Model Business Research Report on the $4.2 Billion Sale of the UFC. That's Billion with a "B."

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The Ultimate Fighting Championship (UFC) was recently sold for the sum of $4.2 billion. The purpose of the sample essay provided by Ultius is to discuss the nature and implications of this sale. Analyzing big business deals can be a tough task and putting that analysis on paper can be even trickier. If you have been tasked with writing a business research report and find yourself struggling to complete it, consider purchasing a sample business research report from Ultius. The time you save will afford you the opportunity to focus on more important goals and the next time you have to write an essay, it'll be easier now that you have a professionally written essay for reference. This essay is organized into four main parts. The first part consists of an overview of what the UFC itself is. Then, the second part considers the actual sale itself. The third part discusses why the UFC was considered to be worth so much money in the eyes of its purchaser. Finally, the essay concludes with a reflection on the implications of the sale for the future of the UFC. 

What is the UFC and why was it sold for $4.2B?

The relationship between the UFC and MMA can be understood as an analogue to the relationship between the sport of American football and the National Football League (NFL). That is, just as the NFL is one of the most important and popular organizations overseeing the play of professional football in the U.S., the UFC is the largest and one of the most important organizations overseeing MMA worldwide. A common misconception, due to a relative lack of familiarity with MMA, is that UFC itself is the name of the actual sport. This is not the case; the UFC, is the name of a professional athletic organization.

MMA as it is known today began in the year 1993. Regarding the history of the sport, The Guardian reports,

To understand the success of the UFC today, you have to go back before . . . the modern era. In the US, MMA grew out of the Brazilian tradition of Vale Tudo, 'anything goes' contests between rival martial arts gyms, each with its own fighting style. The concept was exported to the U.S. by Rorion Gracie, a grandmaster of jiu-jistsu. (paragraph 8)

The UFC is the world’s largest promotion in the sport of Mixed Martial Arts (MMA). The sport involves fighters from multiple martial arts disciplines and backgrounds competing in a one on one fight. Rounds are five minutes in length and there are typically three rounds in a non-title bout, and five rounds for a title bout or main event bout. 

Main disciplines of MMA

• Brazilian Jiu-Jitsu, or BJJ (A submission based martial-art that focuses on joint locks, and chokes. BJJ is the main form of ground-fighting in MMA)

• Wrestling (Almost all forms of wrestling are present in MMA. Getting your opponent to the ground is essential for some fighters not as skilled in striking martial arts.)

• Boxing (While boxing is popular sport on it's own, it's a very important striking aspect of MMA)

• Muay Thai (A form of kickboxing from Thailand that is one of the most used martial-arts in MMA. It often uses knees and elbows)

On occasion fighters from a traditional martial arts (TMA) background, such as karate, tae kwon do, and judo, will also compete in MMA. But these types of martial artists usually focus on a single discipline, and often have less success than their counterparts who study the current form of MMA which encompasses multiple styles.

Weight Classes in the UFC

Men's UFC Weight Classes

• Flyweight (Max 125lbs)
• Bantamweight (Max 135 lbs)
• Featherweight (Max 145 lbs)
• Lightweight (Max 155 lbs)
• Welterweight (Max 170 lbs)
• Middleweight (Max 185 lbs)
• Light-Heavyweight (Max 205 lbs)
• Heavyweight (Max 265 lbs)

Women's UFC Weight Classes

• Atomweight (Max 105 lbs)
• Straw-weight (Max 115lbs)
• Flyweight (Max 125lbs)
• Bantamweight (Max 135 lbs)
• Featherweight (Max 145 lbs)
• Lightweight (Max 155 lbs) 

Nature of the sport of MMA

The very nature of MMA is such that almost any move from any form of martial art or professional fighting is considered acceptable within the context of the match. However, basic rules are in place against the use of moves deemed illegal. According to the rules and regulations of the UFC itself, attacks to the spine or groin, hair pulling, open-handed attacks, or attacks to the eyes or the throat (Ultimate Fighting Championship). Other than this, though, fighters can use both their arms and legs to execute a virtually endless variety of moves against their opponents.

An MMA fight can end in a variety of ways, including knock-outs, submissions, a judge's decision, or the referee can step in and stop the bout if he feels an fighter can no longer intelligently defend themselves (TKO). MMA differs from a sport such as boxing in that there is no standing eight-count, or ten-count if a fighter is knocked out. Some, like sports medicine physician Shelby Karpman of the University of Alberta, believe this makes MMA safer than boxing, limiting brain injury (Alary). In boxing, fighters will often receive a flurry of strikes to the head and be knocked down, only to be given the chance to resume the fight after 8 seconds and incur further injury. On the other hand, it could also be suggested that given the sheer number of different techniques in MMA, that a participant could sustain a multitude of injuries to other parts of the body. Broken arms and legs are no strangers to MMA. 

The early era of the UFC vs the modern era of the UFC

In its early days, MMA was even more dangerous than it is now, due to the fact that formal rules and weight class regulations had not yet been established. It was also during these early days that MMA infamously came to be associated with the term, cage-fighting. While it is true that MMA fighters are surrounded by a "cage," this is meant for the protection of the athletes themselves. The UFC trademarked an octagon shaped cage, and the phrase "inside the octagon." Fighting sports often featured a standard boxing ring before the introduction of a cage. In fights that involved grappling, the fighters would often fall out of the ring between the ropes or get tangled within them requiring a time consuming "reset." The cage was introduced to prevent this and to keep the action flowing. The word, cage-fighting, though, was picked up and marketed by the UFC because of its aura of danger and ruthlessness draws a broader audience. These early events only found a limited release on pay-per-view, and were marketed as "Adults Only"

Today, the term "Cage-Fighting" is viewed as a negative as the sport has grown in popularity. Modern MMA is regulated by the same athletic commissions that regulate all combat sports, such as boxing. The "Unified Rules of MMA" were introduced in 2001 and included new rules for fighter safety such as no kicking a downed opponent, and no strikes to the back of the head. Weight classes were also introduced to keep fights competitive, with each weight class having its own champion. The events are no longer difficult to find and watch. Aside from monthly pay-per-views (Now rated for ages 13 and older), The UFC airs events regularly on FOX, and it's sister channels. Replays of past UFC events are played nightly on FoxSports. Similar to the streaming services oulined in this sample comparative essay on Hulu and Netflix, the UFC even started it's own streaming service called "UFC Fight Pass" where it broadcasts exclusive events and original programming. Fighters are becoming legitimate superstars. Former woman's bantamweight champion Ronda Rousey is currently starring in multiple Hollywood films like the "Fast & The Furious" series. Current men's featherweight champion Connor McGregor recently just became the highest paid fighter in MMA, and his fights sell out arenas in record time. His rematch with Nate Diaz is the most anticipated rematch in UFC history.

The 4.2 Billion Dollar Sale of the UFC

Rumors of a possible UFC sale surfaced months before the sale was final. On the 11th of March 2016, for example, Les Carpenter of the Guardian reported,

Brothers Lorenzo and Frank Fertitta, who own 80% of the UFC, have been rumored to be interested in selling the UFC for some time. The report names WME/IMG, China Media Capital, the Blackstone Group and Dalian Wanda Group as bidders and suggests the price for the UFC could be as high as $4bn. (paragraph 2)

This number is astonishing, if one bears in mind that back in the year 2001, the Ferittas themselves had bought the UFC while it was filing for bankruptcy for a price of a mere $2 million. The estimated selling price was 2,000 times the original purchasing price. Within any kind of business whatsoever, this would be the kind of profit that a businessman may not even dare to let himself dream about.

It would seem that the final selling price for the UFC was a staggering $4.2 billion. According to Muehlhausen's report on this matter, "the UFC has accepted a bid of $4.2 billion to be sold to the ownership group of WME-IMG, the Dalian Wanda Group, The Kraft Group and Tencent Holdings" (Carpenter). This was written on the 20th of June 2016, thereby apparently confirming the truth of the previous rumors discussed above. It would seem that most of the money for the sale has been put forth by the Dalian Wanda Group and Tencent Holdings. It would also seem that China Media Capital and television giant, FOX were bidders for the UFC as well. However, the UFC turned down these offers due to incompatibilities of interest.

Pre-Sale Rumors of UFC's 4.2 Billion Dollar Price Tag

In point of fact, the UFC even released a memo specifically attacking the information presented in the source cited in the preceding paragraph of this essay. At the time reports of the sale surfaced, the UFC not only denied them, the organization was so upset about the rumors of the sale that it hinted at taking legal action against the media companies distributing false information. Tabuena has quoted the UFC as having written the following in an internal memo to its employees:

Such misrepresentation of facts in the media negatively impacts our business, staff members and athletes. We have instructed our attorney to investigate and take all appropriate legal action against the parties publishing and contributing to these false stories. (Carpenter)

On the other hand, though, it is also very much possible that the UFC's posture may be a matter of mere rhetoric. For one thing, as noted on bloodyelbow.com, the UFC has a history of denying factual news stories until the organization is ready to break that news itself (Tabuena). It is also worth noting that the UFC's memo was not in fact in disagreement with the news reports. The news reports indicated that the UFC has only accepted a bid for a sale, and not that the UFC has in fact actually been sold—whereas the UFC's memo says nothing about a bid and only denied the notion that the UFC has been sold. It is thus entirely possible that the UFC was engaged in a kind of linguistic and political game. It makes sense that the organization would not want the general public to know about the sale until it was finalized and the future of the organization has been secured. The most likely interpretation of the conflicting reports is simply that the UFC was trying to throw people off track until the organization formally made the announcement itself. 

Why is the UFC worth so much...and is it really worth 4.2 billion dollars?

With the UFC in fact being sold for $4.2 billion, this raises the question of how the organization is worth so much in the first place. (After all, the new owners would have to believe that they could grow the organization's value to considerably past even that number.) The current boom of the UFC is attributed to the debut season of the reality show "The Ultimate Fighter." The final fight of the show between Stephan Bonnar and Forest Griffin propelled the UFC into the stratosphere, and is still considered one of the greatest fights of all time. Since that initial boom, the UFC was then able to purchase its largest rival MMA promotion Pride Fighting Championships in Japan and start its global expansion. It then purchased its largest rival in the U.S., Strikeforce. Now, the UFC looks to the market of China. China's economy is booming, and so is their desire for recognition of greatness in mainstream sports.

The news reports cited above have indicated that the main bidders for the UFC were also key owners of web portals in China. Moreover, the UFC has already been in independent negotiations to make its fights available to viewers in China: "One part of the strategic agreement is for the Beijing-based company [Sina Sports] to live stream UFC events 'that include the best Chinese fighters as they fight inside the octagon against the best athletes in the world,' as reported by UFC's website" (Andal, paragraph 4). It makes a great deal of sense of the UFC was actually working toward a sale that would strengthen the global expansion of it's brand and MMA in general.

Reflection on the Future of the UFC after Its $4.2 Billion Sale

The reluctance to announce the sale of the UFC for $4.2 billion would seem that the organization itself has been afraid of what the public repercussions may be. In particular, fans of the UFC and MMA may become concerned that the sport of MMA will change its basic character. Suddenly the sport many fans love may no longer be the same with the UFC changing ownership. This concern may be especially pronounced for fans who have come to think of the sport as primarily American in nature and are not keen to the interests of other nations. Even if this concern were only within the minds of the fans themselves, this may still be enough to hurt the overall value of the UFC as a whole.

Objectively speaking, though, there is no substantial reason to feel overly concerned about the fate of MMA or the UFC. For one thing, it is worth remembering that MMA is a relatively young sport in the first place, and that it has plenty of room for growth and evolution. It is also worth considering the fact that over the course of the past 14 years, previous owners of the UFC have grown the value of the organization by a staggering factor of 2,000. This means: one, that such potential for growth in value clearly exists within the UFC as a whole; and two, that the new owners are unlikely to substantially change course from a plan of action that is clearly effective at producing this kind of almost-miraculous value. Dana White, the long time President and public face of the UFC will remain with the company after the sale as reported by the L.A. Times. It was White himself, who is credited for the majority of the UFC's growth. White and the Fertitta brothers have been longtime friends, and it was White who suggested they purchase the UFC in 2001 (Pugmire). In short, whatever changes may occur within the UFC will likely follow the track of the changes that have already occurred within the organization; and with White still running the day to day operations of the UFC, fans probably have little to worry about. 

Conclusion 

In summary, the present essay has consisted of a discussion of the sale of the UFC for a figure of $4.2 billion. After providing an overview of the sport of MMA, the essay delved into the sale itself and its implications. A point that has been made here is that, while the reality of the sale was still uncertain, the UFC itself strongly denied that such an event was in the process of occurring. However, this denial was in all likelihood a media tactic, and the emerging reports concerning the sale were in all likelihood reflective of the truth of the matter. The UFC was likely concerned about what effect this news will have on the fans of MMA, and the athletes on it's roster. Waiting to break the news at the appropriate time and was in organization's own best interests. Given the trajectory of the evolution of the UFC and MMA thus far, though, fans ought not to be too concerned about the future of the UFC or the sport of MMA. 

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Works Cited

Andal, Cristian. "China Sports: UFC Partners with Sina Sports to Broadcast Fights in China." Yibada. 12 Jan. 2016. Web. 29 Jun. 2016. http://en.yibada.com/articles/99994/20160112/china-sports-ufc-partners-sina-broadcast-fights.htm

Carpenter, Les. "UFC Owners Reportedly Considering Deal to Sell Organization for $4bn." Guardian. 11 May 2016. Web. 29 Jun. 2016. https://www.theguardian.com/sport/2016/may/11/ufc-sale-dana-white-fertitta-brothers 

Dann, Jay. "Mixed Martial Arts: 11 Things You Really Need to Know about the World's Fastest Growing Sport." Mirror. 24 Mar. 2014. Web. 29 Jun. 2016. http://www.mirror.co.uk/sport/other-sports/mma/11-things-you-really-need-3277676

The Guardian. "The Fight Game Reloaded: How MMA and UFC Conquered the World." Author, 4 Mar. 2016. Web. 29 Jun. 2016. https://www.theguardian.com/sport/2016/mar/04/the-fight-game-reloaded-how-mma-conquered-world-ufc

Alary, Bryan. "Mixed martial arts bloodier but less dangerous than boxing: Study" University of Alberta,  5 Nov 2015 Web. http://www.eurekalert.org/pub_releases/2015-11/uoa-mma110515.php

Muehlhausen, Steven. "UFC Sale Reportedly Finalized for $4.2 Billion, UFC Denies Sale." Wrestling Inc. 20 Jun. 2016. Web. 29 Jun. 2016. http://www.wrestlinginc.com/wi/news/2016/0620/612862/ufc-sale-reportedly-finalized-for-42-billion/ 

Ultimate Fighting Championship. "Rules and Regulations." The Sport. Zuffa, LLC, n.d. Web. 19 Aug. 2016. http://www.ufc.com/discover/sport/rules-and-regulations

Tabuena, Anton. "UFC Denies Sale on Memo to Employees, Hints at Legal Action against Media." SB Nation. 21 Jun. 2016. Web. http://www.bloodyelbow.com/2016/6/21/11986474/ufc-denies-sale-on-memo-to-employees-hints-at-legal-action-against

Pugmire, Lance "Dana White Pockets Millions From UFC Sale, And Will Continute Running The Company" LA Times. Web. 11 Jul. 2016. http://www.latimes.com/sports/boxing/la-sp-ufc-dana-white-20160711-snap-story.html