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The first of three articles looking at the UFC's finances. In part one we use reports from various financial service companies to examine the UFC's revenues.
While there always seems to be a great deal of questions regarding the finances of the Ultimate Fighting Championship there also seems to little in the way of actual answers available. "How much revenue does the UFC bring in?" "How much do they make from their FOX deal in comparison to pay-per-view?" "Why has the UFC taken on so much debt?" "What are the company's earning?" "What percentage of revenue do the fighters make?"
As the biggest and most important promotion in the sport of mixed martial arts, it is understandable why so many are curious to know the answers to these questions. As the commonly identified "800 pound gorilla" in MMA, their financial health is the financial health of the sport. Unfortunately for those interested in those answers they are not readily available. Due to the fact that its parent entity, Zuffa, LLC, is a private company, the UFC has no obligation to share any such information with the public, which often leaves us only with speculation and guesses.
This isn't to say that the UFC's finances are completely opaque. While Zuffa's books may indeed be closed to us there are other sources out there that offer a glimpse into their business.
Two of the Big Three credit rating agencies, Standard and Poor's (starting in 2007) and Moody's (since 2010), both regularly issue reports on Zuffa, LLC's finances to its clients. Both of these companies are nationally recognized statistical rating organizations whose purpose is to inform potential lenders of Zuffa's ability to meet their loan obligations. (Moody's importance on the bond market is such that New York Times columnist Thomas Friedman once commented that there were two superpowers in the world: the U.S. and Moody's.) As NRSRO's they have access to a company's finances and a duty to keep lenders properly informed, which they do so through their credit reports.
A major problem for most people though is that these reports are not free. A reader may have to pay a couple of hundred dollars to access a Moody's analysis for a single year. With these reports usually offering only a small snippet of actual data, the cost of collecting all of them is obviously too prohibitive for most.
More useful are the reports issued by Deutsche Bank, which was the "Lead Arranger" for their 2007 and 2009 loans. According to Bloomberg's 2015 Global M&A Market Review Financial Rankings Deutsche Bank is one of the world's largest financial institutions with an 8.7% share of all announced global mergers and acquisitions. Unlike Moody's or Standard and Poor's, the Deutsche Bank Confidential Internal Memorandums contain a wealth of hard numbers from Zuffa directly. Unfortunately these are even harder to come by as they are intended to be seen only by potential lenders and are not meant for public consumption.
Bloody Elbow has acquired and studied every report issued by Moody's and Standard and Poor's regarding Zuffa and has also gained access to the two Deutsche Bank reports. Using these, along with the aid of several financial professionals -- including a senior executive corporate accountant, a professor of economics, a CPA with a Federal agency, and several MMA and boxing industry professionals -- we have attempted to construct a financial history of the UFC from 2001-2014, starting from the time Zuffa purchased the promotion and ending last year. The hope is that we bring some clarity to what has been enigmatic for years and in the process perhaps also answer some of those long lingering questions.
For convenience we have broken this into three parts: revenue, debt, and earnings. For part one we will be looking at revenue.
Thankfully, for seven of the fourteen years that Zuffa has owned the UFC there is no need to come up with an estimate for revenue because an amount has already been given to us in a financial report. The May 2007 Deutsche Bank Confidential Information Memorandum includes the total revenue for the years 2001, 2004, 2005, and 2006, while we retrieved 2012's revenue from the 2013 Deutsche Bank report.
The revenue for the years 2013 and 2014 were reported in the February 3, 2014 and February 19, 2015 Moody's Credit Opinion: Zuffa,LLC, respectively. Unlike the other years which end on December 31 these last two cover the Last Twelve Months ending on September 30. This means there is a three month overlap between the 2012 and 2013's revenue total.
For the other years some math was required (See below for details how we came up with our estimates) to fill in the revenue amounts.
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LINK to full article: What investors are being told about UFC revenues - Bloody Elbow
