Report: S&P downgrades Zuffa’s credit rating

Adam Swift of MMAPayout.com is reporting that the S&P cut Zuffa’s, the parent company of the UFC, credit rating today from BB to BB-. I’m not an expert on these things but Swift claims it was because of a weaker than expected performance in the third quarter. It was apparently the second consecutive disappointing quarter for Zuffa.

I think this is significant because a lot of Zuffa’s competitors in the MMA industry are not operating from a position of financial strength right now. If the UFC is not turning out great profits, you have to wonder what the other companies are experiencing?

Actually, you don’t have to wonder because all you need to do is look at the SEC filings.

It doesn’t take a genius to know why Zuffa probably isn’t showing big gains right now as they’ve had to incur some major costs like the acquisition of PRIDE, startup costs for re-branding the WEC, and marketing costs for trying to expand business into the U.K.

However, Zuffa’s reduction in credit rating could be an indication that the MMA industry is starting to cool. I’ve said to many in the industry that I felt MMA’s popularity growth had plateaued but few insiders agreed with me.

I’d love to see MMA become the fourth major sport in the U.S. as much as the next guy, but I’m not so sure that’s going to happen right now.

All boats rise with a strong tide but it seems like the tide is starting to subside.

32 COMMENTS
  • FightMetric says:

    I’d wait to call the boom over until after we see what UFC 79 does. The card should get adequate hype, features three of the UFC’s most-recognizable faces, and has a few good storylines to boot. If a card like UFC 79 can’t do better numbers than some of the more questionable cards recently, that’s a pretty good indicator that things have plateaued.

    MMA will be a niche sport for a long time. The goal of the boom times should be to convert know-nothings into casual fans and turn casual fans into hardcores. Sports are cyclical and every sport needs a good number of casual and hardcore fans to carry it over until the next boom.

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  • Gygax says:

    Everyone kills Zuffa for underpaying all of their fighters, yet the financial community does not believe Zuffa is making the proper amount of money and is incurring too much costs.

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  • Dizzle says:

    UFC will never be what Pride was over in Japan. All of my friends who i’ve turned onto MMA these past years have been very dissapointed with UFC this year. I think things can only get better for the company and MMA business in general. 2 Years ago you couldn’t search for MMA on your satellite. I get home and I do a search for Fight and I get a list of about 10 programs that are showing MMA related materials.

    The industry is really growing, but it takes money to make money.

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  • Kelvin says:

    Zuffa is and will continue to do fine…it cost money to expand overseas etc…

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  • Evan says:

    New sport…New sport. This will take time.

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  • Sam Caplan says:

    It’s a new sport but is no one concerned that the growth is slowing?

    Where are the new fans going to come from?

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  • Dizzle says:

    ….the interwebz?

    I’m not concerned that the growth is slowing. Patience is a virtue.

    If you push it on people too much and too soon…it will collapse and then be forgotten.

    That’s what I think anyways.

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  • a. hieronymous says:

    I’m thinking the new fans will come from watching Spike TV, or network tv if that deal ever gets worked out. All the people I know who’ve turned on to MMA lately got into it by watching a PPV at my house, then stumbling onto UFN re-runs while channel-surfing weeks later & recognizing the brand.

    The growth may be slowing but Zuffa is still banging out plenty of events & TUF is still going strong. I think the story here might be the hard times that lay ahead for the smaller shows…?

    I’d love to see MMA be our 4th sport, too…but I don’t think it’ll get any more popular than boxing, which is still pretty damn good considering how it started.

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  • Evan says:

    Sam, no. This was bound to happen and it rise up again and slow down again.

    Its like with stocks. You just got to sit back and ride it out.

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  • Evan says:

    And I think aiming for number 4 is way too high. We need to expect this to shit somewhere with hockey. MMA is far too violent for the masses.

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  • Adam Morgan says:

    Lots of new fans came from the first couple of seasons of TUF. As it stands, the show is now almost unwatchable, especially this season. If they improve TUF and change a few things, they might attract more casual fans.

    Also, UFC on a network station due to the writers’ strike could be huge for new fans as well.

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  • Paul Balsom says:

    The UFC have put a lot of money into the acquisition of Pride and trying to bring the product over to the UK on a fairly consistent basis. This all costs lots of money.

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  • Evan says:

    “expect this to sit ” I meant…heh

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  • Evan says:

    Paul Balsom

    Agreed. To expect the UFC to make a big profit in one year after the WEC, WFA and PRIDE is unrealistic. Especially with such a new sport.

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  • a. hieronymous says:

    I still don’t understand why they wanna branch out into the UK. If you ask me, THAT’S why they’re losing money! I guess I don’t understand business in general. Why not branch out into Mexico first?

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  • Kelvin says:

    “Why not branch out into Mexico first?”

    Because the UK has been exposed to MMA more….Cage Rage, Pride, UFC had been there before…Mexico hasn’t even been broken into yet.

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  • Jersey Tomato says:

    The acquisition of Pride FC was a complete waste of money! Prior to being purchased by Zuffa, the Japanese organization was already in dire financial shape. Pride was bleeding cash after it lost its broadcast partner on Japanese television. Without a TV deal, Pride could not have survived on the live gate proceeds alone. Seems to me that had Zuffa not been engaged in such a buying frenzy, Pride would have collapsed on its own accord.

    Zuffa basically threw $60MM down the drain. To make matters worse, they did not even come away with Fedor.

    I am sure the Ferttitas would love a “do over” on that deal.

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  • Dizzle says:

    They bought out a company with no plan to reinvest money into the company. With the new ownership of Pride I dont see why the network wouldn’t pick them back up considering that the new owners are legit.

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  • el boxeo says:

    lol at trying to be the 4th sport… come on.. mma / ufc will never become that popular…. its not even as popluar than boxing…

    the main reason the ufc is really strong is because they have a semi monopoly and thats it… they can keep costs down(payroll) but they sure know how to waste money (UK expansion ??/wtf or the pride debacle)

    anybody else think they shouldve just lowballed pride for its library without having to buy all those pointless contracts..

    only way mma imo becomes more popular than boxing is if they take the boxing model which promotes the fighters rather than the organization they are fighting for…

    thats why these boxers are making tens of millions .. ufc is more like pro wrestling that it offers a ppv every month like pro wrestilng whether its good or not.. boxing the ppv events are not as forced.. (although boxing does have its share of bs… vargas /mayorga jones/trinidad)

    imo thats not a good buisness model and once people start getting tired of tuf 47 or forced monthly ppv is when trouble hits for them…

    all it takes is a couple of defections or self promoters to sink the ufc… imagine if randy couture would start his own promotion that leases out his fighters.. or popular guys like tito say “fans come to see me fight” not me fight for the ufc…

    the more popular mma gets the more it will be like boxing (promotional wise) which means more money for fighters that can draw and ends the ufc monopoly…

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  • paddiosf says:

    I like the UFC but like a previous comment I was more satisfied with a PPV purchase of Pride fights then the UFC…I think the biggest difference Pride Events, showed more fights and the fights where more exciting because of the Rules… Also the Pride Tournaments where great…Don’t get me wrong I buy every UFC Event but I sometimes I’m alittle disappointed in what fights they show….

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  • Jay K. says:

    hieronymous’ 8th post on the thread made the most sense!

    I’d like to see the sport become more of a household name like Coutoure’s name or Liddell’s names already are. There’s plenty of room for all different organizations, they all just need to create a universal judging system that’s really applicable to MMA.

    Just my 2 cents.

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  • Dizzle says:

    MMA is already rising above boxing right now. Before time Boxing will be a thing of the past. Boxing isn’t as popular as MMA is world-wide.

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  • el boxeo says:

    boxing is not only more popular than mma world wide.. but its still wayy more popular in america considering that many immigrants that live here still follow boxing…

    boxing is more popular in united kingdom than mma will ever be…

    joe calzaghe /ricky hatton anyone??? i was in vegas when hatton fought castillo and it was amazing how many people followed this guy… and dec. 8 there talking about 30k…

    but as i was stating before…what will make or break mma is when it follows the boxing model.. cause that is where it will end up if it stays popular and the fighters still get paid like garbage… and if the product is as good as it seems ..then it will survive and thrive….

    the more popular mma is the less control the ufc will have… wrestling was extremely poplular in late 90’s but now its a shell of itself.. ufc will be like that if they follow what they are doing…

    mma isnt even as popular as boxing here in america.. but worldwide..come on… not even in latin america or asia is mma in the same league as boxing…

    once mma opens it up to get rid of federations but have rather promotional companies that promote fighters is when mma will truly pass its test to see if its gonna stay for a while… there are many fighters out there who cannot fight great matchups cause they arent signed to ufc or ufc wont co promote… so its not about the super fight or fighters but its about the company….

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  • el boxeo says:

    “Before time Boxing will be a thing of the past.”

    yeah right…

    im sure your average mma fan is really excited to watch a ground an pound or wrestling match rather than have two fighters exchange haymakers in the center of the octagon…

    and boxing is closer to what? wrestling….. people will always tune in for the KO …. nobody enjoys a wrestling match over a boxing match….

    last i checked boxing is about punching people in the face for 3 minutes a round.. unless your name is floyd mayweather…lol

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  • dsid says:

    MMA is just out of the starting gate and there are millions of people who still have no clue what it is *at all*. Think about it. Right now their big exposure is through Spike TV, a miniscule little cable channel that very few people watch (and those who do watch it have mostly come in via the UFC, not the other way around).

    Wait until they ink a deal with ESPN, or HBO (if that comes back up), or one of the big networks, which could happen pretty soon given the current writer’s strike and how badly those guys will be hurting for programming. Then things are really going to be crazy.

    This little credit rating issue is a totally minor blip for a sport that’s still in its adolescence.

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  • Dizzle says:

    el boxeo Boxing is a great sport. No doubt I watched boxing (kickboxing mostly) before I ever watched any type of MMA fight. Boxing is a great sport…but it can be just as boring as MMA alot of the time. MMA is much more strategic and that is what will win the crowds over. I’d much rather see a submission any day than a knockout.

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  • a. hieronymous says:

    yeah…much as i love to see ‘em duke it out i’d rather watch a technical ground game. that’s a big part of why i watch mma in the first place…

    but i have to admit that i’m in the minority; most folks would rather watch a slugfest.

    i like the idea of fighters having bigger names the the promotions they fight for. although the promoters in bosing aren’t exactly choirboys either!

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  • GB says:

    Having worked in financial journalism for a couple of years, I believe you shouldn’t take these credit ratings as the overtly authoritative assessments most think they are. Slight credit downgrades like that one can be transitory and in any event a BB- is not necessarily bad under Zuffa’s circumstances. You have to wonder how much these analysts know about MMA in the first place, whether they are comparing Zuffa’s business model to those applied in other sports and what is their methodology to begin with. I can’t help but think that five years ago these same analysts would have probably given Zuffa a snowball’s chance in hell of being successful.

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  • el boxeo says:

    hell yeah boxing promoters are the worst… corrupt / steal from fighters.. but its a free market and what balances everything out is everybody is trying to either make the best fight or make their fighter the most amount of money.. cause its in the promotoers interest to have them get paid cause they get paid… having like 10 diffrent promoters without one real monopoly allows for the almighty doller to reign supreme…

    in the ufc system its not that much in thier interest to have high paid fighters because they are the monopoly.. they figure that they make the fighters rather than the other way around… they might belive that now because of the success of fighters like hughes or couture or liddell but there about out the door and the only way they seem to grow fighters through the public is tuf or pride…

    its more about the ufc than the fighters… its like pro wrestling… it was really popular with the stars of the late 90s but now its borderline fading away… and they are really the only show in town…

    you guys ever wonder how boxing (which is a dead sport in the media and news prints eyes) can at any given time have superstar fights that make millions for fighters and promoters… and yet boxing is considered dead…

    imo once the ufc monopoly goes away , mma will be more fighter / promoter based like boxing rather than fighter / federation which is like pro wrestling….

    for the sport to survive its in the best interest for capitalism to be in effect and have the fighters make the most amount of money in the free market… fights like randy v. fedor will always be made in that type of system but in the present ufc system.. these fights wont be made unless you sign your life away.. like fedor wasnt willing to do….

    boxing is full of manadtory wack defenses/ bs rankings / corruption but considering its a free market, the super money mega fights can and will always be made…

    even the ufc with trying to get pride and wec is trying to “show” that there is a free market type of competion out there but its really smoke and mirrors.. just like the wwe and their “brands” of diffrnt wrestlng shows…

    ufc will eventually be a promotional organization rather than the fighting organization it is now… once the real money starts flowing in from other directions…

    and the ufc doesnt need to have every month a “validation” ufc 1002 … they are gonna run out of words soon… instead of having to do a show and oversaturate the market.. they should follow boxing or even elite xc and do shows when its necessary and sure things…

    if the ufc wouldve done have the shows this year .. would they have lost anymore money than they seem to be by not doing 12 shows a year plus little tv. shows…

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  • el boxeo says:

    and remember.. that boxing doesnt have a weekly show.. or nearly half the stuff the ufc does on spike.. yet they can still sell mega fights and build fighters .. if THE SPORT IS EXCITING ENOUGH YOU DONT NEED TO HAVE SOMEONE TELL YOU WHO IS GOOD OR WHO YOU NEED TO WATCH..

    ufc seems to think that if they arent in their organizaition, they dont matter…

    and once the money start flowing is when mma can really take off… im sure that

    im sure those hbo negotiations were hilarious .. wonder what hbo said to dana when he wanted to show the ufc on hbo with the ufc handling production …

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  • Accomando says:

    First off Sam, I agree 100%, MMA hit its plateau right before Liddell/Rampage, which was a pathetic fight, and really hurt the momentum of the sport. Turned a lot of people off.

    “…and remember.. that boxing doesnt have a weekly show.. or nearly half the stuff the ufc does on spike..”

    Wrong, boxng has the contender series which is exactly what the TUF series is, minus all the ignorance and beer fests.

    Also, Boxing is on Versus, ESPN 2, ESPN Classic, HBO, boxing content is out there. People saying “boxing is dead” are really dumb. Boxing really got its act together this year, and just slayed the UFC in PPV earnings, and that is even before the Hatton/Mayweather fight. Even my dad wants to buy that fight on PPV for $50 due to the 24/7 series on HBO, which is due to HBO production.

    Boxing is gaining viewers with the fights that have been set up lately and boxing has MMA to thank for that, because MMA gave boxing a kick in the ass, it really did.

    So, both sports ain’t going nowhere, but MMA’s explosive growth has hit its apex. That is of course, until the UFC ends up on CBS, if that happens, then the sky is the limit. I think it might have been a ploy on CBS’s part to get the writers back at the negotiating table, but we shall see.

    The CBS deal could be huge for MMA.

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  • I’m with a lot of what El Boxeo and Accomando are saying. Both boxing and MMA have serious issues, but human history has proved that it’s hard to go wrong selling sex, drugs, or violence. The fan base is there for MMA, but a lot of it is in the teenagers coming in to my gym in Affliction shirts. A fifteen year old isn’t buying PPVs yet, he’s catching up on webtv or sharing videos with friends. In 5-6 years, he’s throwing house parties for every good UFC card.

    Boxing has had a bad run but good personalities and exciting fighters like Hatton will lead to a surge in popularity. I honestly think that MMA will have a positive impact on other combat sports. People will get drawn in by the “craziness” of MMA but then decide, “hey, I like kickboxing / boxing / submission grappling the best” and start focusing more on those sports.

    Long story short, this is a blip on the radar, and there is going to be a lot more upheaval in the industry before it settles down.

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