Private Equity Chases Boxing, MMA Investments in Untapped Market
According to PitchBook Data, between January 2020 and February 2021 private equity funds invested 7.8 billion euros (or $9.41 billion) into U.S. and European sports properties—a 50% increase over 2019. The revenue lost because of the Coronavirus outbreak (think: no fans in attendance) helps explain the need for capital and resulting spike in investments made. Former UFC chief financial officer and current sports, media and talent adviser Nakisa Bidarian said investment interest in fight sports has been “more feverish” in recent months than he has ever seen. But the BAVAFA Sports founder is not attributing the rise in activity around boxing and MMA to the pandemic. He noticed inbound calls began to pick up following last November’s Mike Tyson-Roy Jones Jr. fight. “That single event spurred a massive amount of interest from smaller private equity firms looking to get into the fight space,” Bidarian, who served as an executive producer for the event, told Private Equity News.
Our Take: Bidarian’s evidence of increased investor interest was purely anecdotal. But he pointed to the $65 million Series D round raised by the Professioanl Fighters League in January—co-led by Ares Capital, Knighthead Capital and Elysian Park Ventures—and the site fee being tossed around for an Anthony Joshua–Tyson Fury fight (see: record $150 million) as other examples. Then consider UFC owner Endeavor’s successful IPO at a $10 billion valuation, and it seems investor demand for premium fight sports content is high.
The Tyson-Jones fight sparked the uptick in interest because it opened existing investors’ eyes to new possibilities while catching the attention of new prospective investors. Having “a first-time promoter in Triller putting on a pay-per-view event for the first time, and [it] becoming the eighth most successful pay-per-view—or seventh by some measures—in history,” Bidarian said, made people take notice. The former UFC executive compared this newfound interest to “the organizations that popped up in martial arts post UFC’s success. People understand the business model and feel like they have the ability to replicate [the success] and create their own corner of the market,” he said. It is worth noting Donn Davis started developing the Professional Fighters League concept on the day Frank and Lorenzo Fertitta sold controlling interest in UFC to Endeavor (2016).
The way Triller produced the Tyson-Jones event, tying in musical performances to create a mixed sports-and-entertainment spectacle, changed the PPV paradigm and has investors now thinking differently about the business. It also resulted in some new money coming to the table (think: media/entertainment focused funds). “November 28 and Triller’s April 17 PPV headlined by Jake Paul were something different that no one had seen before in boxing. As a result, there are innovative ideas, and there is fresh interest from investors to get involved in putting on events that have a global monetization opportunity,” Bidarian said.
The underlying fundamentals of both the fight sports audience and the fight sports business have investors excited about boxing and MMA. Speaking specifically about MMA, PFL founder and chairman Davis said there are 550 million mixed martial arts fans worldwide, a figure that trails only soccer and basketball. “People in the U.S. think of MMA as a niche sport,” he said. “It’s not, it’s a mass sport.”
Aside from the massive fan base, combat sports tap into “the next sports viewing audience,” Davis explained. Boxing and MMA draw a young, culturally diverse audience with a propensity to use streaming services. “If you were going to allocate money as an investor, you’re building a portfolio allocation of global sports rights, you would say ‘mobile, high action, short-form, and global’—and that is bullseye of MMA,” Davis said.
Fight sports are by nature short-form and high-action, making them ideal for a mobile consumption. That may help explain how boxing has risen (according to Two Circles’ Future of Fandom research) to become the fourth most popular sport amongst Gen-Z, behind only football, basketball and soccer (MMA is ranked sixth). And in many countries, watching on mobile devices is the most popular form of viewership (think: India, China). “So, [fight sports] lend themselves back to being the best type of global sports IP that exists for investment,” Bidarian said.
In addition to a large global audience to tap into, fight sports investors see an underserved market. Each year, “UFC has offered the audience 40 events,” Davis said. By comparison, “There are 6,000 basketball games. There are nine soccer leagues each with over $2 billion [a year] in revenue. So, when you look at the amount of product delivered to the MMA fan base, they are extremely underserved and under-monetized.”
At least on the MMA side, investors see the potential to realize tremendous profit margins. “When you look at the UFC part of the Endeavor IPO, you see what a good business MMA is,” Davis said. “It’s a superior business model to all other sports. The profit for the UFC is almost 40% bottom line. No other sports property delivers like that. None.”
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