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Ultimate Fighting packing punch with fans, advertisers

7/19/2006

NEW YORK -- Shortly after a group of investors bought the
nearly bankrupt Ultimate Fighting Championship in 2001, the company
put on a pay-per-view bout.

But the fight ran over its allotted time. Angry viewers didn't
get to see the conclusion.

"It was a very bad start," UFC President Dana White
acknowledged. "It took us a long time to rebuild."

UFC has since found its legs and it's making money. The
privately held Las Vegas-based company has been slowly bolstering
its brand, forging a successful relationship with cable network
Spike TV and reshaping attitudes about the violent sport.

More importantly to the bottom line, UFC has begun to attract
impressive audiences with each of its pay-per-view fights,
appealing to young men who yearn for a good slugfest in the absence
of a strong heavyweight boxing card.

"This thing isn't going anywhere," White said. "This is the
new combat sport."

UFC is mixture of martial arts, boxing and wrestling. The best
fighters have mastered elements of all three sports. The combat
takes place over three rounds (championships are five) inside the
UFC's caged ring -- named "The Octagon" -- with judges scoring the
bout.

But this is not Wrestlemania. The punches and kicks are real.
The fighters are dead serious. The top ones train year-round to
give the boisterous crowds a bone-crushing good time. The
atmosphere at the fights rivals boxing matches. It's a sport,
albeit a bloody one.

"You have to be able to wrestle, strike and do submission,"
UFC light heavyweight champion Chuck Liddell said. "You have to be good
at all three or you won't last long. The fighters have evolved."

Already sanctioned in more than 20 states, UFC has ambitions as
big as the casinos in which its fighters duke it out.

The organization wants to legalize the sport nationwide,
including New York, one of the biggest and most lucrative fight
markets, and take its show to European arenas starting with a
London office slated to open in October.

The UFC surprised the boxing world, hiring Marc Ratner, longtime
executive director of the Nevada Athletic Commission, and John
Mulkey, a former managing director at Wachovia Securities and Bear
Stearns Co.

Ratner, who began in May, serves as vice president of Zuffa LLC,
UFC's parent company, while Mulkey was named chief financial
officer.

Ratner brings credibility to the UFC, which has been trying to
prove it's a safe and serious sport and one worthy of coverage.

Brazilian Royce Gracie, a Jiu-Jitsu master, helped start UFC in
1993. Back then, the no-holds barred UFC was brutal, with fighters
using all sorts of now-banned practices like head butting.

Fights were held in small venues such as Indian casinos and
backwater towns. Liddell said his first UFC fight was held about
eight years ago in Louisiana in front of a couple thousand folks.
Liddell, a slugger with a devastating right hand, couldn't remember
the town.

"Somewhere in the middle of nowhere," said Liddell, who's
nicknamed "The Iceman."

Ratner recalled watching CNN in the 1990's while Ken Shamrock,
one of the UFC's biggest stars, debated the organization's biggest
detractor, Sen. John McCain of Arizona. After the show, Ratner
remembered thinking Nevada would never allow the sport.

But it was Ratner, ironically, who helped thrust the UFC into
the mainstream when he decided the sport had to be regulated while
he was with the NAC. The commission approved the sport in 2001.

Out went bloody head butts and other vicious blows that could
cause serious harm. In came a skilled and conditioned fighter.

"The biggest misconception that I've seen is that some people
still think it's anything goes and there are no rules," Ratner
said. "These guys are tremendous athletes."

Still, the UFC struggled. The deep pockets of Lorenzo and Frank
Fertitta -- who bought the UFC for $2 million along with White --
allowed the company to stay afloat.

White said UFC almost folded in 2003. But its fortunes began to
change with a reality show on Spike TV called "Ultimate Fighter"
that has given UFC its biggest stage, averaging 2.2 million viewers
in its third season.

"Spike was a perfect fit for us," White said. "We know who we
are going after."

The UFC's emergence as the premier mixed martial arts sport in
the country and the show's popularity have made Liddell and other
UFC stars wealthy.

That first fight in 1998 earned him $1,000. Now Liddell makes
more than a $1 million a year from UFC bouts and lucrative
sponsorships. And he doesn't fight in podunk towns. His last fight
was in Las Vegas in front of 12,000 people.

"I can't complain," the 36-year-old Liddell said. "The TV
show has helped us grow."

For Spike, the series brought in serious advertising dollars
targeting men between the ages of 18 and 34, the network's prized
demographic. Burger King, the U.S. Army and Taco Bell are among the
advertisers.

Kevin Kay, Spike's general manager, said "Ultimate Fighter"
was the network's highest-rated program and biggest revenue
generator.

But like Ratner, Kay worried whether UFC would repel advertising
instead of attracting it, given its violent image.

"There was a lot of consternation," he said. "Is it gonna
work? Are advertisers going to run away from it?"

The reality show, along with other UFC programming, has allowed
the UFC to create and market its stars, the fighters who will
ultimately decide the company's fortunes. Crowd pleasers such as
Chris Leben and Forrest Griffin have become big draws.

"We've given them a huge television platform, and we helped
them in their pay-per-view fights," Kay said.

Company executives wouldn't disclose what kind of audience their
pay-per-view fights are generating but they did say recent numbers
are at least comparable to World Wrestling Entertainment Inc.
According to filings with the Securities and Exchange Commission,
the WWE had four events that averaged 482,000 pay-per-view buys in
the fourth financial quarter of 2006.

However, UFC's cable ratings lag well behind the WWE broadcasts
on USA Network.

White thinks the UFC could generate a million buys one day very
soon. Saturday's rematch between Tito Ortiz and Shamrock, bitter
rivals who starred in the latest "Ultimate Fighter," was expected
to tally more than a half million buys the Mandalay Bay
hotel-casino in Las Vegas.

For the second time, Ortiz beat Shamrock.

The fight sold out, with ringside seats fetching $750. About
12,400 people attended and tickets generated a $3.5 million gate --
a far cry from Zuffa's first UFC fight in Atlantic City that drew
less than 5,000 people, and a $217,150 gate.

While UFC attempts to conquer television, hurdles remain in
getting the sport legalized across the country. In New York, the
UFC faces a difficult battle; Gov. George Pataki opposes the sport.

The Fertitta brothers have poured millions into the UFC, and
they haven't seen a return on their investment yet.

But the Fertittas aren't known for their bad bets. They made a
fortune with Las Vegas-based Station Casinos Inc., a Wall Street
darling.

"We saw this thing as a diamond in the rough," White said.
"We haven't scratched the surface of this thing yet."