(Update – As of this morning Nickelodeon, MTV, VH1, Comedy Central and other cable channels owned by Viacom were taken off of DirecTV’s lineup early Wednesday morning, beginning a channel blackout that has angered viewers across the United States. In total 20 million homes lost access to Viacom’s channels)
DirectTV® subscribers might wake up tomorrow saying “I want my MTV”. DirectTV® and Viacom have been in negotiations and those negotiations came to a halt last night. DirectTV® claims they have made their final offer to Viacom and will be removing Viacom’s 22 channels (MTV, Spike TV, VH1, Comedy Central and Nickelodeon to name a few) at midnight tonight.
At the heart of negotiations is Viacom’s request for a 30% rate increase that would amount to over $1 billion dollars. Because of Viacom’s size they can bundle all of their channels into the negotiations. DirectTV® said, “You should be able to decide which Viacom channels you want and which you don’t.”
Viacom claims that DirectTV® subscribers have made Viacom the most watched programmer and accounted for 20% of all of its viewing. They also claim that they are only paid for 5% of the viewing and the increase is justified.
Wall Street has been talking about Viacom’s value being in decline. Cable and Satellite providers are under attack from streaming videos and Netflix. The ratings decline for networks like MTV and Nickelodeon it is creating a perfect storm for distributors to drop Viacom from its line up. A few years ago this would be unthinkable just based on Nickelodeon. UBS analyst John Janedis recently downgraded his rating on Viacom’s due to concerns related to ongoing ratings weakness. He wrote in his report: “We continue to think the concerns related to Netflix/Amazon viewing are overblown in the near-term, but from a content perspective, our sense is that returning series at MTV are under-performing, which will translate to further make-goods and a drag on ad growth in fiscal year 2013″.
Why is this important to MMA fans? The loss of DirectTV® hurts the expansion plans of Bellator, who is in partnership with Viacom. Partnership really mis-states the relationship. Viacom owns a large chunk of Bellator. Bellator can’t jump ship the way the UFC left Spike, they’re stuck until sold off. Bellator goes where Viacom goes.
Many thought the Viacom deal would allow Bellator to become the second largest American Mixed Martial Arts promotion. Suddenly Viacom itself is in danger of The Judgement by the market. With One FC’s ten year deal with ESPN STAR for Asian distribution and the DirectTV® Viacom deal hanging by a thread we may see One FC take the number two spot in the sport. Thinking that an Asian distribution deal doesn’t threaten Bellator’s North American position would be a mistake. The missing facts are: Victor Cui, CEO and owner of One FC, was at one time a senior director for ESPN STAR, and ESPN STAR is a 50-50 joint project between ESPN and Rupert Murdoch’s News Corp – the single largest media presence in North America, which includes, yes, FOX.
The House is gearing up for a battle over spending taxpayers money on sports sponsorship. The focus is on NASCAR but you cannot cut NASCAR without affecting all sports. The UFC recently inked a deal with the US Marines and many Mixed Martial Artists (“MMA”) have been sponsored by Military divisions. If the measure passes these expenditures would cease.
Republicans are divided over topics that usually unite them (spending cuts, military and NASCAR) and the Democrats are excited to have the distraction. At the heart of the battle is the $80 million dollars spent on sports sponsorships and the return on that investment. The proponents say $20 million a race is way too much. While supporters of the sponsorship programs, like Army National Guard Director Lt. Gen. William Ingram Jr. say “the program is effective. “ Without the draft, the Military needs to find ways to reach their target demographic.
There is no question that the Military’s target demographic is watching NASCAR and UFC type events. The in-content exposure is valuable and hard to miss. When marquee brands like Nike are cutting TV and Print spending by 40% in favor of Team and Event sponsorships it seems like an odd move by the House to pressure the Military in exactly the opposite direction.
As the US Marines learned with their UFC deal, there are other valuable sports properties that allow the Military to reach its target demographic and not spend $20 million per event. The model in play with the UFC makes a ton of sense for The Marines. The Marines are getting in-content branding on the most sought after sports property around. They get interaction with the athletes, digital placement on the UFC’s website and more.
Unlike NASCAR or other sports like Bull Riding, MMA also opens the door to real engagements with the target demographic. This engagement can go well beyond the recruiting phase too. We all have seen the UFC and Marine marketing program. The House should be looking at ways to get more for the expenditures. Ideas like:
MMA Athletes showing up during Basic Training to help during Combatives Training.
Military discounts on Merchandise and Tickets.
Armed Forces MMA Team – While on Active Duty the ability to train and compete at the amateur level (like they do with other sports like Boxing and Wrestling).
Veterans that were on the Armed Forces Team get immediate entry into TUF and their Pro card is paid for, in return they continue to represent their Branch of service. Guys like Brian Stann should be a sponsored athlete and a part of a program that helps transition the soldier athlete to a professional athlete.
Lifetime free entry in signature events like Grapplers Quest and NAGA for active Military and Veterans.
Ideas like those will only enhance the ROI. From a MMA perspective the price the Military allegedly spends on one race would fund all of the above programs for several years. Every service member will learn some form of hand to hand combat during their enlistment. There is no reason not to offer MMA as a Team Sport on the bases. The opportunity to enhance the return on investment has never been better.
The House needs to realize that it is less about how much they spend and more about how they spend it. If NASCAR has become too expensive then find other sport properties that reach the same demographic. If you can find sports like MMA that weave into the basic structure of current Military life then you can find others. You don’t have to spend $20,000,000 per race to reach your target demographic. You don’t have to kill off your marketing plans because one part of the plan has become too expensive. Just replace it. The sport of Mixed Martial Arts would welcome this budget and the branding would be dominant and active 24/7 like our Military.
Last night’s UFC on FX 4 main event was everything that the major brands want to avoid. There is not a lot of control during a fight. If a guy bites another guy’s ear off the world will be watching. If a guy flips off his opponent a few times on FX, the world will be watching.
The Marketing VP that tells me the sport is too violent and the athletes are too unpredictable was just proven right. The Marketing VP that was taking a “wait and see approach” is going to wait a little bit longer. It is bad enough that we have a champion calling on the Major Brands and a few weeks later show up on TMZ arrested for a DUI single car accident with women that are not his fiancee.
The baseline of this sport should be that it is a form of Martial Arts. You can promote a fight without tarnishing your brand or the value of the guy you are fighting. What did James Tooney call Randy Couture? Then Randy beat him up. So what does that make James? Trash talk is not about taking away from the athletes that compete, discounting those around you. It is about promoting yourself, building your brand and following.
Gray Maynard flipping off Clay Guida is about as far away from being a Martial Artist as you can get. In today’s connected world you cannot say you are one thing and be another. If you are the main event on a televised fight you need to carry yourself accordingly. There is a fine line between promoting a fight and losing your cool. The UFC releases athletes for sending stupid or inappropriate jokes on Twitter but is silent when a fight looks more like an episode of Jersey Shore than a UFC Main Event. The UFC should hand down some serious sanctions for this behavior, and FX should hand the UFC some serious sanctions.
Who is managing these athletes? Where is the training and education of what it means to build your own brand and respect the brand platforms that you are leveraging to build yours? Talking about Coors Light while standing on a Bud Light logo, getting DUI’s, flipping the bird on National TV, and ‘motorboating’ female journalists all hurt the sport’s growth potential. Anderson Silva is reportedly being paid $250,000 to work with Burger King in Brazil. How many Burger Kings are in Brazil vs the US? Yet there are no reports of any mainstream deals of this size for any US based Mixed Martial Artist. I can almost assure you that there won’t be anytime soon if our high profile athletes keep acting the way they are acting in and outside of the Octagon.
There will be enough people that will trash or try to diminish the opponents you face. Your role as a Martial Artist is to respect the sport and your opponents and to train hard to give yourself every advantage possible to win. The way you carry yourself will affect your earnings and the earnings of those that come after you. What do you want your legacy to be?
There has been a lot of talk about The Ultimate Fighter show and a lot of it has been kind of negative. If you look at the series with less angry eyes you will see that any show that can last 16 seasons is a successful series. NBC’s ‘Cheer’s’, one of the most successful series ever, ran 11 seasons. “The Ultimate Fighter’ (“TUF”) first aired in 2005 and is on its 7th year of being on Television going on its 16th season in the US and 2nd season Internationally. The show is now growing internationaly, in its second season in Brazil.
This got me thinking, many say the first season of TUF triggered the explosive growth that led many to claim MMA is one of the fastest growing sports in the US.. TUF and other UFC Televised fights were rating successes in the male 18-35 demographic. Marketers are still talking about how MMA is a hit with males 18-35 and by all indications growing in popularity amongst females in the same demographic. This is what the advertisers are focused on. This valuable demographic has a history of being “elusive” and has been since the early 2000’s. But it’s been seven years since the Boom of MMA, the ’18-35′ of 2005 is now ’25-42′. Who is focusing on the 25-42M demographic that helped kick start this sport? Or for that matter the early adopters of the sport: the 30-55 Male?
As the sport matures and the fan base increases within the core demographic, brands should not lose sight of the fans that helped create the early iconic brands of the sport. As we age (yeah I am one of them) so do our tastes. However we still like a lot of the same things we used to like. Most of us are passionate about the sport and that passion stands the test of time. We are the demographic that gave this sport its legs and made sure it was able to run.
Look no further than the American Express retirement commercials from the late 90’s and today to see how sophisticated brands are shifting their message. They have gone from showing gray haired grandparents quietly puttering in their flower gardens to ‘salt and pepper’ youthful looking, yet older people out in the world on adventures with sky diving, snorkeling and enjoying their retired life. American Express knows that different generations age differently and wish to be advertised to differently.
I recently turned 40 and I do not think I would wear many of the current MMA brands myself. I like my tee shirts and Chuck Taylors like most guys my age, but no foil, wings or skulls with swords in the eye sockets are going to look right at my kids parent teacher conference.
The MMA specific brands need to remember the people that bought the products that built 100 million dollar companies are getting older and we still have money to spend if you want to make products we can use. For every core demographic there are secondary demographics of younger and older fans. One thing that can’t be ignored is that these fans are getting older as the sport matures and branding and message should be adjusted to continue to reach them.
Below you will find a pretty interesting infographic that shows the habits of the Generation Y or Millennium Generation. Let us know if you agree or disagree.
K-Swiss the parent company of Form is exiting the Mixed Martial Arts landscape. Form was one of the few companies that had a true endorsement model and activated around the athletes and sport. According to the companies Edgar filings they bought Form in 2010 for $1.6 million and lost about $3.7 million before tapping out.
From their public filing:
13. Form Athletics
On July 23, 2010, the Company entered into a Membership Interest Purchase Agreement (“Purchase Agreement”) with Form Athletics, LLC (“Form Athletics”) and its Members to purchase Form Athletics for $1,600,000 in cash. Form Athletics was established in January 2010 to design, develop and distribute apparel for mixed martial arts under the Form Athletics brand worldwide. The purchase of Form Athletics was part of an overall strategy to enter the action sports market, however, during the third quarter of 2011, the Company decided to no longer pursue operating in this line of business, as discussed below. Operations of Form Athletics have been accounted for and presented as a discontinued operation in the accompanying Consolidated Financial Statements.
Pursuant to the Purchase Agreement, the Company was obligated to pay additional cash consideration to certain Members of Form Athletics in an amount equal to Form Athletics’ EBITDA for the twelve months ended December 31, 2012 (“Form CPP”). The purchase price of $1,600,000 and the net present value of the initial estimate of the Form CPP was capitalized. The fair value of the Form CPP was determined each quarter based on the net present value of the current quarter’s projection of Form Athletics’ EBITDA for the twelve months ended December 31, 2012. Any subsequent changes to the Form CPP was recognized as interest income or interest expense during the applicable quarter.
The acquisition of Form Athletics was recorded as a 100% purchase and the Form CPP liability was recognized and accordingly, the results of operations of the acquired business were included in the Company’s Consolidated Financial Statements from the date of acquisition. A trademark asset totaling $3,150,000 and goodwill of $539,000, were recognized for the amount of the excess purchase price paid over fair market value of the net assets acquired. The amount of goodwill that was deductible for tax purposes was $507,000 and will be amortized over 15 years.
At July 23, 2010, the acquired assets and liabilities assumed in the purchase of Form Athletics was as follows (in thousands):
July 23, 2010
Contribution by K•Swiss Inc.
Total stockholders’ equity
Total liabilities and stockholders’ equity
Since Form Athletics began operating in early 2010, operating results prior to the Company’s purchase of Form Athletics were not significant and pro forma information was not materially different than what was reported on the Company’s Consolidated Financial Statements.
During the second quarter of 2011, after a review of sales, backlog, cash flows and marketing strategy, the Company determined that its investment in the Form Athletics goodwill and trademark was impaired and recognized impairment losses of $3,689,000 (see Note 5) and reversed the Form CPP liability of $2,110,000, which was recognized as interest income.