WME/IMG’s $4-billion deal for UFC shows the power of sports – Los Angeles Times

Fifteen years ago, mixed martial arts league Ultimate Fighting Championship sold for $2 million. Back then, the sport featured bone-crushing, blood-smearing action that was dismissed as “human cockfighting” by Sen. John McCain.

Now, the UFC is changing hands for $4 billion.

Hollywood mega-talent agency WME/IMG’s acquisition of the league is a major bet on the power of live sporting events in an increasingly fragmented media landscape. And the deal is viewed by sports business experts as a good one.

Sports are in demand because they can be shown across many platforms, attract high viewership and are coveted by advertisers looking to reach consumers who’ll tune into live broadcasts. UFC generates added revenue from video games, clothing and ticket sales to its live fights.

“The TV ecosystem is evolving and this underscores the cliche that ‘content is king’ — although certain content is more valuable than others,” said Eric Katz, media analyst with Wells Fargo Securities. “Sports is appointment-viewing, and generally watched live, and that is why it is becoming more valuable.”

WME/IMG, based in Beverly Hills, is taking ownership of a league that made its name through a slew of tattooed fighters who’ve had their share of run-ins with the law and the U.S. Anti-Doping Agency.

But under casino-owning brothers Frank and Lorenzo Fertitta, who acquired the league in 2001 and ran it via Las Vegas-based parent Zuffa, the UFC has sought to smooth over its rougher edges. Under Chairman Lorenzo Fertitta, the UFC has increased regulation of fighters, streamlined combat rules and instituted drug testing. The brothers, who control a majority stake in the league, stand to profit handsomely from the sale. 

The high-profile acquisition, which was announced Monday, could invite greater scrutiny for the UFC as it becomes more of a mainstream sport. Larger and more established leagues, such as the National Football League and the National Hockey League, have been criticized for the level of violence during games, injuries sustained by players and the off-field conduct of some athletes.

UFC bouts last from three to five rounds, with each spanning five minutes. The sport’s unpredictability is part of the allure. For instance, fighter Conor McGregor late last year ended featherweight champion Jose Aldo’s 10-year unbeaten reign with a knockout punch in 13 seconds, while last weekend, the underdog female fighter Amanda Nunes won the women’s bantamweight belt by breaking Miesha Tate’s nose with a punch and forcing her to “tap out” with a chokehold submission.

The UFC, according to Fox Sports, has become one of the top sports draws for delivering a large television audience of men ages 18 to 49 — a lucrative demographic for advertisers.

Ratings have been on the upswing. Viewership for UFC live fights on the Fox broadcast network and cable channel Fox Sports 1 increased 10% last year, compared with 2014. This year, UFC fights on the Fox broadcast network have been averaging 2.6 million viewers. Still, that is a fraction of the crowd tuning in for America’s most popular sport: football. Last year, “Sunday Night Football” on NBC attracted an average of 22 million viewers.

Just like boxing, UFC has tapped pay-per-view as a key revenue source. On Saturday, the league’s slate of live fights in Las Vegas was offered to consumers for $59.95. Sales figures were not available, but the event was expected to match or surpass the record 1.6 million buys generated by a similar telecast in March. The league also produces a reality show, “The Ultimate Fighter,” on Fox Sports 1.

WME/IMG’s expertise could help expand the UFC’s global reach and digital efforts. The agency has proved proficient in knitting together a client base of A-list entertainers, sports leagues and digital businesses. Consider WME/IMG client and UFC fighter Ronda Rousey, who has become a Hollywood star, hosting “Saturday Night Live,” appearing in feature films as “Furious 7” and “Entourage,” and writing a book, “My Fight / Your Fight.”

The agency represents A-list entertainers such as Ben Affleck, Oprah Winfrey and Martin Scorsese, and athletes such as Lebron James, Serena Williams and Cam Newton. It counts Visa, Rolex and T-Mobile as clients and handles international TV rights for Major League Soccer, NFL and NASCAR. (Additionally, WME/IMG has represented the UFC itself, negotiating TV deals such as the one for “The Ultimate Fighter.”)