Money in cage. Ins and outs of MMA business
The world have lost interest in boxing and turned to the bloodier MMA. Why are billionaires investing in this sport?
Vladimir Putin attended 9 MMA tournaments and not a single boxing match since 2007. He did not go even to a fight between famous Alexander Povetkin and Vladimir Klitchko. MMA is not only more popular with top officials in Russia but is also more extensively covered by media. There are more tournaments and popular professional fighters in MMA, too. People who watch MMA are active Internet users and are younger and more active.
In 2016, Ramzan Kadyrov and Fedor Emelianenko could not understand each other in regard to MMA, or to children fights, more specifically; Ziyavudin Magomedov, an entrepreneur from the Forbs list, bought the Fight Nights Organization; a tournament with $5-million budget was held in St. Petersburg. All the large MMA organizations in Russia have ties to North Caucasus investors: Magamedov is an Avar; ASV and Akhmat are sponsored by the Akhmad Kadyrov Regional Public Fund; Ingush entrepreneur Alikhan Yandiev became an M-1 co-owner.
Summa Group of Companies owner Ziyavudin Magomedov sat in the 1st raw of a City of Kaspiysk arena watching a Fight Nights’s tournament on his 48th birthday on September 25, 2016. The winner’s post-fight speech is a show in and of itself: anything can be said. For example, Rasul Mirzaev sent mysterious regards to some woman called Lyudmila Nikolaevna; Akhmed Aliev thanked his opponent for having put him on a drip a year before. However, all the speeches had a common topic that evening: the winner in every fight took a microphone to thank Magomedov.
In 2015, it was reported the billionaire purchased 51% of Fight Nights stock. Magomedov invested tens of millions of US dollars, according to Fight Nights General Producer Kamil Gadzhiev. He decided to develop his own promotion company instead of investing in the UFC, a successful US project.
The UFC was purchased by Station Casino Chain owners the Fertitta brothers for $2 million in 2001. In July of 2016, it was sold to the WME-IMG Company for $4 billion. The Company provides agent services to world famous sport and show business celebrities. It resulted in, for example, WME-IMG’s client Maria Sharapova becoming a UFC minority stockholder.
Putin attended Fedor Emelianenko’s fights in 2007, 2011, and 2012. Photo by: Ilya Vorobiev / TASS News Agency
Fight Nights held a tournament in St Petersburg during the St Petersburg International Economic Forum on June 17. It announced the tournament had a $5 million budget. Fedor Emelianenko participated in the event. Vladimir Putin attended this athlete’s fights 3 times. The Organization sent the President an invitation this time around, too. However, but he did not show up. “He had tight schedule, apparently. But the President called Fedor on the phone and wished him and all the other fighters good luck”, Kamil Gadzhiev said with sorrow.
Fight Nights made about $500,000 selling tickets for the tournament Emelianenko participated in, according to Gadzhiev. More than 7 thousand people came to watch it. M-1 President Vadim Finkelstein doubted the Organization made that much money, though. He pointed out that they did not make such profit even back in 2011, when he organized Emelianenko’s fight in the chock-full Olimpiyskiy Stadium. It is worth mentioning that M-1 is the oldest Russian MMA promotion company. Fight Nights and М-1 do not even pretend they have not got a conflict going on. Both held tournaments during the Forum, competing for its visitors. Moreover, Express Group Engineering Company, a former major Fight Nights’ sponsor, left it for M-1. “(They) are trying to undercut, cater to our partner, and drag them to their tournament,” Gadzhiev said. “I would be disappointed if one of my sponsors left me for Fight Nights. This would mean I had done something wrong. But it is a sponsor’s choice; they decide who to give money to,” Finkelstein answered. It is worth mentioning he lost to Fight Nights in a ‘fight’ for Emelianenko due to financial reasons in 2016.
Vadim Finkelstein ran a large business in MMA in mid-2000s. M-1, his company, held tournaments in various countries, including the USA. Donald Trump was a Finkelstein’s partner when the latter held 2 tournaments Emelianenko participated in. “Trump said that MMA is the sport of the future. He turned out to be right. Trump liked the fights. He is quite a cheerful person”, Finkelstein recalled.
Fedor Emelianenko was Finkelstein’s most valuable “asset”. Their partnership began in 2003. The fighter was already an MMA star. However, he did not get as much money as he should have due to the way his manager at the time worked. For example, he would only get $5 000 out of a $50 000 bonus. Emelianenko’s paydays grew from $30 thousand to $115 thousand per fight once he began working with Finkelstein. Later he would start getting more than $1 million per fight.
Emelianenko almost lost to Brazilian fighter Maldonado, nearly getting knocked out. However, he withstood and emerged victorious. Photo by: Kristina Kormilitsina / Kommersant
Emelianenko and UFC entered into negotiation in 2007; it continues to this day and was affected by neither Emelianenko being defeated 3 times in a raw nor his 3-year-long career break. In 2010, the UFC owners flew to the Curacao Island; Emelianenko was on vacation there at the time. They made a very generous offer to the fighter, according to UFC President Dana White. “A guy in a suit was with Fedor and Vadim. His mother was either a mayor or governor of some region. He sat there all slouchy. Not bothering to answer, he began laughing once he heard our offer,” White told journalists.
Valentina Matvienko’s son Sergey Matvienko was an M-1 co-owner. He financed promotion of the promotion company among the western audience. Fedor Emelianenko was not offered to sign up for the UFC during the conversation with White, according to Vadim Finkelstein. “They offered purchasing M-1. But Serezha (short of “Serge”, Translator’s note) Matvienko decided not to sell it,” he said. The meeting on the Curacao Island took place in 2010. Matvienko stopped being an M-1 co-owner as soon as the next year. Him leaving coincided with Fedor Emelianenko retiring from sports and Valentina Matvienko’s term as the St. Petersburg Governor ending.
“Sergey simply lost interest (in it). This is a business one needs to keep investing into, after all. I myself keep doing it. However, I spent 19 years of my life on MMA and will never leave it,” Finkelstein said. Finkelstein is going to build M-1 Arena, a multi-purpose sports complex, in St Petersburg in 2017. It is going to be fitted with retractable tribunes allowing to accommodate from 1 00 to 3 000 spectators.
“The project costs about 1 billion rubles. I expect Road to M-1 tournaments to be held once every 2 weeks. These will be Olympic-style tournaments. Young fighters will fight in them. We will sign a contract with the winner,” Finkelstein said.
An M-1 fighter can earn anywhere from $2 thousand to $50 thousand per fight, according to Finkelstein. It all depends on how famous they are. “I would gladly pay more, pay as much as UFC does. But we do not make such a profit as the UFC does yet. However, our fighters are just as good as theirs. People who managed to become high-level fighters in Russia are among the strongest UFC fighters as well,” Finkelstein said.
Fighter in papakha
28 y. o. Khabib Nurmagomedov became the first Russian UFC champion on November 12, 2016. Nurmagomedov is from the Sildi village, Tsumadinsky District, Republic of Dagestan. He had everything to become one: he was an official contender; had the best fighting skills in the world among fighters weighing up to 70 kg; 1 million Instagram subscribers. Nurmagomedov is the only Russian fighter who not only had no need for an interpreter in the USA but cracked jokes and called his opponents ‘paper knights’ and ‘chickens’. In other words, he acted along the lines of the UFC traditions.
Nurmagomedov began wearing a Dagestani papakha to weigh-ins and matches in the USA. He sacrificed a portion of his income to be able to do that. There was a time when the UFC would allow fighters to wear branded clothing to official events. Nurmagomedov could have made about a $1 000 on advertising. All he had to do is to wear a baseball cap with a logo instead of his papakha to his UFC debut.
Nurmagomedov is undefeatable in the cage. He won all his 23 fights, 7 of which he fought in the UFC. However, he is vulnerable outside of it: he did not fight for 3 years due to a knee injury and later had to pull out from 3 fights in a raw due to a broken rib.
17 thousand people attend a UFC tournament in London. Photo by: AFP / East News
Nurmagomedov is now aspiring to take the title currently held by American Eddie Alvarez. Nurmagomedov earned the status of an official championship belt contender after returning to fighting in the cage. He signed a contract for a fight with Alvarez the UFC sent him. The fight was to be held on November 12. He then waited for Alvarez to sign his contract. However, Alvarez never did it.
It is worth mentioning that Nurmagomedov has a big fan base, though it mostly consists of his homies. About 3 000 fans attended Nurmagomedov’s autograph signing session held in a Moscow sports apparel shop in end-April of 2016. The session resulted in total destruction of the shop. When Alvarez signed a contract for a match with another fighter, the crowd went on a mission to destroy Alvarez and UFC President Dana White’s Instagram accounts with cursing on broken English and Russian, hash tag #khabibtime, and emojis. However, one can very well understand why Eddie Alvarez preferred to fight with Conor McGregor rather than with Khabib Nurmagomedov.
Pay per view
Irishman Conor McGregor is the highest paid UFC fighter. He has an excellent record: 8 wins in 9 fights. He won his champion 66-kg belt by knocking out his opponent after 13 seconds. However, the UFC and Conor’s opponents value him for his ability to promote his fights, allowing both sides to make more money.
A promoting company’s revenue is in direct correlation with TV. While in Russia all the UFC tournaments are broadcasted on the Match TV Channel for free, in the Northern America one can only watch the main events if they pay. For example, a PPV ticket for the tournament featuring the fight between Alvarez and McGregor cost $30. Having McGregor on posters meant more than $1.5-million-revenue from selling PPV tickets. McGregor is noisy, scandalous, has a somewhat movie-like fighting style, and other celebrities like Cristiano Ronaldo and Maintain from the Game of Thrones series show up at his training sessions every now and then. And there is the fact that he is Irish, of course. There are about 40 million people of Irish heritage in the USA. These people simply have more money than Nurmagomedov’s fans. Furthermore, it was the first time an MMA tournament was held in New York; the local Irish community is one of the most powerful ethnical groups there.
Conor can make more than $10 million per fight (this includes TV revenue) since he gets a percentage of the money made off of sold PPV tickets. $3 million out of the $10 is the money he gets for simply walking into the cage. In the fall of 2016, McGregor made a public promise to earn $40 million that year. This would move him up to the 20th place from the 85th in the Forbes' List of World's Highest-Paid Athletes. That is probably why Conor ignored an offer to fight at a Fight Nights show in Russia for $2 million half a year ago. It was pretty much the first attempt by a Russian promotion company to organize a fight featuring a popular foreign MMA star in Russia. At the same time, in Russia UFC fighters can make money even without fighting. For example, Brazilian Fabricio Werdum who defeated Fedor Emelianenko in 2010 is a partner with the Akhmat Club. He supports the club even in conflict situations. He visits the Chechen Republic every now and then. A fighter of his level can make anywhere from $30 000 a month on such a contract. Werdum and other MMA stars were guests of honor at 2 Legenda fight shows in 2013. In 2016, the tournaments organizer Ruslan Suleymanov was arrested on allegation of having stolen 800 million rubles.
TV is everywhere
As of today, Russian promotion companies cannot live off of revenue from the PPV business model. “Russian TV pays the UFC for the right to broadcast tournaments while offering us to pay for an outside broadcast station,” M-1 President Vadim Finkelstein said.
Fight Nights gave the right to broadcast its events in others parts of the world away to the UFC Fight Pass platform. It charges $10 a month for access to a video archive and live broadcasts worldwide. “I would not say Fight Pass signs any landmark contracts. However, firstly, this is a stable source of income. Secondly, it grants us access to the US and Canadian audience, giving us an opportunity to introduce them to the Fight Nights Global. This is important since we are going to hold a tournament in the USA. The price for PPV tickets for our tournaments broadcasted through the Fight Pass changes sometimes. It depends on the scale of an event. Let’s put it this way: we make more money on a fight between Emelianenko and Maldonado than on one between Mokhnatkin and Maldonado,” Kamil Gadzhiev said. Gadzhiev specified there is no official data on the amount of views for the fight between Emelianenko and Maldonado available through the UFC Fight Pass. However, about 1 million people in the Northern America and 10 million people worldwide watched it. 7 out of the 10 million people watched it from Russia.
The UFC tried to buy the whole M-1’s video archive from Finkelstein several years ago. “I was offered several million US dollars but I declined. I am going to develop my own platform and profit from it,” Finkelstein said. He invested more than $100 thousand into creation of his own mobile platform after that.
This is sure a profitable market. Aside from Fight Nights, Gadzhiev supervises the Admiral Hockey Club, another Ziyavudin Magomedov’s sport project. He can assess the feedback and payoff from of these sports. “I think MMA is more effective. Sure, they are different. Hockey is more about social projects. For the most part, it is supported by local economic mainstays. It gives people in a region a change to watch a major sport event once a week. In MMA, sponsors are after coherent feedback from a brand’s target audience. I can say that MMA will grow more expensive while hockey will become cheaper,” Gadzhiev said.
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