December 28, 2018 | Kurt Badenhausen, Forbes
Donn Davis was sitting at his desk at his Washington, D.C.-based venture capital firm, Revolution, in July 2016 when news broke that talent agency WME-IMG was buying mixed martial arts firm Ultimate Fighting Championship for $4 billion. The price tag shocked the industry. But Davis, 55, whose career focused on building disruptive digital companies in media, gaming, entertainment and sports, saw an opportunity. “I can do better,” he said to himself.
The Professional Fighters League was born. While most MMA bouts serve as “promotions,” where events are put together by a promoter to create appealing matchups, the PFL follows the format used in professional sports league like the NBA and NFL. There is a regular season, playoff and championship. “Titles are earned, not awarded,” says Davis.
While revelers gather in Time Square on New Year’s Eve, the PFL’s inaugural season will wrap up ten blocks south at the Hulu Theater at Madison Square Garden. Championship bouts in six weight classes cap the June-to-August regular season, which started with 72 fighters. Playoffs followed in October, and the winner of each weight class earns $1 million next week, as part of $10 million in total prize money.
Davis hopes the New Year’s Eve events—and the seven-figure payouts—get the attention of other fighters who want to be part of the 2019 PFL season. Only eight MMA fighters have previously won a $1 million purse in the 25-year history of the sport, per Davis.
MMA, which combines boxing, judo, karate, wrestling and other disciplines, has come a long way since John McCain, a lifelong boxing fan, called it “human cockfighting” in 1996. That year, the late Arizona Senator sent letters to all 50 governors in his crusade to ban the “barbaric” sport.
But McCain came around on MMA, as unified rules and safety measures were implemented. He worked with MMA promoters to fund brain injury research at the Cleveland Clinic and even told one MMA reporter in 2014 that “absolutely” he would have tried MMA if it had been available at the Naval Academy.
The UFC has been the beneficiary of much of the growth of the sport, and it developed crossover stars like Conor McGregor and Ronda Rousey. Brothers Frank and Lorenzo Fertitta paid $2 million for the promotion in 2001 and cashed out 15 years later with the WME sale. UFC revenue topped $700 million last year, and it is now worth $7 billion after its recent $1.5 billion TV contract with ESPN, according to UFC president Dana White (the Fertittas sold their remaining shares at a $5 billion valuation and are now worth some $1.9 billion each).
“The PFL faces an uphill battle taking on the 800-pound gorilla in the room in the UFC,” says Paul Gift, a professor at Pepperdine’s Graziadio Business School and sports economist, with a research focus on mixed martial arts. “The PFL is selling a tournament format, but the casual MMA fan isn’t as familiar with its fighters, and MMA has typically been a star-driven sport.” Other major MMA promotions include Viacom’s Bellator, which launched a decade ago, as well as Singapore-based ONE Championship, which has a large presence in Asia.
Davis thinks there is room for both the UFC and PFL to thrive. “No one is better than UFC at doing pay-per-view events. The second sweet spot for MMA fans is what the PFL is doing with regular season, playoffs and championship,” says Davis. “It’s MMA meets March Madness.”
Davis’ belief is founded in the size of the global MMA audience. MMA is the world’s third most popular sport, behind soccer and basketball. There are 451 million people interested in MMA, according to Nielsen Sports DNA (soccer has 901 million fans). Nearly 85% of the audience is outside the U.S. “Brazil has shown strong growth by adding nearly 8 million fans over the past three years," says Jon Stainer, managing director, Nielsen Sports Americas.
That global audience makes the live digital streaming element critical to the business model, more so than terrestrial TV or gate revenue (paid attendance at PFL events has ranged from a few hundred to a high of 2,200). PFL’s deal this year with Facebook Watch, the social media firm’s video on-demand service, served as the main outlet to watch events, with an average of 2 million fans taking in the action. The playoff round in October posted a season-high 2.3 million viewers. It was the second-most-streamed sport on Facebook Watch, behind only Major League Baseball.
The PFL’s U.S. broadcast TV deal with NBC Sports Network peaked at 248,000 viewers for that event. Davis says the PFL will have expanded and improved media distribution in 2019 and 2020 but is keeping those plans under wraps for now.
The shortage of MMA events leaves the market underserved, according to Davis. There were 72 major events combined between UFC, Bellator and PFL this year. Compare that to basketball, which has 6,000 games annually in college and the pros. Baseball and football have 3,500 combined.
Randy Couture, who competed in a record 16 UFC title fights, served as color commentator during PFL telecasts this year. “The PFL is about merit. It doesn’t matter how many publicity stunts you pull or how much crap you talk, you are not going to get the nod unless you go out there and fight and win,” says Couture. “Most of the other promotions are treating this like it’s the WWE."
Davis and fellow PFL founders, Mark Leschley and Russ Ramsey, invested $25 million to launch the PFL. They purchased the struggling World Series of Fighting, which launched in 2012, to get the business off the ground more quickly, as the WSOF already had an infrastructure, licenses and contracts with dozens of fighters.
The group closed a $28 million Series B equity investment this summer. D.C. sports team owners Ted Leonsis and Mark Lerner, who own three of the four major sports teams in the D.C. area, were part of the equity raise. Celebrity backers also jumped in, including comedian Kevin Hart, reality TV pioneer Mark Burnett and motivational guru Tony Robbins.
“This first PFL season shows how exciting MMA can be when it is a meritocracy,” says Robbins on what attracted him to the PFL. “It is win and advance, from beginning of the season to the championship, so fighters and fans know every fight matters.”
The PFL is taking a page out of the UFC’s playbook with plans for a reality series that follows the journey of up-and-coming professional MMA athletes as they train and compete for a UFC contract. The winner earns a slot in the 2019 PFL playoffs. “The 2005 debut of The Ultimate Fighter series helped the UFC become more mainstream and propelled the promotion into profitability,” says Gift. “While the PFL doesn’t have pay-per-view revenues in its current business model, it could still really benefit from a breakout star in its new reality series.”
Who better to lead the charge for the PFL Challenger Series than reality talk show maestro Burnett, whose résumé includes producing the hit shows Survivor, The Voice, Shark Tank and The Apprentice. “The PFL season format is the future of the sport, as fans can know the fighters, learn their stories and follow their journeys,” says Burnett.
MMA demographics skew young, with 40% of the audience 18 to 35, according to Nielsen. The sport is the third most popular on social media. PFL’s ties to that young, coveted demographic will get a boost next year via a soon-to-be-announced partnership with pro video-gaming giant Team Liquid. “There is nobody more innovative than Team Liquid in esports in connecting with fans digitally,” says Davis, who is an investor in the team, recently valued at $200 million by Forbes.
Team Liquid players will attend and promote events. The esports team will also provide insights into its relationships via a distribution channel such as Twitch, where top video-gaming teams generate millions of dollars for streams of their players “practicing.” The MMA and esports audiences have a huge overlap. They both skew young, male and digitally-oriented.
Davis is betting that his audience will gravitate to PFL through a new partnership in 2019 with Durham, North Carolina-based SMT, whose technology will measure MMA fighter performance analytics along with biometric and positional data. The first-ever “SmartCage” will use sensors to track speed of punches and kicks, power ratings, heart rate tracking and energy exerted. The results will appear in real time on screens for fans.
Also new for the PFL in 2019 will be a women’s division, headlined by Kayla Harrison, who won a pair of Olympic gold medals in judo (Rousey was the first American woman to earn an Olympic medal in judo, with a bronze in 2008). The gender pay gap is massive in most sports. NBA players make roughly 100 times more than their counterparts in the WNBA. But the PFL will have equal pay, with the 2019 women’s championship bout worth $1 million to the winner.
“I want to build the first sports league for the next generation,” says Davis.
Forbes | Image by Ryan Loco