Courtesy of www.econmatters.com.
By EconMatters
Super Bowl of MMA
In looking back at investment decisions for 2013, one of the most glaring business mistakes was made by the UFC in failing to pull off a once in a lifetime marketing bonanza with the Mega Super Fight between Anderson Silva and Georges St-Pierre. This event could have been the Super Bowl of MMA bringing in more revenue, and roping in even casual soccer moms into event viewing parties that are an advertiser`s wet dream.
Unfortunately, for the UFC Anderson Silva lost his belt to Chris Weidman earlier this year, and Georges St-Pierre got beat up pretty bad against Johny Hendricks and went into semi-retirement causing much of the hype and luster to fall off of that Goliath versus Goliath matchup to once and for all determine the pound for pound best fighter in the Universe of Mixed Martial Arts.
Penny Wise & Pound Foolish
This is where the UFC, being penny wise and pound foolish really came back to bite them in the profit category as an organization. I give the organization a lot of credit for risking everything at one point, really putting it all on the line, which most businesses these days just don`t have the guts to do, to make MMA into an actual mainstream sport. So before I am rather harsh with this present criticism, I want to give kudos to that incredible business accomplishment.
Once in a Generation
However, with all the UFC has been through this makes this failing to pull off the Mega Super Fight in 2013 an even more glaring business blunder. Dana White grew up around the boxing world, he understands the promotion game.
It isn`t whether fighters really are invincible, it is the perception of greatness and invincibility that sells tickets for such a marquee matchup. These types of matchups don`t come around very often, maybe once a decade if promoters are lucky.
These are the Sugar Ray Leonard versus Thomas Hearns, Gerry Cooney versus Larry Holmes, Muhammad Ali versus George Foreman Super-Fights that promoters have to cash in on for the bigger picture growth opportunities for marketing the sport to a wider audience.
Everybody has a Price
Both fighters had an aura of invincibility around them earlier this year, the UFC needed to sit these two guys in a room and make this fight happen. Eventually every fighter is going to lose this aura of invincibility if they fight long enough. A good promoter never lets this happen, when both fighters are at their peak you make the fight happen, and this means by whatever means necessary.
In this case it all came down to money as it usually does. Sure one of the fighter`s legacy was going to be tarnished. One of the fighters was probably going to take a reputational hit, a marketing blow, and maybe a considerable beating in the Octagon. But this is MMA that is to be expected.
I am sure that one or both of the fighters probably wasn`t ready for the fight, or the timing wasn`t perfect, it never really is right? There is always going to be some scheduling, training, or vacation timetable that could take precedence in matching these two fighters. The point is that great fighters are perfectionists and they want everything to be perfect. They want things to be just right to maximize the opportunity to win every fight.
These Super Fights are never going to fall just perfectly for both fighters, and this is where compensation comes into play, to compensate both fighters for taking the risk of this fight not fitting perfectly into their fighting and life schedules.
Compensate for Risk Aversion
The business opportunity is so great that the UFC needs to pay the fighters to assume the risk of not being the perfect time for the fight. One or both of the fighters had at times issues in blocking this fight from occurring that if enough money was put on the table, to compensate one of these fighters for taking on additional risk outside of their own comfort zone, this is what means were necessary to make this fight happen.
Silva – GSP Transcends Sport
From a business perspective this fight is bigger, transcends the actual outcome of whether one of the fighters wins or loses; it is the promotion of the sport, and the huge, once in a lifetime marketing opportunity that rarely presents itself.
It all comes down to money; a good promoter sits the two fighters in the room, and keeps raising the money bar until this fight happens. There literally is no realistic figure of fighter compensation whereby the UFC ever loses money on this fight when you run the numbers and account for the extrinsic and intrinsic revenue benefits of this event.
Furthermore, when you factor in the big picture of becoming the ultimate hype destination for the entertainment and media focus one time in the year like the Super Bowl, and what that means for broadening the sport to a wider audience, and future advertising opportunities – the $20 million per fighter figure is a bargain for the UFC. I guarantee you the UFC never saw this big picture or this fight would have happened!
UFC lacked Due Diligence Analysis: Didn`t Commit Enough Money to make Fight Happen
I have watched over the years how tight the UFC is with their money, and they didn`t put enough money on the table to make this Super Fight happen. The UFC wasn`t willing to put enough money on the table to change one of the fighter`s minds to pull off this event. I don`t know the exact figures that the UFC offered both the fighters but it obviously wasn`t enough to persuade one of the fighters to overlook their reservations about taking the fight.
Therefore it wasn`t enough, whatever that figure was. I am pretty confident that it was nowhere near the $20 million figure I just cited which would have made this Super Fight a reality in my opinion. I am guessing they envisioned something in the 6 to 9 million dollar range per fighter.
UFC Should Have Comprehensively Crunched the Numbers
This is the main criticism of the UFC, they were too short-sighted in their analysis to realize that by lowballing the fighters, so that one or both of them wouldn`t commit in early 2013, that they were risking never being able to have this Super Fight because one or both of the fighters could lose and ruin the aura of invincibility. The UFC failed to adequately factor in what I call the Lost Opportunity Cost.
They figured eventually one of the fighters who were putting off the fight would come to the table at the figure the UFC wanted to make this fight happen, and it could have worked out this way in a perfect world.
But you just cannot take that risk with these once in a generation Marketing Goldmine Super Fights, the risk is too great for conditions to no longer exist that make it just an ‘interesting fight.’ This is where the UFC failed in their analysis, and they should have built this into their equations, and put more money on the table.
$200 Million Mistake Brutal for Private Ownership – Forever Lost Opportunity
Well, this is what happens when a business becomes penny wise, and pound foolish. This business failure for 2013 probably cost the UFC an additional $200 million dollars in 2013 by my conservative calculations, and much more long-tern goodwill in the advertising and marketing space.
This is something that a sport like the UFC who only recently got the attention of the broader advertising community just cannot let happen considering where they have come from, once being on the verge of bankruptcy, and shunned by mainstream advertising and product affiliation.
This is one of the classic business and marketing failures of 2013, and a future lesson to be taken to heart by any promotional and entertainment firm, don’t be shortsighted when it comes to putting money on the table to make big productions come to fruition.
