David Samuels interviews Lorenzo Fertitta, one of the two Fertitta brothers who bought the Ultimate Fighting Championship a few years ago — after going to a show and seeing how mismanaged the business was:
Nobody knew about it and there was nothing going on. We got in the car and we drove out to the venue and it was kind of far away, and there was nobody there. I said, ‘you know, I want to buy a UFC t-shirt, it sounds cool.’ Nobody was even selling t-shirts. They weren’t selling programs. Maybe 15% of the seats were full. It was just amazing, and I was sitting there watching the event going ‘wow, this could really be something. What am I missing? What’s different about me — am I really that sick and twisted — that I really like this? Not that I kinda kinda like it, that I really like it, and nobody else cares.’
The Fertitta brothers bought the franchise for two million dollars — but they had to put in a whole lot more to keep it going:
DS: How much money have you put into it since that initial 2 million bucks?LF: I think we got up to like 44 million.
DS: What was the year that you stopped putting money back in?
LF: I think we broke even and stopped putting money in — I think ’05 was the breaking even year.
DS: And since then have you taken money out?
LF: Yeah, yeah, we’ve taken some money out.
DS: Have you gotten back your 44 million yet?
LF: We’ve never disclosed that. Um, so I’d rather not. But it takes a lot of money to get back 44 million, I can tell you that. But I’m happy with where we are. We’re on a good trajectory.
If you look at the business model of a boxing promoter, there’s really not a lot to the business model. Most operations are like four or five people. You have the promoter, a secretary, maybe a PR guy, and a fax machine. I mean, what do they really do at the end of the day for an event? They don’t risk any capital. They don’t put up any capital. They don’t do the production. They don’t do any of the creative, any of the production. They don’t do the marketing. Literally what a boxing promoter has to do is schedule the press conference and buy plane tickets, make sure the fighters arrive on time.
DS: And your business model here is what?
LF: We call it the wheel. The UFC wheel. You’ve got your core — the pay per view. That’s essentially your product, right? And then, you know, you have spinoff things. You can sell it on DVD. Then after you sell it on DVD, you repurpose it and sell it too, put it in syndication on UFC Wired, or on Spike TV. Then you have products that you then put on the internet through VOD and other VOD platforms. Then you have other licensing opportunities like apparel and merchandise and video games, and all the way down. So it’s a complex business.
And we want to build the infrastructure to be able to handle that. So we’re going to have a real marketing department, okay? And not just rely on the pay per view providers to say that they’re gonna market for us. I want to control that. We have an in-house team of people that have direct contact with the cable companies. There’s literally maybe a thousand different cable companies in the U.S. that you have to distribute this product to. And I don’t believe in just letting somebody do that for us, so we’re very involved with how that works. As well as with Direct TV and Dish. Beyond that, we have our PR department. And it’s not just about going and hiring a PR firm and saying go do this for us. We have it in-house. We want to build the relationships in-house, we want to know these people. Every other sport just hands everything over to a network and says you guys do whatever you want with it, we’ll have some input or whatever but HBO rolls in and does boxing. Even the NFL. The major networks roll in and they just do everything for them. We do everything. And one thing about Dana that has made us very successful — he is passionate and meticulous about the product, and he gets how the product should be, and how that needs to resonate with the consumer.
I love the story about trying to market the reality show:
Dana and I flew to LA maybe 50 times. We met with — you name it. MTV. CBS. ABC. ESPN, HBO, Showtime, Spike, USA. We probably met with the Food Channel too. I don’t know. We met with everybody. And to a ‘t,’ every single person said ‘this won’t work. Get out of my office. This is a joke. It’s boring.’ We were just looking at each other going, ‘what are we missing here?’
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So I got on the phone with Craig one day. I said you know the Ultimate Fighting thing again, he says ‘yeah, we gotta figure a way to get that on.’ I said ‘yeah, but we met with everybody, and everybody’s turned us down.’ And just through talking to Craig, he goes, ‘you know another way you could do it, is you could just bankroll, and then go and sell to sponsors yourself to finance it.’ I go ‘wow, I didn’t even know that, I didn’t even think of that. Maybe that’s what we do.’ So that’s essentially what the strategy was. So we sat back down with Spike. And Spike wasn’t real enthusiastic about it, but after about 3 or 4 meetings, they’re like yeah, okay, we’ll do it. It was gonna be the Trojan horse. We were gonna let people see kind of how these guys are, that they’re not thugs, that they have backgrounds, they’re real guys, it’s gonna be great, they’re gonna live in a house and they’ll fight each other, and it’ll be great. And then I pick up the paper, and it’s like Oscar De La Hoya announces that he’s doing this reality show called the Next Great Champion, or whatever it’s called. And then a couple weeks later, Mark Burnett’s doing The Contender. So that didn’t help either. Because in trying to go and talk to a sponsor, it was like, this is the stupidest thing ever. If I’m gonna put money on anything, I’m gonna do it with Mark Burnett or with De La Hoya.And do you know how many commercials we sold and how many sponsors we sold that first season? Zero. Spike didn’t promote it at all. We had funded this thing, 8, 10 million bucks to produce this thing, and about three weeks before it was gonna air, we’re like, they’re not gonna commit to any advertising or promotion.We’re screwed. So we spent like three million dollars buying billboards and radio and tv — going look — someone’s like — I’ve been playing blackjack for 8 hours, and I started with a thousand dollars, and I got 5 dollars left, I might as well put it all out. Who cares at this point. So we’re like, let’s just go all in. If it works, it works, if it doesn’t, we’re toast. Put it on, and the ratings came back after the first one, we’re like holy shit. We started looking, compared to Spike’s ratings, we’re like ‘Wow! Those are huge!’
Since the UFC is bringing in good money now, fighters complain that they’re not getting enough of it — but Fertitta offers this:
And one thing that nobody could ever say about me or Frank or Dana is nobody’s check ever bounced, and we never went to anybody and said look, you know what, we can’t afford to pay you as much as we said . Everybody always got paid for the deal they were contracted for. And I will say this. We are the only promoters in the history of combat sport, that actually have paid fighters more than they’re contracted for.