Interviews November 2008

Lorenzo Fertitta

Lorenzo Fertitta, the billionaire majority owner of the UFC, rarely grants interviews, but he agreed to sit down with David Samuels for his story for The Atlantic. Here is a partial transcript of their conversation
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Lorenzo Fertitta
Lorenzo Fertitta

David Samuels: All right, man. You’ve put something incredible together here.

Lorenzo Feritta: It really has turned out to be that way. You know, when we first got involved in this thing—obviously, I’m sure you’ve heard this story, me and Dana were buddies.

DS: He was your cardio-boxing instructor?

LF: Yeah. Well we went to high school together, so I’d known him for a long time.  We kind  of hooked up again at a wedding, he told me what he was doing. And I was like ‘well, that sounds interesting, I’d like to try that out. I need to get back in shape.’ So I started training with him, and our friendship just came together again. And I started hanging out. And at the time, I was on the boxing commission. Both me and Dana had a great love for boxing. So it just blossomed into being best friends again, going to fights together and talking about fights, and that’s really what our life and relationship revolved around. And then we came across this, and thought, well let’s buy it.

DS: Isn’t that the kind of dumb thought that people with a lot of money aren’t supposed to have?

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LF: Absolutely. But it was out of pure—I don’t know what you’d call it. It’s a vanity business. We actually went down to a fight, when he was managing Tito Ortiz, we went down to a fight in New Orleans, and we got to New Orleans, and there was no feeling that there was even an event going on. Nobody knew about it and there was nothing going on. We got in the car and we drove out to the venue and it was kind of far away, and there was nobody there. I said, ‘you know, I want to buy a UFC t-shirt, it sounds cool.’ Nobody was even selling t-shirts. They weren’t selling programs. Maybe 15% of the seats were full. It was just amazing, and I was sitting there watching the event going ‘wow, this could really be something. What am I missing? What’s different about me—am I really that sick and twisted—that I REALLY like this? Not that I kinda kinda like it, that I really like it, and nobody else cares.’ 

I think the biggest thing is there was this stigma associated with ultimate fighting and the UFC. And there was such a bad feeling about it, and negative connotation associated with it, particularly among regulators, in general, because of the way they handled things in the early days. You know, they shied away—they kind of took on these governmental bodies saying you can’t tell us what to do, we’re gonna do it the way we want. You know, we don’t fall under your regulatory authority. Well, who’s gonna win that one, okay? You’re not gonna win that fight. 

DS: How much money have you put into it since that initial 2 million bucks?

LF: I think we got up to like 44 million

DS: What was the year that you stopped putting money back in?

LF: I think we broke even and stopped putting money in—I think 05 was the breaking even year.

DS: And since then have you taken money out?

LF: Yeah, yeah, we’ve taken some money out.

DS: Have you gotten back your 44 million yet?

LF: We’ve never disclosed that. Um, so I’d rather not. But it takes a lot of money to get back 44 million, I can tell you that. But I’m happy with where we are. We’re on a good trajectory.

If you look at the business model of a boxing promoter, there’s really not a lot to the business model. Most operations are like four or five people. You have the promoter, a secretary, maybe a PR guy, and a fax machine. I mean, what do they really do at the end of the day for an event? They don’t risk any capital. They don’t put up any capital. They don’t do the production. They don’t do any of the creative, any of the production. They don’t do the marketing. Literally what a boxing promoter has to do is schedule the press conference and buy plane tickets, make sure the fighters arrive on time. 

DS: And your business model here is what?

LF: We call it the wheel. The UFC wheel. You’ve got your core— the pay per view. That’s essentially your product, right? And then, you know, you have spinoff things. You can sell it on DVD. Then after you sell it on DVD, you repurpose it and sell it too, put it in syndication on UFC Wired, or on Spike TV. Then you have products that you then put on the internet through VOD and other VOD platforms. Then you have other licensing opportunities like apparel and merchandise and video games, and all the way down. So it’s a complex business.

Dana White
Dana White

And we want to build the infrastructure to be able to handle that. So we’re going to have a real marketing department, okay? And not just rely on the pay per view providers to say that they’re gonna market for us. I want to control that. We have an in-house team of people that have direct contact with the cable companies. There’s literally maybe a thousand different cable companies in the U.S. that you have to distribute this product to. And I don’t believe in just letting somebody do that for us, so we’re very involved with how that works. As well as with Direct TV and Dish. Beyond that, we have our PR department. And it’s not just about going and hiring a PR firm and saying go do this for us. We have it in-house. We want to build the relationships in-house, we want to know these people. Every other sport just hands everything over to a network and says you guys do whatever you want with it, we’ll have some input or whatever but HBO rolls in and does boxing. Even the NFL. The major networks roll in and they just do everything for them. We do everything. And one thing about Dana that has made us very successful—he is passionate and meticulous about the product, and he gets  how the product should be, and how that needs to resonate with the consumer. 

DS: He does a good job at what he does, but you’re the guy who’s put together a world-class business before, and when I look at this organization, I’m clear in my head about who’s probably thinking about this stuff and making these larger strategic decisions. When I talk to people in the organization, they all say ‘Lorenzo does that.’

LF: It’s just a different thing. But I will say that me and Dana make decisions together.

DS: You and your brother Frank have made a fortune from the Station Casino chain, which was founded by your dad.

LF: A lot of guys get frustrated because their dad won’t give them any control at all. I had a different sort of frustration. My dad literally said, 'Okay, here are the keys, you run it.' It’s like either you’re gonna drown or you’re gonna figure it out. It’s like throwing a baby into water. He did the same thing with my brother. He graduated from USC, and he was running the joint right away. And it worked out pretty good. My dad came to Vegas from Galveston and worked his way up in every casino in town as a dealer, and then a pit boss, and then a casino manager, before he started the Station Casino as a place for local people to gamble. He retired in 1993. We had one casino, and we went public that year. I can remember being on the road show, talking to all these big institutional accounts. I was 24, and my brother was 31. Now I guess with the internet age, it’s not as weird. You expect young guys to be doing this stuff. But back then, it was kind of weird. We built the business up to—what do we have now, 17 casinos? 18 if you include the one we manage. I think we’re the 5th or 6th largest casino company in the country. We’re traded on the New York Stock Exchange. We did a private transaction—I don’t know how many billions of dollars last year.

DS: You don’t take UFC bets at the Station Casinos. Why?

LF: When we bought the company, I went straight to the regulators here about it and said ‘Okay, this is what we’re doing. Do you have a problem if we take bets?’ And they’re like, ‘you know, legally, no, we don’t. But you know, why don’t you just see how things go?’ And I just made a conscious decision that of course there would never ever be anything untoward or wrong or illegal for doing that, but just from a public perception standpoint, a guy that makes a bet, maybe. Once those fights start, we hand those keys over to the state of Nevada. We don’t pick the refs, we don’t pick the judges, we make no decisions. Totally out of our hands! The average guy doesn’t believe that, know what I mean? So a guy makes a bet, and the judges make a bad call, the referee makes a call and he’s like you know—it’s just not worth it. 

DS: I want to go around that wheel. Let’s start with the Spike tv connection. The idea of having a reality show that feeds into a professional sport gives the fan the sense that ‘I could, in some alternate universe, in my imagination, become a participant. The barrier between their world and my world is not absolute.’ In other words, one of the fantasies that you’re offering people in this sport is the reality contestant fantasy—that an average person, or a person with skill in the sport, could make that leap from the couch to the Octagon. Talk about how that idea came together and how the relationship with Spike came together.

LF: We went around when we first bought the company, and got together with United Talent Agency, UTA. At the time UFC was a small deal. I think they felt like we were lucky that we were working with them. Today it would be a whole different story. Dana and I flew to LA maybe 50 times. We met with—you name it. MTV. CBS. ABC. ESPN, HBO, Showtime, Spike, USA. We probably met with the Food Channel too. I don’t know. We met with everybody. And to a ‘t,’ every single person said ‘this won’t work. Get out of my office. This is a joke. It’s boring.’ We were just looking at each other going, ‘what are we missing here?’ 

So we had to take a step back. And we partnered up with Craig Pelligian, the reality show producer, who we had originally met through UTA, and then that relationship went away, and then about I don’t know how many years later, let’s say two years later, he called and said he wanted to do a reality show about a casino, and the only person he knew in the casino business was me. And would I be interested. And originally I said ‘nah, I’m not really into that kind of stuff, I kinda have a low profile.’ But we started talking about it and I said, 'You know what, it actually might help our business, and so for business’s sake, you know, we’ll talk about it.' So we ended up doing a deal. American Casino went on the Discovery Channel. It actually did okay.

So I got on the phone with Craig one day. I said you know the Ultimate Fighting thing again, he says ‘yeah, we gotta figure a way to get that on.’ I said ‘yeah, but we met with everybody, and everybody’s turned us down.’ And just through talking to Craig, he goes, ‘you know another way you could do it, is you could just bankroll, and then go and sell to sponsors yourself to finance it.’ I go ‘wow, I didn’t even know that, I didn’t even think of that. Maybe that’s what we do.’ So that’s essentially what the strategy was. So we sat back down with Spike. And Spike wasn’t real enthusiastic about it, but after about 3 or 4 meetings, they’re like yeah, okay, we’ll do it.  It was gonna be the Trojan horse. We were gonna let people see kind of how these guys are, that they’re not thugs, that they have backgrounds, they’re real guys, it’s gonna be great, they’re gonna live in a house and they’ll fight each other, and it’ll be great. And then I pick up the paper, and it’s like Oscar De La Hoya announces that he’s doing this reality show called the Next Great Champion, or whatever it’s called. And then a couple weeks later, Mark Burnett’s doing The Contender. So that didn’t help either. Because in trying to go and talk to a sponsor, it was like, this is the stupidest thing ever. If I’m gonna put money on anything, I’m gonna do it with Mark Burnett or with De La Hoya.

And do you know how many commercials we sold and how many sponsors we sold that first season? Zero. Spike didn’t promote it at all. We had funded this thing, 8, 10 million bucks to produce this thing, and about three weeks before it was gonna air, we’re like, they’re not gonna commit to any advertising or promotion.We’re screwed. So we spent like three million dollars buying billboards and radio and tv—going look—someone’s like—I’ve been playing blackjack for 8 hours, and I started with a thousand dollars, and I got 5 dollars left, I might as well put it all out.  Who cares at this point. So we’re like, let’s just go all in. If it works, it works, if it doesn’t, we’re toast. Put it on, and the ratings came back after the first one, we’re like holy shit. We started looking, compared to Spike’s ratings, we’re like ‘Wow! Those are huge!’

DS: My calculations are that the venue is making gross probably 4 or 5 million bucks a fight, in terms of hotel rooms, gambling, food and beverage. And you’re getting the gate and you’re paying them what to use the arena?

LF: Arena fee is around a hundred—I really don’t want it out there. It’s a six figure.

DS: Now one thing that people have been talking a lot about lately, some politely, some not, is the percentage of that pay per view and gate that’s going to fighters. It’s a low number, it’s 5-8%. You look at boxing, you’re talking about numbers that are, depending on who’s fighting when, 50%. Guys are going out in the ring, they can get killed. Why is the percentage that’s going to fighters in mixed martial arts so low?

LF: A, that’s not true. That’s not true. B, What you have to understand is that the fighters make a base amount. Okay? And on top of that, they have incentives based upon how we perform. Because what was happening was, I was losing so much money every event that I wasn’t willing to go and guarantee big amounts. What I would say to a guy, —I’m talking about the guys that we think make a difference, like Chuck Liddell. ‘Obviously we want you in, we can pay you x, and you know, once we hit a certain mark, we’ll cut you in on the pay per view. Okay?’ I think Randy Couture broke his confidentiality agreement, put it all out, so everybody got a pretty good idea of how it works. It’s kind of, ‘you eat what you kill kind of thing.’ And the fighters like it. You know, they’re fine with it. So when people say, guys are only making 5-8% or whatever, that’s not counting the back end of the deal, which is multiples upon multiples greater than what the base amount is.

DS: They’re getting less than boxers.

LF:  Because it’s a different business model. In boxing, what happens is, the boxing promoter comes in, he doesn’t risk any capital. HBO comes in and does all the production. And does all the marketing. And they’re also carrying all the overhead. They got all the staff and everything. It shouldn’t be and it can’t be an apples and apples comparison. Now, do we make money? Absolutely we make money. But it’s not as simple as saying that boxers get paid 50% and we pay out 5-8%. That’s not correct. The guys that are complaining about their pay are making millions. I think Dana even put out there that—in '07, or '06, when Tito Ortiz fought three times, he made like 6 million dollars. Okay? And he’s the biggest guy saying I want to make more money.

And one thing that nobody could ever say about me or Frank or Dana is nobody’s check ever bounced, and we never went to anybody and said look, you know what, we can’t afford to pay you as much as we said . Everybody always got paid for the deal they were contracted for. And I will say this. We are the only promoters in the history of combat sport, that actually have paid fighters more than they’re contracted for.

I believe that what we built here is an incredible machine and an incredible brand. You hear a lot of criticism, ‘these guys all they care about is the brand, it’s not about the fighters.’ Well let me tell you what. This brand has made a lot of money for a lot of fighters who in and of themselves didn’t have a brand of their own before they fought in the UFC. So the brand creates a lot of value for these guys. 

DS: How do you understand your audience right now? Who are they? 

LF: At the end of the day, me and Dana are really 23 year old fight fanatics. I might have gray hair and be turning on forty, but I think like an 18-25 year old. I listen to that music. I like it. I dress like that. That’s just my lifestyle. I think we get our demographic and get our fans. And that’s what I was talking about with Dana. He knows that when he gets excited about a fight and the way it feels and looks and comes across, that the general public in our demographic is gonna get it.

DS: What is it about this sport now that is getting this audience under 35? I go out there, you’ve got 12, 13-year-olds to 35-year-old men and women, and they’re psyched. Is it because they were exposed to martial arts and different fighting styles when they were younger?

LF: It’s clearly a generational thing. You go back to the old western like a John Wayne movie where John Wayne would hit a guy, drop him, and then what would he do, grab him and literally pick him up and stand him back up! Right? So he could hit him again. I mean, it’s crazy! Who would ever do that? That’s not how fights work. We’ve all seen fights in bars and wherever, I don’t care if it’s a cowboy fight or whatever kind of fight. They didn’t used to fight like that. But that’s the way that TV influenced American culture, which evolved into, You don’t kick a man when he’s down. You don’t hit a man when he’s down.

Well, you go to Japan and Brazil and these other countries, they don’t think like that! You know, it’s not in their culture. And I think maybe through martial arts movies, or our impact on popular culture in the United States, that the younger generation didn’t grow up thinking that way.

Also, I think for the young male, it’s obvious there’s been a lot of research and everything that people’s attention spans are getting a lot shorter. You know, the ADD world that we live in. And you know, when I talk to my nephews, for instance, I’ll say, ‘Did you watch the fight the other night?’ They’re like ‘Oh there’s a UFC?’ I’m like, “No, the boxing match.’  They don’t watch that. It’s too long! I don’t want to sit there for that long. I said ‘Well what about UFC?’ They said it’s short, quick, and concise.

And there’s the holy shit factor. Actually, they said ‘the holy fucking shit factor.’ It happens at every fight. At least one or two times in every UFC show, whether you say it out loud or you say it to yourself, you go, ‘holy shit did that just happen?’ I mean, you might see somebody do a flip, get kicked in the head, get knocked out with a punch. At some point, you’re going ‘whoah, did that just happen? Did I really just see that?’ That’s the nucleus of what our product is.

DS: Do you think you’re gonna see more servicemen coming in? I mean, they’re training in a bunch of this shit, they’ve seen combat, they’re gonna need some outlet, you’ve got a hundred thousand guys now that have cycled through Afghanistan and Iraq in combat situations. If one percent of those guys want to fight, then you’re already dealing with a pool of—

LF: That’s possible. You know, it’s a good question. I’ve never thought about it that way. Really, what I think about more is that—look, this is an outlet where guys really can have careers and make a lot of money. Make millions of dollars. And if not millions of dollars, then enough money to live a damn good lifestyle and have a career. If you think about martial arts just in general in the United States, you could be in any major city, okay? Not even in any major city. In any quasi-major city. And be anywhere in that city, and draw a three-mile concentric ring from where your standing. And there will be a martial arts studio within that 3-mile concentric ring.

DS: One martial arts studio? There will be several dozen.

LF: There might be tons! But I’m saying at least a martial arts studio. To think, put it in a magnitude of how many martial arts studios there are. I think the last I saw, and don’t quote me on this, I don’t even know if it’s a relative statistic—one time, somebody told me there was like 12—it’s the largest—if you can call it a participatory sport, it might be the largest in the United States. It’s something like 11 or 12 million people have done or are doing some type of martial art, at some point in their life. Whether they took a karate class, tae kwon do, kickboxing, whatever it might be. So okay, you think about that just base of people. Okay. So as the pyramid is very large at the bottom, and you whittle your way up, that’s the elite, the best, the guys. Now a portion of those guys are gonna want to compete and put their skill level to the test. In addition to that, you have wrestling, okay? Historically, real wrestling has been an incredible sport, particularly all around the United States, but there’s never been an outlet.

DS: Nobody wants to watch real wrestling besides wrestlers.

LF: And if you don’t win a gold medal, there’s no outlet to make money, and even if you do win the gold medal, you probably won’t make money either. So what we have become is a great outlet for a guy—you don’t have to be an elite wrestler, you can just be a good high school wrestler. If you have that base, then you have the ability to be a good mixed martial artist. Got these guys now, they can be millionaires and have a career

DS: I have a cousin who’s a former elite Israeli commando, and he’s a black belt in jujitsu and has a bunch of other martial arts skills. For him, this is like a complex physical and spiritual discipline. He’ll go with his master to some place in Japan, and you know, I make fun of him sometimes, it’s like from a bad old karate movie. But it’s real to him. And he sees these skills as both a deadly and profound matter and as something that shouldn’t be mixed up with money. Is there a way that you turn these things that do have a spiritual component to them, and you turn them into a professional sport, you start putting millions of dollars out there, and you just fuck up the karma of these disciplines that were supposed to be about a more complex mastery of body and mind?

LF: You know, look, everybody’s got their own opinion. I certainly don’t subscribe to that. Boy, this is probably going to get me in trouble. Shit. I think there was a lot of people over the last 3 or 4 decades that made a lot of money putting out what I’ll call myths. Meaning that if you keep taking my class every week and paying me 40 dollars, I will show you that tae kwon do or kung fu or karate is the best martial art, and you will become a killer, and you know, it will take over your mind, spirit, and body. Well, the bottom line is, a lot of that shit doesn’t work. It’s not really fighting. So for me, I’m a purist. And the ultimate reality is what happens inside that octagon on a Saturday night. 

DS: Which brings me to the Gracie family. How would you define their role and their impact on mixed martial arts and on the UFC?

LF: It’s almost impossible to define it. They’ve had the most significant role that there is, ever. I mean, they created the whole way, the whole thing. They were the myth-breakers. They showed everybody that this is the most effective form of fighting.

DS: When you hear Rickson Gracie talk about how, at the age of 47 or whatever he is now, that he could beat the crap out of these UFC fighters that he sees on TV now, is that an older man’s understandable vanity? Or is he telling the truth?

LF: Let’s do it! I mean, that’s the ultimate test, that’s what I said, right? Let’s find out! If that’s the truth, then let’s find out! I mean, don’t just say it. Let’s do it!

David Samuels is the author of Only Love Can Break Your Heart, a collection of essays and reporting, and The Runner: A True Account of the Amazing Adventures and Fantastical Lies of the Ivy League Imposter James Hogue.
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