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Will Russian oligarch’s proposed $70 million MMA investment pay off?

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Article Source – bloodyelbow.com
Will Russian oligarchs proposed $70 million MMA investment pay off?

Karim Zidan looks at Dagestani oligarch Ziyavudin Magomedov’s plans to develop the local MMA scene over the coming years. 

Times have changed for Ziyavudin Magomedov.

Following a period where the Dagestani native had fallen out of favor with the Kremlin, resulting in the contraction of his personal fortune down to $800 million, the Magomedov returned to the Forbes Top 200 list as the 63rd wealthiest man in the Russian Federation. Savvy business strategies aside, his recent success over the past 12 months can be connected to his investment in technologically advanced tube transportation methods and local mixed martial arts.

According to Forbes, Magomedov is the chairman of Summa Group, a conglomerate invested in port logistics, engineering, construction, telecommunications, and oil and gas. His estimated wealth is approximately $1.4 billion, though it was as high as $2.3 billon during Dmitry Medvedev’s tenure as president. Apart from his work in large-scale infrastructure, Magomedov has shown interest in military logistics, and is now on the board of directors for Elon Musk’s Hyperloop One tube-transportation system.

However, a surprising asset in Magomedov’s portfolio is mixed martial arts promotion Fight Nights Global. The oligarch purchased a majority share of the promotion, as well as in all associated fight clubs and merchandizing properties. He has since embarked on a wide-scale project that involves building new fight clubs and expanding the reach and market share of Fight Nights Global. Millions of dollars were put towards transforming a promotion once indebted 18.7 million rubles into one of the best MMA organizations in Russia.

As part of his revitalization process with Fight Nights, Magomedov paid legendary Russian heavyweight Fedor Emelianenko’s exorbitant fight purse to compete last June at Fight Nights 50. While some would question Magomedov’s decision to sink millions into a fight-sport, his decision to partner with Fedor was instrumental to his regaining of favor at the Kremlin.

Given the positive results since buying out Fight Nights, it comes as little surprise that the Dagestani plans to continue investing heavily in the promotion.

“I think, we will spend closer in the region of 50-70 [million dollars] over three-four years,” Magomedov told Forbes.ru in a recent interview. “And we expect positive results in three years.”

Magomedov’s Fight Nights promotion occupies an interesting space in the industry. Following the UFC’s decision to take a fiscally conservative approach to fighter pay and promotion since the WME-IMG purchase, Russian promotions like Fight Nights and Absolute Championship Berkut (ACB) have been quick to snatch up fight talent with UFC experience. As a result, recent events from both promotions have featured stacked shows with notable names. For example, the upcoming Fight Nights 67 show in St. Petersburg will showcase veteran champs like Antonio ‘Bigfoot’ Silva and a high-quality light-heavyweight bout between UFC vet Nikita Krylov and former Bellator champion Emanuel Newton – names usually reserved for North American promotions.

Yet increased funding does not always lead to swollen profits. Recent history has proven that it is nearly impossible to produce consistently profitable MMA events in Russia. According to RBC.ru, out of the top 50 highest-grossing cultural events in Russia, only ice shows and the Formula 1 ever reap significant profits. Soccer, hockey and MMA are not included in the list, despite significant investment from businesspersons. This has proven to be accurate, as promotions like M-1 Global, the original Russian MMA entity dating back to 1997, only stays afloat through a reliance on investors and sponsors to help alleviate the cost burden.

Even Chechen promotion ACB relies almost entirely on the funds provided by founder Mairbek Khasiev, though they have been far less transparent about the amounts invested or where they originated from. Ahead of ACB 57 in Moscow several weeks ago, Khasiev was asked about ACB’s income stream, to which he responded: “Everything is from God. Allah gives. And he has the money that does not end.”

However, while Magomedov’s return on investment has not yet been realized, at least monetarily, he expects this to change over the coming years.

“This is a business project that is not commercially successful in today’s Russia because the television channels in the US pay huge money for contracts with companies such as the UFC, and the consumer pays $65 for the event (pay-per-view),” Magomedov explained. “Russian consumers themselves will not do that now. But within two or three years, I think the situation will change.”

Apart from simply investing in the fight promotion, Magomedov expanded into gyms and fight clubs to expand his ever-growing MMA network. He recently established ‘Eagles MMA,’ a fight club and training facility now home to some of the top Russian talents. Indeed, UFC contender Khabib Nurmagomedov serves as the entity’s president. The concept is similar to that applied at Prince Khalid bin Hamad Al Khalifa’s KHK MMA facility in Bahrain, and the Akhmat MMA team sponsored by Ramzan Kadyrov in Grozny, Chechnya.

Though the latter two examples represent highly controversial regimes with abhorrent human rights violations, Fight Nights is owned by a businessman with visions of 1000km/h pressure tube transportation. His concern is his strategic placement on the Kremlin’s list of favorite oligarchs. When asked about his relationship with Russian president Vladimir Putin, Magomedov responded that the long time leader is far too busy for him, though “the implementation of such ambitious projects as the Hyperloop, perhaps, may require his attention.”

Naturally, Magomedov is emulating some of the more infamous oligarchs within Putin’s government, such as billionaire brothers Arkady and Boris Rotenberg. The Rotenbergs are some of the richest men in Russia, with a host of sports-related investments sprinkled throughout their extensive portfolios. After staring out as the Russian president’s judo teammates, the brothers later purchased the SKA St. Petersburg hockey club and heavily invested in its development. Years later, they became co-owners of the Stroygazmantazh group, the largest construction company for gas pipelines and electrical power supply lines in the Russia.

Wealthy investors like oligarch Ziyavudin Magomedov have already played their part in fundamentally impacting the MMA industry. Businessmen investing in their favorite sports is hardly a unique or newly developed strategy, but a consistent trend in the Russian Federation that emphasizes the power of sports in the post-Soviet state, and how it can be wielded for political or economic power.

“Better to do it in the ring than on the street.”


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