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« | Home | »

Reports: Station Casinos is in big financial trouble

By Zach Arnold | October 23, 2008

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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.

Topics: MMA, Media, UFC, Zach Arnold | 63 Comments » | Permalink | Trackback |

63 Responses to “Reports: Station Casinos is in big financial trouble”

  1. Alan Conceicao says:

    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.

  2. jeff says:

    “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.

  3. Alan Conceicao says:

    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.

  4. EJ says:

    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.

  5. IceMuncher says:

    “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.

  6. jdavis says:

    “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.

  7. skwirrl says:

    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

  8. Alan Conceicao says:

    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.

  9. cyph says:

    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.

  10. cyph says:

    That should be fate not faith.

  11. Ice_Muncher says:

    “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.

  12. Fluyid says:

    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.

  13. [...] 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 [...]

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