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Will UFC Be Able to Fight 'Til the End?

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Ultimate Fighting Championship is trying to expand, one bloody face at a time.

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It's been hailed as the hot new sport and showered with high-profile advertisers. But is UFC here to stay?

It started with a bizarre 26-second battle involving a 430-pound sumo wrestler named Teila Tuli. This was the first-ever battle in UFC, or Ultimate Fighting Championship, a high-powered mixed martial-arts entity that has grown from a fledgling fringe brand to the fastest-growing player in sports. But in a sports entertainment landscape that has seen countless fly-by-night competitors, how ultimate is UFC?

Spearheaded by brash President Dana White, the UFC has fended off rival mixed martial-arts organizations and in less than a decade carved considerably into the market share of boxing and pro wrestling, both sports catering to the coveted 21- to 34-year-old male demographic.

White and his partners bought the fledgling organization in 2001 for $2 million. Today, with national sponsors like Harley Davidson (HOG) and Bud Light, Forbes has valued UFC at more than $1 billion.

"It's clearly a growing sport. Obviously their PPV (pay-per-view) continues to draw the main revenue source. It's been documented that they talked to the networks about some sort of event on broadcast networks, but that never was worked out," says Tony Ponturo, the CEO at Ponturo Management Group who previously worked for 17 years as Anheuser Busch's VP of Global Media and Sports Entertainment Marketing, bringing Bud Light aboard as a major UFC sponsor.

"I'm not saying all advertisers are ready to jump in the octagon," Ponturo says. "But we observed what they (UFC) did, with regard to the 21- to 31-year-old male. Then we started looking at ESPN (DIS) sports poll research that put UFC second to the NFL with interest in that narrow 21- to 28-year-old demo. Clearly something was going on."

While deals with networks including CBS (CBS), Fox (NWS), and NBC (GE) are still pending, the organization and its athletes have partnered with other players, helping to further commercialize the brand.

THQ (THQI) has released the official video game and UFC is now engaged in another battle with giant gaming publisher EA (ERTS) over Randy Couture, a licensed UFC fighter who signed with the company to appear in its game. Legendary UFC fighter Chuck Liddell will be appearing in the next season of ABC's Dancing with the Stars while fighter Georges St. Pierre is the first mixed martial-arts athlete to be endorsed by sports-marketing powerhouse Gatorade (PEP).

All this while UFC is expected to earn more than $300 million this year through its pay-per-view events. The company's then-record 280,000 views in 2006 has since been dwarfed by the 1.5 million-viewer mark UFC reached last month.

Throw in an online deal with Yahoo (YHOO), On Demand service with Verizon Fios (VZ), a new broadcast pact in China through NMTV, and solid cable ratings on Spike and UFC's grasp is now global.

But for every UFC there is a poker -- a high-profile, emerging televised sport that flamed out.

"Poker was interesting but was passive. This to me has much more growth potential. I think five years from now we'll still be talking about UFC," Ponturo says.

He adds, "Those brands that still rely on the mom purchase won't want to offend. Because of the roughness it's going to at least wipe out half the advertisers. So you have those restrictors."

Whatever the hurdles, UFC appears set on expansion and legitimization, one bloody face at a time.
No positions in stocks mentioned.

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