DirecTV’s UFC Six-Fight Package: How Can Zuffa Capitalize To Build Loyalty? Dan Kuhl October 11, 2012 News Zuffa LLC, parent company of UFC and Strikeforce, usually does a great job of advertising events. Even before the new deal with the Fox Networks started blasting UFC ads all over television and the internet, Zuffa was getting the word out through other internet and various cable and satellite outlets, including the channel guides. However, in a rough economy, the free events on Fox, FX and Fuel TV may be nice, but the best events are still on pay-per-view, which gets expensive for fans. Plenty of other promotions have free events on various cable networks. Fans can watch Strikeforce, Bellator, Titan FC, and many other promotions for “free,” as long as they purchase the right cable package. In fact, Invicta FC, the brand new, super-stacked, all-female promotion has streamed its first three events live and free on the internet. But, the UFC is still the stingy one, and, to the savvy businessperson, rightfully so. Do the math. A UFC pay-per-view (PPV) event earns between $44.95 and $54.95 per viewing, depending on whether it’s in standard definition (SD) or high definition (HD), respectively. UFC 152 had a PPV buyrate of approximately 450,000 purchases. Using a straight fifty percent average of $49.95, that means $22,477,500 generated by pay-per-view alone for one of multiple large events in one year. The 2012 average buyrate has been roughly 428,500. None of those figures include merchandise royalties, gate revenue, and the dozens of other revenue streams that the UFC generates for Zuffa. In 2012, at $49.95 per view, the ten UFC events to date have generated approximately $214 million in revenue to be shared between Zuffa and the various cable and satellite outlets. Of course, the sponsorship money generated by Zuffa greatly outweighs any of the money chipped off for the media outlets, so, needless to say, Zuffa is making a killing. But, what is this doing for the consumer? If a big fan of UFC events wants to see every single fight, in addition to cable and/or internet bills, he or she is looking at a PPV bill of about $585 for SD or $714 for HD, just to watch all of the pay-per-view events in 2012. In 2011, there were 16 events, equating to approximately $800 to watch all of the PPV events. For an average $50,000 to $75,000 per year in household income, that’s around one percent, or more, of annual pre-tax income. When taxes are taken into consideration, that’s approaching 1.5% to 2% of income just to watch a sporting event. Any NFL, MLB or NBA fan with basic channels can watch their sports for free. Of course, there may be some premium to watch the non-MMA sports if the end-user wishes to only watch one team’s games, but the UFC still costs a lot to watch live on PPV. Then comes DirecTV. In September of this year, DirecTV offered a six-fight package to pre-order UFC events for the remainder of the year. For the SD package, the price was $225, a discount of approximately 16.5 percent, and the HD package was $275, a discount closer to 17 percent. Depending on the dedication of the viewer, this may or may not seem like a good deal. For the SD package, the consumer saves $44.70. With six fights, that’s about a $7.45 savings per view. For the HD package, the savings is about $54.70, or $9.12 per view. Again, the savings are all in the eye of the beholder, but, in reality, that’s barely more than a six-pack of Bud Light in savings, which may help some demographics, but not all. Unemployment is still sitting at 7.8 percent. Zuffa is slated to put on three less PPV shows in 2012 as it did in 2011, but the wallets are still a lot lighter. High unemployment rates, lower compensation, and more diluted cards are not helping Zuffa at all. DirecTV did a lot of fans a favor by offering the UFC package, but it also helped Zuffa a lot. Economic uncertainty is at an all-time high, and Zuffa probably came out on top by DirecTV’s offering of the discount. However, is it enough? In 2012, based on current statistics, UFC PPV events will produce approximately $58 million less than in 2011, without the package discount. When all of the revenues associated with events are taken into consideration, this is a big hit to the organization. As with any viable business, recurring revenues are the name of the game. DirecTV’s package definitely generated an up-front revenue stream that will bolster Zuffa’s numbers going into the remainder of the year and has given some fans a reprieve from the high cost of PPV events. However, are there more viable options? The late-quarter 2012 package is a great deal, in perspective. For fans that were willing to purchase the package up-front, they saved forty-five to fifty-five bucks for the year—the equivalent of one free PPV—but the selection was closed. The DirecTV package only offered a pre-purchase of UFC events 152 through 157, to get fans through the end of the year and into a small bit of 2013. But, what happens going forward? Any smart executive at Zuffa needs to understand how to play this game right. Big fight injuries are at an all-time high, and any smart fan knows that not every event is worth fifty bucks for a PPV. However, if it was possible to pre-purchase a package, over any media outlet, that would provide a year-long guarantee of “buy five, get one free,” the promotion may be onto something. Zuffa needs to understand that PPV sporting events are still a luxury. If fans could purchase six events at the “buy five, get one free,” on a “use it or lose it” basis, this could generate more definitive revenues for the company and could give fans the choice of the best cards. Overall, this could help Zuffa make its operations more efficient. UFC 151 debacles are bound to happen, but this could give Zuffa an opportunity to do fans a favor and build even more loyalty. By providing better service and becoming more customer-focused, UFC could use PPV discounts to boost the sport into a more mainstream, justifiable expense. Revenues are down and more fans are looking to other outlets for MMA viewing. Packages are great, but they need to be used wisely. Zuffa should realistically consider revising its promotion to be less sponsor-oriented, and more end-user oriented. In this day and age, that means a more affordable product that delivers. DirecTV’s six-fight package is a great idea, and Zuffa should capitalize on it to guarantee future revenues through a more affordable product that will tap into more fans. [divider]Photo: UFC Six-Pack Advertisment (Directv.com) Chris Childress Yeh, I want another 6-pack….bring it back!!! The current one isn’t even over. lol…still, I want it all the time!!!