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Business takeaways from UFC’s booking of Cain Velasquez vs. Fabricio Werdum for Mexico City

By Zach Arnold | April 30, 2014

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The announcement in Mexico City of Cain Velasquez vs. Fabricio Werdum at Arena Ciudad on November 15th is not a surprise. If you listened to Mike Mersch at the Nevada State Athletic Commission meeting last week, it was very clear that UFC and their television partner have extremely high hopes for the three new Ultimate Fighter series they are launching. The crown jewel of the bunch is TUF Latin America. The UFC and Fox are pinning their hopes, with the relationship involving Televisa, that they can become a major player in the Mexican TV market. This is no different than the hopes/fears that people had many years ago when WWE was taking Mexico by storm and there were concerns about whether or not the two major players in Lucha (AAA & CMLL) would be able to withstand the invasion.

If you listened to our recent interview with Jimmy Lennon Jr. on Fight Opinion Radio, you know that the desire of fight promoters to run major events in Mexico City is nothing new. Jimmy was there for the Julio Cesar Chavez/Greg Haugen fight in front of 130,000 people at Azteca Stadium in 1993.

(Ironically I bring this date up given that Dana used Haugen last week to somewhat justify racist talk in the fight game.)

I’m not surprised at the UFC is trying to make major in-roads into the Mexican market. A big part of their strategy in marketing Cain Velasquez is to convince everyone that he’s a hero to Latino fight fans. They pushed him hard in California and got, at best, mixed results. Then they booked him for Texas. And now it’s onto Mexico City.

In the grand scheme of things, the value of increasing UFC’s footprint in Latin America is all about television. There is a growing middle class in Mexico. As long as UFC can become more visible on television, they win. If they have to start promoting a lot of events in Mexico to increase the footprint, that is when they will encounter political & gang trouble if they don’t have the right allies to take care of what needs to dealt with.

Watching the UFC’s execution of their business plan for expansion is very interesting to watch. All about “World Fucking Domination.” It will either be a rousing success or else it will crash & burn. In addition to TUF Latin America being filmed in Las Vegas, they are taping a TUF Strawweight edition with a bunch of Invicta fighters. At this point, the UFC’s friendly relationship with Invicta has given fighters a signal that if they want to get to the big show, you can go through Shannon Knapp. The same deal with Sig Rogich and World Series of Fighting, although the personal/political relationship between Lorenzo Fertitta & Marc Ratner and Rogich is demonstrably decades-deep. So, the UFC has been able to expand their footprint for control of the business without putting many of their own fingerprints on the other companies. The challenge for the UFC is to make sure that Invicta & WSOF don’t become too much of a loss leader to the point where they either need bailouts or fold altogether.

The longer WSOF can hang around, the more opportunities they have for signing fighters who may have otherwise signed with Bellator. Of course, we know all about Bellator’s various conflicts with fighters and contracts. Bellator can sometimes be their own worst enemy. The question then becomes what happens if their Memphis PPV tanks and doesn’t draw many buys. That scenario appears to be increasing by the day and at some time Viacom will have to make a decision as to whether or not to keep Bellator around for years ala TNA as a cheap way to hang around in the MMA space or if they conclude that UFC = MMA just like WWE = pro-wrestling and throws their hands up in the air. If Viacom gets out of the game, then the only feasible way any new start-up could gain traction is if they could convince a player like Showtime to buy into a turnkey operation. Easier said than done.

As for the business picture in the States, once again California loses out on a big money fight. This is now a real trend, not a coincidence. The three biggest UFC draws in California (Cain Velasquez, Daniel Cormier, Ronda Rousey) aren’t fighting in the state now. Cain’s fighting in Texas and Mexico. Ronda’s fights now are in Las Vegas. Cormier is fighting in Las Vegas. The UFC is throwing a Fox bone or two towards California and the live events themselves draw respectable numbers but the mega-fights are not coming to the state. The fighters/agents don’t want to fight in a state with a double-digit income tax. The UFC has talked about running Staples Center but running in Los Angeles comes with a 5% tax on top of CSAC’s 5% gate tax plus $35,000 TV/PPV cap and the state’s income tax. The state’s tax structure is always a hot-button political issue in California.

And taxes aside, right now things are a genuine mess in California. Everyone on the ground is completely unsure about what is going to happen with Andy Foster long-term. Consumer Affairs runs the show in Sacramento and we will see what tricks they have up their sleeves. There are two major pending lawsuits against CSAC & Consumer Affairs. The doctors are fighting amongst each other. Veteran doctors are pissed that they are being paired with newbie doctors who aren’t volunteering but rather are getting paid what the vets get paid, which is resulting the vets not wanting to teach the newbies the right protocols. (Think: Brett Favre/Aaron Rodgers situation.) And then you have some promoters who are upset that they feel pressured by doctors to pay $300 cash per fighter to get stitched rather than get hit with $500 shots against their insurance when it involves fighters who may… or may not… need stitches in the first place. There are a myriad of other issues at play, including newer athletic inspectors who are approving wrong-sized gloves for both MMA and boxing contests. (Unfortunately, the latter problem is nothing new in the state.) This is the same state where politicos decided that Che Guevara, after missing Antonio Margarito’s illegal hand wraps in January 2009, should get a job promotion to Chief Athletic Inspector in the Sacramento front office. This is now the same state that has decided to promote volunteer athletic inspector Robert Judge, who missed the altered hand-wraps on a Rodrigo Mosquera boxer last September at a Montebello spot show, to a top athletic inspector position in Southern California. You get what you pay for.

At this point, the only “advantage” California might have over Nevada with fighters is less stringent drug testing for big fights.

Bottom line? California’s not as attractive as it used to be for putting on bigger fights. UFC is still a promotion with a heavy audience on the West Coast. UFC’s game plan for expanding their business footprint is going to be a hell of an experiment to watch. They are risking their domestic business, just like WWE has, by burning out fans with a watered down product in exchange for growing the pie. How much longer will the Fertittas stick around before flipping the UFC to the highest bidder?

Topics: MMA, Media, UFC, Zach Arnold | 6 Comments » | Permalink | Trackback |

6 Responses to “Business takeaways from UFC’s booking of Cain Velasquez vs. Fabricio Werdum for Mexico City”

  1. 45 Huddle says:

    http://nypost.com/2014/04/30/ufc-web-pirate-owes-32m-for-stealing-live-mma-events/

    UFC suing a “pirate” for $32 Million dollars.

    Lets see…. HBO tells people to pirate Game of Thrones and ratings go through the roof. The UFC tells people they will sue them if they pirate their PPV’s and buyrates tank.

    HBO allows clips of their show onto YouTube without fighting them. The clips are seen by many people. The UFC bans all clips of fights from YouTube. Nobody can watch anything if they don’t pay for it.

    Not a shock. You want people talking about your show. One way is to allow illegal streams and YouTube videos. Killing the black market is beyond stupid and shows how completely dumb Fertitta is. He does not understand how word of mouth works. He does not understand how to build fans. He is so worried about protecting every PPV Buy for the next PPV that he has completely killed his viewership long term.

    Stop restricting everything so much and they will see viewership grow.

  2. 45 Huddle says:

    750k for the UFC 172 Prelims.

    Bad ratings and horrible sign for the buyrate.

    The sky is falling….

    • turd says:

      45 i just read 350 k for 172 300 k for 171 and these are considered to be the ufcs two biggest draws right now

  3. Diaz's cashed bowl says:

    Werds going to beat him, the mexican fans will be bummed and mexico will no longer be a potential money pit for the ufc.

  4. truthspitter says:

    wheres the link so i can listen to mike mersh?

  5. [...] FightOpinion’s Zach Arnold wrote about the business side of things of the Velasquez/Werdum fight in Mexico City. This entry [...]

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