UFC: Money and the mayhem

The Ultimate Fighting Championship is bringing mixed martial arts into the sporting mainstream, gushing cash as easily as it spills blood.

It’s a Saturday night in downtown Toronto, and the Elephant & Castle is packed. Though a popular spot most weekends, the pub guarantees a larger-than-usual crowd on nights when the Ultimate Fighting Championship, the world’s leading mixed martial arts (MMA) promotion company, produces and broadcasts its monthly pay-per-view match. The events are planned and hyped like Hollywood blockbusters, and the Elephant & Castle is just one of thousands of bars across North America that pay for the privilege of broadcasting UFC fights.

Best described as the bloody love child of boxing and professional wrestling, mixed martial arts is as complex and technical as ballet, and as visceral as two men beating on each other in a cage. It’s also the world’s fastest-growing sport, one that over the past five years has grown from an underdog to a mainstream sports behemoth.

With UFC Hall of Famer Randy Couture facing off against former boxing heavyweight champion James Toney, tonight’s fight is more than a match between two athletes — it’s a showdown between a once popular pastime and a fresh young upstart trying to prove itself to be more than fad. Despite his size, Toney proves to be completely outmatched in the cage. Couture, who recently parlayed his UFC popularity into a wooden acting debut in a Sylvester Stallone movie, dispatches his opponent in about three minutes, taking him down before Toney can throw a punch. Getting up, the boxer looks stunned, whupped and childish. It’s embarrassing, almost heartbreaking.

The Couture fight provides an apt metaphor. MMA, led by the UFC, is taking on traditional sports, and it’s kicking ass.

Founded in 1993 by Robert Meyrowitz, an earlier developer of pay-per-view content, and Rorion Gracie, who had run a similar organization in Brazil, the UFC was originally a less-polished beast, a kind of professional street-fighting league with few rules or regulations, and surviving on shock and juvenile curiosity. It also wasn’t a very strong business. After being banned in most U.S. states and dropped by most pay-per-view carriers — the sport’s lifeblood — it faced bankruptcy by the end of the decade.

Then in 2001, fight manager Dana White came along with Las Vegas casino executives Frank and Lorenzo Fertitta and bought the UFC for $2 million. The trio enforced new rules, added weight classes and a unified fighting style, and injected a healthy dose of rebranding. The sport soon grew beyond its base in Sin City and, one by one, the states and provinces that outlawed it as “human cock fighting,” began to embrace its surging popularity and money-making potential. Today, according to a report by consulting firm HR&A, UFC events typically generate $23 million in economic output, and $4 million in provincial and federal tax revenues.

Almost single-handedly popularizing the sport has meant big profits for the UFC. But the organization’s profile has also forced it to shoulder a greater share of the responsibility for the nasty reputation that still clings to MMA. That image has kept it out of major markets like New York and Toronto. But this August, after years of lobbying, Ontario finally sanctioned mixed martial arts, which should lead to financial benefits on both sides: the last UFC match in Montreal (where MMA has been legal for some time) brought in about $50 million to the local economy — and 40% of attendees were from Ontario.

“The entire supply chain of the industry represents opportunity: events, training, amateur events, self-defense and, of course, media,” says Loudon Owen, chairman of the Fight Network. “The spinoffs in gaming, apparel and general fitness are also exploding in growth.”

After the U.S., Canada is the UFC’s largest market, accounting for about 15%-20% of what is likely a billion dollars in annual revenue. That’s impressive, given Canada’s population. Owen says he believes the multicultural aspect of MMA, which combines fighting styles from a Brazilian form of jiu-jitsu to taekwondo, appeals to Canada’s diverse culture. “Mixed social views? Great. Mixed politics? Great. It only makes sense that mixed martial arts would be a part of that,” he says. The sport’s violent aspect may also appeal to a country enamoured with hockey. “Toronto is the fifth-largest city in North America,” says Owen, “has a talented international workforce and, of course, Rogers is based in Toronto, which provides a one-stop partner for television broadcast, pay-per-view and post-production. The potential sponsors are here, the money is here, MMA athletes and fans are plentiful.”

Technically, the UFC could have come into Ontario illegally. Some smaller MMA promoters stage fights on First Nations reserves, where the law doesn’t quite reach. Others, in New York, for example, go underground. But that’s anathema to the UFC’s business model. Regulation doesn’t cut into UFC’s profits. On the contrary, the more regulated it is, the safer it proves to be, and the more accessible it becomes. Accessibility and public acceptance were a major factor behind the UFC’s recent hiring of Tom Wright as its director of operations for Canada. When he was hired this spring, Wright’s first goal was getting MMA sanctioned in Ontario. It’s difficult to say how much Wright, a former CFL commissioner, actually influenced the government’s decision, but his hiring showed how precise and sharp an organization the UFC has become.

An industry fixture since 1980, Wright began an 11-year run presiding over Adidas in 1988, then spent four more years running Salomon in Canada. After his three years as CFL commissioner, which ended in 2006, he became the managing director of Level5 Strategic Brand Advisors, during which time he was hired by RIM’s Jim Balsillie to assemble and lead the team that authored the tycoon’s doomed Phoenix Coyotes relocation application. “By hiring someone as serious and well-regarded as Tom Wright, UFC demonstrated it is very committed, not only to Ontario, but more generally to Canada,” says Owen.

“This is a guy who is corporately connected, politically connected, and just understands business well,” says (Showdown) Joe Ferraro, a popular MMA analyst with Sportsnet, who has been a lobbyist for the sport in his own right for the past 12 years. “He’s also a great ambassador — a person to look to in order to convince people that mixed martial arts is not this barbaric sport. It’s a legit sport with classy people behind it.”

Wright will admit that his presence may have changed the dynamic of the discussion, but he’s quick to credit the work done prior to his arrival. If nothing else, Wright’s hiring forced the government to re-evaluate the issue by suddenly putting it back in the media’s sights.

“We’re actually two years late,” Wright says of opening the UFC’s Canadian office this past May. “It’s been that big in Canada for that long. We’re paying attention now. We think we can grow even more. It says something that our North American east coast office is in Toronto.”

It actually says a lot. Aside from the obvious benefits Canada has to offer the UFC, Ontario is also the back door into New York, where MMA remains unsanctioned, despite the efforts of Gov. David Paterson. MMA is still a contentious issue in the state, even among the Democrat-controlled assembly. Language that would have allowed the sport into New York was stripped from Paterson’s recent budget proposal, which means the issue still hasn’t been directly voted on. “It’s too early to assess whether or not Ontario’s decision will materially affect the opinions in Albany,” says Wright, who will work in a minor capacity to help New York’s bid to legalize the sport.

For now, with MMA legalized in Ontario, Wright can focus his attention on business instead of politics — for the most part. Shortly after the Ontario government’s announcement, the Canadian Medical Association called for a ban on MMA, citing the potential health risks to its fighters. It’s issues like this that call for Wright’s level-headedness and professionalism, not to mention the UFC’s impressive body of medical research, including a Johns Hopkins study that argues MMA is no more dangerous than other combat sports. The UFC’s handling of the situation is a sign of how much the organization has grown up, and, so far, it seems the CMA won’t be changing anyone’s mind on the decision to sanction the sport in Ontario.

With that minor crisis behind him, Wright’s next goal is to build the brand through education, more focused PR, and more effective partnerships with Canadian advertisers. As he sees it, the UFC isn’t just the biggest MMA promoter in the country, it’s a sports organization competing against the big dogs: the NHL, the NBA, the NFL. “We’re in it for 50 years, not 50 days,” he says. Wright also sees opportunities to open training facilities, and start a Canadian version of the UFC’s reality series, Ultimate Fighter, which was instrumental in moving MMA into the mainstream when the original series began in 2005. Legalization helps. Since the Ontario announcement, three new potential sponsors have already contacted him. With Ontario co-operating, and B.C. and Quebec already on board, the UFC has access to all the major Canadian markets.

Wright is now poised to advise the Ontario government while it decides how to regulate the sport before the first UFC event sometime next year. “We don’t feel pressure in that regard,” he says. “We don’t want to do this fast, we want to do this right.” Ferraro points to states like Nevada, which have set up independent commissions, as an example for Ontario. If the province follows Nevada’s lead — and there’s no reason to assume it won’t — Ontario’s commission could bring in $4 million to $5 million a year, monitoring not just UFC fights, but grassroots ones too, which would save the government from having to budget for regulation.

Wright has attended hundreds of sporting events, but something happened during the Couture-Toney fight that he’d never seen before. When Couture took Toney down, the crowd started to cheer — not Couture’s name, but “U-F-C!” “When was the last time you went a hockey game, and the crowd chanted ‘N-H-L!’?” he asks.

That’s a new kind of brand loyalty. And those chants are only going to get louder.