Flash Entertainment: Zuffa’s necessary partner

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The big story coming out of the UFC this week had nothing to do with Monday Night’s Ultimate Fight Night, but rather with the news that a 10% stake in its parent company Zuffa had been sold to Flash Entertainment. The previous reluctance of White and the Fertittas to go public or sell part of the organization to outsiders made the sale something of a surprise, but its a move that they had to make to continue their international expansion.

Its often overlooked by fight fans just how unusual and ambitious Zuffa really is. Zuffa has been working to establish the Ultimate Fighting Championships as the global league of elite mixed martial arts. That in itself is pretty radical but what is unique is their belief that they can do this while remaining a private, commercial company. Whereas FIFA or the NFL are controlled by its members and run as an association, the UFC is owned by individuals and run like a business. Given its success over the past five years, this makes it incredibly attractive to outside investors. Nobody can buy a stake in boxing or golf, but if they could get Zuffa to sell they would effectively own a stake in elite mixed martial arts.

Sadly for such investors, White and the Ferrittas were unwilling to sell despite the early success the IFL had in going public and both CBS and ESPN making becoming part-owners a condition of entering into a television deal with Zuffa. Indeed, White has said that they rejected a $1.2billion deal for the outright purchase of the company. The rationale for their desire to remain independent was simple – they believed that the people seeking to become owners or part-owners could do nothing with the company that they couldn’t do by themselves. Having succeeded against the odds, the two brothers and their friend were loathed to compromise the integrity of their company.

In all likelyhood, the journey towards Flash Entertainment becoming part-owners started in 2008 with the decision of Lorenzo Fertitta to step down from Station Casinos and become the CEO of Zuffa. As CEO his focus has been to mastermind the sports’ international expansion by getting UFC television programming and live events into more countries. Part of that strategy was to follow the template set by their successful move into the British market with UFC 99 in Germany and the forthcoming UFC 110 in Australia seeking to ape the success of shows such as UFC 70 in appealing not just to hardcore MMA enthusiasts but also grabbing the attention of local boxing and pro-wrestling fans.

However expansion into Asia proved a different and far more difficult proposition. The UFC lacked both the local knowledge to navigate the often Byzantine media landscape and the connections to gain access to the key decision makers. As even the biggest multinationals know it can take years to establish even the smallest foothold in key Asian markets. These were years that the UFC didn’t want to waste, especially given the very real risk that in countries such as China that local MMA promotions would use the time to entrench themselves as being synonymous with MMA. And if anyone wants to be reminded about how difficult it would be for the UFC to succeed in a market with a long-established local rival just look at the fiasco that was the purchase of Pride.

The importance of Asia to sports broadcasting cannot be overstated. The success of soccer clubs such as Manchester United and Real Madrid in attracting a loyal fanbase in the Far East has alerted other sports to the money they could make if they succeeded in marketing their sports to the increasingly wealthy and westernized Asian middle class. Due to their size and rapid economic expansion, China and India are the most coveted markets with western sports looking enviously at the success of events such as the Beijing Olympics and cricket’s Indian Premier League.

In Flash Entertainment, Zuffa believes that they have found a partner that will help them break into the Asian market. With the lines between politics and commerce often blurred in Asia, the wholly owned subsidiary of the Abu Dhabi Executive Affairs Authority is well placed to help organize events in the Middle East and broker deals in China, India and South East Asia. As for the Middle East, the UFC now has the inside track to holding an event in Abu Dhabi and should be able to host events in neighboring emirates such as Dubai and Qatar. Also, Zuffa should now have preferential access to capital from the world’s largest sovereign wealth fund should the need ever arise.

While some have chosen to focus on the Crown Prince’s interest in mixed martial arts in reality for Abu Dhabi the UFC is just the latest in a string of prestige projects that are part of the wider efforts of Abu Dhabi (and its smaller neighbor Dubai) to lessen its economic dependence on oil production by setting itself up as a cosmopolitan trading and tourist centre. These prestige projects have ranged from developing the infrastructure of the city to buying into high-profile western companies. Flash Entertainment’s role in all of this is to organise high profile cultural and sporting events in Abu Dhabi with the twin goals of impressing the worldwide media and ensuring that the city’s wealthy residents are entertained. They’ve successfully hosted a range of events including concerts by artists such as Beyonce, Aerosmith and Coldplay and the recent Tennis ‘World Championships’. They were also a major player in the successful organization of the first-ever Abu Dhabi F1 Grand Prix last year and own a stake in Ferrari.

In selling part of Zuffa to Flash Entertainment, the Fertittas and White have made a leap of faith that few expected them to make but one that should ultimately leave them in a stronger position. They were right to avoid becoming entangled in a messy corporate marriage with a network but to become successful in the Asian market they are going to need the same kind of political influence that Lorenzo Fertitta was able to wield on the UFC’s behalf in Nevada and other commissions in 2001 and 2002. Bringing Flash Entertainment into Zuffa gives them the connections and the knowledge they need to start making headway into the Asian market. When the UFC makes its debut in Abu Dhabi (currently hoped to be on April 10th with UFC 112) it will begin the next stage in their international expansion. Should Dana White and the Fertittas succeed in breaking into the Asian market it will be in part thanks to a major assist from their new, necessary partner Flash Entertainment.

A Comics Nexus original, Will Cooling has written about comics since 2004 despite the best efforts of the industry to kill his love of the medium. He now spends much of his time over at Inside Fights where he gets to see muscle-bound men beat each up without retcons and summer crossovers.