Television giant Viacom's recent purchase of a majority interest in the tournament Bellator Fighting Championships shows that for long-term stability and financial success in a very difficult to crack mixed martial arts industry, timing is everything.
The UFC's purchase of the Strikeforce brand earlier this year made Bellator, which debuted in spring 2009, almost a default No. 2 brand in North America
. Bellator was already running more than two dozen live events per year and had a national television contract on MTV2, pulling in decent numbers for the station. But industry timing, more than a track record of success, is what led to Viacom's interest.
"We've been negotiating probably the better part of a year," said Kevin Kay, the president of Spike TV, the network that put the new-era UFC and MMA on the map when they agreed to air what was considered controversial programming back in 2005. "We saw our relationship with UFC coming to an end and we needed to think about something else. We wanted to stay in the space we helped build. Guys come here [to Spike TV] for MMA content. We're known for it."
In television's ever-changing landscape, networks believe live sporting events are more DVR-proof than other forms of programming, and this helped make the UFC into one of the past decade's true branding successes.
Spike's contract with the UFC ends at the conclusion of 2011, and with heavy hitters like NBC Universal and eventual winner Fox at the table, the UFC's price tripled from the current deal, estimated at $35 million per year. The level was simply too much for Spike, as a basic-cable entity, to compete with.
Spike had already been in a similar situation with pro wrestling, as it held the brand rights to the powerhouse World Wrestling Entertainment brand's Monday Night Raw franchise from 2000-05. When Vince McMahon's promotion returned to the USA Network, Spike stayed in the wrestling business by making a deal with the industry's struggling secondary promotion, Total Nonstop Action Wrestling.
While the new product draws nowhere near the audience of WWE, the group is among the most popular programming on the station. Viacom clearly hopes to do the same by placing Bellator on Spike.
And ownership has its privileges. If Bellator gains traction with the audience and the brand takes off, the company won't have to get into bidding wars to keep it and will have lifetime ownership of the company tape library.
"Every two or three years, we had to renegotiate [with UFC] and it was only going to get worse as their brand grew and their success grew," said Kay. "Our relationship with UFC was a really good thing, a great partnership and we wish them well. We helped them build their brand, but it was only going to get more expensive over time.
“We were renters. The opportunity with Bellator with buying is that you own it for a long period of time. It's locked up. There's no constant renegotiating and we build value in our equity."
Spike's contract with UFC provides for an added year, 2012, in which Spike retains rights to televise taped UFC programming and is not allowed to air any other MMA events. Because of that stipulation, Bellator, which currently runs on Saturday nights on MTV2 and the HD network Epix, won't debut on Spike until early 2013.
So why make the announcement more than a year before the debut?
"We've been talking about it for a long time," said Bellator CEO Bjorn Rebney. "There are a lot of really smart people over there who had to do a lot of due diligence, a lot of investigation. For us, it's a perfect alliance at this stage of Bellator's development. I've got a partner who is one of the leading, largest and most powerful entertainment partners in the world, with MTV, MTV2, Spike, Comedy Central, and they wrote the book on MMA on television."
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"I think people kind of sensed something was going on," said Kay. "I'd read a lot. Bjorn read a lot. Are they going to survive? Are they going to make it? We wanted to give people confidence in their future. We're majority owners and this company is going to have a long life. It's going to stay and we want fans to know that, we want clients to know that and we want fighters to know that."
Bellator's key promotional hook, running several three-month long eight-man tournaments per year, with winning the tournament the only way to qualify for a championship match, will stay the same.
But there are plans for changes, such as a reality show and other types of shows. In addition, the Bellator stars will be marketed across the Viacom platforms, and they are looking for a Bellator presence on other Viacom properties.
For the weekly shows, the company is looking to upgrade production, lighting, audio and graphics, and want shows held in first-class venues. They want to become more competitive in acquiring top talent. Bellator is also looking at doing more storytelling on the background of fighters and have ideas for non-live television specials, like Spike has done with UFC with "best-of" type specials.
Currently, Bellator runs tournaments in four of its current eight categories (the seven major men's weight classes and a 115-pound women's division) in each 12-week season. The plan for 2013 is to have six or seven tournaments each season, with one or two more shows as monthly specials. This leads to more contenders for championship matches, and the elimination of the non-title matches.
"[Champions appearing in non-title matches] have been a space-filler to get guys fights and keep our champions busy," said Rebney. "While there have been some great fights, the key is to provide the champions regular new opponents to defend their titles against." In addition, a decision needs to be made on which night of the week to air shows. Ratings for the current season of Bellator are down 15 percent from the spring, because of UFC running most Saturday nights, as well as competing with boxing and college football. There has been a noticeable correlation between UFC live events and lower Bellator ratings.
"We've got 14 or 15 months to figure out what night of the week it'll do the best on," said Kay. "Once we get it on the air, it'll have a major push. There will be a lot of programming. We have to figure out if we are to do the tournaments as they currently exist or toy with it to have more programming. We need to get good fighters to fight, both for our TV audience and for the athletes."
"We're hyperfocused with our partners and the MTV networks to figure out the day and the time that will reach the largest numbers of MMA fans," said Rebney. "It may be Saturday night. It may be a different night. We're bouncing things around as we speak. It's an anomaly to be able to work with people with an open mind for alternatives and what will be the right night and they'll due do their due diligence and investigation. They wrote the book. They know what we're looking for, the best night for the most people."
The goal is to eventually build the brand to the point it can be successful on pay-per-view, although both Rebney and Kay don't see that in the near future.
"Pay-per-view is one of those things, it's almost like baking a cake, it's done when it's ready," said Rebney. "We're not at that point now. We've got some great fights coming up, but the pay-per-view opportunities for Bellator may come sooner, or they may come later. It's nothing we're going to do in a month or six months."
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