K-1/DREAM vs UFC: The World Is Their Chess Board

Chris Nelson reported last Friday on the parent company of K-1 and DREAM getting a new partner, Chinese investment group Puji Capital, that will allow them to fund a major expansion into new markets in Asia and Europe. MMA Junkie spoke to Mike Kogan, Director of FEG USA:

"Imagine if Strikeforce received 12 million viewers (on CBS)," Kogan said. "(CBS executive) Les Moonves would be doing cartwheels all the way down into the cage. Nick Diaz and Nate Diaz could beat the [expletive] out of the whole crew; they could have melees every other day and nobody would give a [expletive]."

But while those numbers are strong, the revenue that's generated from FEG's TV deals and event attendance are not enough to drive growth.

And without growth, the promotion fights an uphill battle in building stars who could convert some of those television watchers into pay-per-view customers. Kogan said that was an essential part of what kept PRIDE Fighting Championships afloat during the heydey of Japanese MMA - an average of 50,000 people bought the promotion's broadcasts before it was brought down in 2007 by a Yazuka scandal.

...

Kogan said the UFC has done well to leverage its talent into a lucrative customer base, and DREAM needs to catch up. In other words, DREAM needs to get back into the pay-per-view business.

"The (Japanese) audience was brought up watching it for free on TBS and Fuji," he said. "Well, they're not a paying public. The UFC has a hardcore fanbase that's ready to lash out $50 for whatever the [expletive] they put on TV, with at least an average of 300,000 (pay-per-view) buys. So the UFC knows that they will receive at least $15 million dollars in revenue.

Dave Walsh commented:

To prove that Ishii is still influential in the K-1 universe, FEG wants to make K-1 a truly global organization, ala "FIFA." They are looking to have an actual "World Cup" of kickboxing, which if you remember, Kazuyoshi Ishii had mentioned a while back. Seeing as though they have made attempts at making K-1 global for a while now, we'll have to see how this works out. K-1 already holds tournaments in different parts of the world, but for now the main markets are in Asia and Europe. There is room for expansion in the entire Western hemisphere as well as Africa.

Let's be honest here, international expansion is a survival move that companies use when their domestic business is starting to encounter hardships. UFC is an example of rather poor international expansion and strong domestic business, but a company that has enough forward looking to understand that establishing these global markets early on will mean a seamless transition into an international focus if domestic numbers begin to slip. PUJI is a Chinese company, so expect to see more Chinese fighters in DREAM and K-1 and possibly a Chinese GP for K-1. This could mean more regional Grand Prix tournaments leading into qualifying Grand Prix tournaments. Think of the European GPs that had "tributary" tournaments leading up to it.

Ben Fowlkes spoke to Marshall Zelaznik, the UFC U.K. President and Managing Director of International Development:

How about the Asian markets? Japan has historically been a tough place for foreign promoters to get into, but is the UFC still working on eventually having an event there or somewhere else in Asia?

The Asian markets are a priority of ours. Certainly continental Europe remains in our crosshairs, and to the extent that we'll have a new territory next year, my sense is it will be in continental Europe. Asia is hot on our list. I'm probably dealing with three different potential locations for an Asian event, whether it's Japan, whether it's somewhere in China or Hong Kong - even Singapore comes up on the list. But in terms of when it will happen, I don't have a good sense, though next year it wouldn't surprise me if we were able to pull one of those off.

I don't know if you've seen it, but FEG recently partnered with a Shanghai-based investment bank and then announced that they were declaring war on the UFC and the WWE. How seriously do you take them as competitors in the Asian market?

We'd be foolish not to keep abreast of our competition elsewhere, but whenever we talk to any media - whether it's online, TV, or print - it's clear that they look to the UFC as the standard-bearer of the industry. I think it's our market and we'll do our best to continue to ensure that it's our market, doing what we think makes business sense.

It will be very interesting to see if Asia ends up being the front lines of a promotional war between the UFC and K-1/DREAM. The UFC has announced plans to open an office in China and launched a Chinese web site.

More in the full entry.

With the UFC coming from a position of strength the war is likely to be fought mostly in Asia, but should the UFC stumble or K-1/DREAM rapidly improve their position in Japan, then Europe could well be the battle ground.

FEG isn't the only player bringing in allies for the international expansion, Dave Meltzer reminds us that the UFC has brought in friends as well, although whether it was their cash or their connections that were needed remains ambiguous:

It was no secret that casino magnates Lorenzo and Frank Fertitta absorbed several years of losses running the UFC early in the last decade and looked to get out. But after hitting it big on television in 2005, the brothers seemingly never looked back, turning down offers to sell stock and ideas to cash in and take the company public. But on Jan. 11, company president Dana White announced that, after eight months of negotiations, the company had sold a 10 percent stake to Flash Entertainment, an arm of the Abu Dhabi government.

The purchase price was not revealed but was believed to be well in excess of $100 million. White claimed the sale made sense because it would enable the company to speed up its efforts at international expansion, although nothing has been announced in that regard directly related to the deal. Others noted the Fertitta brothers' other main business, Station Casino, was in bankruptcy and the family needed to put up significant cash to regain control, although Lorenzo Fertitta denied one had anything to do with the other. Currently, Zuffa is owned 41 percent each by Lorenzo and Frank Fertitta, 10 percent by Flash and 9 percent by White.

Frankly I think it's a great thing that money will be poured into building MMA on the Asian mainland. China is rapidly becoming the economic center of the world and they have one of the world's great combat sports traditions. Competition does amazing things and I'm looking forward to a good clean fight in which the fans, and the sport, both win.