Meltzer: Closest competitor to the UFC, WWE, pays out 13-15% of gross

Tuesday, January 17, 2012

UFC President Dana White has long voiced the goal of becoming bigger than the NFL, as a point along the path to becoming the world’s most popular sport. However, Dave Meltzer, who has unparalleled knowledge of the MMA and prowrestling worlds, makes the case that the closest business model to the UFC is not the NFL (or other big four sports competitor, or boxing) but rather the WWE.

Within the mixed martial arts industry, those who complain about fighter pay continually throw out numbers, usually claiming that only 10 percent of revenue that UFC brings in trickles its way down to the fighters. That figure is ridiculous.

In an attempt to use figures based on Zuffa’s percentage of an 800,000-buy show, which is the rough industry estimate on UFC 141, the $3.1 million live gate, using listed fighter pay, announced bonuses, estimates of unannounced bonuses, and percentages of pay–per-view revenue built into the main eventers’ contracts, give you a very rough figure of 28 percent going to talent. However, for the Jan. 7, Strikeforce show in Las Vegas, with a very small gate figure and a full roster of fighters to pay, that figure could easily have been in the range of 50 percent.

UFC, as a business, is structured completely differently than the big four team sports, which pay closer to half of total revenue to the athletes. It’s also structured differently than boxing, where the major name fighters earn significantly more than UFC’s biggest draws. UFC has costs associated with producing and marketing shows, front-office expenses, and international expansion costs boxing organizations don’t have.

Virtually every UFC show will do at least 200,000 buys, but the top ceiling for the biggest events isn’t as high as in boxing, in part because there isn’t nearly the level of mainstream media coverage as there is for a Pacquiao or Mayweather fight. Plus, as a general rule, UFC pays undercard fighters better, and markets the shows around the top several matches on a card as opposed to just one killer main event.

The closest business model to UFC is that of World Wrestling Entertainment, which is believed to pay in the range of 13-15 percent of its total revenue to its performers. While some will argue WWE is a form of performance art and not a real athletic competition – and thus the performers don’t deserve as much money – the dollars WWE derives from its performers, who take a legitimate physical pounding, is every bit as green as those which UFC makes.

Both WWE and UFC employ hundreds of full-time front-office workers, so contrasting the percentage they pay to, say, an NFL team, isn’t necessarily a fair comparison.

From 2001-04, UFC lost tens of millions of dollars. If you are talking about what the fighters were earning then, which is a lot less than now, it was significantly more than the company could afford and remain in business for the long-term.

In fact, UFC nearly collapsed under the weight of the debt. But the company turned the corner in 2005 thanks to a deal with Spike TV, and has been running with significantly high EBITDA (earnings before interest, taxes, depreciation and amortization) since that time. However, other operational costs remain, such as getting legalized nationwide and internationally, which no other professional sport has had to deal with.

UFC is not a monopoly, as there are untold numbers of smaller promotions around the country. One competitor, Bellator, is owned by media giant Viacom, which will have a very significant television deal with Spike starting in 2013.

Read entire article…