World Wrestling Entertainment’s Mixed Martial Arts Potential

I read an article from March 1, 2008 by Yahoo Sports writer Kevin Iole that discussed the struggling International Fight League, Inc. (IFLI.OB), a Mixed Martial Arts [MMA] sports league whose shares have tumbled over the past year from a high of $13.25 to currently $.085 per share. The article went on to discuss the broader market for MMA, led by the dominant player in the sector, the Ultimate Fighting Championship [UFC] and a couple of other smaller players that round out the industry.

UFC is owned by Zuffa, LLC, a company controlled by Frank and Lorenzo Fertitta who are also principals in the now private Station Casinos, Inc., and were recently ranked by Forbes Magazine amongst their 400 wealthiest billionaires. Zuffa has been consolidating the sector by acquiring other small leagues and fighter contracts, and is largely credited for cleaning up and legitimizing MMA as a professional sport.

Iole’s article and interview with International Fight League President, Jay Larkin, gives the impression that while MMA is a very hot topic right now in the sports entertainment sector, it’s not very profitable as evidenced by the IFLI stock chart. According to Larkin, “Of all these organizations, no one is making money but the UFC, and we don’t know how much they’re making,” This bleak take on the industry’s financial picture comes despite an ever growing interest and fan base in MMA.

Another billionaire, Mark Cuban, has become one of the sport’s most vocal advocates, and his HDNet now airs HDNet Fights, a series of MMA contests featuring the International Fight League, Xtreme Fighting League, Maximum Fighting Championship, and Inside MMA- a wrap-up and analysis show focused on the sector. In addition to Cuban’s interest in the sport, Viacom (VIA) also airs regular UFC matchups on its Spike Network, and the IFL has also previously aired on Fox Sports Net (NWS) and its struggling sister netlet, MyNetwork TV (NWS). Even CBS (CBS) is jumping on the MMA bandwagon with scheduled airings of UFC and EliteXC matchups on its co-owned CBS and Showtime networks. Of the deal CBS struck with EliteXC parent ProElite, Inc. back in February, another Yahoo Sports writer, Dan Meltzer, writes “The announcement that CBS will broadcast live Elite XC shows on Saturday nights in prime time is potentially the biggest deal in the history of the sport in North America”.

With all this fan attention to the sport of MMA, significant financial backing from billionaire entertainment moguls and major television network contracts in hand, it’s puzzling as to why more of these companies (reportedly other than UFC) aren’t raking the profits in. It may be that MMA as an industry appears too highly fragmented at this point, and outside of the diehard fan base is very hard to follow. Some of the leagues have used team approaches, while others are more traditional one-on-one contests. At this point, it looks as though the sport needs more than just money and attention, and instead needs a unifying vision for the future. It is quite reminiscent of another sector of the sports entertainment world- professional wrestling, from its early days, and it may be a huge opportunity for the man and the company who changed it from a group of highly fragmented regional players into a worldwide entertainment conglomerate. The man is Vincent K. McMahon, and the company is World Wrestling Entertainment, Inc. (WWE).

WWE was formed in 1982 by McMahon after acquiring his father’s wrestling business and recasting it as a national and then worldwide entertainment company. McMahon used the power of cable television, also then in its infancy, to spread his content offerings far beyond his “region”, a practice that was strictly taboo amongst wresting promoters at the time.

Along the way, he and his wife, WWE CEO Linda McMahon, proved to be master marketers, product licensors, and television negotiators. Today, the company not only dominates the live entertainment, broadcast rights and pay per view categories, it owns lucrative publishing, filmed entertainment, new media and licensing divisions. Where WWE has had trouble is growing outside of its core wrestling entertainment businesses into other sports and media products, such as its failed attempt with the XFL, the professional football league it co-owned with NBC (GE) that played just one season before disbanding in 2001.

MMA could be exactly what WWE needs to expand its empire and use its marketing and licensing machine to its fullest capacity. WWE could also be exactly what MMA needs to vault itself to the next level and maximize profitability. There is no company in the sports entertainment realm that does a better job than WWE in developing stars, creating major live events and monetizing intellectual property. Where WWE stumbled with the XFL was that the football league was all sizzle and no steak, with the on field play extremely lacking, losing fan interest after the hype of the first few games. This is where MMA has the edge as no one could possibly deny the excitement and intensity that the sport of Mixed Martial Arts has to offer, and it has managed to continue to build and grow as a sport despite being underfunded throughout.

WWE’s stock price has been doing much better of late, finally breaking out of the trading range it has seen for much of the past 4 years between $10-15 per share. At $17.60 as of the March 7th close, the stock held up extremely well despite some very negative publicity last summer, and has been climbing since the start of the year in otherwise volatile market conditions. In February 2007, the company appointed a new Chief Operating Officer, Michael Sileck, who had previously served as the company’s CFO since 2005. Sileck is someone with whom I previously did some work in the television broadcasting sector, and is a long time, seasoned financial executive in the media and entertainment space who will no doubt keep WWE in prime operating condition as a company. With Sileck’s focused day-to-day management of the businesses under Vince and Linda McMahon’s vision and marketing talents, WWE is poised for significant growth going forward.

What WWE needs now is a major new product announcement that will transform it from being perennially a wrestling company into a diversified sports entertainment holding company. MMA looks to be exactly what WWE needs right now as the intensity and edginess of the sport are much more closely aligned with the WWE brand than anything else out there. It is a far better strategy than trying to take a more traditional sport such as football and add those elements.

WWE could look to acquire and consolidate existing fledgling MMA leagues such as the International Fight League, align itself directly with the establishment and most dominant player in UFC, or startup its own league using its know-how in live event and talent recruitment. Any way it chooses, it looks like a prime opportunity to grow the company while sticking to its core competencies in edgy, action oriented sports entertainment.

Disclosure: None

Disclaimer: This article reflects the individual views of Mr. Hannan and may not be attributed to any person, company or other entity with whom Mr. Hannan is affiliated.

Comments

[Emma]

I'd be interested to see what the McMahon's could muster up to compete with the UFC. The main reason that the UFC is the single most profitable league/organization in MMA is that it features the best fighters. In MMA, most fans won't pay for less than the best. And, it should be clarified, the biggest obstacle facing the McMahon's is that MMA is not sports entertainment, it's a legitimate sport.

[Roggg]

Early modern MMA was very closely intertwined with professional wrestling. The UFC organization was started as a marketing tool for Gracie Jujitsu, not as a "legitimate" sports league.

There are plenty of confirmed "works" and "worked shoots" (fake fights) in MMA history and the sport has been successfully promoted in a manner very, very similar to pro-wrestling. (See the history of Pancrase) It isn't so different from wrestling that WWE couldn't get a handle on it.

(Not to say that they will do it right if they do try - WWF did a toughman competition in the 90s and it was a disaster)

[Mudblood]

Roggg's comments (above) are valid, but not relevant. The history of how MMA WAS promoted is of no importance. The fact is, the current product has taken obvious efforts to distance itself from pro wrestling. The author makes some good points, but the fact still remains that if a company that made it's name presenting worked fights were to get involved in the legitimate sports world, that stigma would be nearly impossible to shake. All the marketing savvy and financial backing in the world can't compensate for a jaded and cynical audience.

[Roggg]

Pride (the offspring of professional wrestler Antonio Inoki) had to deal with the stigma of pro-wrestling from the first shows, and went on to greater success (despite having a couple worked fights in the early shows!) Is it really irrelevant?

If WWE were to associate itself with MMA -- as it has attempted to do in the past (in 2006 WWE held meetings with DreamStage) -- the WWE brand *might* be a detriment. It's tough to say for sure; sentiments like that are common in the MMA-fan world and from the MMA practitioner's perspective, but does the entire potential audience for MMA, or an MMA-WWE hybrid, agree? The US audience for pro-wrestling was once quadruple what it is today. Whether or not the effort would be accepted by serious sports fans, it could still be profitable and popular.

Shane McMahon has discussed it in interviews before. It seems a good possibility that WWE will head in this direction in the future, one way or another.

[KimboSlice]

Yes the spectre of 'worked' fights looms out there if the WWE org gets involved with a MMA promotion. Most serious MMA fans turn their noses up at wrestling entertainment, but both audiences are not mutually exclusive. See evidence of Brock Lesnar's recent fight in the UFC. The 3rd largest pay per view audience in UFC history. One problem that all start up leagues have is getting decent talent or developing new talent in such a way that UFC has done with its Ultimate Fighter Show. Can WWE produce legit fighters as a product and sell them to a generally cynical audience?

[J.P. Hannan]

What amazing feedback... thanks to everyone.

I should have been clearer that I in no way do I think WWE should attach the WWE brand to MMA. As most mentioned above, it would clearly confuse people as to the legitimacy of the sport. It doesn't mean they can't keep MMA as a separate league and still use their corporate prowess and managerial skills to their fullest advantage there, though.

I have read that Shane McMahon is a big proponent of the sport, but that his mother Linda McMahon has said she thinks the sport will die out as a fad. Those comments were from over a year ago though, and one has to wonder if there has been any change of opinion based on the success the sport has seen since that time.

There is another great article on Yahoo Sports today about competition for talent in MMA if anyone is interested-

sports.yahoo.com/mma/news?slug=dm-freeag...

Thanks for all of the comments and emails.

[imonit]

I just don't see this happening at all. Even being tangentially associated with the WWE would irreparably tarnish the brand of any MMA league. Besides, the ability to market stars, which you list as WWE's greatest advantage in this arena, may not be of much help. UFC already does a tremendously good job of marketing individual fighters. They actually do so well at it, that it might be harmful to the sport. Just look at the latest article you quote. The only way you can argue Ortiz being important to sign is because he is marketable, as a fighter he hasn't been particularly relevant lately and is certainly on the decline. TUF does an incredible job of bringing in viewers and building fighter's brands, does the WWE really have that much to add?

If anything, MMA should move away from marketing superstars, and more towards marketing the sport as a whole to potentially increase and stabilize demand. Look at what happened to the NBA. Marketing superstars works great when you have people like Magic Johnson and Michael Jordan, but not so great when you have people like Tim Duncan or teams like the Pistons.

[J.P. Hannan]

Excellent points imonit. Thanks for the comment.