Sherdog.com’s 2016 Story of the Year

By Tristen Critchfield Jan 4, 2017
It was in May when rumors of an impending Ultimate Fighting Championship sale began to gain momentum. During an appearance on “The Dan Patrick Show,” UFC President Dana White shot down and ESPN.com report that Zuffa was in “advanced talks” to sell the company, with at least four potential interested bidders in the hunt.

“We’re not up for sale,” White said. “We’re always working on deals and our expansion globally. I’ve been saying since this thing came out, ‘No, we’re not for sale,’ but let me tell you what, if somebody shows up with $4 billion, we can talk. We can definitely talk.”

White’s denial, as the running joke inside the MMA bubble goes, told savvy observers the sale was probably all but finalized. After all, it would not be the first time the promotion figurehead told the media one thing and the exact opposite happened. Sure enough, some two months later, Zuffa cashed in on what was a longshot investment back in 2000, selling the world’s largest mixed martial arts promotion to William Morris Endeavor and International Management Group (WME-IMG) for a reported $4 billion.

In a tumultuous and memorable year for mixed martial arts, the sale of the UFC surpasses the rise of union and labor groups, Conor McGregor’s two-division reign, the implosion of UFC 200 and the death of Kevin “Kimbo Slice” Ferguson as Sherdog’s “Story of the Year” -- not only for its immediate impact, but for the changes the sale will inevitably enact in the coming months and years.

Brothers Lorenzo Fertitta and Frank Fertitta III purchased the UFC for $2 million in 2000 and promoted their first event at UFC 30 on Feb. 23, 2001. After building the promotion into a massive mainstream success, the brothers relinquished their 40.5 ownership stakes for passive minority interest, with Lorenzo Fertitta stepping down from day-to-day operations as the company CEO. WME-IMG is one of the world’s largest talent agencies, representing artists in movies, music and television, as well as the NFL, NHL and some athletes in the UFC. The sale was the most lucrative ever for a professional sports franchise and signified just what a big business the UFC has become.

“We’ve been fortunate over the years to represent [the] UFC and a number of its remarkable athletes,” WME-IMG CEOs Ariel Emanuel and Patrick Whitesell said in a joint statement. “It’s been exciting to watch the organization’s incredible growth over the last decade under the leadership of the Fertitta brothers, Dana White and their dedicated team. We’re now committed to pursuing new opportunities for [the] UFC and its talented athletes to ensure the sport’s continued growth and success on a global scale.”

White, who once convinced the Fertittas, his longtime friends, to take a chance on the UFC, reaped the rewards from the sale. He signed a five-year contract to remain UFC president, while he reportedly received a cool $360 million for his nine percent ownership stake. Additionally, it is believed that White’s contract includes a stipulation where he would receive nine percent of the promotion’s net profits. According to an ESPN.com report, if the promotion made $200 million in 2017, White’s total salary would check in at approximately $18 million, placing him in the rarified company of NFL Commissioner Roger Goodell, who averaged $21 million per year during his first decade on the job.

“I can tell you this, and this is the honest-to-God truth: When this deal closed, it bugged me out a little bit,” White said during an appearance on the “Jimmy Kimmel Live” show. “When you make that kind of money ... My partners, I’ve been with them for 20 years, so that’s all gonna change; I have new partners now. I just kind of Howard Hughes’d myself up into a hotel room for a couple days, didn’t sleep or eat; it kind of freaked me out a little bit.”

While the Fertittas and White sold their stock, WME-IMG opened up ownership to a number of celebrity investors, including prominent Hollywood and professional sports figures. That high-profile group included the likes of Abel “The Weeknd” Tesfaye, Adam Levine, Anthony Kiedis, Ben Affleck, Calvin Harris, Cam Newton, Conan O’Brien, Flea, Guy Fieri, Jimmy Kimmel, Li Na, LL Cool J, Maria Sharapova, Mark Wahlberg, Michael Bay, Rob Dyrdek, Robert Kraft, Serena Williams, Sylvester Stallone, Tom Brady, Trey Parker, Tyler Perry and Venus Williams.

While the UFC suddenly had a more glamorous feel, many employees within the company were not feeling as fortunate. A few months after the sale became official, numerous reports surfaced that as many as 80 layoffs from multiple departments had occurred within the promotion. Chief Global Brand Officer Garry Cook, Chief Content Officer Marshall Zelaznik, Executive Vice President and General Manager of Asia Ken Berger and Senior Vice president of Global Content Jamie Pollack were some of the more prominent names to lose their jobs. According to a report from MMAFighting.com, morale at the UFC’s Las Vegas office was likened to a “morgue” as the layoffs began.

Perhaps even more telling were the promotion staples that parted ways with the company of their own accord. Longtime matchmaker Joe Silva, Vice President and General Manager in Brazil Giovani Decker, Vice President of Public Relations Dave Sholler and play-by-play commentator Mike Goldberg all punched the clock for the final time with the UFC by the end of 2016. While the owners themselves stayed largely in the background, it already felt like the promotion was moving on from the “Face the Pain” era, even if the theme song remained.

In order to maximize profits, more changes could be on the horizon. MMAjunkie.com reported that the new ownership group could activate an additional $250 million in “earn-outs” if the UFC could increase its earnings before interest, tax and depreciation from its reported $170 million from June 2015 to June 2016 to $275 million by June 2017 and to $350 million by June 2018. The aforementioned cutbacks were only part of the means to reach that goal. In addition to seeking increased rights fees from its TV deal with Fox and from other sponsors, employee payroll could be slashed by more than 50 percent, according to the report.

With its purchase, WME-IMG reportedly inherited $1.8 billion in Zuffa debt. While an obligation to provide content for Fox and Fox Sports 1 means that there will still likely be a fair share of UFC Fight Night events, it is expected that new management could cut back on international shows to narrow its focus to primarily domestic markets in the coming years. It has been rumored that the UFC could eventually hold as few as 30 shows per year, a significant decrease from the oversaturation era that has seen 40-plus cards occupy nearly every weekend of the calendar. As an entertainment entity, it is only natural that WME-IMG could shift the UFC’s matchmaking strategy even further in that direction. Such an emphasis could only fuel fighter unrest, which has been at an all-time high in recent months.

New ownership must also deal with a newly formed fighters’ association, a pending class-action lawsuit, increased concern with fighter safety, dissatisfaction with the Reebok deal, the United States Anti-Doping Agency’s impact on fight cards (see UFC 200) and Bellator MMA’s rise as a viable alternative for free agents. In short, while the UFC has undoubtedly become a lucrative professional sports property, its purchase came with a number of built-in caveats, as well. How WME-IMG navigates the current climate of the sport will be an ongoing story worth following, perhaps well past 2017.

“No other sport compares to [the] UFC,” White said after the sale. “Our goal has always been to put on the biggest and the best fights for our fans and to make this the biggest sport in the world. I’m looking forward to working with WME-MG to continue to take this sport to the next level.”

Somewhere, the Fertittas are counting their money and laughing, relieved to cash out at such an opportune time. An era may have ended in 2016, but the UFC’s story is only beginning.

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