Hello BE - at the risk of being a bit dry compared to the witty satire I just read, I'm posting my views on some of the business issues facing the UFC.
Dana has stated or inferred that the long term UFC strategy is to make MMA/UFC into a major sport. Underlying this is the implied profit/value maximisation imperative: i.e. make the owners of the company as much money as possible. There's nothing wrong with that - in fact, it is or should be the underlying goal of all businesses and companies, excluding of course non-profit organisations or companies set up with a clear community service mandate.
The UFC under Dana and the Fertittas has demonstrated its ability to grow profits significantly, but in the last couple of years has experienced significant hurdles while also achieving some new goals including the FOX deal. Stars have been injured/ill or have retired (Brock, GSP being the two biggest examples), leading to reduced PPV sales. Viewership on free to air cards has been underwhelming (partly due to failure to impress on the first FOX event when Guida/Bendo was not aired; and sub-optimal cards versus competition from other entertainment on subsequent events). PPV sales recently have not been strong, and the ignominious cancellation of 151 seems like icing on the cake of a somewhat tragic period in UFC history.
We can hope that things cannot get any worse. This must be the low point - surely a return to form is on the cards (bad pun I know). On the other hand, has the UFC peaked and are we seeing a long drawn out phase of decline?
The truth is that it's indeterminate. What happens for the UFC over the next 5-10 years is largely dependent on their strategy, tactics and the execution of these.
I believe the UFC should employ a strategy based on several key initiatives running in parallel. Some of these are clearly in place already, while others are either in development or non-existent.
1. Brand maximisation. The UFC wants to make its brand so strong that any UFC show should sell on the expected entertainment value rather than on the brandnames of star fighters. Various tactics such as advertising, expos, corporate social responsibility, alliances (e.g. with a music star or label), sponsorships (the UFC could sponsor, for example, a celebrity or athlete who is a big UFC fan), supporting MMA themed movies and other methods including some of the items below.
2. Dual Platform Broadcasting. High quality, free to air or cable broadcasting coupled with the PPV model. Historically, non-PPV cards have tended to be weak. Currently, FOX cards are reasonably strong but have yet to be particularly impressive. My view is that at least some high quality title fights and #1 contender fights should be allocated to FOX, to bring in additional fans - of which some percentage will become longer term PPV buyers. This would entail sacrificing some short term PPV revenue but ultimately strengthen the brand. If done correctly, the additional PPV revenue across all future cards would counterbalance the short term losses.
3. Talent management. The UFC should not rely only on its brand. It should actively seek to develop stars. I feel this is an area which could be significantly improved. Possibilities include:
- Developing a new prospect identification, recruitment and development program. TUF is getting tired. I would point them in the direction of BE's top prospects post series which is comprehensive and impressive, for a start. Given the relatively low fighter pay at that level, the UFC can afford to sign up and develop these fighters - with a view to skills, potential as well as personality/marketability. I would advocate the UFC supporting with training costs, including image and media management training (I'm looking at you, Jon Jones; and perhaps Chael Sonnen could teach some classes on self promotion). I know WWE makes some people cringe, but historically they have shown an ability to create new star personalities (draws) from the raw unknown talent that they recruit.
- Media/Image management and training for existing fighters who have talent/ranking but could do better in terms of drawing viewers
- Stronger contracts with fighters. The fact that JJ could reject a replacement opponent (contributing to 151 not being saved) is a flaw in the contract structure. I believe the UFC should be able to compel, within reasonable parameters, its fighters to take fights. It all comes down to what is negotiated. Before anyone flies of the handle to say that the UFC has too much power over fighters as it is, let me say that when you demand concessions in a contract, you should also pay for them. So, the UFC should pay its fighters more than it currently does, in return for greater control of matchmaking. I see that as a win/win. I doubt anyone can argue that fighters are currently paid too much.
4. Event Management. Various complaints have been leveled at the UFC's card lineups. Some cards are weak, some are stacked, some are dependent on only one main event fight which, if it falls through, can cause the card to be cancelled. Inadequate risk management (i.e. weak supporting fights) and a sub-par process (Anderson and others were not exhaustively contacted before the event was cancelled) for rectifying problems contributed to 151's cancellation. We can agree, I think, that cancelling an event is a black eye for the UFC, damaging its credibility with industry and fans, and costing the UFC and other parties (e.g. fans, sponsors, venue etc) significant losses. The solutions are surprisingly simple yet were not implemented.
- I advocate, where possible, a strong backup fight positioned as the co-main event, that can carry the card. Alternatively, put on a fight in the same weight class so the opponents can be re-allocated if necessary into the main event. Best of course is if you have a top contender match-up which satisfies both criteria.
- Backup plans - identify fighters which are willing to fill in on short notice, so that if the main event falls through you can simply slot in your replacement fight. Anderson was willing to take on a LHW. Chael vs Vitor could probably have been setup as a backup plan ahead of time. JJ could have been told ahead of time that in the event of Dan Henderson pulling out, he would have to face Chael or Vitor. Both Chael and Vitor could have been put on notice, with a training budget to compensate them while they ready themselves to fill in for Dan (or JJ if he's injured), or to fight each other. In hindsight, all this seems so obvious but clearly these processes could have been considered in advance (given all the UFC history of injuries and event changes e.g. GSP/Condit).
There are other areas but these are the main ones I'd like to cover here. What the UFC needs are clear policies and processes that ensure that their events work smoothly; their talent continues to convert into draws; their broadcasting attracts fans as well as generates increasingly higher revenue and profits; and their brand becomes a household name. The strategy should be to identify, implement and optimise these policies and processes. The tactics should fit within the strategy and support it. And the execution of the strategy and tactics should be optimised by recruiting talented/experienced staff to do the work; providing adequate training and information so they can do their jobs well; compensating them adequately so turnover is reasonable (so experience and expertise grows over time); and bedding down the processes so execution becomes easy and consistent.
I believe the UFC has the potential to be much more successful, if these elements are implemented. It currently has the feel of a medium sized organisation wanting to progress into the tier of major corporates. To do so successfully, it has to see itself and behave like a major corporation. This means improving itself in a multitude of ways so that it can compete in the big leagues - i.e. against other major entertainment options, not just sports (NFL, NBA, Olympics) but also other forms that compete for our time and money (movies e.g. Avengers; other TV shows; the broader restaurant/bar/club industry).
Hope you enjoyed this.
[ArcaMMA is a strategy consultant working mainly with clients in the Private Equity, Sports/Entertainment, and related industries]