UFC Parent Heavily Reliant On Sports Betting Industry In Rebooted IPO Plan

Endeavor Group Holdings touts sports wagering opportunities in recently filed paperwork
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The parent company of the Ultimate Fighting Championship, the global leader in MMA promotion, is taking another stab at going public after an unsuccessful attempt in 2019. Endeavor Group Holdings Inc. filed paperwork with the Securities and Exchange Commission that was released on March 31.

California-based Endeavor, which generates a growing portion of its revenue from the UFC, mentioned the growth in spending on media rights associated with gambling.

“Spending on media rights continues to be a significant component of revenues in the sports industry with rights values appreciating consistently over the past decade,” the firm said. “Our market constituents include linear and digital distributors, which acquire sports media rights and broadcast sports content.”

Endeavor noted that global sports media rights are projected to see compound annual growth of 8% (CAGR) to $53 billion in 2023. “The rise of streaming, increased legalization of sports betting, increased competition from tech entrants, and continued viewership appeal attribute to the projected growth on the rights price tags,” Endeavor noted.

In 2019, ESPN acquired the UFC television package under a five-year deal worth $150 million per year.

While the UFC is headquartered in the U.S., it noted that it should be able to capitalize on global sports betting growth. The promotion has athletes from all around the world and has held events in many different countries over the years, including some with legal sports betting.

“The global sports gaming industry comprised of land-based and interactive sports betting grew at a 10% CAGR from 2017 to 2019, reaching $42 billion (gross win) in 2019, and is expected to grow at a 12% CAGR through 2024 to $76 billion, according to H2 Global,” Endeavor noted. “As of February 2021, 25 total states across the United States have legalized sports betting, and sports betting is currently operational in 20 states according to the American Gaming Association.”

Endeavor purchased the UFC in 2016 for more than $4 billion from Las Vegas casino moguls.

Additionally, Endeavor sells UFC data to sportsbooks through another one of its products.

“Through IMG ARENA [based out of London], we work with more than 470 leading sportsbook brands worldwide to deliver live streaming video and data feeds for more than 45,000 sports events annually, as well as for on-demand virtual sports products including our own UFC Event Centre,” the firm, founded in the mid-1990s as a talent agency, stated.

Just this week, IMG ARENA acquired another data firm called FlightScope to boost its business.

Popularity of wagering on the UFC?

MMA is not a popular betting sport, compared to others in the United States. The Colorado sports betting market breaks down betting handle to include MMA, and the sport generates just 1% of total handle. It’s a fringe sport to the U.S. gambling public.

More than $21 billion was bet on sports legally in 2020, so, based on Colorado’s figures, the regulated MMA betting handle nationwide projects to about $210 million. MMA includes more than just the UFC, as there are other promotions, such as the California-based Bellator MMA. However, the UFC surely commands the vast majority of the MMA handle across the U.S.

Assuming a sportsbook hold percentage of 7%, in the ballpark of $15 million in revenue from MMA betting was seen nationwide in 2020 from regulated operators. That’s not much. It’s unknown how much was bet via offshore websites that still exist in both unregulated and regulated state markets. Only 40% of U.S. states had legal sports betting last year, with the massive markets of California, Florida, New York, and Texas still untapped to online apps.

Just this week, New York reached a tentative and controversial plan for online sports betting.

The sports world was shut down during spring 2020, including the UFC, though the MMA leader was the first U.S. sport back holding live events without crowds, so it enjoyed a bit of a boost last year from that.

The UFC trails far behind the sports industry average in terms of live wagering handle, so there could be room to grow its handle share compared to other sports if bettors start betting more during the fights as opposed to before they start. Live wagering is expected to be the major growth area for the U.S. sports wagering industry in the near-term.

The UFC recently signed an exclusive $350 million, five-year betting partnership with DraftKings, which is one of the top players in the U.S. market. It could boost live wagering.

More recently, the UFC and the casino industry lobby teamed up to promote responsible gambling and educate the gambling public about regulated gambling apps.

The UFC is Endeavor’s most prized asset. “Our most transformative acquisition was the UFC in 2016, adding a one-of-a-kind, global, and category-defining sports organization to our portfolio,” the firm stated.

Major shift in identity for Endeavor

As The Hollywood Reporter noted, Endeavor describes its business differently in 2021 than it did in 2019.

“Endeavor is a premium intellectual property, content, events, and experiences company. We own and operate premium sports properties, including the UFC, produce and distribute sports and entertainment content, own and manage exclusive live events and experiences, and represent top sports and entertainment talent, as well as blue chip corporate clients,” the firm said in describing its business.

Sports (and betting) is more of a company focus due in large part to the pandemic’s impact on its business, per The Hollywood Reporter. Endeavor’s representation business had a 43.6% decline year-over-year as Hollywood productions and music venues shut down.

Combined with the Professional Bull Riders asset, Endeavor’s sports business saw nearly $1 billion in revenue last year, up nearly 2% year-over-year. “The majority of UFC’s revenues are earned from contractual long-term media and pay-per-view deals that allowed UFC to continue generating strong results, despite the pandemic,” wrote a pair of Moody’s analysts, per the report.

Per the regulatory filing, Endeavor’s current debt stands at $5.7 billion. Last year, the company saw revenue of $3.47 billion with a net loss of more than $625 million. An IPO date hasn’t been set.

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