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Reports: Station Casinos is in big financial trouble
By Zach Arnold | October 23, 2008
- October 19th - Going private hasn’t saved companies from slump (Las Vegas Review-Journal)
- October 19th - Station Casinos will seek some reprieve from its banks, though the company’s debt costs will likely go up (Las Vegas Sun)
- October 20th - Station Casinos confident business model will best economic worry (online casino advisory)
- October 23rd - Is Station Casinos going out of business? (Fightlinker)
When Dana White announced a while back that Lorenzo Fertitta was making a 100% commitment to UFC and moving away from actively managing Station Casinos, it was heralded as a move that was going to forever change the MMA business. Much to the credit of Fight Opinion Radio lead host (Jeff Thaler), Jeff never bought into the initial explanation given as to why Lorenzo Fertitta would give up such a lucrative position in Las Vegas to go to UFC — a profitable company, but nothing close to the money-making machine that Station Casinos had been over the past decade.
Addendum: In addition to the Station Casino troubles, MMA Payout claims that there are problems between UFC and Walmart. Ironic, given the stances that both Station Casinos and Walmart have taken in regards to worker’s unions.
Update: This sounds not-so-good:
“In terms of the covenants, we really just don’t know,” Friel said. “We’re just going to have to wait and see how the property opens.”
However, the nearly $400 million in debt that Aliante Station will open with will be leveraged against the property and not added to Station Casinos’ current $5.3 billion debt load.
If the property’s cash flow is unable to meet banking covenants, the partnership could contribute cash to cover any shortfall, Friel said.
Station Casinos declined to disclose projections for revenue and cash flow for the new property.
Topics: MMA, Media, UFC, Zach Arnold | | Permalink | Trackback | Share This
As I made sure to post about in the article you’ve been kind enough to link to, this should have been the first thing in people’s minds. Echelon can’t get financing, MGM is scrambling to find money for Citycenter, but the casino chain that depends on the health of the big boys is perfect? It didn’t make sense then and its hilarious to see people coming to that conclusion now.
The endless fawning of the internet over Lorenzo as the hulking superman to guide MMA to mass market hyper success was enormously misguided fanboyism pretending to be some sort of journalism/editorial hybrid. I bet there aren’t many folks willing to put forth retractions.
They have nothing to retract.
You’re right. Short of someone from Colony Capital coming out and saying “we gave Lorenzo an ultimatum,” no one would say anything, even if the company went under. At that point, it would just be a “huge shock” or something.
So your saying that Lorenzo was forced out of Station in June because of a economic crash in September/October?
You know even if he did leave Station as a money saving measure it doesn’t really change anything anyone was talking about with him joining Zuffa. These are MMA news sites not Casino news sites, I’m not sure what they would have to retract?
This can be typical of companies that go private. They put a lot of the debt into the company, and hope for the future profts to pay it down. But when the economy takes a turn for the worse, these “going private” deals end up looking horrible.
If UFC continues making money like it has, there won’t be any problems.
However, we know that Zuffa has that huge line of credit & loan they took out a couple of years ago that they need to pay off by 2013. Combine that with what’s happening with Station Casinos and the hope (if you’re a UFC fan) is that the Fertittas don’t have to start pumping their own cash to finance some of the operations or, worse case scenario, sell off UFC or any sort of business assets they have.
Crash that happened in September/October? Please. The fortunes of Vegas have been in a downturn much longer than that. Airfare shot through the roof and the lack of cheap rooms on the strip is killing the place. They’ll argue that they’re looking for “bargain hunters”, but the real estate bubble in the Vegas suburbs first popped in late 2006 and has been rapidly deflating ever since. You go tell Caesars/MGM-Mirage/Boyds that this is all the last 60 days and see what they tell you in response.
What you have is a company that, like everyone in Nevada, started seeing quite serious attendance drops and seems utterly baffled as to what to do. The Fertittas don’t own it and Colony, the private capital firm, holds the controlling share of the company since it went private. They’re obviously gonna demand results and Lorenzo leaving to go run Zuffa was a likely a great out. Don’t be shocked to see Frank out of there in a year or so either. The location of all their hotels well off strip or out of city limits in Henderson and the like means that they’re gonna have to come up with something drastic to draw in tourists accustomed to South Strip if they want to survive.
However, we know that Zuffa has that huge line of credit & loan they took out a couple of years ago that they need to pay off by 2013. Combine that with what’s happening with Station Casinos and the hope (if you’re a UFC fan) is that the Fertittas don’t have to start pumping their own cash to finance some of the operations or, worse case scenario, sell off UFC or any sort of business assets they have.
My guess is that Colony ends up buying out their share somewhere down the line. Things are bad if you’re on the strip, and bordering on apocalyptic if you’re downtown/Fremont. Now imagine being 10 miles away with no steady transportation to/from the tourist centers.
[The location of all their hotels well off strip or out of city limits in Henderson and the like means that they’re gonna have to come up with something drastic to draw in tourists accustomed to South Strip if they want to survive.]
I believe Stations wasn’t built or soley built to draw in tourists it was built around drawing in locals. It seems the locals have been hit just as hard as the tourists have in this economy.
All of the actual articles (Not counting the Ferrell stuff) simply include Station with every other casino that is dealing with the economic struggles.
Obviously they have problems, but so do the rest of them.
Alan, like Body mentioned, Station Casinos have never catered to the tourist crowd.
You know who the big winner is in all this? Ed fucking Fishman. He was able to get relief from PrideFC for his consulting fee, looked at getting into MMA with one of the other promotions, but had the patience to hold off. He very well might dip his toes in, but he’s had a wealth of failures to keep an eye on and learn from.
Ed’s angle always was to use the casinos to funnel the big fish to the events and have the casinos back/finance the MMA promotion. With the strip getting anemic, he could have been in a word of hurt now if he had pulled the trigger 18 months ago.
I’d like to get a beer with that guy one day and hear about all of the shit that went down with PrideFC.
Zach, why don’t you do a new interview with him - he knows the MMA scene and can really expound on the casino trends and what’s likely to happen with the Station brand….
This year, Vegas has seen a decrease in visitors, primarily due to rising gas prices. Fortunately, gas prices have gone down; unfortunately, it happened a few weeks after we find out we’re on the verge of a big economic recession.
Station Casinos has a few things going for it. As was pointed out earlier, they go after locals rather than focusing solely on tourists, and they’ve also got a stronger profit margin than most of their contemporaries, which should give them some flexibility. Unfortunately, they were caught in the middle of going private.
Everyone is going to be feeling the upcoming squeeze, it’ll be interesting to see how it affects companies like the UFC and Station Casinos.
I’d love to hear Ed Fishman’s thoughts too.
Lorenzo went to take over Zuffa to clean up the loose ends. This is what happens before any company flips. When the right offer comes along, they’ll sell. The likeness agreements go right along with all of this…more juice for a sale.
If that’s the truth then who is willing to pay over a billion dollars for an MMA company because that’s gonna be the price. Anyway Dana and company have been very smart by the way that they have done business, they’ve pretty much built an empire that even if the casino business goes bad their fall back MMA company is bigger than ever.
The fact that they are a “locals chain” was eluded to in talking about the real estate crash and that they are “dependent on the rest”. I assumed we were at the point where it was a given. The problem with being a locals chain when the locals have suddenly no longer have money should be self evident.
So what have the fertittas done that is so bad that Capital would want to remove them? The economy is the same for everyone, there’s not much fixing it at the moment.
Not all drops in market are even. Station’s revenue dropped at a rate twice that of Harrah’s/Caesars in the first 6 months of the year. Lorenzo resigned from Station’s board in July of this year.
Just to sort of give a better barometer of what the problem is with their business plan (you know, the one the Fertittas created):
http://www.lvrj.com/business/33208049.html
So, they just finished building a casino in a part of Las Vegas that’s seen gambling revenue drop over 17% in the middle of a planned community when the new housing market in Vegas is going belly up. They can’t even tell the gaming commission how well they think it’ll do because they have no idea. If I were the head of an capital firm who just bought into this business plan, how comfortable would you feel about the future and following the same path?
To put it another way: The economy is tanking as a whole right now. If you’re an American taxpayer, would you want to see Greenspan come back into the government after essentially guiding the country into this and expressing shock about it? Hey, he was successful once…
Station Casino has nothing to do with Zuffa. If it fails, it fails. The Fertittas have less money to play with. Zuffa and the UFC will survive.
I can’t really shed a tear for these billionaires.
Anyone who took 5 seconds to think about the situation would have realized that Lorenzo would never have voluntarily left Station to help run the UFC. It made no financial sense. There was no way he could make the UFC grow enough to make up for the lost income.
I said at the time that I wished I knew what had happened behind closed doors at Station to make Lorenzo leave. Now we have a good idea - Stations stumbled and the private equity firm politely ’suggested’ that he leave.
With the UFC’s huge debt and Stations casinos stumbling, look for the UFC to drop its purchase price and start actively looking for buyers again.
Station Casino has nothing to do with Zuffa. If it fails, it fails. The Fertittas have less money to play with. Zuffa and the UFC will survive.
I can’t really shed a tear for these billionaires.
The money the Fertittas have is very likely not liquid and much more likely to be tied up in, you know, their key business (Station Casinos). So basically, the Fertittas (owners of the UFC) would be broke and have nothing to back the Zuffa loans from last year (over $300 million worth) except the UFC’s intellectual properties. At that point, should business falter at all (and it takes quite the leap of faith to believe they’re gonna coast through the biggest recession in 70 years), we enter the “bad things happen” realm.
You should read up on the discussion on Bloody Elbow. Corporations back their own debt. Individuals don’t. Debts are backed up by the assets of the corporation itself.
The UFC is now a viable company. Their recent finance deal was solely on the merit of the UFC as a business entity. It has nothing to do with Station Casino.
I get it entirely and I laid it out for you. Any hiccup in Zuffa and their ability to make money would be disasterous with the Fertittas lacking the money they had in Station Casinos. They wouldn’t be billionaires anymore or anything close to it.
No they wouldn’t. And I actually prefer that. Then they can’t sell the only baby they have left, the UFC.
Uhhh, why wouldn’t they? Particularly if a downturn in the market causes it to be less profitable or if a buyer offering significant amounts of capital appears? I wouldn’t go pretending you’re inside Lorenzo and Frank’s head here. Given the choice of the casinos or the MMA organization, they may not share the same values as you, dear.
“No they wouldn’t” to your comment of their not being billionaires any more. I have no idea if they will sell the UFC or not.
If they lost their casino, then they only have one profitable business left. Entertainment historically have weathered recessions well. In a recession, you don’t throw good toward bad. You flee to safety.
And don’t call me dear.
“Entertainment historically have weathered recessions well”
Possible counter-argument:
http://www.newsweek.com/id/135638
http://www.forbes.com/feeds/ap/2008/10/23/ap5598783.html
^ *Correction: Not a counter-argument, but perhaps evidence that this section of the entertainment industry isn’t weathering this economic downturn very well.
If Station goes Chapter 11 or even Chapter 7, they might use the UFC to raise capital to purchase assets from it should they feel the market had bottomed. After all, their core competency has been casino management, has it not?
“Anyone who took 5 seconds to think about the situation would have realized that Lorenzo would never have voluntarily left Station to help run the UFC. It made no financial sense. There was no way he could make the UFC grow enough to make up for the lost income.”
If I was a multi-billionaire, I would absolutely quit working at a casino company I already own and work at the UFC. No hesitation.
If he didn’t own the company he was “leaving”, and if he wasn’t a huge MMA fan, then it would be, as you put it, obvious.
If this was a financial move to save the company money, I have to wonder why he isn’t instead working at Station Casinos at a greatly reduced salary so he can continue to help the troubled business. Given how important Station Casinos undoubtedly is to the Fertittas, that seems like a smarter play than jumping ship to a company that is doing excellent without him.
If I was a multi-billionaire, I would absolutely quit working at a casino company I already own and work at the UFC. No hesitation.
Okay, Ice, here’s the thing: If you’re a multibillionare, chances are your personal wealth is not liquid. Its stuff. In the case of the Fertittas, it is real estate and businesses. Their wealth is directly tied to Station because of their ownership in the company and its assets. Namely, this is the very physical ownership of land and things developed on the land, like hotel/casinos.
If the Fertittas were just guys paid to work on the board with some stock options and enormous cash salaries, that would be one thing. But it isn’t the case here.
Entertainment as in movies, sports, UFC… not casino.
Entertainment has historically weathered recession well. I don’t see anything so far that contradicts this.
When people are depressed they either (a) hit the bottle, or (2) go out for some entertainment. Human nature never change.
D. Cap has much more eloquently got across what I was trying to elaborate on at Bloody Elbow. I’ve been out of the world of big business intricacies for a while and didn’t get across the points I meant to. As Cyph pointed out to me over there - Zuffa LLC can’t be seized if Station goes bankrupt. However since the Fertitta’s likely aren’t liquid… Where is the money for ZUFFA’s loans to come from? ZUFFA will get sold - I would hope to Cuban possibly in partnership possibly with Golden Boy/Affliction
Cyph this last comment is true - And especially true in the combat sports genre. Boxing’s boom days was the Great Depression, HOWEVER… I think the mainstream fan income regarding PPV’s will not hold up with historical trends. There is no evidence to support this, just a hunch. I think you’ll see alot more fans following plan A) — Going to the bar - hitting the bottle AND watching the fights.
Skwirrl,
The money for Zuffa’s loan comes from profits!!!
Zuffa is profitable!!!
“ZUFFA will get sold - I would hope to Cuban possibly in partnership possibly with Golden Boy/Affliction”
That’s a bold prediction. Assuming for the sake of discussion that it’s true, you do NOT want Cuban as the owner unless he gets a new crew of MMA people to surround himself with.
There is a big disconnect from Cuban and Ayre/some of the other failed MMA owners.
Cuban is a proven owner/operator of a Sports franchise and all the facets of business involved in it. He took the Mavericks from NBA laughing stock and one of the worst teams in history and not only made them profitable but turned them into one of the most valuable teams in sports. He owns his own delivery service for the product. HDNet.
If the UFC went to HDNet it would only increase the value of one of businesses he already owns 10 fold. This is because it would drive consumer demand on cable companies to include that in their service sky high. With the channel on more services - Advertising revenue skyrockets for all programs involved. Then its mutually worthwhile for GBP/Affliction to be involved because they are getting high profile advertising of their product while covering only some of the costs of putting on the show and fighter salaries.
Also Cuban isn’t a stupid business man - this is already been established by making the Mavericks profitable - I seem to remember reading something about him consulting with Ed Fishman before ever going into the MMA business in the first place. He would bring in the people to handle it right for MMA fans. If he didn’t he would still be a more dignified President than Dana White or Skala.
The one thing I would note about the UFC’s large debts is that a big chunk of that debt financing didn’t even go into the “the Company” but to line the pockets of Frank, Lorenzo and Dana.
So they’ve definitely got some personal liquidity going on that end.
Regardless they have some big ppvs coming up that are most likely to make their year-ends look pretty good, so I wouldn’t be too worried about them.
UFC 91 will be the barometer… If that does less than 700,000K buys there are troubled times ahead IMO
Don’t diss $kala, Skwirrl!
Let me get this all straight. If Station Casinos doesn’t adjust it’s covenant agreement with the banks for some odd reason then the banks may decide to push them into bankruptcy instead of actually trying to work with them and then the Fertitta’s may lose much of their investment in Station Casino ownership and property holdings and then if the UFC also happens to completely crash financially they may not have the money in their personal pockets to cover Zuffa’s $325 million dollar loan that comes due in 2013, provided they don’t refinance it before then? Man the UFC may or may not be in trouble if a bunch of incredibly bad things happen, the sky is falling the sky is falling the sky is falling!
I would say the same thing. But shit in Vegas is alot worse than everywhere else in the country.
Is it? Because it sure seems that it’s a lot worse on Wall Street where they are actually losing money as opposed to just making less. Nevada doesn’t seem to be doing as bad as Michigan or Ohio in the tough times catagory. Of course being as Zuffa isn’t really dependant on Vegas the whole subject is irrelevant anyway.
jdavis,
It does not take an apocalyptic scenario for the UFC to change hands.
If the Fertitas are coming up short at Stations, and the UFC either looks shaky on its debt or is not going to give them the kind of cash flow their lifestyles demand, look for them to cash out by selling the UFC.
Just my opinion, of course.
Is it? Because it sure seems that it’s a lot worse on Wall Street where they are actually losing money as opposed to just making less. Nevada doesn’t seem to be doing as bad as Michigan or Ohio in the tough times catagory. Of course being as Zuffa isn’t really dependant on Vegas the whole subject is irrelevant anyway.
Michigan and Ohio’s problems are nothing new. The “Rust Belt” moniker didn’t pop up out of nowhere in September. Vegas is a different story. When the real estate boom ended suddenly about 2 years ago, the attitude was that it was merely a matter of time for the market to bounce back. It now clearly is not.
So when we’re talking about what may or may not happen with Station and how it could affect Zuffa, the fact is this: the UFC’s potential to make money anytime soon compared to that of a healthy Station Casinos is not a comparison that does them well, particularly in a recession where what their market is utterly untested. Casinos, on the other hand, are generally considered bellwethers (though there is evidence showing how that is not the case now).
Banks reworking the terms of the loan with Zuffa would be a great solution if most of the major banks in this country were not enormously short on capital right now. Offering credit to businesses that are performing poorly is increasingly not an option. Hell, its barely an option for businesses that are performing well. Or even state governments. If they need the money, they may not be able to necessarily lock up any sort of renegotiation with ease as they might have 3-4 years ago.
Finally, the idea that Zuffa isn’t in any way dependent or at least somewhat reliant on Vegas’ casinos is madness. The three biggest cards of the next 6 months are all going to hotel/casinos in Vegas. Most of their UFN and TUF cards are there too because its cheaper to produce out of there when that’s their homebase. Plus, casinos usually cut excellent deals with programs like the UFC to drive traffic into the hotels/gaming/shopping in terms your average corporate sponsored arena can’t match.
“Finally, the idea that Zuffa isn’t in any way dependent or at least somewhat reliant on Vegas’ casinos is madness.”
It’s not though, at least in the way you mean. You have to realize, we’re talking about a company whose fanbase is so enthusiastic that they can still get 200k PPV buys with the worst card you could possibly come up with. The UFC is big enough to bring its own crowd with them to Vegas. The fact that Vegas is making 75% of what they made a year ago will have little effect on UFC attendance. And, like you said, Vegas tends to host the big shows, meaning the shows with the most fan interest.
Now that I think about it, it’s quite possible that the casinos’ woes will help the UFC. Not to say the recession will help, it definitely won’t, but its effect on the casinos may play into the UFC’s hands. Las Vegas will reduce prices and offer incentives to attract more business during the slow times, business 101. That translates to better deals for the UFC fans that want to catch a live show, and possibly better deals for the UFC.
75% of the UFC’s profits come from PPV and that has nothing to do with Las Vegas. So yes the shows they do in Vegas are dependant on selling tickets in Vegas but that’s a long way from being dependant on the casino industry(who would probably cut even better deals if they were desperate for a draw). It’s not like Zuffa only does shows in Vegas. Zuffa’s issue is they are way too dependant on PPV, they can do shows from anywhere.
Now this whole discussion is about how Station Casinos financial issues are going to affect Zuffa and the link people keep coming back to is that if the Fertitta’s lose their Station Casino investment then they won’t be able to cover this debt of the UFC. Well honestly even if Station Casino comes out of this great and the Fertitta’s don’t lose a dime can they just whip $325 million dollars in cash out to cover this loan? Honestly it’s not like the Fertitta’s were ever a 300million dollar safety net and beyond that what is the link?
The basic end of all this thinking is that the UFC is on it’s own with its finances and it can logically be assumed that it was that way to start with. What happens with Station Casinos is irrelevant. There is no need for this over-thought sequence of possible events when all that needs to be said is that if Zuffa gets into financial trouble then Zuffa will be in financial trouble.
“It does not take an apocalyptic scenario for the UFC to change hands.”
No you are right it doesn’t take a apocalyptic scenario for the UFC to change hands, so why are people throwing one around? What happens at Station Casinos is irrelevant, you don’t have to have Station get in trouble and Zuffa get in trouble to have Zuffa actually be in trouble. If Zuffa gets in financial trouble then Zuffa is in financial trouble, it is just that simple.
As for selling the company, hell it is for sell now if you can come up with enough money, the Fertitta’s might decide to sell it off tomorrow because they are sick of the headache and ready to move on to something else. It doesn’t take a apocalyptic scenario for them to one day decide to take a offer on the company.
Now that I think about it, it’s quite possible that the casinos’ woes will help the UFC. Not to say the recession will help, it definitely won’t, but its effect on the casinos may play into the UFC’s hands. Las Vegas will reduce prices and offer incentives to attract more business during the slow times, business 101. That translates to better deals for the UFC fans that want to catch a live show, and possibly better deals for the UFC.
How on earth does reducing ticket prices “help” the UFC? I am stumped here. People are not going to fly to Vegas and get a hotel room at an expensive strip hotel because tickets are only $450 instead of $600 for the middle tier at MGM Grand Garden Arena. The argument that falling ticket prices = better attendance is hardly a truism.
“As for selling the company, hell it is for sell now if you can come up with enough money, the Fertitta’s might decide to sell it off tomorrow because they are sick of the headache and ready to move on to something else.”
Exactly. The UFC’s been for sale. But, I foresee a lower asking price. One realistic enough to get a deal done.
75% of the UFC’s profits come from PPV and that has nothing to do with Las Vegas. So yes the shows they do in Vegas are dependant on selling tickets in Vegas but that’s a long way from being dependant on the casino industry(who would probably cut even better deals if they were desperate for a draw). It’s not like Zuffa only does shows in Vegas. Zuffa’s issue is they are way too dependant on PPV, they can do shows from anywhere.
They can do shows from a set number of locales right now in North America and Great Britain with any expectation of success. To go to those places means that they end up having to spend lots of money on production and satellite linkups. I doubt seriously that the UFC made oodles of money with UFC 72, 80, or 85, if they made any, off of PPV. They simply don’t have a TV contract structured in such a fashion that they can bring all those events to US TV.
(and frankly, if UFC 89 was a PPV, good lord, it would have been the worst PPV since 55 business wise)
Now this whole discussion is about how Station Casinos financial issues are going to affect Zuffa and the link people keep coming back to is that if the Fertitta’s lose their Station Casino investment then they won’t be able to cover this debt of the UFC.
You obviously haven’t read a single thing I’ve said, otherwise you wouldn’t stop droning on about it. For the last time: Station falters and their personal wealth takes a massive hit, making it enormously difficult for them to throw in money for the UFC should they need to invest for any reason at all. I’m not just talking about if the UFC buyrates implode, I’m talking about major expenditures like widescale internationalization they’ve been promising.
Additionally, the Fertittas may feel that their better bet business-wise is Station and decide to sell Zuffa in order to raise the capital, credit markets being what they are and all.
And again I ask who is gonna spend a billion dollars to buy an MMA company specially during this economy?. Zuffa is profitable and stands on it’s own regardless of what the casino business does, for them to get rid of their only profitable company to pump money into a losing effort is dumb and I doubt the Fertittas are dumb. It really just shows how little people know about the business of MMA this isn’t 2001 the UFC isn’t living from Lorezo and Franks hands anymore it’s a goldmine and it’s doing great. In this economy anything that is profitable and has a good future isn’t gonna be sold in return for something that is tanking. If anything Zuffa will become even more important to Dana and company as this reccession continues into the coming year.
“How on earth does reducing ticket prices “help” the UFC? I am stumped here. People are not going to fly to Vegas and get a hotel room at an expensive strip hotel because tickets are only $450 instead of $600 for the middle tier at MGM Grand Garden Arena. The argument that falling ticket prices = better attendance is hardly a truism.”
Read it closer. I didn’t say the UFC would lower its prices, I said that Vegas would lower their prices. Hotel rooms and possibly even airfare would get cheaper, which could significantly lower the total cost of going to a UFC event while requiring no change in price from the UFC’s end of the deal.
“To go to those places means that they end up having to spend lots of money on production and satellite linkups. I doubt seriously that the UFC made oodles of money with UFC 72, 80, or 85, if they made any, off of PPV.”
You are just speculating about what they did and didn’t spend or make because we don’t know. Those were very weak cards and their buyrates wouldn’t of been great even if they were in Vegas. Now UFC 83 did great numbers in gate and PPV if your looking for a example outside of Vegas.
In 2008 the UFC did (will do) 20 events, 9 were from Vegas and 4 of those were small fight night/TUF final shows. Three of them are in the last month and a half of the year. Yea they do a lot of shows from Vegas but that is where the home office is, they are also making a real effort to get around the country for shows and some of their biggest shows were outside of Vegas in 2008. The WWE does shows all around the country and has a similar business set up and has the same technical issues, heck they sell fewer PPVs but it works pretty good for them, don’t tell me that the UFC needs to be in Vegas to make big money off a show.
“For the last time: Station falters and their personal wealth takes a massive hit, making it enormously difficult for them to throw in money for the UFC should they need to invest for any reason at all.”
The Fertitta’s were ready to sell before TUF because they were through dumping their money into it, it’s been the UFC’s success that’s driven their growth and expansion. Do you think they are going to dump personal money into expanding the company if the company starts struggling or will they try to cut expenses and get profitable again? Who’s going to continue with a wide scale internationalization plan if the company starts struggling? I’ve read what you’ve said it’s just that your whole point seems to be based on the Fertitta’s no longer being able to prop up the UFC out of pocket but honestly we don’t know if they could or would even if Station Casinos was booming. Your speculating about what the Fertitta’s may or may not do without knowing their actual financial situation (Are you their account?)or what they would be thinking if Zuffa hits hard times in the future. It’s speculating about speculation about a possible future scenerio. Perhaps this conversation might mean a bit more if Zuffa was actually in financial trouble instead of just having their credit rating raised due to improved performance.
“Additionally, the Fertittas may feel that their better bet business-wise is Station and decide to sell Zuffa in order to raise the capital, credit markets being what they are and all.
”
Or Colony Capital LLC might cover what Station needs being that they own the vast majority of Station Casinos and stand to lose on a much larger scale if it folds. We can speculate all day about what the Fertitta’s might do, heck they might wake up tomorrow and decide to sell Zuffa for no specific reason at all.
How on earth does reducing ticket prices “help” the UFC? I am stumped here. People are not going to fly to Vegas and get a hotel room at an expensive strip hotel because tickets are only $450 instead of $600 for the middle tier at MGM Grand Garden Arena. The argument that falling ticket prices = better attendance is hardly a truism.”
Read it closer. I didn’t say the UFC would lower its prices, I said that Vegas would lower their prices. Hotel rooms and possibly even airfare would get cheaper, which could significantly lower the total cost of going to a UFC event while requiring no change in price from the UFC’s end of the deal.
You know that makes you seem a half-wit right? Vegas HAS been doing this for years. Have you ever even been to a gaming center? They’ve been doing this since gaming tourism started there. The last 2 years has seen this increase exponentially with hotels completely comping rooms to even low level spenders. You know what? It hasn’t worked well up until now and its only gonna get worse
You are just speculating about what they did and didn’t spend or make because we don’t know.
Let’s assume they made some money. Well, there’s no way they made as much as a domestic 200,000 buy PPV because they have to go through the process of beaming that signal back over to the US. They also have to pay for transportation for fighters and production team with costs that are probably 100X that of packing up a truck and driving it 15 blocks.
Now UFC 83 did great numbers in gate and PPV if your looking for a example outside of Vegas.
It absolutely did! However, its hard to imagine every city becoming a Montreal or Montreal even repeating the $5 million dollar gate on a regular basis.
The WWE does shows all around the country and has a similar business set up and has the same technical issues,
The WWE has a touring element to their business the UFC cannot have because of the nature of what the UFC does. The WWE also has TV deals that necessitates 4 hours of weekly live/taped TV programming and compensates them accordingly. If the UFC had TV deal demanding 4 hours of weekly live/taped programming, it would have to be astounding in cost.
heck they sell fewer PPVs but it works pretty good for them,
Aside from the fact that, say, Brandon Vera makes more in one night than most of the WWE’s supporting cast does in an entire year, this is a good point. However, again, we run into the fact that apart from being in rings and on PPV, the acting business models are not really alike.
Do you think they are going to dump personal money into expanding the company if the company starts struggling or will they try to cut expenses and get profitable again? Who’s going to continue with a wide scale internationalization plan if the company starts struggling?
A wide scale internationalization plan doesn’t require the company be faltering to need money. The UK expansion cost a lot of money. To then go forth and run a bunch of international shows next year or the year after and open up offices and the rest will require cash and loads of it. I am personally of the belief that the talk of shows in Dubai and Southeast Asia was a lot of smoke blown up people’s asses and we’ll see nothing of it. None of that has to do with the UFC crashing and burning.
Now this whole discussion is about how Station Casinos financial issues are going to affect Zuffa and the link people keep coming back to is that if the Fertitta’s lose their Station Casino investment then they won’t be able to cover this debt of the UFC. Well honestly even if Station Casino comes out of this great and the Fertitta’s don’t lose a dime can they just whip $325 million dollars in cash out to cover this loan? Honestly it’s not like the Fertitta’s were ever a 300million dollar safety net and beyond that what is the link?
You fail to grasp the situation. You and other are arguing about something you have no understanding of. Station Casino does NOT and WILL NOT have anything to do with this $325 mil loan. The loan is Zuffa and Zuffa alone. They pay this back through their profits from operation. When the bank loaned them this money it was based on the profit and loss and projected growth of the company. Banks don’t loan money out based on the faith of the owner.
Let me repeat: the faith of Station Casino is separate from any loan that Zuffa has.
That should be fate not faith.
“You know that makes you seem a half-wit right? Vegas HAS been doing this for years. Have you ever even been to a gaming center? They’ve been doing this since gaming tourism started there. The last 2 years has seen this increase exponentially with hotels completely comping rooms to even low level spenders. You know what? It hasn’t worked well up until now and its only gonna get worse”
Don’t call me a half-wit because of your own lack of understanding. It’s obvious you have absolutely no comprehension of my argument.
I’m not saying Vegas Casinos will do well because they’ll start comping more, I’m saying that the UFC can capitalize on the fact that the hotels are, as you put it, “completely comping rooms to even low level spenders”. Lots of UFC fans plan trips to Vegas with the primary purpose of seeing a UFC show, the gambling and other activities are periphery entertainment that sweeten the deal. This is why casinos give deals to the UFC to host their shows in the first place. If those same fans are getting even more comps from hotels, it can only increase the incentive for a fan to go to a Las Vegas UFC show.
Your last point “It hasn’t worked well up until now and its only gonna get worse” just proves to me how little you understand of my position. The UFC has been doing absolutely fantastic with their Vegas shows “up until now”. For the last time, I’m talking about the UFC, NOT the casinos.
If your next reply completely misrepresents my point again, I won’t even bother replying.
Coincidentally enough, I just got an interview with Fishman emailed to me today.
http://carsonscorner.podomatic.com/
I have no idea how I got on this cat’s mailing list, but the interviews are often interesting. Listening to the Fishman interview right now.
[...] through a $5.3 billion debt load and a tanking economy, Lorenzo and Frank Fertitta Jr.’s Station Casinos empire is in serious financial trouble. Could Lorenzo’s previous decision to commit himself full-time to the UFC be a sign that [...]