Zuffa L.L.C

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Zuffa L.L.C

2960 West Sahara, Suite 200
Las Vegas, Nevada 89102
U.S.A .
Telephone: (702) 221-4780
Web site: http://www.ufc.com

Private Company
Incorporated: 2001
Sales: $205 million (2006 est.)
NAIC: 711320 Promoters of Performing Arts, Sports, and Similar Events Without Facilities

UFC ROOTS: 1992

NAME CHANGED TO ULTIMATE FIGHTING CHAMPIONSHIP

AMA CALL FOR BAN: 1996

ZUFFA BUYS UFC: 2001

PRINCIPAL SUBSIDIARIES

PRINCIPAL COMPETITORS

UFC ROOTS: 1992

There were several people responsible for the birth of the UFC in 1992, including Rorion Gracie, Arthur Davie, John Millius, David Isaacs, Campbell McLaren, and Robert Meyrowitz. Davie is credited with the idea of televising a single-elimination tournament to determine which fighting style would prevail. A Los Angeles advertising agency executive, Davie had been interested in mixed-match fighting since his days as a marine in Vietnam when on leave in Thailand he witnessed a bout between an Indian wrestler and a Thai boxer. Some 30 years later he became interested in promoting martial arts events and tried to persuade a beer client to sponsor a kickboxing event. During the course of his research he learned about the Gracie family of Brazil, practitioners of their own style of jiu-jitsu.

The patriarch of the Gracie family and developer of what became known as Brazilian jiu-jitsu was Carlos Gracie, who in the early 1900s trained under a Japanese jiu-jitsu champion. He modified the technique and

incorporated boxing skills in order to become a street fighter. Despite standing just five feet, six inches tall and weighing 135 pounds, Gracie became so proficient a fighter that he took to placing newspaper ads to challenge all comers, no matter their size or fighting technique, thus further refining his skills. Gracie then taught his fighting style to his sons and four younger brothers, and they in turn taught their sons. In the 1920s the family initiated the Gracie Challenge, inviting any willing fighter to oppose a Gracie selected to represent the clan in a Vale Tudo (“anything goes” in Portuguese) fight. While the Gracies did not prevail every time, they won the vast majority of the matches, which served to promote Brazilian jiu-jitsu and the family name. Carlos Gracie remained a wiry fighter well into his 90s, and his sons and grandsons carried on the tradition of the Gracie Challenge. In the 1980s grandson Rorion Gracie moved to the United States to teach Brazilian jiu-jitsu, bringing the Gracie Challenge with him as a promotional device and offering $100,000 to any fighter who could beat a member of the family. He was joined by his 18-year-old brother, Royce.

Davie read about the Gracies in a 1989 Playboy article and arranged a meeting in 1990 at the Gracie Academy in Torrance, Florida. Although they were willing to fight anyone, Davie learned the Gracies had not put much effort into promoting their bouts. While visiting with Rorion, Davie began taking lessons and became friends with one of the other students, John Millius, a film director. In an interview with MMATorch.com, Davie recalled, “Millius, Gracie, and I were sitting around one night talking and we began to have a conversation, like guys used to have in Vietnam, about if Sugar Ray Robinson were alive and would have fought Bruce Lee, who would have won.” Out of this conversation grew the idea of hosting a tournament of fighters employing different styles to see who would emerge as the ultimate fighter. “I went back to my agency and had my art department put together a comp called ‘The War of the Worlds.’” He then enlisted the help of Gracie and Millius, and together they developed a plan in October 1992; in 1993 they formed WOW Promotions. Because of his theatrical back-ground, Millius was charged with designing the fighting surface, and Gracie would make sure it made sense in terms of fighting. Rather than use a traditional boxing ring, they developed the larger fenced-in surface. Because fights went to the ground, the fence was necessary to prevent fighters from falling out of the ring. Davie was in charge of raising money and marketing.

Interested in making War of the Worlds a pay-per-view event, Davie sought out Semiphore Entertainment Group. Semiphore had been created as a joint venture the previous year by Bertelsmann Music Group, the music and video subsidiary of Bertelsmann AG, and Thursday Night Concerts, whose president was Robert Meyrowitz. An ad salesman for NBC radio in the early 1970s, Meyrowitz made his mark when he put together a live radio concert of Three Dog Night for NBC affiliates to air when the World Series ended in just five games. It was the unofficial start of the King Biscuit Flower Hour and led to Meyrowitz founding DIR Broadcasting, which produced all manner of syndicated radio programming. When pay-per-view technology became viable in the 1980s he established Thursday Night Concerts to produce pay-per-view concerts, comedy, and other events, but Meyrowitz quickly learned that entertainment events did not perform well on a pay-per-view basis. All but a handful lost money. With Semiphore he tried his hand at sports; the company’s first event was a tennis match between Jimmy Connors and Martina Navratilova, a battle of the sexes that failed to excite either gender and lost money. Meyrowitz began thinking in smaller terms and looked for niche opportunities. When Davie approached Semi-phore about doing War of the Worlds, his idea was embraced by Campbell McLaren, head of programming, and David Isaacs, vice-president of marketing, who brought it to Meyrowitz for approval.

COMPANY PERSPECTIVES

The UFC organization is regulated and recognized by the world’s most prestigious sports regulatory bodies including the California, Florida, Nevada, New Jersey, Ohio and Pennsylvania State Athletic Commissions. The UFC organization strives for the highest levels of safety and quality in all aspects of the sport.

Under the strong leadership of owners Lorenzo Fertitta and Frank Fertitta III, and expertise of President Dana White, the UFC brand continues to thrive across a spectrum of live event sports, television production and ancillary business development.

NAME CHANGED TO ULTIMATE FIGHTING CHAMPIONSHIP

War of the Worlds did not test well, leading too many people to think of the H. G. Wells novel and Orson Welles radio adaptation. Semiphore’s Michael Abramson was responsible for changing the name to the Ultimate

Fighting Championship. The event’s promotion focused on the violence and the “two men in, one man leaves” motif, implying that the fights might be to the death, an approach that everyone would eventually regret. The first Ultimate Fighting Championship event, intended to be a one-time-only competition, was held at McNichols Arena in Denver, Colorado, on November 12, 1993. It featured ten fighters, eight actual competitors and two alternates, representing such combat disciplines as boxing, kickboxing, karate, kung fu, savate (French kickboxing), submission fighting, sumo, and Brazilian jiu-jitsu. The member of the Gracie family selected to participate was a surprise to most, 20-year-old Royce, the smallest of the fighters at 170 pounds.

UFC 1 attracted 80,000 pay-per-view buyers at $14.95. The competition was spotty with several of the fighters outclassed and easily dispatched, and the television commentary bordered on the amateurish. The winner of the event was Royce Gracie, whose extraordinary ground skills made the difference. With an uncanny ability to take down his opponents and twist himself around their bodies, Gracie choked out three straight opponents to take the honors, which he quickly attributed to the efforts of the entire Gracie clan.

While the Gracies may have viewed UFC 1 as a test of family honor, many in the United States were appalled by what was reported about the brutal nature of the contest. Such publicity, of course, only ensured that the one-time event would spawn UFC 2. Regardless of the hype, Meyrowitz was attracted to the basic economics of the event, which was inexpensive to produce and thus made it much easier to turn a profit when selling to a limited audience, unlike a televised concert featuring stars that commanded large guarantees. Moreover, the competition could be edited for video release to draw further income.

UFC 2 was held on March 11, 1994, at Mammoth Gardens in Denver, featuring 16 fighters and a top prize of $60,000. There were no weight classes, no rounds or time limit, and no judges. Only submission, knock out, or throwing in the towel by seconds could end the bouts. Such an arrangement all but ensured that UFC would exceed the time limit of the telecast, and many viewers were cut off before the climax of the night. Although they received refunds, they had a difficult time learning that Royce Gracie once again prevailed. The Brazilian was clearly the early star of the UFC, and became the favorite for UFC 3, held in Charlotte, North Carolina, on September 9, 1994. After winning his first bout, however, Gracie was unable to continue due to injury and exhaustion, as was another top fighter, Ken Shamrock, resulting in an alternate fighter proceeding straight to the finals to win the championship. UFC 4 was held just three months later in Tulsa, Oklahoma. With the field reduced to eight fighters, Gracie regained the championship in the longest match in UFC history to that point, almost 16 minutes, outlasting his opponent to finally win by submission with a triangle choke. It would be his last UFC fight for a dozen years.

KEY DATES

1993:: WOW promotions is formed to promote Ultimate Fighting Championship (UFC).
1995:: SEG Sports Corporation acquires UFC.
1997:: Cable systems refuse to carry UFC pay-per-view events.
2001:: Zuffa L.L.C. is formed to acquire UFC.
2005:: Ultimate Fighter premieres on Spike TV.
2007:: ESPN begins covering UFC fights.

AMA CALL FOR BAN: 1996

UFC was developing a sizable following, and soon was able to increase the pay-per-view price to $24.95. It regularly drew buys of 300,000. In April 1995, following UFC 5, Meyrowitz and the Semiphore-based entity, SEG Sports Corporation, acquired WOW and took complete control over the UFC. Yet the condemnation of the sport increased as well during this time. In 1996 the American Medical Association called for a ban on ultimate fighting, and Arizona senator John McCain became UFC’s most vocal critic, giving it the enduring tag as “human cockfighting,” and began lobbying to have it banned in every state. In February 1997 a UFC event scheduled in Niagara Falls, New York, was moved at the last minute to a small town in Alabama when the New York State Athletic Commission refused to sanction the bout unless new regulations were adopted, including mandatory headgear, eight-ounce gloves, the elimination of choke holds, and no kicking above the shoulders or below the knees. This was just the beginning of difficulties for the UFC. In May 1997 several important cable television operators, including Cablevision, Time Warmer, and Adelphia Communications, succumbed to pressure and refused to carry UFC payper-view events. UFC responded by making a number of sweeping rule changes, adding weight classes, requiring fighters to wear martial arts gloves, and eliminating some egregious tactics that ultimate fighters refrained from employing, including hair pulling, groin strikes, and small bone manipulation. It was a matter of too little too late, though. UFC paid the price of the marketing excesses of the early years and its pay-perview events were limited to satellite carriers. By 2000 all but a few states refused to sanction UFC fights.

ZUFFA BUYS UFC: 2001

The UFC brand faded steadily in the late 1990s and into the new century. In 2000 Meyrowitz approached Frank Fertitta III and Lorenzo Fertitta about buying a half-interest in UFC. Instead, they decided to buy it all for $2 million, forming Zuffa L.L.C. in 2001 to complete the deal. The Fertitta brothers were well aware of the UFC because Lorenzo had been a member of the Nevada State Athletic Commission, before which Meyrowitz had appeared seeking approval for UFC. Lorenzo was sent on a fact-finding mission to watch ultimate fights in Iowa and came away impressed by the athleticism of the fighters. He and his brother became so captivated by mixed martial arts, that they began training together in the basement of the headquarters of Station Casinos, operators of off-the-Strip casinos in Las Vegas that catered mostly to the locals. The Fertittas’ father, when he was 21, had come to Las Vegas from Galveston, Texas, working his way up from bellman at the Tropicana to blackjack dealer at the Stardust. With three partners and $50,000 he bought a small, off-the-Strip casino in 1976 and reopened it as the Bingo Palace to cater to the non-tourist trade. It eventually became the Palace Station, the foundation for the Palace Station company that his sons would take public and expand to other Las Vegas locations as well as Missouri.

To manage Zuffa, the Fertitta brothers brought in Dana White and made him a partner with a 10 percent stake. Raised in Las Vegas, White had been a high school classmate of Lorenzo Fertitta. The two became reacquainted at a wedding in 1995, and like the Fertitta brothers he became interested in the UFC, managing some of the fighters while running a string of area gyms. The new owners of UFC gained little more than a tarnished brand and ramshackle octagon but quickly set to the task of transforming the business. After further rule changes were added to help clean up the image of ultimate fighting, Lorenzo Fertitta used the connections he made from his days on the Nevada State Athletic Commission to have mixed martial arts approved by Nevada and New Jersey, both key states because they opened the way for Las Vegas and Atlantic City casinos to host UFC events. UFC gained further credibility when the executive director of the Nevada Athletic Commission resigned his post to become a vice-president at Zuffa. The UFC was in a position to return to cable television, and several months later In Demand agreed to carry its events starting in 2002, although Zuffa had to settle for about 40 percent of the take instead of the 50 percent boxing promoters received. Buys were in the 50,000 to 60,000 range in 2002, respectable numbers, and the production values were greatly improved over Zuffa’s first event televised solely on satellite the year before.

The UFC’s greatest drawback was its lack of press coverage to drive interest and ramp up the live gate and pay-per-view buys. By 2004 Zuffa had invested $34 million in UFC. It was uncertain how much longer the Fertitta brothers would be willing to bankroll a losing proposition, and at one point they had White seek a buyer before changing their minds. With reality shows enjoying success on television, White and his team developed the idea for a show that brought together 16 fighters living in one house, split into teams that were coached by established UFC fighters. Each show eliminated a contestant, until the winner prevailed in a final tournament and received a UFC contract. The idea was pitched with no success to the networks, but finally Spike TV, a cable channel devoted to the tastes of young men, agreed to carry the program as long as Zuffa paid all of the production costs. The show, Ultimate Fighter, debuted in 2005 and found an audience in fight fans. More importantly the show developed interest in the fighters as people, providing viewers with a rooting interest, which translated into escalating sales for payper-view events, where celebrities began to show up.

With the success of Ultimate Fighter, UFC turned the corner and quickly became more of a mainstream sport that began to seriously challenge boxing in popularity and spread to Europe. Pay-per-view buys topped the one million mark, and according to the New York Times, UFC grossed $205 million in pay-per-view sales in 2006, compared to the $177 million taken in by HBO’s boxing events. In 2007 the premiere cable sports channel, ESPN, began to treat UFC events as it did boxing, providing prefight interviews and stories, live weigh-in coverage, and postfight analysis.Sports Illustrated and ESPN the Magazine both featured UFC and its fighters on their covers. Long a major power in boxing, HBO also began talking to Zuffa about a possible UFC series. A syndicated deal for a weekly series called UFC Wired was also developed for Fox Television stations, set to air in the fall of 2007. Zuffa seized on UFC’s sudden rise in prominence to begin consolidating the MMA field. In 2006 it acquired the World Fighting Alliance and World Extreme Cagefighting, and in an even more important move added its chief rival in 2007, Pride Fighting Championships, which was highly popular in Asia. While Pride would be operated as a separate entity, Zuffa had set the stage to pit the best fighters of the two leagues against one another, something that had not happened before but held the potential for major pay-per-view events that could be marketed on a global scale.