On the Heels of Two Major International Events, the UFC Looks to Capitalize on New Business

By Patrick Auger Sep 13, 2019
Sign up for ESPN+ right here, and you can then stream UFC on ESPN+ live on your computer, phone, tablet or streaming device via the ESPN app.

Editor’s note: The views and opinions expressed below are those of the author and do not necessarily reflect the views of Sherdog.com, its affiliates and sponsors or its parent company, Evolve Media.

* * *

UFC 242 may not have been the most stacked card on paper, but the main event was one for the ages. Defending his Ultimate Fighting Championship lightweight strap for the second time, Khabib Nurmagomedov faced interim lightweight champion Dustin Poirier in a 155-pound title unification bout, and like many of Nurmagomedov’s opponents before him, Poirier could do nothing to stop the Dagestani’s smothering wrestling and was forced to tap out to a rear-naked choke in the third round. Although the bout took place in Abu Dhabi, it certainly felt like a hometown win for Nurmagomedov, who had the crowd behind him ever since the fight was announced and who has become a star in the predominantly Muslim Middle East.

Although UFC 242 was the first time the promotion had returned to the region in five years, it won’t be a long time before the company returns to the market. Prior to the event taking place, the UFC signed a deal with the Department of Culture and Tourism – Abu Dhabi (DCT Abu Dhabi) to bring one event per year to the emirate through 2024. Also included in the arrangement is a three-year broadcast rights deal with Abu Dhabi’s state media channel, which will show the promotion’s events exclusively in the Middle East and North Africa.

“They [Abu Dhabi] are making a huge commitment to grow the sport,” UFC Chief Operating Officer Lawrence Epstein said in an interview with Reuters. “It’s a big population. It’s a young population. It’s a population with discretionary income and what’s key to us is it’s a population that’s got an affinity for the sport.”

The Middle East isn’t the only region the UFC is making big moves in, however. Just one week prior to UFC 242, the promotion held UFC Fight Night 157 in Shenzhen, China, where the company crowned its first-ever Chinese champion after Weili Zhang dethroned Jessica Andrade for the UFC women’s strawweight championship. Prior to the event, the UFC unveiled a massive UFC Performance Institute in Shanghai, as well as extended deals with sponsors in the region like AirAsia. After Zhang’s emphatic performance, the UFC is now looking to renegotiate its current media rights deal in China, doubling fees from $50 million over five years to $100 million in the same time-span.

This comes after the UFC added a new leveraged loan of $465 million to an existing $1.875 billion loan that matures in 2026. Despite increasing the company’s overall debt, the company is expected to maintain its EBITDA ratio by the end of 2019 due to increased revenue from the ESPN deal signed back in March of this year. The UFC posted revenue of over $700 million for Q2 2019 and, according to various financial experts, has improved their relationship with current and future investors with its recent dealings.

The renegotiation of its media rights deal in China, new agreements with the United Arab Emirates government and the addition of a substantial new loan all point to just how successful the UFC’s past two events have been for the organization. With a Chinese champion that trended as the top search on Baidou and Weibo after her victory, it only makes sense for the company to attempt to restructure their current media rights deal and strike while the hype around Zhang is at newfound heights. Establishing a deal with Abu Dhabi for multiple events while Khabib Nurmagomedov is a huge deal in the region is a no-brainer, and, with his dominant victory on Sept. 7, one has to wonder if the UFC won’t try to restructure/further that offer as well. Increasing the company’s debt makes sense while investors are on their side, as it gives them more cash flow for further expansion at a better price.

The UFC also realizes that they have to move quickly when things go their way, as the nature of their business is volatile. If Zhang had gotten knocked out in the first round or been defeated in dominant fashion, the company would have no leverage to renegotiate its deal in China. Had Nurmagomedov lost to Conor McGregor back at UFC 229, there would have been less incentive for DCT Abu Dhabi to make a deal with the promotion, let alone for a five-year time-span. Without these two successful deals and the ESPN agreement earlier this year leading to a perfect storm of favorable conditions, the company wouldn’t have been able to add on to their existing loan without drawing the ire of their creditors, if at all.

While it’s no secret that the UFC is doing well financially, these opportunistic dealings are what has led to the promotion’s continued growth and success. As the American market has become more saturated and the average viewing audience for MMA increases, the UFC needs to find new ways to expand the sport globally and draw in younger fans if it wants to see the steady increase in revenues it has come to expect. Deals such as these facilitate such initiatives. It will be interesting to see if the stars keep aligning for the organization as they continue their aggressive maneuvering to increase their bottom line, but should their luck turn on them, they always have the public to fall back to. Advertisement

Comments

Comments powered by Disqus
<h2>Fight Finder</h2>