March 7 2016

Protecting your Stars – The aftermath of UFC 196

Thought Leadership, UFC, UK, Europe

Following on from Conor McGregor losing to Nate Diaz at UFC 196, Chris Gratton, Group Director – Octagon, examines the two sides of the argument for allowing the star of the sport to dictate their pathway and whether that is to the detriment of the sport and athlete as a whole.

Conor McGregor is, and despite this loss, will continue to be, the jewel in the crown for UFC and MMA all over the world, unlocking new audiences, driving TV and live attendance and ultimately commercial revenue for UFC. As the published fighter payment figures show, only Diaz (in reality by nature of fighting McGregor) and Holm (second on the bill) come close and even so are at half the million dollars earned by McGregor. By comparison only one other fighter broke 100k with or without win bonus and McGregor had a flat fee win or lose (Source:MMA Junkie).

The revenue McGregor is generating for UFC continues to break record after record for PPV and sells out huge arenas when he is on the bill, potentially a reason why since his rise to stardom, he also fights more frequently than most. As the sport grows at impressive levels it also becomes more interesting and appealing to sponsors, it was ranked by Forbes as the 10th most valuable sports brand in the world in 2015 with a brand value estimated at $460 million. Eyeballs and engagement of fans, many who fit into a hard-core consumption group, are important to sponsors and the sports characters only help to amplify this via their own social channels. Reebok signed a landmark deal in December 2014, reported to be $70m over a six year period for the full roster of over 500 fighters to wear the brand’s sportswear in the fight week leading into an event. In addition to this, there are a number of brands taking advantage of individual fighter endorsements. Budweiser have used both Ronda Rousey and Conor McGregor in market specific advertising campaigns (key UFC consumption markets of Brazil and Ireland respectively). We would expect to see an increase in the number as well as the value of these deals as the sport continues to grow and UFC looks at diversifying revenue streams. Coupled with the $700 million, 7-year deal with Fox Sports in the US and various other regional broadcasters such as BT Sport in the UK and the overall commercial proposition looks a strong one for a brand willing to associate in this space. It does represent a reasonable level of risk given the nature of the sport however as does every sponsorship deal, something again very much in the spotlight this week with Maria Sharapova being dropped by various sponsors following her admission of a failed drug test.

McGregor has all the charisma needed from a star and is one of the smartest individuals in the industry. When in fight mode he has the right balance of comedy, trash talk and unwavering confidence, so much so that in many cases the fight is won before he even steps in the Octagon. Out of fight mode he is immensely appreciative of where he came from and the struggles of the Irish nation that backs him so vehemently… putting his social profile updates to one side for now (stacks of dollar bills and Rolls Royces are a regular occurrence)… pre and post-fight interviews show a humble man with huge respect for the people that put him on the great stage, never turning down a fan photo or a chance to interact with his supporters, another thing that endears him to the wider audience, not just the hardcore.

The question at hand is whether it was the right decision by Dana White and the UFC to offer him the fight with Diaz. McGregor was already stepping up to take on Dos Anjos and then had to put on even more pounds in a short space of time to take on Diaz at around 170lbs (although Diaz does normally fight at 155lbs, but that’s an argument for another day). Despite having a better camp and better conditioning he was at a major disadvantage having to stack this weight on and fight a naturally bigger stronger and rangier opponent who didn’t have to change his physique in any way… in fact he had 10 days to train for the fight which shows the natural advantage he has without even being in a proper camp.

The loss is not a major shock (unlike Holm beating Rousey) and in reality it will not be seen to affect McGregor’s legacy, something that I’m sure he knew as he comes across as a smart and certainly very commercially savvy individual. In fact, in the hours and days following the loss, major stars from all sports were coming out to support him in adversity and state that he is still a champ, again showing his star power and ability to transcend the sport. If anything it has strengthened brand McGregor by the way he has reacted to the defeat. He didn’t really have anything to lose by stepping up for the Diaz fight. A win would have catapulted him to unrivalled stardom, the loss doesn’t affect that. Where McGregor goes now is the important move, whatever fight he takes he must win. Does he drop back to 145lbs for a rematch with Aldo or stick with the original plan to go to 155lbs for Dos Anjos and attempt to become a double weight world champion? This is the crucial move and needs to be managed carefully. A loss at either of those weights and the star will begin to wane and that is something that the UFC cannot afford to see happen as without McGregor as a champion, the commercial side of the sport will take a major knock. There is still a lack of great characters with the necessary charisma to carry the ‘out of octagon’ interest. Add the golden girl, Ronda Rousey losing to Holly Holm and Holm then going on to lose to Tate at UFC 196 and Whites two stars have been blunted in the short term at least. They will continue to dominate column inches, social channels and TV coverage but the next fight for both is key and a must win or they fall from grace and White must give title shots to other less ‘fashionable’ contenders despite his knowledge that they carry the success of UFC in the short term. The return of Jon Jones (who fights Cormier at UFC 197) will help spread the burden of those two athletes to carry the numbers but he also comes with heavyweight baggage.

To make a comparison to boxing, McGregor is a lot like Mayweather in being a moneymaking machine for the sport and he could do a lot worse than looking to Mayweather as a shining light in how to manage a smart career… I say this for guidance only because although Mayweather dominated the sport, he never took a fight he thought he might lose, pointing mainly to Pacquiao who he fought when past his prime. McGregor will never be one to shy away from taking the big fight even when he is at a disadvantage as seen by fighting Diaz but he does need to be smart about the next fight. UFC has a major opportunity to capitalise on the current lack of major stars in boxing and stake a claim for that audience which it is already cannibalising and with that, the huge commercial revenue that comes with it but it needs figures like McGregor to drive that agenda. If Dana White lets McGregor pick and choose his own fights with no regard for what a loss can do to his career then he is in danger of tarnishing the star quality. The other side is that controlling your major commodity, particularly one so clearly headstrong and confident is never going to be easy.

Dana White and UFC of course have to make compelling match ups that the fans want to see, Holm vs Rousey had to be made and I don’t think many expected the result. McGregor vs Diaz on the other hand didn’t. In future they may want to control how ‘compelling’ (risky) those match ups are in order to protect their stars. The next fight for both could define not only their careers but also the short term commercial value and rapid growth of UFC.