In a matter of weeks, the first payments of UFC’s $100 million debt will begin to be repaid. It has yet to be seen whether taking on this debt is a new beginning or a sign of more difficult times.
Back in the summer of 2016, UFC was acquired in a monumental $4.2 billion buy out by sports marketing company, WME-IMG. Using money generated through a number of private investors, WME was able to take control of UFC, in the process losing Co-owners Lorenzo and Frank Fertitta. Even with the agreed conditions from its creditors the deal was well received by the majority of fans, and was seen as the beginning of a new era for the sport. WME have a good history of buying and growing its clients.
All was not as it seemed though. Soon after the buy-out, a number of cost-cutting measures were implemented. It started with small things; reports of free merchandise for employees being cut and a lack of UFC branded pens, at this time it all seemed trivial. However, this was followed by changes to the broadcasting team, noticeably the loss of Mike Goldberg. At this point, questions were being asked about the necessity of all these cost saving measures.
Finally and perhaps most personally, the Canadian offices of UFC were closed down and with it came the loss of the President of Canadian Operations, Tom Wright. Wright had been at the company for nearly seven years and had done more than most to spread UFC around the world. Although not at UFC for the longest time, Wright had taken them through arguably their most important and prosperous period. After the departure of Wright many fans became seriously concerned by these cost cutting measures.
Back in April UFC took out the loan of $100 million, which was used to fund conditions placed in the buyout of 2016, for hitting financial targets. This coupled with the cost cutting measures have left many wondering what is happening with UFC. Importantly this is not the first time UFC have taken out a large and aggressive loan for similar reasons. We should take solace with UFC’s ability to achieve record revenues and pay back their debtors; encouragingly the loan was taken because they are hitting their financial targets.
Worryingly though, UFC is at something of an impasse with its operations. While its ability to generate large audiences continues and seems to be on the up, the audience it does receive is that of older working class men. This causes issues with UFC’s advertisers, who contribute monumentally to UFC’s revenue.
Companies like a varied and diverse base of people to advertise to. If UFC can only offer one demographic, advertisers quickly run out of products to sell to them. Coupling this with the potential loss of their biggest star, Conor McGregor, to boxing and on going issues with fights being withdrawn (Nunes vs Shevchenko UFC 213) it is potentially a difficult period for UFC.
For now, it is difficult to predict how things will go. UFC is a global, multi-billion dollar company, whose true worth is difficult to asses. I’m confident with the backing that UFC has by WME it can handle pretty much any problem thrown at it. What remains to be seen is how they will overcome this potentially difficult situation.
