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Will the WEC succeed on Pay-Per-View?

Will the WEC succeed on Pay-Per-View?
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posted by xtravote

Last week, in an interview with a Sacremento radio station, Dana White made an interesting announcement regarding World Extreme Cagefighting (WEC). The Mike Brown vs. Urijah Faber rematch, one of the biggest fights available within the promotion?s ranks right now, will likely headline the first WEC pay-per-view event in June. The likely price of such an event would be $39.95.

That the WEC is planning to break ground on its pay-per-view (PPV) efforts is no surprise to anyone. Given UFC?s enormous financial success on PPV, it seems natural that Zuffa leverage its know-how to begin drawing PPV revenue from its ?other? brand. It has been consistently rumored that WEC would produce pay-per-view events in 2009, and this fight is as compelling a headliner as they are going to make in the near future.

What is interesting in this case is the decision to proceed despite what looks to be an uphill battle. The promotion?s current broadcast home, Versus, has seen ratings for WEC actually drop in recent events. The peak event, WEC 34: Faber vs. Pulver, did a 1.4 rating, which equates to 1.54 million households. However, the subsequent five live broadcast events all failed to break 1 million viewers, with the last event, WEC 39, drawing just over 531,000.

Quality has not been a problem for WEC events, so where are the viewers? It?s a difficult question, and one that likely has several answers. For one, the WEC has lagged the larger UFC in building a proprietary brand image. UFC started with huge headstart: most casual fans remembered the SEG-era shows featuring Royce Gracie defeating men twice his size. They also inherited established stars carried over from the previous owner, like Ken Shamrock, Tito Ortiz, and Randy Couture. Prior to the Zuffa buyout, World Extreme Cagefighting was largely a local promotion. California-based hardcore MMA fans knew and loved the product, but it had little presence with casual fans outside of the state, and none of their marquis fighters enjoyed a national ?star? presence. Lower-weight fighters, the focus of WEC?s promotional efforts, simply haven?t caught on with an American audience the way they have in Japan and with Latin American boxing fans. After failing to draw significant interest, WEC has sent its remaining middleweight and welterweight rosters to the UFC, effectively transforming it into a focused lower-weight MMA product with only one divisional overlap (lightweight).

Viewership is not the only headwind that Zuffa faces. The economic downturn is at the forefront of everyone?s mind and conditions continue to worsen. In a time when MMA fans? cable bills are already saddled with a UFC pay-per-view event every month, the prospect of another forty-dollar jab is unlikely to be met with excitement. With the unemployment rate climbing and middle-class families getting serious about saving, pay-per-views are becoming luxury items that many families may snip out of their budgets.

The third obstacle is the ever-increasing presence of mixed-martial arts on free or premium television. Once upon a time, MMA fans ordered every UFC or Pride pay-per-view simply because it was all they could get. Times have changed, and April will bring two new dogs into the fight, with Strikeforce debuting on Showtime and Bellator Fighting Championships debuting on ESPN Deportes. Add on a multitude of free events on HDNet and the web, and $10-20 a month will soon buy MMA fans 4-5 live shows, a considerably better value than a PPV.

Struggling viewership, a worsening economy, and the ever-increasing presence of low-cost alternatives to pay-per-view is a powerful three punch combo that Zuffa will grapple with for its upstart WEC pay-per-view franchise. In a poll of over 200 hardcore MMA fans, 54% said they never planned on ordering WEC PPV events, while 36% indicated that they would only purchase events with extremely stacked cards. If hardcore fans will be reluctant to foot the bill, mainstream fans that largely aren?t aware of the WEC are unlikely to show up at all. Unlike its big brother, WEC has not begun its international expansion to help drive numbers.

So what is Zuffa thinking by escorting WEC into a pay-per-view market that will be very difficult to crack for the foreseeable future? For one, they have likely built as much brand recognition and loyalty as they are going to with the free Versus broadcasts. The events do not seem to be attracting incremental viewers, so why wait around? But even at low buy rates, the pay-per-views will attract similar or better economics than what they are generating on Versus. With advertising spending in America declining, it is unlikely to improve much on cable television.

More importantly, Zuffa likely views those three major headwinds as temporary. With the growth of the sport in North America, it seems inevitable that the fastest growing product will be lower-weight MMA. The fights are fast paced, the talent pool is as deep as an ocean, and the product appeals to a market that hasn?t fully embraced MMA yet: non-Brazil Latin America. In terms of the economy, as awful as things look now, there will be a day when the cycle will reverse, and Americans will have money to spend. Finally, Zuffa has never been one to adapt their strategy to the current competitive landscape, wisely choosing to instead build their own product and fanbase.

The one thing we haven?t discussed yet is the individual fighters, and it?s not an oversight. Quite simply, WEC has not been able to build stars as quickly as it may have hoped when it began its efforts. The promotion?s top star, Urijah Faber, ranks leagues behind the PPV-carrying UFC stars such as Chuck Liddell and Brock Lesnar in popularity. Miguel Torres has built some popularity, particularly among Hispanic fans, but he will also have difficulty carrying a pay-per-view audience for the near future. It?s through no fault of their own; fighters like Faber, Torres, Mike Brown, and Jose Aldo have been putting on dazzling performances since Zuffa has taken charge.

The long-term outlook for WEC on pay-per-view is another question, and one that hinges largely on the adoption of lower-weight MMA in the American market. If casual fans begin to appreciate what smaller fighters bring to the table, the way foreign and hardcore fans have, one could argue that WEC is holding quite a poker hand. They are virtually uncontested in the North American market for featherweight and bantamweight MMA, hold the most popular fighters, and can get nearly anyone they want.

What can WEC do to improve its chances on pay-per-view television? For one, the price point is simply too high for Americans who erroneously view smaller fighters as a lesser option, or minor league, to their larger counterparts. Debuting the promotion at $29.95 for the initial pay-per-view events would have at least afforded them a ?value? argument, at $39.95 it?s a tough sale. Popularity growth and economic recovery down the road will enable price increases, but to debut at such a high price point may prove a miscalculation.

Another option for Zuffa is to help jump-start the popularity of its stars by carrying some over from the UFC. Jens Pulver, one of the bigger draws for Versus? free broadcasts, was familiar to fans from his UFC title days and coaching stint on The Ultimate Fighter. Recently, a move to the WEC featherweight class was announced for former UFC lightweight Manny Gamburyan, who ironically fought for Jens? team on The Ultimate Fighter. The transfer of fighters from the UFC?s lightweight division, which is vastly overstocked with talent, to the WEC?s much sparser lightweight division, seems like an obvious move to both ?even the ranks? and inject fan awareness into WEC.

Initially, it appears that the headwinds faced by the WEC in its move to pay-per-view are just too strong for it to have anywhere near the success of UFC. But is this really a good yardstick? Probably not, as gate revenue and sponsorship alone is likely enough to support much of the lower cost structure of WEC. Even Zuffa is not immune to the hurdles of MMA promotion and cannot instantly replicate UFC?s success.

Most likely, Zuffa will not be overly worried about the initial buy rates. The WEC is a growth engine, and essentially a first-mover claim on the potential that is lower-weight MMA. If Zuffa is correct, and MMA continues its impressive growth pattern, it only makes sense to stake their claim on the premium product in featherweight and bantamweight MMA, and begin charging for it as such. Whether it becomes a UFC-level cash machine seems doubtful at the present, and almost entirely swings on the fans? acceptance of smaller fighters and MMA growth in the Latin American market. To deny its long-term potential would be foolish, and Zuffa will be ready with a pay-per-view product should those headwinds reverse to tailwinds.

At first glance, WEC?s migration to pay-per-view seems premature, poorly timed, and overly aggressive. But it must be noted that this isn?t a move designed to turn a growing business into a cash cow overnight. It is one to establish a market position and premium product before the demand arrives, and saturate MMA fans? budget before competitors can build their own PPV franchises. It?s too early to tell if that demand will ever materialize, but with the investment Zuffa has put in the WEC, it only makes sense to maximize its future profit potential. Thinking two steps ahead has traditionally paid off for them, and what may be mistaken for overzealousness here is really just another sound tactical plan.

Source: Mixed martial arts - Articles - Zimbio

Will the WEC succeed on Pay-Per-View?

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