Fertitta focuses on international issues

When Lorenzo Fertitta left his post overseeing Station Casinos 16 months ago to work full-time as CEO of Zuffa LLC, the parent company of the Ultimate Fighting Championship and World Extreme Cagefighting, his biggest challenge was international expansion of the UFC brand.

Almost since Fertitta made the move, UFC president Dana White, the public face of the company, told anyone who would listen that in eight years, UFC would be "bigger on a worldwide basis than the NFL or soccer."

"Remember I said it," White said, knowing that even accepting the remarkable strides in popularity the company has made domestically in the last four years, that’s bucking the massive head start both sports have.

Mixed martial arts hasn’t even fully broken through in its home country, let alone be competitive with the two sports that dominate worldwide sports interest.

But as the company makes its plans for 2010, Fertitta is thinking both short term – such as the company's Australia debut on Feb. 21 – and long.

"Asia, China and India are going to be big markets," Fertitta said. "But it might be 10-15 years before we can fully monetize their potential."

In figuring out how the UFC can best implement its international plans, Fertitta looks back at how the company managed to revive a failing brand stateside. "People talk about us as an overnight success, but we struggled early," noted Fertitta. "When we first got the company, our thought was that as soon as we got back on pay-per-view, we’d be a real quick success."

Eight year ago, the UFC projected 100,000-150,000 buys per show starting with UFC 33. Instead, many shows in the early years did 25,000-30,000. The company's first television deal, with FOX Sports Net, didn't make a dent, but The Ultimate Fighter on Spike TV ended up as the turning point. The lesson learned is that simply getting on television in and of itself doesn't matter as much as having the right deal. Every country is different, as is every television deal. Some countries only have a few stations, so getting hours of programming time is difficult, but that programming can be extremely valuable because viewership is high. Other countries have so much television fragmentation that they can have supply endless hours of programming, but only reach a limited audience.

The number of television viewers in the U.K. is minuscule compared to other countries, but most of the live events have sold out, and the Nov. 14 show in Manchester is tracking to sell out, with only about 1,000 unsold tickets at this point.

There are other obstacles. The company is getting huge ratings on the equivalent to a major network in the Philippines. When they brought Chuck Liddell over for a visit a year ago, more than 4,000 people came to see him work out at a mall. But at this point, UFC doesn't feel the country is a market in which they can turn a profit on a live show.

"There’s a reason (Manny) Pacquiao doesn’t fight in the Philippines where he’s a God," noted one UFC official.

In France, the company is doing strong ratings on a station broadcasting out of Luxembourg that hits the entire country. But UFC is currently banned in France, so it can’t be broadcast on a station within the country, nor can it hold live events. Fertitta noted it’s a dream of his to run a show in Paris.

The company is also on strong stations and doing well in the ratings in Mexico and Scandinavian countries like Norway and Finland. Another strong market is Brazil, home of so many great mixed martial arts, where the old owners ran a live card in 1998.

Zuffa’s major revenue stream is pay-per-view, but many countries simply don’t have the mentality in which people are used to paying for one-off sporting events on television. PPV was an easy fit in the U.S. and Canada, because the two things that most closely are similar in marketing to UFC, boxing and pro wrestling, never gave away the big events for free. Big boxing matches were televised around the country on closed-circuit television and wrestling television always marketed big events at local arenas. When pay-per-view came along, both sets of fans saw it as a more convenient way to do what they were used to doing, which was paying to see the big matches.

But the UFC product going forward is going to be far more than just presentation of live events. There is merchandising and video games that can be marketed worldwide. And there’s an ever changing world due to the Internet.

Fertitta noted one of the big surprises was the success of the company’s video game in Spain.

"In Spain, we don’t even have a TV deal and we’re the No. 2 grossing sports video game next to FIFA soccer," he said. The UFC had a major presence this week at Sportel, the biggest worldwide convention for television networks looking at purchasing sports programming.

"Two years ago, people were looking just to see what we were," said Marshall Zelaznik, the UFC’s president, who is working with Fertitta on global expansion of the brand. "Last year, people were looking at signing us up. This year sports stations are saying they need us."

Zelaznik noted a big advantage in selling UFC to new markets is the simplistic nature of the sport that makes it easy to understand across cultural barriers. He also noted UFC has an advantage over many sports because much of the programming, whether it be repackaged fights or seasons of The Ultimate Fighter reality show, is "evergreen," meaning it can be shown over and over and still draw an audience, unlike most sports events where major appeal shows are usually limited to live events.

UFC does the strongest pay-per-view numbers of any sports company in North America, but aside from Australia, hasn’t really broken through on pay-per-view elsewhere.

Currently UFC does less than 10 percent of its overall revenue outside the U.S. and Canada. As a private company, exact figures aren’t available but the company is expected to gross in excess of $300 million this year. Fertitta figures the percentage of revenue coming from outside North America to eventually top 50 percent.

Australia is the next target market for a live show, with a date scheduled but not finalized on Feb. 21 at the Acer Arena in Sydney. The belief, because the Australian economy hasn’t been hit as hard as the rest of the world over the past couple years, and with the American success of concerts, sports and WWE, that the UFC can do a sizable live gate.

"We've been doing our research on Australia," said Fertitta. "We've seen the ticket prices that are charged for concerts, sports and WWE. Australia's economy didn't take as much of a hit as the rest of the world. So that's where we think we can do very well. Plus we like Australia because we can do a live pay-per-view." The show is scheduled for a live pay-per-view in North America, meaning the live event itself will be starting at between 10 and 11 a.m. on a Sunday morning and main matches starting at 1 p.m. in Sydney for airing in the usual 10 p.m. Eastern time slot.

There is also talk of doing a 2010 card in the Middle East, and there will be several shows in the United Kingdom and likely one show in Ireland and Germany this year. There is talk of doing a Fight Night card on Spike from Scotland, running in a smaller arena than usual simply because Scotland doesn’t have any huge arenas, and focusing on using European talent.

Fertitta expects to run about the same number of live events in 2010 as the 20 events in 2009. While demand for live events in new markets remain strong, the supply of available star fighters and demands on the staff keep the company from further pushing the envelope.