MMA: A Economic Study
In late 2015, after a wave of legalizations across the USA, New York was the only state where MMA remained illegal.
MMA promoters had spent the last decade modernizing the sport with new unified rules and a strict code of conduct for its athletes. These changes and the resulting legalizations had helped MMA become one of the most rapidly expanding sports in the USA.
But the surging popularity and new rules hadn’t changed the Empire State’s mind. The UFC decided to try a different approach.
Their figures told them MMA was also one of the most lucrative arena sports in the USA. UFC officials decided to hire HR&A Advisors, an economic development consulting firm, to estimate the potential revenue that legalizing MMA could bring to New York. They hoped that seeing the income, jobs and tax revenue the state was missing out on would help change legislators’ minds.
HR&A looked at MMA economic activity in nearby states and similar events held in New York to try to get an idea of the total missed revenue. Let’s take a look at what the report found.
To estimate how much economic activity legalizing MMA in New York would generate, HR&A named three possible revenue sources:
- UFC events in New York State
- Other smaller MMA events in New York State
- Expansion of UFC training centers across the state
They calculated that these three facets of the sport would produce around $137 million of extra revenue within New York State borders. About a quarter of the total would come from large UFC events in the state’s biggest venues.
They believed hotel stays across New York would go up around 11% and countless additional tourist spending and media exposure would be encouraged by the massive events.
Besides the headlining events, the report also projected that there would be around 66 slightly smaller MMA events each year. These would be organized by other large MMA promoters like Bellator and World Series of Fighting.
The smaller events would range in size from around 8,000 spectators at medium-sized fights to around 1,500 at small venues. HR&A calculated that these smaller fights would produce around $29 million of revenue per year inside New York State.
In total, all projected MMA events in New York should generate a whopping $61 million per year. And that was just the beginning.
Looking at the explosion of MMA gyms in other cities where large MMA events had been held, the report also estimated that within three years of legalization, around 35 MMA training centers would open across New York. Comparing these with gyms in other cities, it concluded that these new New York training centers would produce around $76 million of additional economic activity.
Revenue from all MMA events and gyms was projected to generate a total of $137 million per year in New York once the sport was legalized. This would come with the equivalent of around 1,400 new full-time jobs in the state. The fiscal benefit to the State of New York from taxing this revenue was estimated to reach around $5.4 million per year.
As the final cherry on top of their fiscal argument, HR&A presented a graph of how much money New York would have made if MMA had been legalized back in 2009.
Economic Activity Breakdown
At first glance, $137 million of MMA-related revenue per year seems like a lot of money. Let’s explore how HR&A reached those numbers.
The argument was that since MMA was illegal in New York, all that potential MMA revenue was being lost to other nearby cities where the sport was legal. They noted that a UFC event held in Toronto a few years earlier had attracted 55,000 attendees for a total of $35 million in economic activity. Another event held in nearby Newark attracted 14,000 spectators for over $2 million in ticket sales alone.
The $32 million projected annual revenue of UFC events in NY State included:
- 3 events per year in upstate New York
- 2 events per year in New York City
The three upstate events would be held in Albany, Buffalo and Rochester. Each was projected to attract around 17,000 attendees, which would generate $1.7 million per event in ticket sales. That would come with 145 jobs, generating $7.1 million in wages. They included an estimated additional $7 million of indirect and induced economic activity for a total of about $17 million.
The two events in New York City would be in Madison Square Garden and Barclays Center. They should attract about 19,000 attendees each and spawn around 105 jobs, making about $8 million in direct activity and $7 million in indirect activity for a total of $15 million.
The report also forecast $29 million from non-UFC MMA events, including:
- 6 mid-sized events
- 60 smaller events
The six mid-sized events would create around 100 jobs and see around 8,000 spectators each. They would make around $2.4 million in direct ticket sales and over $10 million in wages and indirect activity, totaling about $13 million.
The 60 smaller events in New York were projected to make around $16 million annually, with around 1,400 attendees and $63,000 in ticket sales per event. These would also generate around 100 new jobs in the state.
Finally, the report hypothesized that legalizing MMA in New York would bring in $76 million from an explosion of new MMA gyms across the state. They estimated that 35 new gyms would open with around 69,000 members for an annual revenue of just over $45 million. These would create 960 jobs with an additional $30 million in wages for a grand total of $76 million of revenue.
At New York’s 2015 tax rate, the $32 million total generated from UFC events would make around $2.6 million dollars per year in tax revenue for the State of New York. The $29 million from non-UFC events would make $1.8 million in taxes, and the $76 million coming from new MMA gyms would make another $1 million.
A few months after the UFC released this report, MMA was legalized in New York. The first NY UFC event was held in Madison Square Garden on November 12, 2016.
There were over 20,000 spectators at the fight, which made $17.7 million in ticket sales. The UFC’s post-fight economic impact analysis estimated that the event created 300 jobs and generated $37.4 million of economic activity, making a total of $1.6 million in taxes for the state.