The Rise Of The UFC: From $2 Million To $10 Billion
The UFC is one of the most interesting case studies in sports. Today's email breaks down the unique factors that enabled them to build a business from $2 million to $10 billion.
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Almost 30 years ago, on November 12th, 1993, the Ultimate Fighting Championship (UFC) held its first event in Denver, Colorado.
The event was designed as an eight-man tournament that featured fighters from various disciplines — Karate, Brazilian Jui-Jitsu, Wrestling, Boxing, Kickboxing, and Taekwondo — with the idea that the winner would determine which martial art was superior.
Fighters weren’t separated into weight classes. They didn’t wear gloves. There were no judges, no time limit, and the fights could only end one of three ways — by submission, knockout, or the fighter’s corner throwing in the towel. Hell, even NFL Hall of Famer Jim Brown was an “MMA analyst” at the time.
In simple terms, there were no rules.
Almost 100,000 people bought the pay-per-view. But only the winner was paid, the arena was half-full, and the media labeled the seemingly barbaric sport as “human cockfighting.”
Fast forward nearly three decades, and the UFC is a completely different sport.
The original founders — Art Davie, Rorion Gracie, Bob Meyrowitz, and Campbell McLaren — built up a solid fan base. They later implemented obvious rules like no biting, no eye-gouging, and no head butts. They even hired judges, created weight classes, and enforced the use of padded gloves.
But there was just one problem. Despite working relentlessly to expand the sport domestically and abroad, the owners were unable to turn a profit. This is where Dana White and his friends Frank and Lorenzo Fertitta come in.
During a tense negotiation with former UFC owner Bob Meyrowitz in 2001, Dana White, who was working as a manager for UFC fighters Tito Ortiz & Chuck Lidell, sensed an opportunity. Meyrowitz frustratingly said, "There is no more money; I don't even know if I have enough money to put on one more event."
Given the Fertitta brothers were billionaire casino owners in Las Vegas and fans of the UFC, White called them up. Within weeks, they presented a $2 million offer to buy the UFC.
Fighting off bankruptcy for years, the UFC had already sold off all its assets — even its website domain. The trio would start from scratch, only receiving the “UFC” name. The Fertitta brothers funded the $2 million purchase price, and Dana White was named President of the operation and given a 9% equity stake in return.
Next up, expansion.
Since purchasing the UFC, Dana White and the Fertitta brothers have worked relentlessly to expand the sport over the last two decades.
They quickly realigned weight classes. They secured sanctioning in important states like Nevada and New York. They spent millions of dollars marketing legendary fighters like Brock Lesnar, Tito Ortiz, and Ken Shamrock. But still, just three years later, they had already lost an additional $34 million (and growing).
So how did they turn it around?
There were obvious things like state-wide regulatory changes, better fighters, acquiring smaller promotions, and bigger TV contracts. Still, in my opinion, the two largest contributing factors to the UFC’s eventual success flew mostly under the radar to the casual fan.
First, the UFC launched “The Ultimate Fighter,” a reality television show featuring up-and-coming MMA fighters living, training, and competing against each other for a six-figure UFC contract. Several TV networks were pitched on the idea, but they all rejected the concept.
Only after Dana White and the UFC agreed to pay the $10 million production costs themselves did they finally get Spike TV to agree to produce & distribute the show.
The results were fantastic. Not only did the behind-the-scenes access connect future fans on a more personal level with the UFC fighters, but the heavyweight final between Stephan Bonnar and Forrest Griffin is still considered by many to be the greatest fight in UFC history.
The craziest part? After averaging just 45,000 pay-per-view buys per event in 2005, the UFC broke 1 million pay-per-view buys less than 12 months after The Ultimate Fighter debuted.
It literally saved the sport.
In addition to The Ultimate Fighter, Dana White’s approach to social media was just as important. While other leagues like the NFL and NBA were fining players for using social media, Dana White took the opposite approach.
After seeing the success that fighters showing their personality through The Ultimate Fighter had on the sport, Dana White instituted a plan that paid fighters based on how effectively they used Twitter in 2011.
The concept was simple: Dana White set aside $240,000 the first year and gave quarterly $5,000 payouts to the fighters that increased their percentage of followers the most.
It might seem small, but over time, the results have compounded.
Conor McGregor: 39.9 million
Khabib Nurmagomedov: 28.4 million
Ronda Rousey: 13.3 million
Jon Bones Jones: 5.8 million
Nate Diaz: 4.8 million
Now, leagues like the NBA and NFL encourage social media use, and similiar social media payout policies have been implemented by the PGA Tour and others.
In the end, the UFC is one of the most interesting case studies in sports. They bought a failing business for pennies on the dollar and built up a loyal and engaged audience by promoting the personality of its fighters.
Now, the business is worth between $9 billion to $10 billion.
Dana White and the Fertitta brothers have put on a masterclass in marketing. While everyone is praising Formula One and Netflix for attracting new viewers through their “innovative” series, it’s easy to forget that the UFC did it first.
Remember, the combination of special access, great creative, and amazing storytelling can produce incredible results.
Have a great day, and we’ll talk tomorrow.
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