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UFC International Expansion: Stage 2

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The first stage of the UFC's international expansion was to the UK, and by pretty much any measure, it has been a big success.  The company is now turning a profit, has made back their large initial branding investment, has a money making TV deal, and routinely does strong gates all over the UK.  Just over two months ago, Lorenzo Fertitta stepped down from his lucrative position at Station Casinos to focus all of his efforts on the coming push towards a true international expansion for the UFC.  Dave Meltzer previewed the next stage of the expansion here:

“In the spring of 2009, we plan to have two (international) events outside of the United Kingdom,” said Marshall Zaleznik, the company’s U.K. division president, who is working heavily with co-owner Lorenzo Fertitta in the company’s worldwide expansion plans. “We’re looking at Italy, Sweden, Australia and the Philippines. We want to go to Germany (in 2009) but we haven’t launched television.”

With the expansion comes questions. Zaleznik makes no bones about the company modeling its expansion goals after the success of World Wrestling Entertainment, which in its last quarter derived 40 percent of its profits from outside North America.

In fact, one of the company’s key factors in deciding on locations to expand into first are markets the WWE has had success in. But the most important factor is where UFC itself has established a core television audience.

“We look at places where WWE has had five years of success. After three to five years of following WWE, many fans are ready to graduate to the UFC.”

I was one of many skeptical voices about the UK expansion, but I was wrong.  This expansion will also lose a lot of money at first in an initial investment, but we won't be able to judge its success for a while.  The upside of a successful expansion is huge though, and people shouldn't underestimate how important the expansion is.  The WWE remains immensely profitable even with lagging TV ratings and domestic buyrates, largely thanks to their incredible international revenue stream.  One day the UFC fad could dry up, and if it does, they need a solid revenue stream to fall back on.

One of the big questions about these added shows is how they will air them in the United States.  They cannot run 20-25 PPV shows a year, 12 is already pushing it.  I don't think Spike will be airing all of these, so they will need to go elsewhere for distribution.  They are still in all sorts of talks about a TV deal with networks right now, and there is always the option of distribution through Yahoo streaming, though it would have to either be free with advertising or at a much lower price.  

Another issue is roster depth.  Meltzer talks about it in the article above, but they definitely do not have the depth to do 20 PPV caliber main events per year.  Personally, I think the right move is to merge the WEC into the UFC, and add 135 and 145 pound weight divisions.  At the current number of shows I think it would be too much, but if they're really going to be running 25 events next year, it is an option worth considering, because 3 main events a year from Torres and Faber could easily close that gap.