UFC 229: Khabib vs McGregor is poised to become not only the biggest fight in UFC history, but one of the biggest fights in combat sports history. Earlier this week White told Yahoo Sports’ Kevin Iole that the fight for the UFC lightweight championship was expected to sell more than 2 million pay-per-view buys, perhaps as many as 3 million.

“The gate is going to be $17 million,” White continued. “There are going to be celebrities like you’ve never seen. I knew this was going to be massive, but it’s even blowing me away what this is doing.”

If true this indeed would be one of the biggest prize fights in history. Of course, there is a pretty good chance that Dana White may be exaggerating slightly. He is, as White himself testified during his deposition last year, a promoter after all.

While White may not be the most trustworthy source, web traffic and other metrics do support the idea that it will be a very successful pay-per-view. So let's say White is being honest, what does a blockbuster for the UFC look like?

Like many other UFC events, Khabib's vs McGregor will be depending on ticket sales, sponsors, television rights fees, and pay-per-view sales to generate its revenue. The major difference will be the scale at which it is generated.

Pay-Per-View Revenue

The biggest source of revenue for the event will be from pay-per-view sales. The buys that Dana White is referring to when he predicts it will sell 2.5 to 3 million is the residential sales (homes) and doesn’t include commercial sales (closed circuit theaters and bars). The vast majority of the revenue generated by these residential PPV buys - 85% - will come from the domestic US market. The international market is responsible for only 15% of the total PPV revenues, with Canada being by far the largest market, followed by Australia.

Pay-per-view prices are typically the same in the US, Canada, and Australia: $54.99 for standard definition and $64.95 for high definition, with 2/3 of purchases being the more expensive HD. These prices are in the local currency though. With both the Canadian and Australian dollar being weaker than the US dollar, PPV sales in those two countries will generate less revenue per buy for the UFC. In US dollars the price of an Australian UFC PPV event is about 70% of what it costs in the US, while Canadians pay only 80%.

When someone does purchase a pay-per-view, the UFC does not get the full price but instead they have to split it with the pay-per-view provider. Years ago, before The Ultimate Fighter made the UFC a pay-per-view juggernaut, the split was much more in the provider’s favor. On average the UFC would only receive 44% of a pay-per-view’s sales price. Today the split is much more favorable to the UFC.

With satellite providers (Dish Network and DirecTV), around 55% of the sales price goes to the UFC. With cable television providers (Time Warner, Spectrum, AT&T), it is around 60%. For video on demand streaming, approximately 70% of the sale goes to the UFC. (Endeavor also owns a streaming service in NeuLion, meaning that if it is purchased using that service the other 30% of that sale is still going to Endeavor.)

The VOD sales, categorized as digital pay-per-view buys by the UFC, have seen their proportion of the total pay-per-view revenues increasing over the years. Five years ago digital sales made up less than 10% of all residential pay-per-view revenues. Today digital buys are estimated to make up more than 20% of pay-per-view revenue.

What the UFC makes from the pay-per-view is therefore dependent on a wide range of variables, including what country it is purchased in, the provider it is purchased from, and whether it is the SD or HD version. The average of all these different options is estimated to be around $36 a buy.

Base on that $36 average here is what the UFC can expect to generate in revenue for a wide range of sales:

PPV Buys Revenue

311,000* $11.2 million

1.317 million** $47.4 million

2 million $72 million

2.5 million $90 million

3 million $108 million

3.6 million $129.6 million

* UFC average for 2017

** UFC 196 PPV sales

In addition to the residential pay-per-view sales the UFC will also collect a sizable amount of revenue from commercial pay-per-view sales, which are the closed circuit sales to bars, theaters, and other public venues. Over 20% of Zuffa’s total pay-per-view revenue every year is generated by commercial pay-per-view sales, although this percentage is guaranteed to be much lower for UFC 229 than it would for most of their other pay-per-view events.

If Khabib vs McGregor was a blockbuster boxing match it would surely generate much more from commercial pay-per-view sales, but because the UFC tries to convince bars to carry all their pay-per-views, they offer owners the chance to commit for a year at a discount. Because many places take them up on this offer it means that many of the locations showing the fight will be paying a much lower price than they would have if they had purchased only this single event. It also means that since they have already committed to a year of events the number of locations is unlikely to rise dramatically for the bigger UFC fights.

It’s for that reason, that while UFC 229 can expect to see residential pay-per-view revenues that are 5 to 10 times what the typical event generates, it will be lucky if commercial pay-per-view revenue are twice what the usual UFC event brings in.

Gate

White has already stated that the gate will be $17 million, the second largest gate in UFC history (behind only UFC 205 in New York City) and the largest gate ever for the promotion in Las Vegas. While the UFC does collect site fees for some of their shows, they apparently do not for events in Las Vegas. Instead they retain the ticket revenue.

Since the UFC is required to report the gate to the Nevada Athletic Commission, there is little reason to doubt the figure given by White.

Sponsorship

Zuffa contractual sponsorship revenues were almost $30 million when the company was purchased by Endeavor in July of 2016. They are thought to have since risen to around $40 million a year. (Total sponsorship revenues would be closer to $60 million.) This comes out to about $1 million an event from sponsors.

While $1 million may seem like a ridiculously low price for an event as highly anticipated as UFC 229, that low price is offset by having sponsors also paying for long term exclusive rights to all the UFC events.

On top of those contractual sponsors the UFC will makes a few million more from selling the remaining spots for in-cage logos (although that might have been taken up by Proper No. 12 Whiskey) and in-PPV ads, which are mostly studio film trailers,

International Broadcast Rights

Much like sponsors, international television rights are mostly sold as package deals with all the UFC PPV content included. While this means the UFC can not sell these bigger fights for more, it also means the reverse is true. Markets that want the big events also end up paying a larger price for the less appealing cards.

The end result is the UFC will only make a few million from the international broadcast rights for this one fight, but their total revenues from international broadcast rights will approach $100 million for the year.

Expenses

With so much revenue one would expect the expenses to be equally large, but with the exception of a select few fighters, most of Zufa's costs are relatively fixed.

UFC events are major productions with large crews of cameramen, editors, and technical directors to stage, shoot, and broadcast the event live. This isn’t cheap. The UFC spend around $1.5 million to produce one of their events.

Another major costs is advertising. Historically, the UFC has earmarked just under 10% of their total earnings every year for marketing costs, with the marketing budgets of pay-per-view events being anywhere from several hundred thousand dollars to a few million for the bigger fights. McGregor fights are such events now that Zuffa benefits from the large amount of free press he attracts. Thanks to all the attention from mainstream non-MMA media, such as ESPN, CNN, and the Washington Post, Zuffa gets millions in free advertising.

The undercard is another major expense, and not just for the fighters' purses. There is also the costs of transportation, room and board, licensing, and insurance for the fighters and the cornerman. For the most part, these are fixed costs; most fighters are not receiving pay-per-view bonuses on the undercard. The one variable is the show/to win payment structure. The UFC could end up paying anywhere from $1.3 million to $1.7 million in purses to the undercard depending on who wins. The other auxiliary fighter expenses, plus the “Of the Night” bonuses and the customary discretionary bonuses, adds around a million more to the undercard expenses.

The largest expense for Zuffa will come from the main event, where both of the fighters are getting not only much larger guaranteed purses but likely a cut of the pay-per-view revenue as well (one more than the other.)

While we have no knowledge of what Khabib Nurmagomedov’s actual agreement is for this match, we can use previous payouts by Zuffa as a guide.

Generally, when a fighter receives pay-per-view bonuses it is paid out in tiers. The standard seems to be $1 per PPV starting at 200,000 buys, rising to $2 a PPV for every buy over 400,000, and then finally rising to $2.50 a PPV for every buy over 600,000. It changes somewhat fighter to fighter, with the price per pay-per-view or the tiers being slightly different.

The biggest stars not only have larger PPV bonuses (up to $4 or even $5 a buy) they will also often have side deals. These side deals pay guaranteed money in addition to their show purses, and are not reported to the athletic commissions. Part of the side agreement might also include requiring the pay-per-view bonus to reach a higher number of buys before it kicks in, while in exchange the fighter receives more guaranteed pay.

Lately, Zuffa seems as if they may be eschewing some of these side agreements, instead including the total guaranteed amount in the reported purse.

The National Athletic Commission reports that Nurmagomedov will be paid $2 million to defend his lightweight title. Since this purse is identical to what Nate Diaz was paid to fight McGregor at UFC 202, lets make the assumption that Khabib asked for and received a similar deal as Nate.

According to sources familiar with Diaz’s deal, he reportedly earned around $4 million for UFC 202, after the pay-per-view bonuses were included. If Khabib has a similar deal than we can estimate that if UFC 229 sells 2 million pay-per-views he might earn in the neighborhood of $6 million and over $8 million if it does 3 million buys.

Conor McGregor

The biggest expense for the UFC is their “partner” Conor McGregor. According to McGregor he will earn around $50 million if the events sells 3 million to 3.6 million pay-per-views. This would suggest that McGregor is receiving a split of around 1/3 the total revenue. This would easily be the largest amount, both in terms of monetary and share of revenue, a fighter has ever earned with the UFC. It would mark a dramatic increase from his previous purses.

While it has been widely repeated that McGregor has earned well into eight digits for his previous UFC matches, several industry professionals have informed me that his purses, while still big, weren't quite that lucrative. The amount given by different sources is remarkably consistent, putting his largest purse as around $8 million.

While McGregor, like White, is prone to exaggerate when promoting himself or a fight, there is reason to believe he this time may indeed be receiving such a generous payout. For one, the combination of his drawing power and earnings from the Mayweather fight should give him enough leverage to carve out a much better deal than would be possible for any other fighter. Secondly, it's also very possible that the amount includes the barter value for promoting his Proper No. 12 Whiskey. Either way, we'll take his word on it for now.

Even if McGregor's purse is really as large as he says it will be, Zuffa is still looking at a massive success. According to their 2016 Lender Presentation, the average pay-per-view event will add $17 million to their year end EBITDA. At minimum UFC 229 should add twice that much to their earnings, and potentially more than four times as much.

In the end, whomever is victorious Saturday night, Zuffa is assured to be one of the winners.