The UFC (UFC Holdings, LLC) has fulfilled a previous financial prophecy by generating over $600 million in revenue last year. Lorenzo Fertitta predicted in 2015 that the company would be making a record high $600 million. This revenue was verified by credit ratings issued last month (including prior Zuffa 2016 acquisition by Endeavor, Kohlberg Kravis Roberts & Co and Silver Lake Partners.)
As reported by Bloody Elbow, the Moody’s Investor Services and Global Rating Report anticipate the UFC will increase their 1st lien term loan by $435 million, increasing it from $1.442 billion to $1.877 billion. This is to repay an existing 2nd lien term loan and any extra transactional expenses.
However, revenue seems to have decreased. Last year, Moody reported a generated revenue of approximately $700 million in 2017. That is approximately $100 million more than these newly released 2018 figures and can largely be attributed to the superstardom of fighters like Conor McGregor and Ronda Rousey in 2017. The Floyd Mayweather vs Conor McGregor fight saw a significant spike in revenue. Other than that, greater efficiency with marketing, event production and strong contractual revenue from entities such as Reebok aided strong revenue growth in 2017.
As we look to the future, S&P Global said in their report “UFC estimates that about 70% of its total 2019 pro forma revenue will be contractually fixed, which compares with less than 40% previously. This will mitigate the company’s business risks by replacing the volatile revenue from its event-driven PPV business model with a fixed-fee revenue stream.”
The media partnership with ESPN will likely benefit the stability and growth of UFC revenue. This, combined with the PPV business model will likely help the UFC secure a fixed loan add on, despite the change of streaming structure which increases the cost of fights for those who don’t subscribe to ESPN+. This poses a threat to casual fans and UFC revenue which could decrease PPV numbers for fans who don’t want to join ESPN+.
Despite the concern for PPV numbers and the significant debt, the UFC is looking at the brightest and most financially secure future since its inception.
This article first appeared on BJPENN.COM on 5/15/2019.