HOLLYWOOD, CA - MAY 10: Ari Emanuel attends the premiere of "The Nice Guys" at TCL Chinese Theatre on May 10, 2016 in Hollywood, California. (Photo by Jason LaVeris/FilmMagic)
The UFC Becoming A Public Company Was Terrible For Fans
It was the early 17th century and the trade routes were becoming very profitable. The British Crown invented something called a “corporation.” This let companies act on behalf of the government. Sounds boring, right? What if I told you that the 17th century Brits were responsible for these deplorable APEX cards we’ve been getting from the UFC as of late? Bear with me as I get through the rest of the boring stuff.
The Corporation and the Monetization of the UFC
Again, the 17th century saw the creation of the corporation by the British. But in earlier times, such as 800 BC India, guilds would be granted personhood to work in the public interest. But it wasn’t until 1886 and the Santa Clara County v. Southern Pacific Railroad Company that things got a little hairy. That specific Supreme Court Case noted that the Equal Protection Clause of the Fourteenth Amendment granted constitutional protections to corporations.
The Fourteenth Amendment states: “No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”
When the Santa Clara County v. Southern Pacific Railroad Company granted corporations legal rights and constitutional protections, what it really did was allow a corporation protections of a limited liability company while also having the rights of a citizen. A corporation protects those that own the corporation and also grants them immunity through the limited liability rules. This means that through a bunch of legal magic (or witchcraft if you’re the anti-capitalist type) corporation’s sole responsibility is to maximize profits for it’s shareholders.
Losing Quality, Making Dough
With the news breaking that Endeavor is close to purchasing the WWE and intends to merge it with the UFC on the corporate level, the company is looking for maximization of profit for it’s shareholders. But the issue happened long before this WWE deal came about. It was years before in 2019.
In 2016, WME-IMG (Endeavor) bought the UFC from the Fertitta brothers and acquired the UFC. It was a massive $4.025 billion deal. This brought the UFC into the realm of a corporation by those who have no interest in fights.
The Fertitta brothers, say what you will, were fight fans first who happened to turn the company into a corporation. Endeavor was a Hollywood talent agency. Then in 2019, WME-IMG went public and became a publicly traded stock. This means they now have many shareholders with their hands in the pot at Wall Street looking for one thing: profit.
The day the UFC was sold to Endeavor was the day it died. But the initial public offering was when the final nail was put in the coffin.
Now we have a company who is trying to maximize profits for it’s shareholders while being caught up in an ESPN deal that has the company set at a certain amount of profit per year. That means the option for revenue growth is not there. The growth in proprietary technology and other capital efficiency isn’t really there for the UFC. It’s a fight promotion.
The only other way for Endeavor to make more money is to work in operating margin. Payroll, overhead, shipping, and more are they way to improve that. In other words, cutting costs. The COVID-19 pandemic was best thing to happen for shareholders. With all this new Contender Series talent coming in on $10k/$10k contracts, the Endeavor could cut costs by cutting old names like Alistair Overeem, Junior Dos Santos, and others with a high salary in exchange for these cheaper contractors. Easy profit.
Working at the APEX means travel is down, overhead is down (they own the building) and by loading these cards up with cheaply bought fighters, and by meeting the quota of fight cards per year, the UFC is cutting costs to improve margin.
With the WWE joining the mix, I expect to see the ESPN deal potentially not renewed with the opportunity to piggyback off of what the WWE built with WWE Network rolled into what Fight Pass has become. There the UFC and Endeavor can grow subscriptions, the hottest trend in tech right now, to increase income. Pay $20 a month and you get all the UFC cards like on ESPN+. With the added monthly pay-per-view from the UFC, the company gets to double dip on it’s clients.
Money; that’s what made recent fight nights’ look so sparse. The pursuit of a dollar. This is no longer about growing the sport, it’s about making as much money as you can from the sport. Money comes first, not the fights. And for fight fans, that’s not a good thing.
