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Thursday, July 13, 2006
Mixed Martial Arts--- UFC's Pay-Per-View Buys Explode in 2006
by Ivan Trembow
Originally Published on MMAWeekly
While the television deal with Spike TV helped to dramatically increase the UFC's national exposure in 2005, it has been the huge increase in pay-per-view buys in 2006 that has had the biggest impact on the bottom line of Zuffa, the UFC's parent company.
The UFC's PPV sales growth has been far more drastic in 2006 than it was in 2005, which is all the more impressive given the fact that all-but-one of the UFC's PPV events in 2006 have carried the higher price tag of $39.95.
Before we get into the PPV buyrate explosion of 2006, taking a look at some of the UFC's previous PPV records will help to put the newer figures into perspective. The most successful PPV of the UFC's pre-Zuffa days was UFC 5, which took place in April 1995 and was headlined by Royce Gracie vs. Ken Shamrock. That event drew approximately 260,000 PPV buys, which is very impressive given the much smaller number of American homes that had PPV-buying capabilities in 1995.
The most successful PPV of the UFC's pre-Spike TV era, before The Ultimate Fighter started airing on national television in early 2005, was UFC 40, which took place in November 2002 and was headlined by Tito Ortiz vs. Ken Shamrock. That event drew approximately 150,000 PPV buys, and while there were a few other UFC events that cracked the 100,000 barrier, Zuffa's high mark of 150,000 was not broken until after The Ultimate Fighter debuted on Spike TV.
After the huge national television exposure of being on Spike TV every week, and an entire season's worth of television to hype the fact that coaches Randy Couture and Chuck Liddell would be fighting on PPV after the season aired, there was a huge jump in PPV sales for UFC 52, which took place in April 2005 and was headlined by Randy Couture vs. Chuck Liddell. UFC 52 was also the first PPV event to which Zuffa attached a suggested retail price of $34.95; previous events had been sold for $29.95 each.
Zuffa kept the PPV buyrate information for UFC 52 under wraps for a while, but the Wrestling Observer, which has been one of the most credible publications for many years when it comes to PPV buys, later reported that UFC 52 drew approximately 280,000 PPV buys, which beat the all-time UFC record that was set ten years earlier by UFC 5. UFC 52's new record of 280,000 buys was not approached by any of the UFC's other PPV events in 2005.
Starting at the beginning of 2006, the UFC's PPV sales have increased to levels that would have been unthinkable if they had been suggested just eight months ago. The Wrestling Observer reported on the PPV industry's initial buyrate estimates for each of the UFC's PPV events in 2006, and these initial buyrate estimates from the PPV industry are always lower than the final numbers due to the fact that the final numbers take into account "late buys."
Late buys is a term that refers to encore PPV buys of an event's replays throughout the month that it debuted, as well as PPV buys from smaller cable systems throughout the United States, and these late buys typically take several months to be fully reported in the inefficient cable industry.
The PPV industry's initial buyrate estimates, as published by the Wrestling Observer, combined with MMAWeekly's own sources in the PPV industry, who are more familiar with the updated numbers that have "late buys" taken into account, paint a picture of a company that has seen its PPV buyrates skyrocket in just over one year.
The numbers published in this article are fairly conservative figures, and the final PPV buyrates for any given event could very well be slightly higher than the figures published in this article. Also, these figures only take into account domestic PPV buys, which is where the vast majority of the UFC's PPV buys originate.
The explosion in the UFC's PPV sales began to hit full stride with the highly-anticipated third fight between Chuck Liddell and Randy Couture at UFC 57 in February of this year. UFC 57 was also the first PPV event to which Zuffa attached a suggested retail price of $39.95; the events of the previous ten months had been sold for $34.95 each.
The PPV industry's initial buyrate estimate for UFC 57 was 350,000 buys, and MMAWeekly has learned that the final buyrate will be in the range of 400,000 to 410,000 buys. With a price of $39.95, this means that the gross PPV revenue was between $15.98 million and $16.38 million. Taken on its own, this shattered the previous record that was set by the second fight between Liddell and Couture, but this was just the beginning of the UFC's 2006 buyrate explosion.
The expectation within the PPV industry after UFC 57 was that the UFC's PPV buyrates would go back to their previous (2005) levels. After all, UFC 52 in 2005 (headlined by Liddell vs. Couture II) was also a record-breaking mega-fight with Spike TV's national exposure behind it, but the UFC record that was set by UFC 52 was not broken later in 2005, and UFC 52 did not lead to a trend of UFC PPVs consistently breaking the 200,000 barrier in 2005.
With UFC 58 scheduled to take place a mere four weeks after UFC 57, and with a non-marquee main event of Rich Franklin vs. David Loiseau, the belief was that UFC 58 might draw in the range of 200,000 buys at the absolute most, at a price of $34.95. This would have still been considered a success, as most WWE pay-per-views on a month-to-month basis draw less than 200,000 buys in the United States (a large percentage of WWE's PPV buys come from international sales).
However, that is not what happened. In a strong testament to the PPV drawing power of Rich Franklin as the UFC's "next big star," and to the fact that PPV viewers generally liked what they got with UFC 57, the initial buyrate estimate for UFC 58 came in at 275,000 buys, blowing away all expectations. MMAWeekly has subsequently learned that with the late buys included, the final buyrate will be in the range of 290,000 to 300,000 buys, which actually surpasses the mark that was set by Liddell vs. Couture II. With a price of $34.95, the gross PPV revenue was between $10.14 million and $10.49 million.
Of course, it didn't approach Liddell vs. Couture III's PPV buyrate, but it did hold up very well and it was, at that point, the #2 most-purchased PPV in UFC history.
At that point, all bets were off, and nobody in the PPV industry knew quite what was going to happen next (the same could probably be said for those within Zuffa). Starting with UFC 59 on April 15th, the suggested retail price of all UFC PPV events was $39.95. The de facto main event of UFC 59, the fight that was given the vast majority of the pre-event hype, and the fight that was likely responsible for much of the PPV buyrate was Tito Ortiz vs. Forrest Griffin.
The UFC Heavyweight Title match-up between Andrei Arlovski and Tim Sylvia, though it ended up taking place as the last fight on the broadcast, was initially treated as such an afterthought that Arlovski's opponent wasn't even named in the very first ads for UFC 59 that Zuffa ran on Spike TV, even though Sylvia had already signed to fight Arlovski. Though Sylvia's name was added to the commercials shortly thereafter, and Sylvia ended up surprising just about everyone by knocking out Arlovski, it was clear going into the event that UFC 59 was going to sink or swim at the PPV box office based on the strength of Tito Ortiz vs. Forrest Griffin.
It was expected within the PPV industry that UFC 59 would surpass the mark set by UFC 58, but would be very unlikely to match the all-time UFC record that was set by Liddell vs. Couture III at UFC 57.
What ended up happening is that UFC 59 not only matched UFC 57's record-breaking numbers, but it actually surpassed those numbers. The PPV industry's initial buyrate estimate was 400,000 buys, and MMAWeekly has learned that the final buyrate will be in the range of 415,000 to 435,000 buys (the range is slightly wider for UFC 59 because it just took place less than three months ago). UFC 59 had become the most-purchased PPV in UFC history, and with a price of $39.95, its gross PPV revenue was between $16.58 million and $17.38 million.
In a way, UFC 59's phenomenal PPV buyrate did more to change how the PPV industry thought of the UFC than the buyrate of UFC 57 two months earlier. In addition to drawing a slightly higher buyrate than the incredibly successful UFC 57, UFC 59 also showed that the UFC could produce mega-hit PPVs on a regular basis. The UFC had proven itself as a huge PPV draw beyond a shadow of a doubt and was no longer a "one mega-hit event per year" proposition. The UFC had just drawn a huge PPV buyrate in February, a very good PPV buyrate in March, and another huge PPV buyrate in April.
Just over a month later, the headline match of Matt Hughes vs. Royce Gracie at UFC 60 was hailed by Zuffa as the event that would break all of the UFC's records in PPV buyrates, total attendance, and live gate revenue. While it fell short of breaking the latter two records, the PPV business that was generated by UFC 60 is truly astounding. The PPV industry's initial buyrate estimate for UFC 60 is a whopping 600,000 buys, and with a price of $39.95, that leads to gross PPV revenue of $23.97 million.
Given that the previous UFC record, set by UFC 59, was less than 450,000 buys (which is, again, an extraordinary buyrate in and of itself), the jump up to 600,000 buys is all the more astonishing. That figure is just the initial buyrate estimate, and the final buyrate figure is always higher than the initial estimate. It's far too early for final buyrate figures, given the fact that the event just took place six weeks ago. In addition, it's too early for any initial buyrate estimates for UFC 61, given the fact that the event just took place last weekend.
Adding up all of the aforementioned figures, the gross PPV revenue generated by the first four UFC PPVs of 2006 was between $66.67 million and $68.22 million, not counting the late buys for UFC 60.
Though they promote two different products, the single company with which the UFC most directly competes is WWE, and you can easily verify that by watching The Ultimate Fighter 3. In less than six months, the UFC has gone from not being able to touch any of WWE's big-event numbers to actually beating WrestleMania in domestic PPV sales for the first time in the UFC's history.
WrestleMania, which has been the biggest American pro wrestling event in every single year since 1985, drew approximately 560,000 domestic PPV buys this year. (WWE, as a publicly traded company, is forced to publicly release its PPV numbers.) If somebody told Vince McMahon six months ago that a UFC event was going to out-draw WrestleMania at the domestic PPV box office this year, it's likely that he would have laughed at such a ridiculous notion, and the same can be said for most people within the PPV industry.
The Royal Rumble, which is WWE's second- or third-biggest PPV event every year (behind only WrestleMania and occasionally SummerSlam), drew approximately 340,000 domestic PPV buys this past January. A year ago, even the UFC's biggest PPV events (including UFC 52 with Liddell vs. Couture II) couldn't come close to the domestic PPV sales of the Royal Rumble. Now, in 2006, three of the UFC's first four PPV events of the year easily surpassed the domestic PPV buys of the Royal Rumble, and the only event that didn't (UFC 58 on March 4th) came fairly close.
For the PPV events on a month-to-month basis, it's not even remotely close anymore. WWE's No Way Out PPV in February drew approximately 140,000 domestic PPV buys, while WWE's Backlash PPV in April drew approximately 130,000 PPV buys. Those PPV buyrates would have been considered excellent for the UFC just a year or two ago, but the UFC's PPV business would now have to completely collapse in order for WWE to come close to the UFC on a month-to-month basis.
While there are numerous reasons for the drastic increase in the UFC's PPV sales, one factor that should not be underestimated is the promotion from the pre-PPV countdown specials on Spike TV. It was only at the beginning of this year that these specials started to air in the week before every single UFC PPV event. The pre-UFC countdown specials aired on Spike TV for some, but not all, of the UFC's PPV events in the second half of 2005.
In the case of the UFC 60 Countdown Special in particular, it was a 60-minute special that aired multiple times and drew overall ratings of 0.9, 1.1, and 0.7. The total viewership for all of the airings was 3.23 million viewers, and you'll find very few things that do a better job of enticing viewers to buy pay-per-views than the pre-UFC countdown specials. The high number of viewers who are watching the countdown shows on Spike TV, coupled with the level of PPV hype that is put into those shows, has likely been one of the important factors in helping to boost the UFC's PPV buyrates.
Ultimately, when it comes to the business side of the UFC, 2005 will be remembered as the year in which the UFC got on national television and saw its PPV buyrates begin to climb. However, it is 2006 that has been the year in which the UFC's PPV sales have truly exploded.