Sports Business

UFC Uses New Media To Secure $4 Billion Score

UFC Uses New Media To Secure $4 Billion Score

The largest acquisition of a sports organization does not involve the NFL, NBA, MLB, NHL, EPL, La Liga, or Bundesliga. It involves fighting. Monday, WME-IMG announced that it was purchasing Ultimate Fighting Championship (UFC) for a reported $4 billion. It is almost the same price of the Los Angeles Dodgers and Los Angeles Clippers, the two previous largest sports acquisitions, combined.

So how did brothers Lorenzo and Frank Fertitta turn their $2 million investment in UFC in 2000 into a return on investment of 2,000 times in 2016? The Fertitta brothers and UFC President Dana White made a series of decisions that leveraged new forms of media to build a highly devoted, engaged audience willing to pay a premium for more traditional service offerings.

For example, the UFC created called The Ultimate Fighter for Spike TV in 2005, a reality contest show that provided a “six-figure” contract for the winner. At the time, there were few reality shows focused on sports. Boxing had already moved away from cable and broadcast television and instead relied on pay-per-view fights to generate most of its revenue. The UFC made a bet that the more exposure it could gain to its target audience, males 18-34, the better. One excellent way to gain that exposure was to create a show for a channel designed to target this exact demographic.

In addition, the UFC made early, significant investments into social media. White is famous for engaging with people on many different social platforms with content authentic to his direct (and some would say confrontational) personality. White’s openness to communicate directly and authentically with fans and the media was different than how other sports executives engaged with their audiences.

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Using innovation and newer communication channels largely accomplished what the UFC hoped for in maximizing the exposure of the sport. With a large, highly-engaged audience the UFC was able to more effectively monetize traditional revenue streams, including charging $245 (on average) for live events in 2014 and making much of its current $600 million annual revenue from pay-per-view events. In addition, a new media rights deal with Fox Sports is projected to be worth $200 million per year starting in 2018.

Some of the implement of this strategy was not fully by choice. The UFC was close to filing bankruptcy in 2005 when The Ultimate Fighter launched. The show was an attempt to save the business. The main way Lorenzo Fertitta and White persuaded Spike TV to broadcast The Ulitmate Fighter was for UFC to pay for all of the production costs. However, the result of this strategy came to fruition with the $4 billion purchase.

ESports has closely followed UFC’s path to success in the way it has used new communication channels to build its audience and is now starting to use this large, highly-engaged audience to monetize more traditional sports revenue streams. In two recent episodes of the StartUp podcast, the Twitch co-founders shared that they discovered a large portion of their audience was using the live streaming platform to watch people compete against each other in video games. Even with the success of YouTube, live streaming was not considered a mainstream communication channel when the original company began in 2007. However, eSports players innovatively used live streaming channels, like Twitch, to build large, engaged audiences that would spend hours watching them compete at very little cost.

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Once eSports athletes built audiences through new communication platforms they were able to monetize more traditional sponsorship, in venue, and television revenues streams. These athletes have built large sponsorship portfolios with companies including Intel INTC +0.89%Coca-Cola , and Nissan Motor  becoming heavily involved. ESports competitions have been selling out large sports venues, including 40,000 people coming to Seoul’s World Cup Stadium to watch the finals of the “League of Legends” tournament in Korea in 2014. TBS began broadcasting the ELeague this May with teams competing on larger-scale cable platform for the first time through a deal with WME-IMG. Twitch was acquired by Amazon for $970 million in 2014 because of Amazon’s strategy to focus more on live streaming content and compete with companies such as Netflix NFLX +1.64% in this space.

There is a concern in the sports industry that the influx of new technology will make it more difficult for sports organizations to make money from traditional sources. Technology like Virtual Reality headsets will make it easier than ever before for people to consume sports content without actually having to attend or watch games. What the UFC and eSports have shown is that the emergence of new communication can be the catalyst for sports organizations to maximize revenue in more traditional revenue streams rather than their replacement.

Adam Grossman is the president of the sports sponsorship and analytics firm Block Six Analytics. He is also the co-author of "The Sports Strategist: Developing Leaders for a High-Performance Industry." In addition, he is currently an adjunct lecturer at Northwestern University, where he teaches classes on entrepreneurship and quantitative analysis. Grossman also contributes to Forbes. Follow Adam Grossman on Twitter @adamrgrossman.

This article originally appeared on Forbes.com.

The Daily Line: Week 6 Football Picks

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USA TODAY

The Daily Line: Week 6 Football Picks

The Supreme Court opened the door for sports betting legalization with its May ruling that struck down a 1992 law that banned commercial sports betting in most states. Sports betting is not yet legal in Illinois, but with football season underway, former Northwestern offensive lineman Eric Olson will take a weekly look at the odds surrounding the action on the field.

Eric is traveling this week so Bears producer Paul Aspan will fill in with a weekend of picks. Unlike Eric, he certainly does not have a Masters in Predictive Analytics and his football ‘career’ came to a crashing halt a few Falls ago with the loud pop of a hamstring on a Lincoln Park flag football field. Suffice it to say, you should not expect him to replicate Eric’s 11-1 heater over the last two weeks.

Steelers at Bengals, Sunday 12PM CT

Spread: Bengals -2

Betting Percentage:  62% of bets on the Steelers; 75% of the money on Steelers

The pick: Steelers +2

I just don’t believe in the Bengals. Whether they’re 4-1 this year or 8-0 in 2015, there has to be some psychological impact knowing that your ceiling is the Wild Card game. The Steelers have won six straight games against Cinci, and I’m trying to figure out what exactly the Bengals do well. Yes they score points (thanks for pointing that out).  But their defense isn’t very good, they don’t get off the field on third down and they’re actually middle of the road in every offensive category: passing, rushing, 3rd down…everything outside of the one that matters most – scoring (where they’re 5th) - they’re somewhere between 12th and 23rd in the NFL. It’s not like the Steelers convinced me they’re fixed by beating Atlanta last week, but they do get to the quarterback (they lead the NFL with 19 sacks) and if this is a last score wins game, I’ll take Roethlisberger over Dalton all day.

Bears at Dolphins, Sunday 12PM CT

Spread: Bears – 3.5

Betting Percentage:  61% of bets on the Bears ; 55% of the money

The Pick: Dolphins +3.5

This line jumped from Bears -1.5 to -3 almost immediately, and late in the week it’s creeping higher. Everything points to the Bears this week, which I hate as far as taking their side. The Dolphins offensive line could be down three starters against the best pass rusher in the entire NFL in Khalil Mack. Starting left tackle Laremy Tunsil has practiced on a limited basis this week but is in the concussion protocol and watching his backup Sam Young get destroyed by the Bengals late in the Dolphins Week 5 collapse has to have the Bears foaming at the mouth. Home dogs have been hot (4-0 ATS last week), so I’m going back to that well and counting on the hook to make the difference.

Which brings me to a home dog teaser.

Two 12 PM CT games

  • Dolphins +3.5 vs Bears
  • Raiders +3 vs Seahawks (in London)

 

Two 3:25PM CT games

  • Titans +3 vs Ravens
  • Cowboys +3 vs Jaguars

 

Tease them all up 6 points at +260 odds (a $10 bet would win $26), and it looks like this:

  • Dolphins + 9.5
  • Titans +9
  • Cowboys +9
  • Raiders +9

 

Yes, I’m including the Raiders in my home dogs teaser. Who were the original Raiders? Pretty sure guys like Blackbeard and Jack Sparrow were British as hell. Factor in Mark Davis’ Beatles haircut and the Raiders should feel right at home at Wembley. The Seahawks had their Super Bowl last week, throwing everything they had at the Rams. They appeared to get past the Earl Thomas contract / injury backlash and the Russell Wilson favoritism fall out but this feels like a house of cards that might now just fall apart.

The Ravens – as we discussed on The Daily Line podcast – disgust all of us with their inconsistency. They’re currently 10/1 to win the Super Bowl which is insane, and I can’t not take the points against Joe Flacco with a Titans team that suffered a not all that unpredictable letdown in Buffalo after beating the defending Super Bowl champs the week before.

The Cowboys red zone defense balled out against the Texans but once again Jason Garrett’s (lack of) strategy & job security is already a hot topic in Big D. And speaking of QBs you can’t trust, Blake Bortles made sure to remind everyone last week with a nice little 4 INT game in Kansas City.

And I’ll just add this to the Dolphins: they lead the NFL in interceptions (10) as they suit up against young Mitchell Trubisky. Now that I’ve tried to pounce on the hot home dogs trend (16-6 ATS this season), here’s to hoping it waits at least one more week to regress.

Obscure College Pick of the Week:

Middle Tennessee State vs FIU Saturday 6:30PM CT

Total: O/U: 56.5  

Betting Percentage: 37% Bets, 64% of the money on the Over

The Pick: Over 56.5

To be honest I was just looking for a lopsided discrepancy between the percentage of bets (public money) and percentage of money (sharp money). And I knew I didn’t want to take an under because cheering for no points is no fun. So here we are.

The total opened at 58 and dropped to 56.5. Only 37% of the bets are on the over, but 64% of the money is on the over, so count me in on the over. And if that’s not enough of a draw for you, this is a battle for first place in Conference USA’s East division and features a father-son Coach-QB combo of Rick Stockstill & Brent Stockstill for Middle Tennessee State. Just don’t ask me how (or if) I plan on watching this game on Saturday.

The Daily Line Podcast, Chicago edition : Debut episode

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NBC Sports Chicago

The Daily Line Podcast, Chicago edition : Debut episode

On the debut episode of the Daily Line on NBC Sports Chicago, Ryan McGuffey and Paul Aspan are joined by VSIN’s Joe Ostrowski & Sam Panayotovich to take a look at the Bears and the rest of the NFL thru the eyes of the sports bettor.

How Vegas views the Bears after their 3-1 start and heading into Sunday’s game as a favorite in Miami. Is there any value on the Bears at 25/1 to win the Super Bowl or Khalil Mack at 28/1 to win MVP?

Plus NFL teams that are frauds and for real after 5 weeks. And of course a 6-pack of picks to get you thru the weekend. 

Listen to the full podcast here or via the embedded player below