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It was not a fair fight. Competitors in mixed martial arts years ago sued the UFC and its corporate predecessors, accusing them of running an illegal “monopsony”. The MMA fighters alleged that UFC prevented competition in the sport’s labour market, which left them almost contractually bound to only enter fights put on by the UFC organisation. As such, they were deprived of fair, market-driven wages, which they said had cost them $1.6bn in aggregate. The litigation was supposed to be a landmark in worker’s rights.
Rather than go to the mat, UFC earlier this month settled the pending cases for $335mn, before a scheduled April trial. Ultimate damages could have been in the several billion dollars region so the settlement, while not cheap, was worth resolving early.
The once-fringe sport has minted billionaires among its early backers and lured investors over the years such as KKR and Endeavor. But the headlines of late have not been pretty. UFC last year was spun out of Endeavor and then combined with WWE, the pro wrestling league, at a $21bn valuation. Its shares have tumbled almost 15 per cent since the deal closed.
Wrestling mogul and WWE founder Vince McMahon earlier this year left the board of the combined company, called TKO Group, after he was sued for sexual assault. He has denied the charges.
TKO still has an enterprise value of $18bn. WWE recently signed a blockbuster media rights deal with Netflix for $5bn over a decade. But the question now is if it can grow beyond its scrappy roots to be a professionally managed organisation that belongs in the big leagues.
Pro sports, particularly in individual-based games like tennis, golf and fighting, benefit when the top talent is in a single league. But a dearth of competitive options can, at the same time, depress the wages of these athletes. According to preliminary fact finding from the court, UFC had utilised “ruthless coercive techniques” to keep fighters in line.
TKO trades at a healthy 15 times its forecast 2024 ebitda. The $335mn settlement with the class action group is to be paid in instalments and is supposed to be tax deductible, further mitigating the company’s burden.
As a provider of unique content around the world TKO should be able to withstand the ongoing seismic shifts in media and entertainment. Its rough characters have not so far dented its popularity with fans over the years. But as a standalone, large, public company, this is an important round. TKO had better be ready for its moment.
sujeet.indap@ft.com
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