"We’re flat out going to lose money on this fight...but that’s the investment we’re makingLorenzo Fertitta, UFC CEO and Zuffa chairman
The official story heading into Saturday's UFC on Fox 1 event is that by placing a highly-coveted event on network television rather than pay-per-view, the Ultimate Fighting Championship is losing money in the short run. The stated goal is to make an investment in the sport and brand by forgoing the quick pay-per-view buck in favor of broader distribution on network television. But is it really true?
Mostly, yes. But there's a little 'no' in there, too.
Let's first make a couple of assumptions. If this card were to be on pay-per-view, it would likely have been the main event for UFC 139 (it was originally slated that way). That would make Cain Velasquez vs. Junior dos Santos the main event, Dan Henderson vs. Mauricio Rua the co-main and Urijah Faber vs. Brian Bowles the feature bout.
Second, Fertitta told USA TODAY and the Sports Business Daily he believes this upcoming Velasquez vs. dos Santos Fox card could pull 800,000 pay-per-view buys. I respectfully disagree.
My personal estimate of the best number the UFC on Fox card would pull is 375,000. Other reasonable estimates I've heard could go as high as 400,000, but I'm skeptical of that ceiling. Despite incredible talent and deserved accolades, neither dos Santos nor Velsaquez is yet to become a pay-per-view attraction. While Velasquez's bout with Lesnar (UFC 121) pulled one million buys, that event was more about Lesnar's star power and Velasquez's introduction. Outside of that one event, neither of this weekend's main event fighters have headlined a card that has pulled more than 350,000 buys.
However, were Velasquez and dos Santos to headline the UFC 139 fight card aforementioned, it is conceivable the event could pull as high as 450,000 buys. Let's go with that presumed card for our discussion.
It is true the amount of revenue the UFC would immediately generate from an event that pulled 450,000 buys would be somewhere in the neighborhood of $9 million. And for a UFC-Fox deal that's paying roughly $100 million annually for four Fox fights, two seasons of The Ultimate Fighter and significantly more programming, $9 million in pay-per-view generated revenue on one event is a princely sum to walk away from.
But there's no such thing as a free lunch. What no one seems to be taking into account is the cost that comes with the push from Fox (and presumably shared production costs).
Consider all of the advertisements Fox has placed promoting this UFC event. Consider the testimonials during live baseball or football games from Joe Buck or Dick Stockton. Consider the full use of the Fox Sports apparati to raise awareness and generate interest in this event. Consider these advertisements or testimonials air during top-rated NFL games, some of the most marquee ad inventory available. If the UFC were forced to pay for that level of advertising, what do you suppose the costs would be? That level of ubiquitous and preeminent UFC advertising is very easily a multi-million dollar campaign, perhaps even in the eight figures.
Moreover, sources within the television industry tell MMA Nation the type of push Fox has given to UFC (e.g., in-game testimonials or content reminders) is only available to in-house brands. Unless brands have Fox deals, they're unable to take advantage of that space.
None of this is to suggest the central thesis of the UFC's claims are incorrect. Cash in hand is being lost. Moreover, the general idea that placing this event on television is designed to pay dividends down the road is incontestably true. But it's also true that making UFC on Fox a success come with a heavy dose of advertising costs the UFC does not have to shoulder (unlike, for example, much of the advertisements for next weekend's UFC 139). Fox Sports is able to leverage their vast amount of resources, huge audiences and access to key demographics to help push UFC over the top. It's what makes this deal UFC signed with Fox so incredibly valuable to their brand and to the sport of mixed martial arts.
It's a level of treatment that's extraordinarily expensive to pay for and only available to partners. It's something, quite literally, money can't buy.