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When is paying yourself a crime? UFC’s financial landscape after Fertitta family ownership

By Zach Arnold | January 25, 2018

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Over the many years of covering UFC financing on Fight Opinion Radio, my trusty co-host Jeff Thaler and I noted that Lorenzo & Frank Fertitta had no problem paying themselves in many different ways from UFC.

One of the golden rules of running a business is never to forget to pay yourself. The problem is that many businesses, at least small-to-mid-sized businesses, don’t make ends meets and owners take the haircut. The bigger the stakes, the more you are encouraged to not only pay yourself but… if you’re smart… create as many companies as possible to profit off of the original operation. Why just pay yourself when you can pay yourself and pay vendors that you have ownership in?

That’s what the old UFC ownership did. They paid themselves quite handsomely. On the surface, nobody has presented any facts to show that there was illegal activity involved in this process. If you can pay yourself twenty different ways and financial institutions are willing to continue backing you, then that’s the system in place.

What happens when you get new ownership that has its own venture capitalists? Everyone wants to know who is getting paid what — especially when some of those investors are representing foreign governments in the form of retirement pensions.

You can squeeze out extra cash by analyzing the accounting. New ownership (WME) is paying itself a yearly fee of $25 million USD. They’re getting cheaper when it comes to expenses.

When WME purchased UFC, I pondered if they would go the Bain (vulture) Capital route. The gamble was that the television landscape for sports TV rights would continue to explode. That gamble appears to be on really shaky ground right now:

Before Rupert Murdoch unloaded many of his sports TV assets to ESPN & Disney, I wrote an article at Bloody Elbow stating that Amazon would be UFC’s best bet for a new television deal. In order to maximize such a deal, UFC needs to maintain some sort of presence with a broadcast network. Why? Take a look at the new ATSC 3.0 over-the-air USA TV standards coming in 2019. Ultra HD 4k 120 frames per second with complete internet integration. For free.

UFC needs Fox a lot more than Fox needs UFC. A combo marriage between Amazon and Fox Sports keeps UFC as a relevant American sport with room to grow internationally. Fight Pass needs a lot of help. The room to explode UFC’s bottom line on merchandising clearly exists. You need the right players, especially if you are shifting away from a heavy-on-PPV business model to a volume programming model based on television fees.

The ratings for UFC go up and down. More positive than negative but everything is relative right now. $400 million USD a year from Fox Sports is not going to happen. UFC should pray to maintain their current deal with Fox Sports and make up for lost projections elsewhere. The last thing UFC needs is to get dumped by Rupert Murdoch in exchange for a reunion with Vince McMahon & WWE.

Topics: Media, MMA, UFC, Zach Arnold | 9 Comments » | Permalink | Trackback |

9 Responses to “When is paying yourself a crime? UFC’s financial landscape after Fertitta family ownership”

  1. Diaz's packed bowl says:

    That was a very weak card to put on fox if you want fox to pay more. I watched Jacare beat Brunsen with a bad right arm even, thats it. No interest in any of the other fighters.

    I heard about the Bermudez Fili judging controversy. I did not watch it, but again, if the method of tabulating the scores was changed to a round by round consensus then the decision goes the other way. I think this is a pretty good start to fix bad judging and nothing needs to be changed except the person tabulates scores differently.

  2. Diaz's packed bowl says:

    Instead of each judge scoring the whole fight, each round scored must now have a judges consensus.

    If two judges score round 1 for fighter A and one judge for fighter B, then fighter A won that round.
    If one judge scores round 2 for fighter A and one judge for fighter B, and one judge scores it a draw then its a draw.
    It really tightens up the scoring and works especially well with 5 round fights.
    I have been using this system for a while to score any close fight and have found that it makes sense, it’s less clumsy, and works better than the current system.

  3. Diaz's packed bowl says:

    With Holloway out, I bet Shevchenko vs Nicco Montano is their new cheaper headliner. The only other fighter uninjured or without a scheduled fight is TJ, and he’s wisely going to wait for DJ to recover.

    • Diaz's packed bowl says:

      Slim possibility of that fight happening, since I don’t know if Montano has even had surgery let alone recovered.
      With no championship fight or even interim belt on the line it looks like they have three choices…
      Do you think they have 222 on free tv? Or maybe they can create a superfight belt like the old days? Or will they just make another interim belt for Edgar and Ortega?

      I didn’t watch yamasakis latest, but he should never judge again just by his past blow jobs. He’s either too late or too quick to stop. I no nothing about his personal life, but he looks like an alcoholic or heavy drug user.

  4. The possibility is cool! I like to have the big variety of options. Have the great week!

  5. Diaz's packed bowl says:

    It may be time to open up the super heavy weight division(ufc created it long ago but never used it) with a title fight on UFC 222 between the two largest guys on the roster. SHW is where a lot of these bigger fighters belong like Nganou. But they are probably planning a women’s atom weight division.

    UFC relying on title fights to get ppv money isn’t working out that great. UFC 202 had no title fight, but it did have a fight between a title holder and a certain Diaz brother. And ufc 202 was the biggest money maker ever for UFC. Androstane Silva also did super fights which resulted in lots of money for the ufc.

    So the precedent has been set already, and DJ mentioned something about a super fight belt for fights outside your champion weight as well. Its a good idea worth seriously considering.

    However…

    WME oddly enough is so idea anemic, they make the frattatas look like geniuses. It shows that Dana without them is a simple embellisher of ideas, like a stan lee without jack kirby.

  6. Diaz's packed bowl says:

    Lol at the non title interim title fight gift belt Luke will be getting IF he wins. So if Yoel wins I guess that makes Whittaker undisputed? I knew saving 222 would mean another show gets diluted. I guarantee for every person who watches 222 because cheatborg is on the show there is at least one other who won’t.

    UFC has been creeping towards, and is basically over 50% fail at this time.

    No sponsors except for some cheap jiz stained reebok trash that make all the fighters look the same,looking used and abused, sent packing without even enough money to wash their fighter kits.

    • Overeem ate my horse says:

      You know UFC sells fighters likenesses to ea sports for their video game and stiffs the fighters?
      That’s slavery!

      Great the way Romero put entitled whitey down last night.

  7. Diaz's packed bowl says:

    If JJ doesn’t get at least the 2 year suspension which is required by USADA rules, then you know USADA is corrupt.

    JJ presenting his case is much worse than pleading the fifth, since it seems like everything JJ did regarding USADA was wrong. I mean he admits to cheating USADA! how can you ignore the fact that he had his signature forged!!

    The reality is… peds like turinabol will get stored in fat cells and at some point usually when undergoing weight loss when that fat cell is burned it releases the metabolite it had unknowingly stored. This was brought up at the csac. JJ used it at some point period

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