UFC expansion not without risks

The Ultimate Fighting Championship will increase international activity in the next few months, with plans to open up new markets .

"In the spring of 2009, we plan to have two (international) events outside of the United Kingdom," said Marshall Zaleznik, the company’s U.K. division president, who is working heavily with co-owner Lorenzo Fertitta in the company’s worldwide expansion plans. "We’re looking at Italy, Sweden, Australia and the Philippines. We want to go to Germany (in 2009) but we haven’t launched television."

That’s only the first wave of planned expansion. Fertitta leaving his post as the highest-paid casino executive in Las Vegas to work full-time for UFC was with the goal of trying to duplicate the company's U.S. success on a worldwide basis. There are even serious talks of running a regular schedule of events in Japan, now that the company has a television deal, although that is more on the long-term radar.

With expansion comes major questions. Parent company Zuffa LLC will promote 19 shows this year under the UFC brand name, and another six under the WEC banner. With a finite number of stars and real main event fighters, it becomes a balancing act of how many shows you can produce without watering down the lineups, and thus weakening the brand.

There were already problems at times this year, which largely came from the injury bug hitting, but that’s an inevitable part of the game. The June show in London had a weak pay-per-view main event of Matt Hughes vs. Thiago Alves after injuries felled the planned Chuck Liddell vs. Mauricio "Shogun" Rua match. The show drew well live because the arena was already almost sold out when Liddell tore his hamstring, but it was the weakest drawing pay-per-view of the year.

A July Spike TV special was hastily put together, largely to combat the debut of the Affliction group on pay-per-view. With many top stars not wanting to fight on short notice, Anderson Silva saved the show by agreeing to compete in the main event.

They’ve struggled to find a main event for the Nov. 15 show in Portland, Ore., with Joe Stevenson vs. Kenny Florian close to final and Brock Lesnar vs. Cheick Kongo in the talking stages.

In 2009, you’re probably talking 23-25 UFC events and eight WEC cards. The company is fortunate that none of its competitors have gained a real foothold, because a group like Affliction, with far less talent depth, if only running three or four shows per year, has the ability to put on stronger lineups.

Zuffa's full-scale push into the U.K. started with UFC 70 on April 21, 2007, which ended with the stunning Gabriel Gonzaga knockout of Mirko Cro Cop. The company has set several major arena live gate and merchandise sales records in that country’s biggest indoor venues. They are currently preparing an Oct. 18 show in Birmingham, England, which will air on Spike TV on tape delay in the U.S., headlined by Liverpool’s Ultimate Fighter season three champion Michael Bisping (17-1) against Chris Leben (18-4).

UFC ran once in the U.K. in 2002, but pulled out of the market due to company president Dana White not liking the terms of the company’s television deal. Like in the U.S., the popularity took off in 2005 when the U.K. version of Bravo aired season one of the Ultimate Fighter. The company also embarked on a huge marketing campaign in early 2007 to build the brand name.

"I think Lorenzo (Fertitta) says it best, were we going to launch with a standard marketing plan or did we want to reach, as Dana White said, every sheepherder in the country?," said Zaleznik. "He decided, let’s just spend to be sure. What we realized after two events is that we didn’t have to spend as much. Once we got to London (for the third U.K.

show Sept. 8, 2007 show) we realized the UFC was bigger than we anticipated."

Zaleznik felt the branding campaign wasn’t needed for the core fan base in the country, but for the general public he’s noticed a huge difference.

"You used to say `UFC,’ and people would say, ‘Huh?.’" he said. "Now, say UFC, and every cab driver knows exactly what you’re talking about."

Zaleznik estimated they have cut back 80 percent in spending to market the recent shows. A Standard & Poor’s credit review of the company, which downgraded the company last year because of international expansion losses due to the marketing campaign, noted in an upgrade that U.K. operations are now profitable.

The company recently made a tough decision to move away from Bravo, which is the equivalent of a cable station in the U.S., to Setanta Sports, which is a premium sports package network, but reaches far fewer casual viewers. The move was made for a number of reasons.

"A big reason was to get all the shows airing live," said Zaleznik. "Our diehard fans will stay up until 4 a.m. to watch it live. There may only be 10,000 to 15,000 of them, but we have to present it as a sport where people see the events live."

Another reason was Setanta agreed to put more money into marketing, which has allowed UFC to cut back its own marketing budget. Part was a perception issue, as Zaleznik felt in the long-term, it’s important UFC is considered a major sport, and on Bravo it would be seen more as entertainment.

With the expansion comes questions. Zaleznik makes no bones about the company modeling its expansion goals after the success of World Wrestling Entertainment, which in its last quarter derived 40 percent of its profits from outside North America.

In fact, one of the company’s key factors in deciding on locations to expand into first are markets the WWE has had success in. But the most important factor is where UFC itself has established a core television audience.

"We do believe in the matriculation of WWE fans to UFC," said Zaleznik.

"We look at places where WWE has had five years of success. After three to five years of following WWE, many fans are ready to graduate to the UFC."

Another similarity they’ve found is that you don’t need a native superstar to be successful.

"Bisping has made it a bit easier, but the people want to see the UFC fighters they’ve seen on television," said Zaleznik. "We saw that In Belfast with the reactions to Rich Franklin and Forrest Griffin. Bisping is great, but they want to see the television stars. If Bisping doesn’t win Ultimate Fighter 3, we’d still be successful."

Still, Zaleznik noted the type of event to take the sport to the next level in that country, running a 50,000-seat stadium like boxing native stars Ricky Hatton and Joe Calzaghe have headlined, would probably not be considered unless Bisping can challenge Anderson Silva for the middleweight title.