UFC Sets New Precedent With Chinese Market
Commitment to the Chinese Market
The UFC has fully committed to pushing their product into the Chinese sporting market. Back in 2013, the MMA giant decided to take its product to Chinese television. Liaoning Television would play host to its first season of the UFC’s longstanding reality TV series ‘The Ultimate Fighter’. This allowed the UFC to introduce China to MMA prior to having their first event in the nation.
From 2014 to the present, the UFC has averaged about one event in China annually. In fact, they just completed their sixth live event in the country at UFC Fight Night 157. At this show, they crowned their first-ever Chinese UFC champion, Zhang Weili. This series of events made the UFC’s interest in the Chinese market abundantly clear. But nothing spoke more to their commitment than their construction of the UFC Performance Institute in Shanghai, China.
Opened in June of 2019, the new facility is the world’s largest MMA training and development facility. By comparison, the Shanghai facility is three times larger than the original UFC Performance Institute. The building is teeming with state-of-the-art equipment, and professionals devoted to athlete development. It offers cryotherapy, weightlifting, cardio machines, boxing rings, UFC octagons, physical therapists, swimming pools, and much more. But having so much to offer under one roof inevitably comes at a steep price.
Theoretical Facility Costs
Building a Performance Institute in Shanghai is a fascinating market strategy. Though the UFC has a vested interest in becoming an international sport, they’ve never pursued a new region quite like this. The construction cost of the building was reported at 13 million dollars. While this is a massive investment, it likely doesn’t hold a candle to the cost of staffing the 93,000 square foot training facility.
According to the Life Cycle Cost Analysis (LCCA) method, over 30 years time, the original construction of a facility accounts for roughly 2% of the costs associated with owning it. Operations and maintenance usually account for about 6%, and personnel salaries make up about 92%. If we apply this concept in reverse to what we know about the original construction cost, the UFC could be paying close to 20 million dollars annually just to staff the place. We have no way of knowing what the cost is to maintain a facility of that magnitude, but let’s say those figures are accurate. Even with the backing of a business titan like WME-IMG, that’s a pretty large nut to crack consistently. But the Las Vegas giant has moved a sizable pile of poker chips towards the middle of the table. Why now, and why China?
WME-IMG’s Connection to Chinese Market
WME-IMG officially purchased the UFC from Zuffa in July of 2016. One month before that, WME-IMG announced a joint venture with some of the major players in Corporate China. This included a partnership with a large American venture capital firm called Sequoia Capital, and a Chinese investment holding conglomerate by the name of Tencent. Though WME-IMG already had a strong presence in the country, the company saw a major opportunity for expedited growth in the region. Almost three years later to the day, the UFC–now owned by WME-IMG–opened up the Performance Institute in Shangai. The new building could have a two-pronged effect. On one end, the facility theoretically solidifies WME-IMG’s foothold in China. On the other end, the exposure creates tremendous growth opportunities for the UFC.
Opportunities for the UFC in China
China has a population of roughly 1.4 billion people. To put that into perspective, China’s population exceeds the combined populations of North and South America by hundreds of millions. It’s literally the most populous country in the world. China also has one of, if not the largest economy on the planet. For a global sport hellbent on expansion, it’s an impossible region to ignore. In addition to the wealth of monetary opportunities, there is a mass of potential for new athletes to be discovered, developed, and added onto the UFC roster.
With the backing of WME-IMG, the UFC’s opportunities for international growth and expansion have never been greater. As more nations and new populations experience firsthand exposure to mixed martial arts, the talent pool will continue to deepen. This will inevitably raise the MMA skill bar to new heights. Early on, many fans were concerned with the changes that might come from WME-IMG purchasing the UFC. Although a corporate buyout was understandably unsettling for many, it’s exciting to see new international opportunities that have likely been catalyzed by the purchase.