On the afternoon before one of the biggest mixed-martial-arts fights of 2012, a group of Ultimate Fighting Championship employees takes up position in a sun-blasted parking lot outside the Mandalay Bay Resort and Casino. It's July in Las Vegas. It's 103 degrees of unpleasant. And it's about to get worse—because UFC president Dana White just tweeted their location. White is giving away 20 $1,200 tickets to this weekend's UFC 148 (most fight cards are named by number), headlined by a rematch between Brazilian middleweight champion Anderson Silva and his American nemesis, Chael Sonnen. Any fan who shows up within 20 minutes with a can of UFC-branded Edge shave gel will be entered into a ticket raffle.
It takes less than 10 seconds for Isiah and Dominique Quintanilla, teenage brothers from Visalia, California, to materialize from the back stairs with cans. "Some guy offered us $66 for one," Isiah says. UFC fans, it seems, had cleaned out drugstores on the Las Vegas Strip.
Minutes later, a horde bursts from the casino—mostly men in the UFC's coveted 18- to 34-year-old demographic, but women, too, in a dead sprint. They stampede toward the UFC team, grooming products in hand. Some hurdle a chain in the parking lot. One woman tries to scale a fence and bloodies her knee. In the fight business, these fans are known as hardcores. They buy the UFC's pay-per-view shows, which blend wrestling, Brazilian Jiu-Jitsu, Muay Thai, and other combat styles into an action-packed, often-bloody sport known as mixed-martial arts, or MMA. They buy apparel and merchandise. Above all, they buy into a UFC lifestyle that celebrates everyone's inner warrior.
"Fighting is in our DNA," White likes to say. It's an easy sell. But that dismisses a larger achievement: In a decade, the UFC turned what was essentially a no-holds-barred spectacle banned throughout the country into a sanctioned sport with mass appeal. MMA is now one of the country's fastest-growing sports. And the UFC has become one of the world's most valuable sports franchises, with annual revenue approaching $600 million, according to one of its owners—and a worth, if you believe the smoke signals, of more than $2 billion. That's more than the New York Yankees, more than the New England Patriots, more than Real Madrid. And there's seemingly more to come. In 2011, the UFC signed an unprecedented $700 million deal to air fights in prime time on Fox, the goal being to turn fringe fans into "casuals" and casuals into hardcores. Fight sports have been extremely rare on prime-time network TV since the 1980s.
Now the UFC is at a critical juncture. It could join the country's major sports leagues—an ascension fueled by big profits, network TV acceptance, and aggressive international expansion. Or, the UFC could mismanage its growth—by fatiguing fans with too many events, failing to resolve labor tensions with fighters, or simply overreaching. And, of course, there's an inherent question the UFC is finally large enough to confront: Is this sport too violent to thrive in mainstream America?
On that last point, especially, White already has his answer. When the last Edge cans are collected, he wades into the mob to cheers of "Da-na! Da-na!" As UFC publicists never fail to mention, you don't see NFL commissioner Roger Goodell doing this. You don't see the NBA's David Stern. Hell, the MLB's Bud Selig barely knows how to use a computer. White, on the other hand, is an Internet-age P.T. Barnum, or Don King on Twitter minus the hair and a murder rap. He stands there for an hour in heat that could bake an apple. He poses for every photo and bro-hugs every bro. He stays until the last fan is gone.
A visitor to White's office in the headquarters of Zuffa, the UFC's parent company, will encounter a yakuza member having sex with a young woman. The giant Nobuyoshi Araki print hangs on a wall next to a giant print of Mike Tyson's bull neck, which isn't far from a giant print of a gorilla holding a gun. A partial list of the room's other contents: a painting that blares "Pay attention, motherfuckers!"; copies of the Old and New Testaments carved into the shape of pistols; a $380,000 print of a naked Stephanie Seymour hanging over the toilet. The showpiece, however, is against the back wall inside a glass case. "Check this out," White says, hovering reverently over the case. "I bought it from a museum in Dallas." It is a fossilized sabertooth tiger skull. It cost $160,000.
By contrast, Lorenzo Fertitta, the UFC CEO and White's best friend, has a Basquiat hanging in his adjacent office. He won't talk about the painting unless prompted. Fertitta and White met in high school. As different as they are, they complement each other nicely: White's streetwise yin to the pensive yang of Fertitta, a New York University business-school grad who focuses on strategy.
"I grew up in a housing development just over there," Fertitta says, waving his muscle-bound arm past a window down West Sahara Avenue. Up the street is his junior high school, where his mom used to pick him up to go see boxers train at Caesar's: Larry Holmes, Tommy Hearns, the whole Kronk team. The boxers would sign autographs and hang out with fans. This personal connection hooked Fertitta on fight sports.
He nods to the east: "Down there is the first casino my father built." A low-slung building with brown carpets and a bingo hall, the casino, now known as the Palace Station, was opened by Frank Fertitta Jr. in 1976, attached to a motor inn off the Strip. Frank's target clientele was unusual: Las Vegas locals. "People thought he was crazy," the son says. And just crazy enough to bequeath what the Palace Station turned into—a gambling hub worth hundreds of millions of dollars—to his children, who had ambitions of their own.
Fertitta and White didn't start the UFC. That happened in 1993, with a group of businessmen and martial artists who wanted to pit different fighting styles against each other—to see if, say, a practitioner of the "Hawaiian art of bone breaking" could beat a barroom brawler. (Answer: no.) A few years after that, Fertitta, White, and Fertitta's older brother Frank III were taking classes in Brazilian Jiu-Jitsu, a fighting style that had come to dominate the early UFC. They met several of the company's fighters, and White was the first to spot opportunity: He ran a small business managing fighters and signed two of the UFC's, Tito Ortiz and Chuck Liddell.
But when White and Fertitta attended UFC 27 in New Orleans in September 2000, they were stunned by the empty arena and the anemic marketing. "There was no buzz at all," Fertitta says. "We're literally sitting in the front row and I'm going, 'This has gotta be one of the worst-run businesses. What is missing here? There could be much more to this.'"
The UFC was a victim of its own gore. In its early days, there were no weight classes, no time limits, and only two banned moves: eye gouging and biting. Fighters could surrender (and still can, by tapping out), but promoters played up the death-match atmosphere. That prompted Senator John McCain to successfully petition governors around the country to ban MMA. McCain also pressured cable companies to take the sport off the air. Although the UFC adopted better rules—creating about 30 fouls, such as throat strikes and head butting—it was too late: The company was near bankruptcy. A month after White and Fertitta's New Orleans visit, it went up for sale.
White persuaded Fertitta and Frank III (known as "Three Sticks"), who now runs the family casino business, to take a chance. The Fertittas plunked down $2 million and gave White a 10% stake in the company; in exchange, he took over running day-to-day operations. Now they looked crazy. But Fertitta had served on the Nevada Athletic Commission, which oversees boxing, a sport deep into its nosedive by 2001. "We felt like we had a better product than boxing," he says. "It was the next evolution. But it was as much about the brand as anything."
The new owners began an arduous process of rehabilitating the company's image by further increasing safety measures and working with states to lift their bans. But news coverage was slim, and pay-per-views didn't sell. By 2005, the UFC was $44 million in the hole, and the Fertittas were covering expenses from their personal accounts. They decided to take one more chance.
World Wrestling Entertainment provided inspiration. Fertitta and White had pored over its public filings when they first bought the UFC. Now they copied the WWE's model. "[WWE] had mastered the ability to use television to suck people into a story line," Fertitta says. And story lines fueled pay-per-view buys. So the UFC came up with one of its own, tailored to the reality-TV boom of the time: They envisioned a show about a group of fighters living together as they duke it out for a contract. "We met with ABC, NBC, Fox, MTV, Spike—I mean, literally everybody," Fertitta says. "And everybody turned it down."
So the UFC produced the show on its own for $10 million, gave it to Spike for free, and spent another couple million on ads and billboards. The Ultimate Fighter became the highest-rated show outside of WWE to ever air on the men's network. More than 2.5 million people watched the first season finale between fighters Forrest Griffin and Stephan Bonnar. As Fertitta and White left the arena that night, Spike execs grabbed them and drew up a deal on the back of an envelope for two more seasons of the show, plus other programming. The UFC quickly went on to pass the WWE—and HBO boxing—in pay-per-view audience.
To appreciate the economic system that Fertitta and White have since fostered, stop by its regular UFC Fan Expo. This one is at the Mandalay Bay, in advance of UFC 148, where fans wander by exhibitors with funky names such as Muscle Egg and Sweet Sweat. They buy apparel from TapouT, which pulled in more than $200 million in 2009 (the last year it offers data) by plastering its logo all over UFC fighters and riding MMA's rise. Large brands are here too—Topps trading cards, Bud Light, and Dodge.
You don't get sponsors at that level without big-time stars, and the UFC is constantly working to humanize cauliflower-eared men who break noses for a living. "Our culture is that you interact with the fans," Fertitta says. "If you're not willing to do that, you can't be on the roster." That's why heavyweight champion Junior dos Santos—a 6-foot-4-inch, 238-pound Brazilian superstar—arrives early for his autograph session at the expo, his demeanor as unthreatening as an oversized accountant's. This weekend, he's one of more than 50 of the company's 442 fighters in town to glad-hand.
As part of their duties, fighters also stop by the EA Sports tent to pose for the game maker's cameras. It's a live stunt with a purpose—the images will be used in EA's 2014 UFC game. Video games address a key obstacle for the UFC: The sport's intricate, on-the-ground combat wrestling moves can be hard to appreciate, so future fans need schooling. "As these kids start playing the game, they start understanding fighting very well because of in-game tutorials," says Bryan Johnston, the UFC's chief marketing officer.
Once fans are educated, the UFC wants to turn them into paying viewers. It already has a robust pay-per-view system; a successful event can notch 700,000 buys at around $50 each. (This is also why the UFC partnered with Xbox Live, which, with 40 million subscribers, is one of the largest pay-per-view platforms in the world.) The UFC stages at least one pay-per-view a month and, during each event, airs a few preliminary fights on Facebook and a few more for free on cable TV. These might scoop up some casual viewers one night, but the real prize is in the future: A broad base of fans won't have to pay to see the UFC's lower-tier fighters. If those fighters graduate to pay-per-view events, the fans are more likely to follow.
Using free content to hook viewers is nothing new. But the UFC's 2011 partnership with Fox is. The seven-year deal gives the UFC an unparalleled platform from which to recruit new fans. (Fox, for instance, promotes UFC fights during NFL broadcasts.) And there's a hierarchy to the content that's consistent with the way the UFC grooms talent. The Fox-owned Fuel TV—the cable baby of the bunch—generally airs cards with lesser-known fighters. Another Fox property, FX, is the teenager, showing events with more established fighters. And Fox prime time is the daddy, airing cards roughly on par with the UFC's elite-level pay-per-views.
It's been a learning experience. The first Fox show, last November, was a one-hour live event built around a single fight. After some seemingly interminable throat-clearing from commentators, dos Santos knocked out his opponent in just one minute and four seconds to win the heavyweight title. (Championship fights can go for five five-minute rounds.) The limited action left fans disappointed and Fox wondering how better to showcase fights, which can be hard to predict.
Now the Fox shows are well planned; each has four fights, with commentary in between. If a bout ends in a quick knockout, Fox can plug the gap in airtime with one of the preliminary fights. The shows air about once every three months.
How many new fans can the UFC make this way? It's too early to tell. The first Fox event drew 5.7 million viewers, but that number has slipped since. A Fox show in August drew 2.4 million (though it was up against the Olympics). Still, the network seems excited by the potential. "We're going to go through a wall for them and they're going to go through a wall for us," says Eric Shanks, president of Fox Sports, "and that's a rare thing in the sports business."
An American audience isn't the UFC's only stated prize. A global one is, too—and here, the company is making inroads that the NFL and others might envy. White often crows that MMA will soon be "the biggest sport in the world," and you can see why he's excited: UFC programming now reaches more than half a billion homes in 175 countries and in 22 languages.
The UFC has border-hopped since 2007, first into Europe and Canada, then Australia, Brazil, Japan, China, and the Middle East. The next step is both simple and excessively difficult. Any international fan knows it: "We need a [local] hero," says Puerto Rican journalist Angel Cordero. He runs a site called The MMA Truth that caters to a Latino audience, and he is convinced his boxing-obsessed homeland will embrace MMA—but only when Puerto Ricans can root for one of their own.
Brazil is the UFC's model country, a place with a tradition of martial arts and local heroes, none of them bigger than Anderson Silva, one of whose fights drew 32 million local viewers. The UFC has put on four live events in Brazil since 2011. It also went back to its American playbook—launching a Brazilian version of The Ultimate Fighter, which was a smash hit, generating the same level of social media buzz as Brazil's 2010 presidential elections. MMA is now challenging to be the No. 2 sport in this soccer-crazy country.
Here, the UFC sees a formula.
First, it studies web and social media traffic, and talent scouts track where in the world fighters are being produced. If a particular region looks promising, UFC envoys start educating local government agencies about safety and rules. (Severe injuries are rare, although a handful of people have died in unregulated amateur MMA fights and the sport is too young to know whether a concussion problem exists.) Then the UFC reaches out to local broadcasters, seeking deals in which the company provides free content, packaged for TV. In return, the carrier must agree to position the UFC as tentpole programming and air it exactly as provided. "If you are selling a can of Coke, you want it on every shelf," says Marshall Zelaznik, the UFC's director of international development. "In our world, every shelf means a free-to-air broadcaster."
In India, for example, the UFC has partnered with the popular TV network Multi Screen Media, which airs a daily 9 to 11 p.m. UFC show on its sports channel. "India has traditionally been a one-sport nation, which is cricket," says Man Jit Singh, Multi Screen Media's CEO. "Our research pointed out that the young people in India are tired of their parents' game. They are not watching a five-day test match. They want a fast-moving sport."
As TV ramps up, the company returns to its old trick: a reality show. Much as it did in America, the show identifies and incubates a new generation of stars that could rise in the UFC and prime a country for a live event. And as with other international versions, The Ultimate Fighter: India, airing on Singh's network in 2013, will culminate in a live UFC card, most likely in Delhi or Bombay. After that, Indian fighters will have a chance to progress from local shows to bigger-ticket events, as will fighters in other parts of the world: The UFC plans to launch regional promotions in both Asia and Latin America that will eventually feed burgeoning stars to the pay-per-view shows.
At his UFC Hall of Fame induction speech in July, Tito Ortiz—a former Mexican-American champ, one of the first Latino heroes, and one of those guys White signed up to represent back when the UFC was foundering—summed up the company's attitude on international expansion: "Soccer, basketball," he said, his fist raised. "We're coming after your asses."
This summer, a different kind of rumble broke out in the UFC: Dana White versus his light heavyweight champion, Jon "Bones" Jones, who was scheduled to defend his belt at UFC 151, two months after the Vegas event. With about a week to go, Jones's opponent pulled out of the fight with a torn knee ligament. Injuries are common in fighting, and the UFC usually just plugs a replacement into the card. But Jones refused to take on the new opponent, Chael Sonnen, claiming he didn't have enough time to prepare. That led to a UFC first: It had to cancel the event.
White ripped into Jones and his trainer, Greg Jackson, whom he called a "fucking sport killer." He labeled Jones a "guy a lot of fans don't like" and savaged his decision as "selfish, disgusting." Hard-core followers, who take their cues from the UFC boss, turned on Jones, blaming him for the demise of a card that White branded as "the event Jon Jones and Greg Jackson murdered." No need for a publicist to point out that you won't see Roger Goodell behaving in this manner. Or Bud Selig. Or, typically, David Stern. But the barrage was normal for White, who could fill a chapbook with the boorish remarks he's made on the job.
The Jon Jones fiasco does, however, raise a more persistent, less navigable problem. In White and Fertitta's UFC, fighters are expected to be company men or face exile. But as the sport's stature has grown, its most famous fighters have gained a bit of the leverage possessed by other sports' stars. A handful of UFC fighters have big sponsorship deals—Jones signed with Nike this August, welterweight king Georges St-Pierre has a deal with Under Armour, and Silva is with Burger King—and fans demand to see them in action. In years past, White might have booted Jones from the UFC. But all the UFC president could do now was move his fractious fighter to the next card. Then, to capitalize on the scandal, he booked Jones and Sonnen as opposing coaches in The Ultimate Fighter's upcoming season. The two men will fight on April 27.
Seen from a higher altitude, the revolt carried a positive message for fighters, who grumble discreetly about having to give up too much to the UFC. MMA is, perhaps, moving gradually closer to an equipoise where the people getting punched in the head, at least at the top level, can claim more control over their careers.
"There's always going to be a point in time when a sport grows enough, and the revenue streams are sufficient, that the talent and the promotion or the league management is at loggerheads," says Bjorn Rebney, CEO of Bellator Fighting Championships, the UFC's closest (though significantly smaller) competition. "But those are good problems to have."
In other sports, these problems have led to unionization. While the possibility has been bandied about, the fallout from UFC 151 shows that an MMA union isn't imminent. Instead of supporting Jones in his decision, many UFC fighters openly bashed him for not doing White's bidding or costing them paydays (although the UFC ended up paying many of the fighters on the canceled card).
The UFC claims it has created 50 millionaires and multimillionaires among past and present fighters. Elite fighters can make $250,000 or more per bout, but most athletes currently don't come near that. Entry-level fighters may net about $6,000 to $10,000 a fight (the winners double that), but may only be able to compete two or three times a year. Performance-based bonuses are paid for feats like spectacular knockouts, but those tend to go to more-established fighters. A select few also have contracts that guarantee an undisclosed but substantially more lucrative cut of the UFC's pay-per-view revenue. Life is good at the top.
Publicly, fighters will only acknowledge this one truth: Before the UFC made MMA so profitable, most of them may not have made a living at all. But still, in most major sports, revenue is split roughly 50-50 between athletes and owners. The UFC claims it now approaches that level, but a controversial 2012 ESPN investigative report estimated that fighters receive only around 10% of revenue.
White and Fertitta boilerplate their way out of interviews about athlete pay. But fighters' agents are beginning to talk—itself an indication that the balance may be shifting. As more money pours into the UFC, the pressure to spread the wealth and allow athletes more control could mount, perhaps to a combustible stage. "When this blows up," says the manager of a current UFC champion. "It's a matter of when, not if."
Not all of the UFC's problems stem from labor relations. Some of the organization's biggest stars have recently retired or been sidelined with injury. Others have yet to rise to fill the void, leading to thin fight cards as the UFC puts on more and more events. Many fans now accuse the UFC of propping up one big bout with a lot of less-consequential ones, which could be why pay-per-view revenue is slipping: It declined last year by 26%, to $310 million, according to financial research firm SNL Kagan. And pirate sites are always live-streaming those pay-per-view events, forcing the UFC into attack mode: The company shuts down hundreds of streams, and sues those who host them. "It's whack-a-mole, no doubt," says Ed Muncey, senior VP of digital, who spends fight nights scouring the web for pirates.
But credit the UFC for this: It has come a long way from the New Orleans fiasco that White and Fertitta attended in 2000. Inside the arena at UFC 148 in Vegas, their success is on display. Many of the UFC's 231 employees—the company is still quite lean—are hard at work, determined to deliver yet another great show. "These are smart guys," says Shanks, the Fox exec. "They're not going to cook their golden goose."
During the first half of the fight card, White holes up in "the lab," a designated room where he churns out tweets with Kristin Adams, the UFC's 29-year-old social media manager. ("My Twitter baby," he calls her.) Having newly come of age, the UFC used social media to grow interest in MMA before the mainstream press showed up. White urges his athletes to tweet, even giving bonuses for those who attract the most followers. The UFC boss has 2.3 million Twitter followers of his own; compare that to the NFL's Goodell, who has 330,000. And tonight, the UFC is trying out a new tool—a Radian6 social media monitoring system that looks like it's on loan from NORAD. Its six screens, arrayed in a semicircle, allow for real-time monitoring of almost any online conversation about the UFC. Even in Iraq, people are talking about the fights. Another screen shows real-time tweets sorted by number of followers; atop the board are Dwayne "The Rock" Johnson, MC Hammer, Mandy Moore, and Channing Tatum, who is in attendance, and all of with whom White has cultivated relationships.
Eventually, White takes his seat among the cage-side celebrities, near Fertitta. The best friends sit by each other at almost every fight. They live down the street from one another. Employees sometimes catch them in the Zuffa offices stretched out on a couch, watching tape together, batting around fight lingo. Tonight, they're all smiles.
This is the kind of Saturday that all the preparation and planning builds to, the kind of night the UFC will need more of next year. The event sells nearly 1 million pay-per-views and does almost $7 million at the gate, setting a new record for an MMA event in Las Vegas. Seven million Americans watch. So do 19 million Brazilians, and nearly 48 million people around the world.
In the octagon, at the end, Anderson Silva needs only one opening. It comes in the second round, when his opponent, Chael Sonnen, misses a spinning backfist and falls to the ground. The serpentine Silva, whom White calls the best MMA fighter ever, is known for his sudden, venomous counterstrikes, and he unspools a knee to Sonnen's chest. The fight ends quickly. The Brazilians in the audience begin dancing. They'll dance through the night.
A version of this article appeared in the December 2012/January 2013 issue of Fast Company magazine.