UFC deal reflects the growing sports power of WME-IMG
On Monday the mixed martial arts promotion company Ultimate Fighting Championship (UFC) announced it had sold itself to a group of buyers for $4 billion. It’s the most expensive sale of a sports organization in history.
For context among other deals, the price tag is equal to what Disney paid LucasFilm for the rights to “Star Wars” in 2012. It’s twice what former Microsoft CEO Steve Ballmer paid for the L.A. Clippers in 2014 and twice what a group including Magic Johnson paid for the L.A. Dodgers in 2012. But lest you think that the UFC became this valuable overnight, consider that it has been around since 1993, and that brothers Frank and Lorenzo Fertitta bought it back in 2001 for $2 million. It took 15 years to grow the UFC to $4 billion in value. It took Nintendo four days to grow its market cap by $9 billion after the release of its new mobile game Pokémon Go. (In other words, the UFC is hot, but it ain’t viral.)
There’s a lot to dissect about the landmark deal. The Verge points out that the UFC became “the Netflix of combat” thanks to UFC Fight Pass, its much-praised streaming subscription service. Kevin Iole at Yahoo Sports says one negative of the deal is the loss of Lorenzo Fertitta, who has been the sport’s business visionary and will now move on. USA Today correctly identifies digital content as the reason for the high price—along with the devotion of the existing audience, and the potential for it to get even bigger.
Potential is what WME-IMG, which gets the majority stake, sees in the UFC, which had $600 million in revenue last year. The perceived valuation banks on that number multiplying in the next few years. And as everyone marvels at how UFC commanded such a hefty price for itself, one point lost in the narrative has been the foresight of WME-IMG, which continues to grow more powerful as a global sports giant. (WME-IMG says it is holding off on interviews until the UFC sale closes; UFC did not respond to interview requests.)
William Morris Endeavor, the talent agency founded in 2009 by Ari Emanuel and Patrick Whitesell, bought 50-year-old sports agency IMG Worldwide in 2013 for $2.4 billion. WME, itself the result of a 2009 merger between William Morris and Endeavor Talent, had become a Hollywood powerhouse, and represented glitzy talent like Ben Affleck, Matt Damon, Tina Fey, Dwayne “The Rock” Johnson and others. By joining IMG, which boasts big-name athlete clients like Maria Sharapova, Serena Williams, Novak Djokovic, and Cam Newton, it made itself a sports powerhouse as well. And since the merger three years ago, the combined organization has made a string of smart moves.
In 2012, WME formed a strategic partnership with Zumba Fitness, a popular workout craze. In January of last year, WME acquired Global Esports Management (GEM), an agency that represents esports players.
Last April, WME-IMG bought the Professional Bull Riders (PBR), the world’s leading bull-riding entity (think of it as the UFC for bull-riding) from a private equity group for somewhere north of $100 million. It was a savvy targeting of a not-yet-mainstream league with an extremely devoted following. Sound familiar? PBR puts on more than 300 events a year at big stadiums like Madison Square Garden. At the time, WME-IMG co-CEOs Emanuel and Whitesell called PBR the fastest-growing sport in the country.
If all that wasn’t enough, in September WME acquired Miss Universe, which includes the Miss Universe and Miss USA pageants, from Donald Trump.
With the UFC acquisition, WME-IMG gets to work with talent like Ronda Rousey, Conor McGregor, Jon Jones, Anderson Silva, Holly Holm, and Nick Diaz, not all of which are IMG clients, but will surely work with IMG on outside-the-ring opportunities. UFC 200, which happened last weekend, set live attendance and gate receipt records in Las Vegas, and a new Pay-Per-View buy record for the UFC. Brock Lesnar received a $2.5 million purse, the biggest ever fight-night salary in the sport so far. WME-IMG sees future TV potential here too; the UFC’s current 7-year contract with Fox (to broadcast four live events per year) ends in 2018.
The sport is only going to get bigger, and more global, from here. “We’re now committed to pursuing new opportunities for UFC and its talented athletes to ensure the sport’s continued growth and success on a global scale,” WME-IMG said in its statement. This deal was as much about media as sports. Expect WME-IMG, which has extensive operations outside the US in places like China, to expand the UFC’s global operations and appeal via digital content.
After a blockbuster sale, the UFC “is going to the next level,” president Dana White told ESPN. So is the global reach of WME-IMG.
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Daniel Roberts is a writer at Yahoo Finance, covering sports business and technology. Follow him on Twitter at @readDanwrite.
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