UFC profits drop 40 percent in 2014

The sky isn't falling, but that hasn't stopped the ZUFFA brass from taking shelter.

The same company that was recently named one of the "World's Most Valuable Sports Brands," under the leadership of "Brand Genius" (and UFC President) Dana White, is now faced with a 40-percent decline in profits for calendar year 2014, according to Standard & Poor's (S&P).

MMA Payout adds some perspective:

S&P now expects ZUFFA's cash flow/debt leverage to increase to the "high-5x area at the end of 2014." In its October 2014 report, it had predicted ZUFFA to be in the 3 range. The cash flow/leverage is based on a scale of 1-6 with 1 being minimally leveraged to 6 being highly leveraged. ZUFFA is now pegged as 5 whereas S&P had forecasted it being a 3.

What's to blame?

Injuries, for one, which contribute to much lower pay-per-view (PPV) buys. In the past few months, the promotion was forced to postpone title defenses from two of its biggest stars in light heavyweight champion Jon Jones and heavyweight titleholder Cain Velasquez.

And Georges St. Pierre, the longtime "king" of PPV, is playing hooky.

It should also be noted that ZUFFA has been extremely aggressive in its global expansion, at the same time that it rolled out its new "UFC Fight Pass" digital network. That means a bevy of long-term investments, without a lot of short-term profits.

Too much, too soon?

http://www.mmamania.com/2014/11/20/7254113/zuffa-roasted-standard-ufc-profits-drop-40-percent-2014-mma

When almost every big fight you have gets cancelled due to injury it's going to impact your bottom line and PPV numbers. January will be huge for them as long as there are no injuries if 2015 goes off as planned everyone will forget the injury train wreck of 2014.

Josh Gross is also predicting 2015 to a year of "redemption" for the UFC. I hope he's right. Not for the profit of the UFC, but for the pleasure of the fans who love to watch their fights.....

A decline in profits is not necessarily too telling; even apart from the recent injury issues, it's pretty normal for a company that's making lots of long-term investments and expansion efforts to have less profit.  Amazon, for example, has famously eschewed profits in pursuit of expansion.  It only becomes a problem if those investments and expansion efforts do not pay off, which in the UFC's case remains to be seen.

The decrease in short-term profit, and particularly the increased leverage (which shows that the UFC is financing a lot of its expansion efforts with debt) does mean that the UFC is taking on more risk, which might be reason for concern if you were thinking about loaning them money... but otherwise I don't think you can take a whole lot from this.

they had to expect their profits to diminish up to some point, but they've probably been hit harder than they expected. I hope they have a good year in 2015 and get back on track. but this is definitely a good time for WSOF and Bellator to gain some traction against the UFC, Bellator already seems to be doing their part, if only now WSOF would get out of their own way so they could succeed as a promotion

It seems that this is a "rebuilding" year of sorts for the UFC. They did experience several setbacks in 2013, losing GSP and Anderson for 2014 (maybe longer for GSP). 

45 events next year is surely expansion.

2014 will end on the 47 events mark, so yeah, if you add TUF finales to the list it'll be an expansion, but not something big ... maybe not even that ... if the Latin/Japanese/Uzbeki/Brazilian TUF finales are going to be put on the UFN/PPV cards that were announced and counted in those 45, you add 2 US TUF finales and you've got exactly the same number of events as in '14.

* Edited at 11.20.2014, 4:38 PM ET *

too many events, cards are too watered down. Now-a-day to be a daily fan of the 'UFC" there is so much you have to buy. Fight pass, ppv. its a lot to invest in for a product that is so inconsistent with stars.

* Edited at 11.20.2014, 5:06 PM ET *

The investment in international markets is a huge cost, but one with a very large long term upside. Of course profits are going to drop.

The one thing that is interesting to think about, and is a sign of how complicated this business is, is how many injuries that have resulted in fights being canceled have occurred since Zuffa started offering insurance. It is the right thing to do, in my opinion, but people never think of the many possible repercussions of any one action.