Editorial: Can Bellator catch up with the UFC?

Bellator 179 is this Friday. It’s a strong international card in my home town of London. While it suffers from the loss of Michael Page, it has a can’t-miss headliner in Rory MacDonald vs Paul Daley, as well as a decent matchup between Linton Vassell and former champion Liam McGeary. It represents an international expansion from Bellator, begun with the “British Invasion” storyline.

Bellator has some momentum at the moment. It has signed a number of medium-to-big name fighters in recent years, including MacDonald himself. It has been pulling down decent TV ratings and there is some buzz about its latest foray into the PPV marketplace.

So here’s the big question: whether the upstart can cause a serious shakeup, and whether it can step onto equal footing with the 900lb gorilla in the room, by catching up with or overtaking the UFC.

It’s an interesting question, one which has been asked implicitly or explicitly a number of times. The answer… is no? No. Outside of massive, unpredictable shocks, it is near-impossible that Bellator can catch up to or overtake the UFC any time in the remotely near future, and most likely ever.

The UFC has a brutally strong grip on this sport; in many ways it defines it. The acronym “UFC” is literally better-known than “MMA”, a basic advantage which would be like people knowing basketball as NBA, or soccer as FIFA. It is likely the most successful PPV company in the world. It has a collection of lucrative international domestic and international TV deals. It has its own streaming service in FightPass, through which it also owns much of the history of the sport via its video library. It has, per the nonpartisan FightMatrix, about 80% of the top 15 MMA fighters in all of its major weight classes. The relative nature of rankings means that this is even more of a barrier than it looks, because it means that being the best fighter in the world is defined by being at the top of the UFC(1).

Nothing is forever, though. The UFC is only a company, and one which has made several errors lately. Bellator, while vastly smaller, has been making some strides. So why is it so impossible for Bellator to catch up?

Disruption from below

Here’s the Google Trends search for Bellator vs the UFC by geography.

Source: Google Trends

The highlighted areas are relative (the UFC is obviously gigantically more popular), but the point here is about shape, not scale. The two organizations have extremely similar basic footprints, so Bellator is, in a not insignificant way, underneath the UFC.

If we think of a disruption in any marketplace, instinctively it feels as though it should be about the #2 overtaking the #1. However, the idea of disruption as being something which happens from below is rarely borne out in almost any kind of complex system. An entity which rests in an ecological niche is rarely simply shoved out by a smaller or weaker entity which comes along and tries to do the same thing, for obvious reasons. The incumbent is better suited at taking in the necessary resources and will outcompete and/or starve the challenger in a head-to-head. In this case, the UFC is taking up pretty much all the available UFC-shaped space in the market, and what it gives up it largely does voluntarily.

The old Rebney-era Bellator made a valiant effort at being a UFC-like organisation with a twist. It tried to build its own stars through its tournaments, and did a fine job of moneyballing relatively unknown Caucasus fighters(3). Overall, however, this incarnation of the organization did not develop significantly past its first few years, and Rebney was somewhat unpopular with the fighters.

This occurred approximately as the MMA boom was slowing, and the primary lesson which everyone learned was that demand was not unlimited. The UFC realized it couldn’t clog the airwaves with content and expect TV shows and international events to seed fans in the same ways as their earlier offerings. Bellator couldn’t put on decent fighters with coherent tournament storylines and expect to pick up much traction. In the end, everyone was pulling from the same relatively limited pool of fans. If that pool expands beyond a certain point, it does so slowly, and in fits and starts.

Additional pressures of expectation were put on when Strikeforce was bought up, and Bellator moved into its position as the number 2 MMA organization by default. In the end, the solution would be to make Bellator more like Strikeforce, by removing Bjorn Rebney and bringing in former Strikeforce CEO Scott Coker.

The reinvention of Bellator under Coker has straddled the difference between being UFC-lite, and being a parasite of the bigger organisation. While retaining the old Bellator’s belts, fighters and nominal competitive structure, “SpikeForce” has used targeted the gaps in the UFC’s approach. Essentially, If Bellator couldn’t compete on sporting legitimacy, it would capitalize on nostalgia and the freak-fight appeal which defined the earlier UFCs- things which it largely left behind as it became more mainstream. This has included things like one-day tournaments, kickboxing, more pro-wrestling promotion, and crossovers. In terms of event structure, however, the Bellator product has started to mirror the UFC more, with events clearly divided into approximate silos: lower grade TV fodder, and larger tentpoles.

Without the brand or promotional capabilities to make its own stars, it also started to target ex-UFC mainstays as centerpieces, and big-ticket events have almost entirely been based around these fighters. Debatably, its only non-UFC star is Fedor, and it’s difficult to think of him as not being a relic of a time when there was more genuine competition between the top dogs in the market, and a man who looks to be steadily gathering speed along the downslope of his career(3).

Bellator has no major home-grown stars, and those which it might build (say, if Aaron Pico lives up to his potential) will then immediately be buried by questions about why they’re not in the UFC.

The brand and promotional machine of the bigger organization are rocket fuel for potentially lucrative fighters, and necessary to push them out past the gravity well of what is still a fundamentally niche sport. Conor McGregor is the biggest draw MMA has ever seen, but he added basically nothing to the buyrate of UFC 178, until the UFC had established him as a main event, championship-level property. Ronda Rousey was a charismatic belt-holder in Strikeforce, but transferring over the UFC gave her the ability to make huge leaps in popularity.

Bellator can do well by marketing itself as the entertaining alternative to the UFC. However, attempting to step into the bigger area of consistent legitimacy would be extremely difficult, and would damage its ability to be the “fun fights” organization. The pessimistic take is that the strategy itself is concession to the UFC’s dominance.

Disruption from the side

If disruptions occur relatively rarely from similar entities, then where do they actually come from? The relatively unhelpful answer is “from unexpected angles.” I’m not sure what an angular disruption would be in MMA. Maybe a massive fad in the Chinese / East Asian marketplace turning ONE into a behemoth which could go head to head with the WME|IMG organisation(5). Perhaps the Caucasus organizations could provide enough cash injections and build off existing cultural trends for a critical mass to arise over there(6).

Alternatively, disruption can occur through destruction, where an external shock destroys or weakens the incumbent, leaving the niche empty for a challenger to slip into- a punctuated equilibrium or Great Leveler mechanism. In this case, say, the fandom stops caring about MMA for some reason, similar to what happened in Japan. The UFC would collapse… but Bellator is interlaced with a subset of the UFC’s market, and would likely follow suit. If the sport then came back to popularity at a later date and a phoenix rose from the ashes, it seems probable that it’d be a UFC spinoff, or a completely new player.

Aside from these hypothetical doomsday scenarios, the upshot is that the UFC is not going to be overtaken by a UFC-like company, i.e. one occupying the same geographical, financial and demographic market, unless it messes up astonishingly, bizarrely badly. This scenario is also mostly separate from the mistakes that its parent company might make. Even if WME|IMG suffers a significant downturn, or finds out that it has levered up too heavily in buying the organization, the UFC itself will remain a relatively independently functioning, profitable business with a great brand which can be sold off in a pinch to another faceless corporate machine.

As much as some might think that letting top 10 fighters go might qualify as a potentially lethal error, it simply isn’t true. It can look like it is, particularly when measured against recent events.

Here, almost every major division in the UFC has recently been clogged or become tangibly less interesting via, among other things, a failed drugs test, cynical matchmaking, an attempt at a silly boxing bout, the departure of a divisional touchstone, and a breathtakingly terrible title fight. This is bad for viewers and bad for the organization as well, but it is the kind of hit which the UFC has absorbed before, and recently, in its underwhelming 2014.

It is disappointing, though, and there are many fans who would like to see the UFC get the boot for it. People root for scrappy underdogs; want more competition; just want a different flavour of MMA. This kind of hope looks small measured against the realities of the situation.

The rise of Bellator is likely a net good. It makes more of a market for fighters and causes pressure to pay more for second-tier draws. Absent this pressure, those fighters would continue to get low-balled(7). However, that is as far as it goes. There is nothing existential about the threat that Bellator poses to the UFC, and the pressure it represents is annoying rather than dangerous.

Profitability is and will likely be built from its position firmly beneath the larger organization: giving the older fighters who burned their bridges a new lease on their careers, stretching out the bid-ask spread for younger fighters unhappy with the UFC meatgrinder, leveraging the gap left by the Reebok deal, and trying to get to prospects like Pico and Bubba Jenkins(8) early enough for purchasing power between organizations to be approximately equal(9).

It can improve, it can close the gap somewhat, but only a tiny amount, and probably only while the UFC is in a downturn. Bellator is best served to try and be the greatest second-place organization it can be. The organizational, financial and reputational barriers to doing more are basically insurmountable.

Notes

1. For example, back in 2012 Strikeforce was the clear #2 organization. In retrospect it probably had a stronger top to its middleweight division than the UFC did, with at least three fighters (Jacare, Rockhold and Kennedy) who were better than just about everyone who wasn’t Weidman or Silva. Yet here are Sherdog’s 2012 rankings, where Rockhold scrapes into the Top 10. Sherdog aren’t and weren’t “UFC shills”(2) and I think most would have agreed with those rankings, or something like them. It’s necessary to have some kind of consensus firm ground, otherwise judging ranked fighters in separate organizations becomes an eye test. That firm ground is, and has been for many years now, the UFC. As men like Gilbert Melendez found out, it just doesn’t matter how well you fight or how consistently you defend a belt- since Fedor lost, the UFC champ is always the #1, and other rankings mostly stream from that.
2. Don’t do this.
3. This isn’t a crippling issue for a company which happily puts Ken Shamrock and Royce Gracie into fights, but Fedor’s management is historically finicky and likely have a vested interest in him being seen as a stone-cold killer, not a sideshow.
4. Unfortunately (like most Moneyball-like strategies) there was little to stop the UFC from copying this idea. So it did. Then, the sport got enough traction to become a social signifier for Caucasus oligarchs, so those fighters have started to be pulled back home to organisations like ACB by bigger purses. See: Karim’s pieces.
5. The Tai Chi vs MMA story is an interesting seed to keep an eye on, perhaps?
6. Although PRIDE already demonstrated the potential problems with a business model which is tied into high wealth individuals in “unstable” businesses, like the Yakuza, or kleptocracies.
7. They’re probably being low-balled even at the upgraded Bellator salaries, but it’s better than nothing?
8. It doesn’t always work out!
9. This logically leads to a “get-’em-young” arms race for prospects, as in other sports. Try to snaffle up the youth before the other org can, by offering him or her something which would appeal but which isn’t too expensive. If he or she gets crushed by the brutality of a closed professional MMA ecosystem, at least it’s a better outcome than going to the other promoter. Thus anyone who thinks that the UFC matches their prospects hard at the moment might want to keep an eye on whether this proves to be a profitable line of business. Sage Northcutt has probably been a pretty good investment, all things considered.