UFC Passes WWE in PPV Buys, Weaker on TV

Barron's looks at the WWE's business prospects and concludes that the UFC is leaving the McMahon's empire in the dust (note the sources for the chart):

The number of viewers making "buys" of WWE pay-per-view broadcasts has been falling for three years. Over the same period, as the chart on this page shows, pay-per-view buys have trended up for the mixed martial-arts events of UFC. Pay-per-view is a high-margin business that contributes almost a fifth of WWE revenues but a bigger share of profits. Barrios blames the weak pay-per-view showings on a weak economy, in which the $49.95 price of an event looms larger on cable bills.
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WWE's Monday-night show RAW is the longest-running prime-time series. That's not necessarily reassuring. Nor is it comforting to hear Barrios say that UFC reminds him of where WWE was 15 years ago. Facing off against younger challengers like UFC, the wrestlers of WWE look old.

MMA Payout takes a long look at the state of the UFC from a business perspective (the whole thing is a MUST READ) and concludes that they're doing great on PPV but not so well on Spike TV:

The UFC is now just exiting an eight (8) event streak where it scored 500,000 PPV buys or more. Moreover, the UFC is currently on pace to break its PPV sales record with a 2010 showing that should come in around the 9 million mark: UFC 121 should do at least 1 million buys with the Brocktober promotion, plus a decent UFC 123 card and TUF-backed UFC 124 should be able to do another million combined.

The PPV sales are encouraging and demonstrate the potential of the UFC. There is a strong demand for its product at the highest levels, which implies strong matchmaking, evocative story telling, and reasonably injury free combatants. If the UFC can continue to develop fighters and carefully select matches that make sense for both the division and entertainment purposes, the sky is nearly the limit.

However, the television ratings are dropping on Spike for just about everything. I don't think this a reflection of the sport or a slight to the potential of the product. Rather I think it comes back to provide compelling content. When the UFC provides content like UFN 14 (Silva vs. Irvin) or UFC 105 (Couture vs. Vera) people are going to tune in. When the UFC offers up something like Swick-Burkman as a main event for UFN 12, people won't.

I hear a lot of concern about over-saturation in the marketplace, but it really all comes down to the product offering. The good events will be highly successful and the bad events will experience just mediocre results.

But I will caution that the UFC cannot afford to get complacent. Spike has essentially run the same format on TUF for the last 12 seasons and the results of a stale and bland product are starting to show. The UFC is a company known for its willingness to experiment and live on the edge - both with its product and its marketing tactics - but we haven't seen the same level of innovation (or risk taking) on the production side. It would be a shame to see the company fail to change and adapt to an evolving fan base with new and different tastes and preferences. 

I'd agree that attention to the quality of the product is the most important thing for the UFC to focus on, but I think that MMA Payout is missing two key things in an otherwise excellent analysis:

1. Price point
   Payout says: "There's been a certain falsehood perpetuated by some in the media that suggests the UFC should sellout and do a huge gate in every new market, but rarely is this the case. It takes time to build a local spectator market - no matter if you've had television exposure in the area or not."
   But they don't mention the factor of price in the attendance and gate figures. If the UFC would cut prices on their tickets slightly they could sell enough extra tickets to more than increase overall profitability. The same for their Pay Per View events. If they offered the weak events at a discount rate they could increase sales enough to increase their net and prevent their core audience from eroding.
2. Dropping Buy Rate Floors 
   Figure FourWrestling Observer (subscription only) is estimating the buy rate for UFC 119 at 275,000 buys. That's down from 300,000 for the worst performing UFCs in the last year. 

Overall, the UFC is clearly in a very strong business position, but they need to continue to adapt to changing market realities and maintain the highest possible product quality to continue to grow rapidly.