As Japanese MMA Implodes, the UFC Plateaus

How Dana White is seen in Japan -- wearing a suit?

We've been covering the troubles of FEG, the parent company of Dream and K-1, as they go from bad to worse. Head Kick Legend is reporting that not only will Dynamite -- the annual New Year's Eve extravaganza -- likely be aired on PPV rather than network television but that FEG is actively looking for buyers after a Chinese investment bank refused to bring in cash without a change in management:

Head Kick Legend has been alerted over the past few days that the situation within FEG is possibly dire, as we've seen over the past few weeks, there are massive problems with Dynamite!! 2010. Dynamite!! will happen, that much is clear. It looks like at the K-1World Grand Prix on December 11 we'll start hearing more information as to what will happen with the show. All reports have been that PPV will most likely be the Japanese home for Dynamite!! and HDnet will air it live as well, other than that, nothing. Consider this a blackout, as Japanese PPV is hardly widespread and this event has a long history of being free on New Year's Eve.

What we have been alerted to is that FEG is looking for buyers. This comes from a reliable source within the company who wished to remain anonymous due to loyalty to the company, but even then, this employee is extremely frustrated and concerned about their future. Ishii has always stated that DREAM would be the first to go if need be, but this source explicitly mentioned K-1.

Zach Arnold says this is clearly the biggest MMA story of 2010 and talks about the implications of an FEG collapse for the worldwide MMA scene:

The door will be slammed for anyone to get back onto network television in Japan. There may be occasional one-off specials on a minor network like TV Tokyo, but that's about it. MMA will not be major league for a long time to come. The most lucrative kickboxing promotion will also shut down. This means a lot of fighters and a lot of agents are going to be out of work. None of this is good for the business. It may be a win short-term for Scott Coker (since it will pressure guys like Overeem to focus only on Strikeforce), but part of the allure of some of the fighters under the Strikeforce banner was the ability to fight for K-1/DREAM. With the Japanese option likely off the table, expect more disgruntled fighters under the Strikeforce banner.    

When I hear American fans act as if the loss of the Japanese market doesn't impact the sport I have to shake my head. Seven years ago 54 million people tuned in to see K-1's NYE show. Even their 2009 NYE show drew 16.7% of the TV audience. That's considerably more people than tuned in to see the most watched MMA event in U.S. history. It's also an enormous number of fans and lucrative advertising to remove from the global MMA economy. 

Combined with this survey from the prestigious Sports Business Journal (HT MMA Payout):

Will UFC (Ultimate Fighting Championship) continue to grow in mainstream acceptance or has it peaked as a sports property?

  • Continue to grow 46.95%
  • Has peaked 53.05%

There were 1,293 responses to this question.

MMA Payout also points out this survey result:

Although readers thought that the UFC growth peaked, another survey question ranked the UFC second behind Major League Soccer as the "Property/organization with the most growth potential." (1,295 responses)

The readers of the SBJ are the most savvy insiders in the American sports business community. That doesn't mean they're right, but I do agree with them. It seems very likely that the UFC has reached a very profitable plateau. Barring disaster or the emergence of a mega-star not currently on the horizon, I expect them to hold at current levels of popularity in the U.S. for the next 5 to 10 years.

That's actually probably a good thing for the long term health of MMA, but it's not necessarily the best-case scenario. It is without a doubt the best case scenario for Zuffa's bottom line. 

That's because the most rapid growth for the sport requires three things  -- the emergence of one or more breakout stars, network television success in the U.S. and a strong Japanese scene. It should be obvious that a Michael Jordan level star would be much more of a headache for Zuffa to deal with than their entire current roster combined. American network television will demand control of production and a more independent coverage of the sport than Zuffa prefers and Japan has proven to be an insolvable riddle for the UFC.

More in the full entry from Dave Meltzer.

Dave Meltzer (subscription required) talks about the impact of the UFC monopoly on the greater MMA economy, specifically as regards sponsorships:

Mark Pavelich, the promoter of Edmonton's Maximum Fighting Championships, got a lot of attention talking about the UFC's practices when it comes to sponsors. Now, a lot of people don't like Pavelich, and I can see why, but there is a point here. Right now, the sponsorship situation for fighters have gotten far worse over the past 18 months, and the companies that use MMA fighter sponsorships for publicity also have it harder than ever. The key things that have all happened were UFC's insisting on a payment to them (said to be between $50,000 and $100,000 per year depending on the size of the company) for the right to sponsor UFC fighters. So if you're a company that has a $250,000 sponsorship budget, the $50,000 or so you'd pay to UFC means less for the fighters. It also eliminates smaller companies from sponsoring lower level fighters, where maybe you can sponsor them for $2,500 or $5,000 once or twice and be in the game. Now, you have to be able to spend serious money just to get in the game. Still, UFC has every right to do that. It is their show, and companies were getting sponsorship on fights that not only air live, but are repeated multiple times. But the more recent move is UFC's doctrine that companies that sponsor fighters in UFC have to be exclusive within the MMA genre to UFC. In other words, if you are on Clay Guida's trunks, you can't sponsor someone on Strikeforce, Bellator or any other company that has television. That's a killer to the Robbie Lawler-level fighters in Strikeforce, for example, who has a name and could probably get at least decent sponsorship, but any big name company involved with UFC, well, Lawler is off limits. Again, UFC has the right to do that, many/most companies in their position in the sports or entertainment world that control a 90% market share or whatever UFC controls would likely do the same thing. But it does make it a lot more difficult for fighters outside the organization. And the economy doesn't help, either. The other thing was the sale of Tapout and several of the leading clothing companies all being under one roof that used to sponsor fighters. The new company has cut way back on sponsorships of fighters, and are exclusive with UFC, and Tapout was one of the biggest sponsors around.

The UFC has every right to do things like this, but there's no disputing it has a negative impact on the sport as a whole and in the long run, reduces the talent pool the UFC can draw on. 

Time will tell how all this plays out, but my advice to fans and fighters is not to expect the continued rapid growth we've seen since 2005 and to remember that it could all come crashing down very suddenly. 

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