’ll comment on this more later, but I just wanted to say that the analysis at Bloody Elbow keeps getting better and better. Keep up the good work!
by Michaelthebox on Sep 24, 2008 1:41 PM EDT 0 recs
"If the stubbornness of the UFC to give up some degree of their production leads to an inability to get on a network bigger than Spike "
It was more than that holding up a TV deal if I remember correctly…moreso it was the TV companies wanting some sort of stake in Zuffa(like CBS/EliteXC)…or did I mis-read that somewhere a while back…
http://mma4real.net/
by Tha Realness on Sep 24, 2008 1:42 PM EDT 0 recs
I think that was the case with....
at least one network (Fox if I remember correctly).
Contributing Editor - BloodyElbow.com - SBNation's mixed martial arts headquarters.
by Brent Brookhouse on
Sep 24, 2008 1:46 PM EDT
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correct..
Dana White said that if he would have signed a t.v. deal, those guys (tv execs) would have owned the company.
$700 mill buyout is the proposed bailout right now. They are saying this could reach a Trillion.
by steveoc24 on
Sep 24, 2008 2:19 PM EDT
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Billion...
not million.
Contributing Editor - BloodyElbow.com - SBNation's mixed martial arts headquarters.
by Brent Brookhouse on
Sep 24, 2008 2:21 PM EDT
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billion.. my bad
I watched 86 at a buddies house for the first since I didn’t want to cough up an extra $50 for a PPV that month. He had about 20-30 people there. After talking to some of the people there, about 10 of them usually order the PPV’s at their house like me, but it was just getting too expensive. I’m sure the UFC is starting to see this and is losing a lot in PPV buys.
by steveoc24 on
Sep 24, 2008 2:38 PM EDT
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Why should they go to another network? They already have their niche locked on and get very respectable ratings on Spike. One of the biggest advantages that UFC has is a strong foundation with Spike. They have a formula that works. They don’t want another entity messing with their final product. They prolly have some fixed contract with them(Spike) and it is very unlikely that any combat sport will get significant air time on the national tv networks.
by Zocalo on
Sep 24, 2008 4:53 PM EDT
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They don't have to abandon Spike...
they could continue their thing with Spike while also putting shows on another network.
Contributing Editor - BloodyElbow.com - SBNation's mixed martial arts headquarters.
by Brent Brookhouse on
Sep 24, 2008 5:29 PM EDT
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Just in my opinion overextending yourself in a very shaky economic climate isn’t a good idea. I don’t think that FOX or any other media outlet can take the risk of giving anyone a slot on primetime. I don’t like to bring in wrestling, but one of the downfalls of the organizations were having too many shows on various channels and then asking their audience to then pay for PPV. If you have too many shows the quality of the product will go down.
by Zocalo on
Sep 24, 2008 5:47 PM EDT
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I believe I read an article on MMAPayout suggesting that HBO was doing the same. For them, it certainly makes sense: since HBO is by subscription, any extra programming beyond a few UFC fights makes no sense for them. For instance, they don’t really benefit by doing countdown shows, and those countdown shows would cut into other programming they could do to attract other markets. For their boxing countdown shows, any increase in the buy rate benefits them since they produce the PPVs. They’d need a piece of the UFC for that to make sense for them in terms of UFC countdown shows.
Networks make a lot more sense, since they get advertising dollars, and even countdown shows draw a decent viewership. Having the majority of events on free television, with the occasional PPV supercard, would make good sense in terms of growing the sport and the UFC market, and probably not result in too enormous a decrease in revenue, as having regular shows on the networks would quickly drive the fanbase up and make the supercards that much larger.
I wonder what affect it would have on payouts, though. Right now the big names take pieces of the PPV revenue; having only a few “super-PPVs” would mean more top fighters on those PPVs taking a bigger chunk of the revenue.
by Michaelthebox on Sep 24, 2008 2:18 PM EDT 0 recs
My source...
told me that early on there was a deal on the table that involved no ownership by the network. This was during the writer’s strike when networks were desperate for new content. Now it sounds like that has become a bigger issue.
Contributing Editor - BloodyElbow.com - SBNation's mixed martial arts headquarters.
by Brent Brookhouse on Sep 24, 2008 2:27 PM EDT 0 recs
International
Might see more international shows from them, as the US is kind of messed up right now. There is a place for the UFC in Montreal, that’s for certain.
by Ubernoober on Sep 24, 2008 2:28 PM EDT 0 recs
That might be the case, considering Zuffa’s recent push for increased international expansion. But even in some international markets, there may be slow down. Take Canada for example: Whenever the US gets a cold, we tend to get it too. The US downturn is really effecting Canada, and now there is the threat of a possible housing and mortgage meltdown as well. Things are more tightly regulated and practiced in Canada, but that doesn’t mean there could be trouble ahead. The housing market in the US collapsed, as well as the UK and other places. Merrill Lynch warned yesterday that the lack of credit crunch in Canada is potential for big trouble, especially considering Canadians aren’t saving enough and are overextended as well. The slowdown definitely here already, what with the reduction in housing starts, etc. My buddy put his condo up on the market in Vancouver a few months ago (probably one of, if not the strongest areas) and had to pull it off again because the buyers just weren’t there with his asking price, which was more than reasonable for what the market supposedly could bear.
That being said, I’m sure if the UFC did another few shows up here, they’d sell out really quickly due to Canadians loving MMA, but repeat business would depend on what the Canadian economy is doing. This will definitely hurt PPVs also. Other MMA fans I know are resorting more and more to the cluster viewing at bars and other homes.
Also, the FBI says it’s now investigating bailout firms like Fannie Mae, Freddie Mac, Lehman Bros., and AIG for possible mortgage fraud. If it turns out there was fraud and illegal activity, this will mess things up further in the US in terms of investor confidence, etc., which is already basically shot to hell. People are scared to shit right now.
by pud333 on
Sep 24, 2008 2:54 PM EDT
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The fact is The entertainment business thrives during downturns… you will see viewership for Zuffa programming actually increase.
Volume will increase, but high end purchases will decrease. Zuffa is already planning for this – shows will still sell out.
The fight business is a lot like drugs and pussy… the worse people are off the better it sells.
by mmalogic on Sep 24, 2008 2:50 PM EDT 0 recs
What was your analogy with Affliction and boxing? Persian food and Chinese?
I like this one better.
by Baudelaire on
Sep 24, 2008 3:03 PM EDT
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The only real factor this economy has in regards to MMA is the availability of capital…
You will not see any Elite XC’s or IFL’s popping up… the cookie jar is closed. (The AFL recently found this out as all capital commitments have been pulled… their business plan can now be used to wipe someones ass).
In a way this is a good thing as whatever money is invested into this space it will be very well managed.
by mmalogic on Sep 24, 2008 2:59 PM EDT 0 recs
The AFL recently found this out as all capital commitments have been pulled
Wow. They’re done already?
by Tonley on
Sep 24, 2008 3:03 PM EDT
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The weak dollar has probably actually helped Zuffa – it makes it cheaper for tourists to visit the US. In addition, it increases Zuffa’s profits from overseas events.
by John Matrix on Sep 24, 2008 3:07 PM EDT 0 recs
there is no added direct taxpayer strain from the bailout until and unless taxrates go up. and, if the bailout solves the financial crisis (by no means a certain outcome) and thereby eases current economic difficulties, then the net result (bailout costs + improved economy) could be positive even if taxes are eventually raised to pay for the bailout.
the broader concern about a downturn cutting into disposable income and thereby into demand for the UFC product is valid though. i’m not sure how elastic demand for the product is.
mmalogic’s assertion about demand being counter-cyclical isn’t obvious. i know that boxing struggled through the first half of the 1930s after doing spectacularly well in the 1920s. he’s right though that difficulties in corporate financing will be the most immediate obstacle to more MMA.
by boxingstudent on Sep 24, 2008 3:08 PM EDT 0 recs
actually the bailout will have an effect even without taxes being raised.
Think of the dollar as a stock note…
If you stock in a company and the company dilutes it by issuing more stock your note is worth less.
If you wanted to pillage a nation you wouldn’t increase taxes as you could cause a revolt.
You do it by raising a commodity that is used in every facet of life “oil” and issuing more “stock” (printing more money)
This is a stealth tax which people won’t realize until its all over.
If you take a frog and through it in boiling water it will jump out right away… it will be scathed but it will be alive.
If you take that same frog and place it in luke warm water and slowly turn up the heat it will boil to death without even realizing it.
by mmalogic on
Sep 24, 2008 3:15 PM EDT
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so you’re saying that the $700bn or whatever the cost of the bailout turns out to be (remember that there is some possibility of a profit for the gov’t out of this thing) will have a strong dilutive effect on the US dollar that will make individual taxpayers poorer?
1) $700bn is not a lot of money relative to the entire pot of US currency
2) in the context of the UFC, we’re not buying an imported product
3) why does nominal inflation matter at all here? real individual income is what matters, and the bailout may not have a negative effect on it
by boxingstudent on
Sep 24, 2008 3:22 PM EDT
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on re-reading i guess the point is that we’ll be paying more for oil as a result of a cheaper US dollar and that will function as an implicit tax? if real incomes don’t decline then the part of the increased price of oil due to a cheaper dollar won’t matter.
by boxingstudent on
Sep 24, 2008 3:32 PM EDT
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go look at the price of food and compare it to last year and then you’ll understand what I’m talking about… oil is just one in the dominoe effect.
You are about to see some magic:
Without salaries decreasing and taxes increasing the american population is about to lose 20 to 50% of their net worth.
by mmalogic on
Sep 24, 2008 5:39 PM EDT
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1) The $700 billion is money that does not exist, as the US Government is already well in the hole. This forces the country to go to other nations to basically float them whilst we go further in debt. Like the billions we’ve spent similarly in the last 10 years, what happens when you just print more money is that the value of the money begins to go down.
2) Inflation matters because as a “service based economy,” the whole concept is to generally sell things sold elsewhere. Since the average worker in this country doesn’t make any more than he did 3 decades ago when adjusting for inflation, he’s had to mortgage the house and go into debt to buy everything he owns. Well, now that we’ve reached the peak and home prices are beginning to tail spin, suddenly the equity in Joe Average’s home is starting to disappear, and he was counting on that to pay off the things that he bought with money he doesn’t have. Add in that the currency is undergoing inflation relative to outside economies that, well, actually produce things, and it forces the prices upward. He has to spend more money on basic necessities just to get by, all the while, he’s actually already deeply in debt.
by D.Capitated on
Sep 24, 2008 3:43 PM EDT
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When the economy goes in the gutter...
Cheap entertainment goes into a boom.
Video games —> Up.
Movies —> Up.
Vacations —> Down.
UFC live tickets —> Down.
UFC PPV buys —> Up.
When times are tough, people head toward cheap entertainment. People like to escape reality when times are tough. Historically, that has been the case.
UFC PPV buys won’t go down. It may even go up. Tickets to PPV shows at Vegas may go down, however.
by cyph on Sep 24, 2008 3:27 PM EDT 0 recs
Keep in mind
That they’ve been traveling to new cities/venues, and those shows will continue to do big numbers at the door. Seems like a good backup plan..
Besides, everyone is getting really excited about how they won’t fill the gate. How about….. we wait until that start happening? Rampage could crash a boat into a nursery too, but I’m not going to type a story about it..
by Blackout612 on
Sep 24, 2008 3:34 PM EDT
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is there any evidence that PPV buys don’t suffer in a downturn? people throw this escapism justification for cheap entertainment around a lot but i’ve never seen anything to prove it.
by boxingstudent on
Sep 24, 2008 3:40 PM EDT
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PPVs as a fully accepted medium for sports hasn’t really been measurable during a serious and sustained downturn in the economy.
by D.Capitated on
Sep 24, 2008 3:46 PM EDT
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Ask yourself this:
You no longer have $1000 for a cheap vacation. You only have $300. What are you going to use $300 for? Movies, video games, and PPV. Entertainment are interchangeable in the same price range. $1000 cruise = $1000 vegas trip. $60 video game = $50 PPV.
Of course I have no proof of that. But as an MMA fan, are you really, truly going to stop paying for your vacation and your MMA addiction as well because times are tough?
by cyph on
Sep 24, 2008 4:04 PM EDT
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Great Clear and Concise Points
Good points cyph and the author.
I’m not really sure that PPV’s will also go up. I don’t think they will decline drastically but people will form “watch parties” as someone else says or if they are the type that would normally go to a live show (social) will likely want to be with other fans in bar or watch party. Even if they did all order PPV the overall number will still be mostly inconsequential (10,000 to 300,000).
Another big factor is the time factor of entertainment cost. a PPV only entertains for a day to a week while a video game of the same amount can entertain for anywhere from a week to years.
by natyong on
Sep 24, 2008 4:28 PM EDT
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also ask yourself…
when your depressed what do you do?
You want to numb from reality…
Hence the economic term “depression”.
But enough with the common sense go search and you will find tons of statistics backing this up.
by mmalogic on
Sep 24, 2008 5:44 PM EDT
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where are these stats? i’ve looked at bureau of economic analysis figures as well as academic literature— all point to reduced recreation/entertainment spending in recessionary/depressionary periods. i’m not saying your point is wrong necessarily, but i’d like to see data.
by boxingstudent on
Sep 24, 2008 8:17 PM EDT
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I just did a load of searches and couldn’t find anything also regarding PPV. I personally have a skewed person opinion in that I take advantage of free alternatives since I always consider myself to damn cheap no matter how well off i am.
Is the video game industry recession-proof? MSNBC
Is the Entertainment Industry Recession-Proof?
Quite a few articles pretty much state that TV watching often doesn’t change much, but TV ads start to get really available in prime spots since Networks don’t lower rates.
by natyong on
Sep 25, 2008 4:04 AM EDT
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Will this thing I saw outside spell doom for Dana?
Will increased melting of the polar ice caps end the UFC?
Will Affliction solve the Israeli-Palestinian logjam?
Does the sun rising fuck the UFC forever?
God damn, this is alarmist. They’ll be fine.
by subo on Sep 24, 2008 4:04 PM EDT 0 recs
It isn't alarmist...
why are you all taking every post at more than it is? I was simply asking if there may be an impact to the UFC by a major American event.
You’re being incredibly ignorant as well as insulting.
Contributing Editor - BloodyElbow.com - SBNation's mixed martial arts headquarters.
by Brent Brookhouse on
Sep 24, 2008 5:31 PM EDT
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I think it is very valid to bring up if the economic slowdown will effect UFC. Baseball just released their seating numbers and after 7 years of growth they had a negative growth. This past Sunday I saw some seats available in several football games. The Phx Suns, one of the most exciting basketball teams have less season ticket holders this year. Baseball,football, nor football are going to fold but with combat sports, fighters are the ones who lose in the end. They can’t demand bigger purses if there are smaller gates and smaller ratings.
by Zocalo on
Sep 24, 2008 5:55 PM EDT
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As far as the UFC and the networks go, its been clear that the UFC’s attitude is that it is their way or the highway when it comes to every aspect of their business. Right now their PPV buys are fantastic, and rationally, I suppose its a bit absurd to demand that they should be forced to hand over a cut of that to HBO, Fox, CBS, or whoever, or for that matter, allow someone to run the production for them for that reason. When pushed on it, they can mention that they want NBA money or the like, and you’ll probably see a lot of nodding heads on the internet.
The downside is that it may mean that MMA becomes the perennial “next big thing” or that they will “see an explosion similar to NASCAR” for the next however many years.
by D.Capitated on Sep 24, 2008 4:05 PM EDT 0 recs
UFC has so many untapped markets for shows. It wouldn’t surprise me to see them hitting the road more often. I think people have plenty of money to go to a show in their locale, they just may not have enough to go to Vegas and stay and go to a show.
"The bigger the cushion, the sweeter the pushin'"
by BJJDenver on Sep 24, 2008 4:46 PM EDT 0 recs
ive read all of the comments on this thread, and i think there is one determining factor that has been left out, that is by the end of this year or early next year, the ufc may be the only major mma organization left, save strikeforce, if you consider them a major org. Elite xc is 55 million in the hole and are on life support. Affliction just got put on life support with a desperate merger with GBP. Dream, even though they are not an american company, got abysmal ratings for tuesday’s show and are relying heavily on nye’s event. so my thoughts are if there is no real competiton (not that there’s much now) what else will there be for mma fans to watch. the economy has been in the toilet for quite some time now and the ufc has only flourished. i dont think they need to go the network tv way just yet, unless it is in their best interest and it is a good deal for them. only time will tell.
by bdw on Sep 24, 2008 5:00 PM EDT 0 recs







