Billion-Dollar Bloodbath

A deep-dive into the history of the Ultimate Fighting Championship

In a dimly lit room, people sit staring to the bright cage in the middle. Inside, the opponents are chirping at each other from opposite corners. The audience yells and is putting down bets on which one of these animals they think is going to win. You’re probably asking yourself, is this article really about cockfighting? Almost. 

Cage fighting has long been seen as a platform for savagery and deathly matches. No one ever thought this could become a billion-dollar industry that now competes with major league sports in the United States. The Ultimate Fighting Championship, or UFC, has come a long way from the all-out, no rules, barbaric fighting establishment it once was. Today, it is indisputably the largest promotion for professional MMA fighting. But since its turbulent inception, the UFC has fended off its fair share of adversity to reach the top of the Mixed Martial Arts (MMA) kingdom.

Humble Beginnings

As with any business, the UFC has always been about making money. It needs capital to survive and can only be sustained if it sells. But the originator of the idea had a deeper purpose as well. Rorion Gracie, largely considered a pioneer of MMA, had the idea to globalize the sport and make it well known. With the financial backing of several financial partners, the UFC was born (Segal 2016).

The Gracie’s are to mixed martial arts as the Kennedy’s are to American politics. A family so deeply rooted into the sport you cannot speak about its history without a mention to them. The family is Brazilian royalty. They are known for the creation of Brazilian Jiu-Jitsu, a common spin on the classic Japanese sport of Jiu-Jitsu and one of the most common modalities of MMA. Today, you can find a Gracie gym in every continent, and in most major cities across the United States. But before the sport became mainstream, that was only a dream for Rorion.

Unfortunately, neither of the founders were able to see their dreams come to fruition. The organization never took off under Gracie and his partners. The strategy was doomed from the start. They built a “reputation for unchecked aggression” (Segal 2016) and were condemned for it. The sport would never be popular when marketed as an “everything goes” or “fight to the death” event. The UFC was at the brink of irrelevance. They were losing money quickly and had no strategies for growth. In fighting terms, you could say Gracie and Meyrowitz were about to tap out.

Enter Frank and Lorenzo Fertitta. The brothers, born seven years apart, grew up in Las Vegas in a family known for their casino chain, Station Casinos. Growing up in the fight capital of the world, both were instilled with a love for boxing at a young age. The avid investors wanted to enter the fighting business and saw the UFC as the perfect opportunity. They bought the company for pennies on the dollar at a sum of 2 million. It would be a challenge to grow this company after the very tarnished reputation it had already built. The brothers created Zuffa, a company to run the UFC. Zuffa, the Italian word for “fight” was quite fitting coming from a classic Italian family and also for the struggles they would face ahead.

Early Struggles

Much like the initial version of the organization, the UFC was not successful out of the gates under its new management. The first issue was the branding the organization had created before the sale. The three letters by which the promotion was known were synonymous to a dangerous style of fighting with no rules. Imagine Fight Club and bloodied up Brad Pitt in a fight to the death. This was not the imagine that the Fertitta’s saw when they imagined their company. The company underwent an immense amount of re-branding and re-structuring efforts in order to align itself with an image more similar to what American major league sports boast; a regulated, entertaining, and star-studded competition.

In the first couple of years, the Fertitta’s lost nearly $10 million a year (New York Times, March 2016). Not enough people were tuning in to watch the fights. Then there was the broadcasting fiasco that the Fertitta’s remember to this day. The Pay-Per-View event was running long and they had not bought enough broadcasting time in order to finish the event. Fans watching on TV were stopped in their tracks when the the event cut out in the middle of the main event. The UFC rebounded from this by starting The Ultimate Fighter (TUF). TUF is a competition that recruits top mixed martial artists from across the globe to compete for a contract with the promotion. The competition was an instant success with fans globally.

It wasn’t all uphill from there however. The UFC was also on the tail-end from much scrutiny due to health concerns of their fighters. Much like boxing and football, this is a heavy contact sport. This brings much concern to the dangers of head trauma. Being such a new sport, the true effects of MMA and its activities in the UFC are yet to be fully documented. Nevertheless, UFC president Dana White claims “this thing is safe,” adding that “there’s never been a death or serious injury in the 20-year history of UFC” (Wall Street Journal 2010).

In addition to the health concerns, The Championship also had to battle with lawmakers to fully legalize the sport in the United States. Stemming from its barbaric roots, New York lawmakers were weary about legalizing this sport in their state. However, the UFC was recently able to overcome that adversity and is now allowed to operate in all 50 states.

The Boom

After the UFC turned their performance around they have seen a fast rise in popularity. It is now the fastest growing sport in the world and has built a hardcore fan base all around the world. The promotion estimates that 30 to 40 million people tune in to watch their biggest pay-per-view events. For reference, that blows away the audience for any of the 2015 N.B.A. finals (Segal 2016). A lot of the success of the company can be attributed to superstars that they have created. Connor McGregor and Ronda Rousey are only two of the athletes that are employed by the UFC and have become household names across the world. These two have seen a meteoric rise in fame and draw an immense amount of attention to the company. Even those who are not fans of combat sports now want to tune in just because they have seen their faces so much in the media.

Recently, the UFC sold itself for approximately $4 billion to WME-IMG and a handful of private equity funds. WME-IMG is a talent agency lead by Patrick Whitesell and Ari Emanuel, a close friend of the Fertitta family. The private equity funds involved in the deal were KKR, Silverlake, and MSD Capital (Merced 2016). The sale represents a return of approximately $800 million for each of the brothers who took the brand to the next level (Kirsch 2016). Even though the company underwent a successful sale, the new management will have to face some of the similar struggles Frank and Lorenzo Fertitta faced. The first challenge; facing the scrutiny of antitrust regulators. The company has already been a target of an investigation for abuse of monopoly power in the industry (The Economist 2011).

Nonetheless, the UFC remains a powerhouse in the sports industry no matter what way you cut it. The small company that started with a Brazilian dream is now a global behemoth. Even though Gracie was not the one to do it, his dream still became reality. The UFC has made the sport of MMA a household name across the globe.