UFC 268 will take place Saturday night at Madison Square Garden, nearly five years to the date of UFC 205, the promotion’s first return to New York since September 1995. A longtime ban that outlawed live mixed martial arts events in the state had been overturned earlier in 2016. UFC 205 (headlined by Conor McGregor vs. Eddie Alvarez) remains the highest-grossing gate in MSG history, at $17.7 million. But as UFC chief operating officer Lawrence Epstein said, the extended effort to get mixed martial arts legalized and regulated in the state was not just about the opportunity to hold lucrative events in the World’s Most Famous Arena. “Frankly, it was much, much bigger than that,” he said. Gaining approval in the state was necessary to legitimize the sport and “capture a permanent space within the sports ecosystem,” he explained.
JWS’ Take: To be clear, the events UFC holds at MSG and Barclays Center (along with those at T-Mobile Arena in Las Vegas) do generate the greatest gate receipts. That is because the size of the market and large amounts of discretionary income in the New York metropolitan area enable the promotion to charge higher ticket prices than anywhere else. UFC 268 is expected to be the fourth highest-grossing gate in MSG history and is tracking to be among the Top 10 gates in UFC history.
But as Epstein noted, the significance of New York’s embrace of MMA spans far beyond ticket revenue. In fact, he suggested the passing of the legalization bill was “one of the seminal moments in the history of the UFC,” he said. “[It] ranks up there with us getting our first television deal with Spike, our first sponsorship deal with Budweiser and some of the big media deals we’ve done with Fox and currently ESPN.”
The UFC executive doubts that many of the positive developments that followed would have taken place had the state continued the ban. “There were all sorts of negative connotations, negative ripple effects” because MMA was outlawed in the state, he explained. “When the stigma of not being able to do events in New York was lifted, it was truly a transformational moment for the UFC brand and the sport…. It was a game-changer at so many levels.”
Sponsorship was among those levels. Back in 2016, there were more than 50 Fortune 500 companies in New York City alone, and many of them were not willing to do business with a company who could not do business in the state. Epstein said on several occasions prior to legalization, the UFC came to terms with a blue chip brand only for that company’s compliance department to shut it down.
Once MMA became legal in the market, New York became a value driver for the UFC’s sponsorship business (think: in terms of attracting new partners) and sale (see: attracting potential investors). The promotion did not want to name any brand partners that joined in the immediate wake of the change in legal status, but the company’s portfolio of brand partners did in fact swell.
The change in New York legislation was a game-changer at the media level, too. Epstein is convinced the UFC would not have its current deal with ESPN if the sport was still banned in the state. “It is home to New York City, which is one of the most important media centers in the world—maybe the most important media center in the world,” he said.
The positive impact of legalization on the UFC brand and on company financials has been referred to within UFC circles as “The New York Effect.” Projections associated with the financing of the 2016 Endeavor-Zuffa transaction suggest legalization would be worth as much as $30-35 million in sponsorship and live event revenue annually, with roughly 80% of that money flowing through to the bottom line. Endeavor CEO Ari Emanuel said, “When we were looking to buy UFC, the intrinsic value of the organization was undeniable even without New York, but the addition of the biggest media market in the world helped take it to that next level.”
The UFC fan base has grown in New York over the last five years too. But the organization does not attribute that to the 12 events it’s hosted across the state during that time. Epstein cited the large UFC fan base the state had before the ban was overturned. “One of the great ironies of this, quote, ban on live mixed martial arts events is that New York was, if not No. 1, then No. 2 for every event when it came to pay-per-view sales.”
The UFC’s battle to get the sport regulated in New York went on for more than a decade. The high-profile state was the final U.S. entity to permit live fights (in part because of resistance from disgraced former New York Assembly Speaker Sheldon Silver). France, the final global holdout, overturned its ban on the sport earlier this year. Epstein said the UFC hopes to do an event “in Paris, and many other cities in France, in 2022 and beyond.” After all, UFC interim heavyweight champion Ciryl Gane hails from France and heavyweight champion Francis Ngannou currently trains and resides in the country. The two are set to meet in January at UFC 270 … in Anaheim.