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How the UFC became the Netflix of combat

The company has evolved from a generic fight promotion to a savvy, digital media empire

This past weekend the Ultimate Fighting Championship celebrated its 200th pay-per-view fight card, a massive event that put more UFC champions into the cage in one night than ever before. And this morning the UFC — and it's parent company, Zuffa — reaped the rewards of its success, selling itself to the talent group WME/IMG for $4 billion. That’s a whopping increase from the $2 million the company sold for back in 2001, when it was banned from broadcast television and on the verge of bankruptcy. It's a capstone to one of the most successful and unlikely turnaround stories in the last two decades of American business.

At some level, the UFC’s success is simple. Like any sports media company, it had to produce good content and build its fanbase. Its formula was to pit the world’s best martial artists against each other in an eight-sided cage. But another key element to the UFC’s success is technological: its evolution from a generic fight promoter into one of the most agile and forward thinking digital media companies in the world of sports.

Take this weekend’s UFC 200, the biggest card of fights the company has ever put on. The evening kicked off at 6:30pm to subscribers who pay $9.99 for UFC Fight Pass, the company’s streaming service. At 8pm it switched over to Fox Sports 1, available to anyone and supported by ads. For the main card at 10pm things shifted to a pay-per-view model, which costs $49.99 for the last five fights. There isn’t another major sports league on Earth that spreads a single night of action across online streaming, basic cable, broadcast television, and pay-per-view. “They have done a very good job of slicing and dicing the media rights they have,” says Brandon Ross, a media analyst with BTIG Research. “The NFL are the masters of squeezing the most juice out of their content, but the UFC is doing it with a more modern, ground-up approach.”

The streaming platform the UFC has built also represents it most interesting opportunity for growth. The core business of live sporting events is limited by time, space, and talent. But that’s much less true in the digital realm, where the UFC is rapidly becoming the Netflix of combat sports. That sounds grandiose, but hear me out: it’s streaming platform, launched in December of 2013, costs $10 a month, and is available around the world. To give customers something to watch, the UFC acquired a massive library of archival content, basically the history of modern MMA from 1990 to the present, similar to the way Netflix packed its library with older movies and TV series.

The UFC has become the best streaming platform for all combat sports

Now the UFC has begun operating as the technology platform and distribution channel for smaller promotions across the globe. Just as outlets like Netflix can offer a streaming platform to comedians and indie directors without a good way to reach consumers, the UFC is now the aggregator for MMA promotions that aren’t big enough to build their own streaming service.

You could also draw a parallel to Major League Baseball's tech division, which was early to streaming for its own teams before branching out to act as the platform for sports like golf and hockey, not to mention HBO. Over the last few months the UFC has streamed events put on by small promotions in Japan, Brazil, England, and Russia. And it’s even started showing sports tangential to MMA, such as kickboxing matches and Brazilian jiu jitsu tournaments. "You have a lot of leagues out there, especially on a worldwide basis, that are simply not big enough to have their own direct to consumer platform," says Ross. "The UFC is the only one out there with the scale to pull it off. And it builds the UFC’s power further."

Unlike traditional television, which is supported by advertising and must aim to reach the greatest number of viewers possible, the UFC can adopt a strategy of "narrow-casting" that has been touted by executives at Netflix, Amazon, and YouTube. A jiu jitsu tournament might not bring in a huge viewing audience, but if it captures a few new subscribers, and provides some extra value to current ones, then it makes sense as a business venture for the UFC.

Here’s an example. Twenty-four hours before the start of any fight card, the UFC works to build excitement with a weigh-in. The fighters strip down, flex for the camera, and line up to face each other for the last time before they enter the cage. The audience cheers lustily, and, as often as not, this moment of mutual intimidation descends into a scuffle, a little taste of violence to further whet the appetite of the crowd.

The UFC's online business can scale faster than its fight business

There was still a weigh-in for this weekend’s fights, but that’s not what I watched. At 4pm I tuned into a livestream of Cage Warriors 77, a small British MMA promotion. The event is being put on at the Camden Centre in London, a venue with a listed capacity of 900 people. This is the kind of small local show that doesn’t grab a big audience or pay its fighters much. But for the devoted fight fan like me, it’s an absolute treat, and a good reason to keep paying $9.99 a month. For most people around the globe, it’s also the only option save going to the arena itself.

The company, like Netflix, always insists on global rights and maintains full control of its original content. "Whereas most sports rely on their traditional TV broadcaster to create the content for the most part, we’ve always been the kind of company that produces our own content, and as a result, we have, in all of our traditional TV deals, been able to hold back rights that have given the ability to take advantage of these outlets," says Marshall Zelanik, the UFC’s chief content officer. Unlike the NFL or NBA, which have signed long term licensing deals with outlets like ESPN and give broadcast networks the responsibility for creating the content which appears on TV, the UFC owns and produces all of its events.

There is a lot to love about Fight Pass as a fan of combat sports. But the UFC’s relative dominance is also a bit worrying. "We want to really document the history of this sport, and we’re in a good position to do it, because it is so young, we are the leader in it," says Marshall Zelaznik, the UFC’s executive vice president and chief content officer. The UFC spent most of its life as a company defining itself in opposition to competing promotions. Having all but vanquished them, says Zelaznik, "we want to now become the archivist."

But as eagle-eyed fans have pointed out, the UFC often edits its video in a way that makes its favored fighters look better. Take a controversial win by Demetrious Johnson, the UFC’s current flyweight champion. In the original broadcast the judges’ decision to award him the victory elicited boos, whistles, and few cheers from the crowd, a fact the announcer even comments on, saying, "obviously the crowd not liking the decision."

But in the version of the bout currently on Fight Pass, the boos have been replaced with canned cheers. It creates an odd dissonance, when the announcer notes the crowd is unhappy, but the audio plays only gentle applause.

In another instance, the UFC cut out footage of Michael Bisping, the current Middleweight Champion, spitting on the opponent’s cornermen after winning the fight. The company is of course under no legal obligation to preserve its fight videos exactly as they were originally broadcast. But if it hopes to be the archivist for the history of an entire sport, it should try to preserve the record as faithfully as possible.

Mistakes are erased and fighters are effaced

Another fighter appears to have been buried in the company’s archive. UFC Fight Pass allows users to search for videos by name. You can find almost any athlete, even obscure combatants who fought for the promotion just once or twice. And yet there is no fighter page for Tito Ortiz, who for almost a decade was one of the promotion's most popular champions, but has since developed an antagonistic relationship with the company.

Of course, similar complaints have been made about the way the WWE — professional wrestling’s biggest promotion — selectively edits its archives. You could argue that's okay because the WWE scripts its fights, while the action inside the UFC cage is supposed to be unfettered competition, but the two companies have plenty in common. "The UFC learned how to build stars and those individuals really helped to catalyze and mainstream the business," says Jason Cruz, an analyst with MMA Payout, a website focused on the business of the sport. "It became as much about celebrity and entertainment as sports and combat."

The UFC figured out that real combat can take the same breaks for narrative or character development that professional wrestling can. And with the Ultimate Fighter series, where a group of aspiring amateurs compete for a UFC contract while living in a Real World-style house together, the company moved into outright reality television. "That was really key to the turnaround," says Cruz.

The fights are real, the drama isn't

Reality television has also been key to the UFC’s international success. It has franchised out its Ultimate Fighter series, doing seasons based in Brazil, Latin America, and the UK, with more far-flung locales planned for the future.

Demographically speaking, the UFC is in a better spot than many major American sports. It’s audience is far younger, more international, and increasingly female. "They moved into a void that boxing left behind," says Cruz. Its biggest liability at this point, might be its own success. The company has made it through two FTC investigations without charges, but is facing an anti-trust lawsuit from a large group of fighters, including many former UFC athletes, alleging that it sought to limit their pay and ability to organize, abusing its power as a monopolist in the market. "When you think about mixed martial arts, you think about the UFC," says Ross. "It’s like Kleenex for combat sports."

The UFC's early failures positioned it for success

The UFC’s success, at least in part, grew out of the company's failures before it was acquired by Zuffa. "I think someone once said that a successful strategy is always created looking backwards," says Zelaznik. When Zuffa took over the UFC it was banned from television in 36 states. That freed the company up to experiment with emerging web platforms. It started streaming on Facebook five years ago, well before most people thought of the social network as a place for live video. And it moved aggressively to stream fights on the web in any territory where it didn’t have a broadcast TV partner.

"That wasn’t by accident, that really was Dana and Lorenzo, [UFC president and CEO], carrying a bit of a chip on our shoulder in the early days, because it was an uphill fight to get traditional media companies to care," says Zelaznik. "The aggressive sort of irreverent nature of what digital media is, in that it isn’t traditional, in that you can make your way there, that was an outlet for our ownership and they knew it."

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