- MMA BECOMES MAJOR MONEY MAKER FOR CASINOS

August 30, 2005
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by Arnold Knightly
BY ARNOLD KNIGHTLY
BUSINESS PRESS

Light heavyweight James Irvin caught Terry Martin with a flying knee to the head nine seconds into the second round, knocking out Martin in the opening bout of UFC 54: Boiling Point. Martin was given oxygen and removed from the octagon ring by stretcher.

Four-time champion Randy Couture out-wrestled former-NCAA Wrestling Champion Mike Van Arsdale, who tapped out on a modified choke hold in the third round.

In the main event, light heavyweight champion Chuck “The Iceman” Liddell knocked challenger Jeremy Horn to the canvas five times before Horn had enough midway through the fourth round.

All the while, a crowd of 13,520 roared its approval of the Ultimate Fighting Championship event at the MGM Grand Garden Arena.

“Three years ago, people would have laughed at you if you would have said they’d have 10,000 people,” said Keith Kizer, chief deputy attorney general and legal counsel to the Nevada State Athletic Commission. “Three years ago if you said they’d do more than $2 million, they would have said ‘You’re crazy.’ They’ve just brought new blood into it and really made it viable.”

The UFC is owned by Station Casinos bosses Lorenzo Fertitta and Frank Fertitta III, along with longtime family friend Dana White, via the league’s parent company, Zuffa LLC. They bought the fledgling UFC brand in January 2001 for an undisclosed amount and have quickly established it as the premier mixed martial arts company in the United States.

The Fertittas and White, who serves as UFC president, are tight-lipped about the organization’s financial operations. Instead, White often talks in generalities about the organization.

“A lot of our financial stuff is private,” he said. “We don’t tell anybody what we do on pay-per-view numbers. Let’s just say our business has increased 20 times since we bought it.”

The UFC is growing with the nationwide expansion of extreme sports. It consistently draws paying crowds of more than 10,000 whenever it comes to Las Vegas. The day before UFC 54, about 2,000 fans showed up at the MGM Grand Garden Arena for a weigh-in and autograph session.

“It really brings in a good crowd,” noted Richard Sturm, president of entertainment and sports for MGM Mirage. “It is a bit younger (crowd) than boxing, but they go to the restaurants and in the casino. That’s the kind of crowd we’re looking for.”

While the combatants were going through the pre-fight ritual of physicals and contract signings, champions from three weight classes who were not fighting were in the lobby signing autographs for hundreds of fans. The crowd roared its approval as its favorite fighters were called to the scale, an event overseen by the Nevada State Athletic Commission.

With two vendor stands open, Zuffa LLC experienced brisk sales of T-shirts and other memorabilia during the weigh-in. Prices ranged from $10 for a set of UFC wristbands to $100 for an autographed poster promoting UFC 54. Most T-shirts sold for $25. DVDs were also moving.

“The appeal is that it is really raw,” said Stacey Cerniuk, a UFC fan from Vancouver, British Columbia, who attended the weigh-in. “It’s two guys going at it with all these different styles and you see who comes out on top. But the other thing that is cool is that these guys will beat the hell out of each other or try, and at the end of it they will stand up and hug each other.”

CONGRESSIONAL TROUBLES

It is that rawness that Zuffa sells throughout its promotion of the UFC: “The Action Is So Real, It Can Only Be the Ultimate Fighting Championship,” reads one slogan. “See How It Feels When It’s Real,” reads another.

Nothing has helped the growth of the UFC more than its reality show, “The Ultimate Fighter,” which appears on the testosterone-laden cable channel Spike TV. In its second season, the show brings the nuance of mixed martial arts to 2 million homes every week.

“The show’s put us over the top,” said UFC veteran Couture. “And the biggest thing is educating them on what we do and who we are as athletes. That’s huge. It breaks down a lot of misconceptions people have about us mixed martial artists that fight in a cage.”

Couture, who first won the heavyweight championship at UFC 13 in May 1997, remembers pre-Zuffa events that drew 1,000 fans and “most of them were probably comped.”

While the Fertitta’s provided the initial financial backing of Zuffa, it is White, Lorenzo’s classmate at Las Vegas’ Bishop Gorman High School, who oversees the day-to-day operations, including event planning, fight card selection, finances, legal operations, broadcast production and marketing. He can also be seen as the host on “The Ultimate Fighter.” The Fertitta brothers declined to be interviewed for this story despite repeated requests from the Business Press.

“When we first bought the company, the only thing we ended up buying was the name,” White said. “This guy had stripped it down and sold everything away. The company was in a lot of trouble. Basically, they were on their last show.”

“This guy” was New York-based pay-per-view entrepreneur Robert Meyrowitz. In the early 1990s, Meyrowitz, along with some mixed martial arts practitioners and fans, came up with an idea born of capitalism, a passion for sport and a desire for a spectacle that would draw people to their televisions.

The initial plan was for a pay-per-view event that would put together different styles of fighting into a single-day tournament to see who would be left standing.

“Two men enter, one man leaves,” was the initial promotion line. No weight classes, only two rules — no biting and no eye-gouging — throw the thing on pay-per-view and see what happens. The first incarnation of The Ultimate Fighting Championship was born.

“Used to be in the old days, it was see what happens when you put a boxer with a wrestler,” said Cerniuk, the British Columbia fan, “or let’s see what happens when you put a sumo wrestler with a kick boxer, these weird combinations.”

Initially, the UFC started gathering large crowds and pay-per-view buys. A lack of time limits and no boxing-style rounds caused some matches to drag on for as long as 36 minutes, an exhausting marathon that often ended with two combatants rolling on the ground and no clear winner. Meantime, the head-to-head tourneys often dragged on for a full day, leading to injuries and the need for replacement fighters to compete in championship bouts.

Time also became a problem for pay-per-view companies. The UFC would go over its time-allotment limits, leaving home audiences without a resolution.

While Meyrowitz, and UFC’s parent company, the New York-based Sephamore Entertainment Group, were busy trying to fine tune the spectacle, another problem arose. In the mid-1990’s, Sen. John McCain, R-Ariz. was given a tape of an early UFC match. An avid boxing fan, McCain was appalled by the violence and brutality of what he saw. Working with Sen. Ben Nighthorse-Campbell, R-Colo., McCain sent a letter to the governors of every state encouraging a ban of the sport. The UFC had sought out states with weak or nonexistent athletic commissions.

With the urging of McCain and his supporters, athletic commissions in 40 states banned contests of extreme fighting, putting the UFC on the run.

NO SHIRT, NO SHOES

McCain was not finished. Using his position as chairman of the Senate Commerce Committee, which oversees cable TV, McCain delivered a near-death blow to the UFC in 1997. Time Warner and TCI Cablevision, two of the biggest cable distributors at that time, stopped carrying the UFC pay-per-views, fearing a regulatory backlash.

“The marketing ended up coming back and biting them,” White said. “They ended up having to sell everything away to keep the thing floating.”

The UFC began holding events in states where athletic commissions had little clout. Between July 1996 and May 1999, six UFC events were held in Alabama. Georgia, Mississippi and Louisiana also hosted UFC events. It also took to the road, trying such countries as Brazil, Puerto Rico, and Japan.

“They were running from athletic commissions,” White said. “Senator John McCain actually went after them. Instead of working with him, (Meyrowitz) ran from him. But if it wasn’t for McCain it wouldn’t be the sport that it is today.”

By late 2000, the UFC was on its death bed. Meyrowitz started looking for investors to help breathe some life into the dying organization. In January 2001, Zuffa bought its few remaining assets.

The first challenge for the new owners was to establish the UFC and mixed martial arts as a legitimate sport. The best way White felt to do that was to get licensed in two of the toughest regulatory environments for contact fighting — Nevada and New Jersey. White felt it was crucial to the integrity and growth of mixed martial arts and the UFC to have athletic commission oversight.

“Our main goal, obviously, was to get sanctioned in Nevada,” White said.

Zuffa set about developing a set of rules that would permit licensing of the UFC. It expanded the number of weight classes, adopted formal mixed martial arts rules and redesigned the Octagon for greater safety, replacing wooden poles and chain-link fencing with padded posts and plastic-coated fencing.

UFC combatants use minimal equipment. They enter the Octagon wearing four- to six-ounce gloves, mouthpieces, and groin protectors and shorts. No shirt, no shoes. The gloves are designed to protect the hands, not to improve the striking surface. Gloves were not mandatory until 1997.

Zuffa also set the length of most matches at three five-minute rounds. Championship bouts stretch to five five-minute rounds.

“They realized that the product here is the athlete,” Couture said. “It’s not about the brand. You promote the athletes and the brand is going to grow. I think that was the major shift in thinking from the old organization to the new organization.”

Liddell, the light heavyweight champion, added: “It’s more of a sport. They run it like a business. They run it like it should be.”

Liddell is a UFC veteran, having made his debut in May 1998. Formally managed by White before Zuffa, Liddell recalls the old UFC management was less concerned about the fighters and worked to fix matches.

“When I first came to the UFC, those guys walked into my room and told me if I wanted to come back, I’d better stand up,” Liddell said. “They didn’t know I was a striker, and they put me in against a striker and they wanted me to lose. They’d do stuff like that on a regular basis like that where they were trying (to affect the outcome). That’s not right. You shouldn’t come into a corner a tell a man how to fight a fight.”

A PERFECT FIT

“When we first bought the company, there was the stigma attached to the UFC,” White said. “At that time we were out trying to talk to venues. Venues weren’t even interested in having the UFC there. MGM, Mandalay Bay, a few out in Atlantic City. We had to go in and get people interested in hosting UFC events.”

After a couple of fights in New Jersey, the UFC came to Las Vegas in Sept. 2001, a little more than two weeks after the terrorist attacks on the northeastern United States.

The match was held at Mandalay Bay, but the turnout was low. The second one, a couple of months later, did worse. But soon fortunes turned, with the fights doing $1 million gates as word spread about the reconfigured league.

In April, the UFC had its best gate in Nevada to date, $2.5 million, and its second-best paid attendance, more than 12,000 at the MGM Grand. Ticket prices at the most recent bout ranged from $50 to $400. Fourteen of the UFC’s last 25 events have been held in Las Vegas since the Zuffa purchase.

The Fertitta brothers do not cross-promote their Station Casinos properties at UFC matches because they do not want Station Casinos shareholders to believe they are using corporate dollars to promote the league, said a source familiar with the league’s operations.

“They’re responsible for it,” said UFC fan Adlai Cleveland of the Fertittas and White. “The changes they made, all the new rules, the sponsors coming forth, that is all because of the new ownership.”

Adlai, along with his brother Cody and girlfriend Kristina Nyland were the first in the autograph line the day of the Aug. 19 public weigh-in. The three had traveled from Detroit for the event, the fourth time Adlai had been to Las Vegas for the UFC. A fan since 1997, he has noticed a big change since Zuffa.

“They get a lot more publicity now,” he said. “The TV show has really helped. There are a lot more sponsors. There is a lot more money being brought in.”

While the boxing shows “The Contender” and “The Next Great Champion” have disappeared into the annals of network television oblivion, “The Ultimate Fighter” has found a home on Spike TV. After what was viewed as a successful first season, the UFC and Spike TV signed a new two-year agreement that will bring a heightened visibility to the world of mixed martial arts. Spike TV will host six live events over the next two seasons. The first was held Aug. 6 at the Cox Pavilion. They will also play 26 one-hour specials featuring the vast library of past contests. This is all in addition to the reality television show.

“It was a perfect fit for a sport on the rise with a network on the rise,” said David Schwarz, spokesman for Spike TV. “It’s exciting to be part of something that is going to be bigger.”

“I believe in two or three years I’ll be making million-dollar fights,” said season one Ultimate Fighter winner Diego Sanchez. ” Its going to be the top sport in the world.”

aknightly@lvpress.com

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