12 Things Learned About MMA Business From Executives Under Oath

The UFC filed a motion for summary judgment on Monday in the class-action, antitrust lawsuit brought by former fighters claiming their compensation was suppressed through an anticompetitive scheme. I summarized the summary judgment filing on Tuesday and have since reviewed many of the 112 attached exhibits. Most were depositions of current and former UFC executives, fighters, and other MMA promoters.

Current and former UFC executives, among others, gave deposition testimony about various topics including sponsor and venue agreements, fighter pay, and Bellator. (AP Photo/Reed Saxon)

Here are 12 things about the business of MMA pulled from the sworn deposition testimony of key industry players while under oath.

  1. The exact purchase price of the UFC was $4.025 billion.

When asked how much the UFC sold for in 2016 (to WME-IMG at the time, now Endeavor), then-CEO Lorenzo Fertitta replied, “The total closing value in debt plus equity was $4,025,000,000.”

  1. In terms of fighter pay as a percentage of revenues, Fertitta would point to Major League Soccer as a “more comparable sports league.”

In an infamous 2012 interview with ESPN’s John Barr, Fertitta described UFC fighter pay as “not far off from what the other major sports leagues pay as a percentage of revenue.” In his deposition, he seemed to have one regret.

Q. Right. And what do you recall saying, if anything, about the percentage of revenue that [UFC] paid to fighters compared to the percentage of revenue paid by other sports?

A. Sure. My recollection of that is that I said that we felt like we compared favorably to other sports.

I know a lot of other sports throw out these terms like, you know, we pay 50 percent to our athletes.
And what I tried to explain to the reporter who was asking me questions was something similar to what we talked about, that it’s very hard to compare the UFC with those other established leagues because the business models are different from that standpoint, we have to bear more overall costs for the event.

Unfortunately, what I failed to point out was that it really is completely unfair for anybody to be comparing UFC’s financials to that of the NFL or Major League Baseball or the NBA. It’s really not a comparison, and really, a more comparable sports league would have been something more like Major League Soccer, which had about the same – been around for almost the same period of time, whereas, you know, I think baseball has been around for over a hundred years and the NFL has been around for a very long time and basketball since the ’40s or ’50s.

  1. Not only would the UFC avoid scheduling events during March Madness and major boxing shows, it would also try to avoid big movie releases.

The UFC is a sports entertainment property to Fertitta, but it also has to pay attention to other significant entertainment options for consumers when scheduling events. This may be one of the reasons Plaintiffs no longer appear to be pursuing their monopolization claim in the output market for elite, professional MMA bouts and instead focus on alleged UFC monopsonization of the input market for fighter services.

Q. And during the course of your tenure as CEO and chairman of [UFC], did you come to the view that the real competitors of UFC were what else – the other things were happening in sports entertainment rather than other MMA organizations?

A. Yes.

Q. Okay. And why is that?

A. The way I approached the business and thought about the business was that, at the end of the day, mixed martial arts, one of our events, UFC, is a form of entertainment and sports. Sports entertainment, clearly. Which means, when you think about our core demographic, young males, 18 to 34, was the demographic we primarily targeted, we had to think about what else was consuming their time for that entertainment time, that period.

So we actually spent a lot of time talking about it internally, doing analysis, thinking about it. It affected where we would put an event. It affected what date we would put an event on because we felt like not only were we competing with other promoters and leagues in mixed martial arts but also other sports, the NFL, the NBA, Major League Baseball.

And certainly I always wanted to stay away from March Madness. Wanted to stay away from boxing, major boxing events, primarily a Floyd Mayweather fight, Manny Pacquiao fight.

In addition to that, we would do some analysis looking at what theatrical releases were coming out, you know. Probably not a great idea to hold a big pay-per-view or pay -per-view [sic] or do an event on the same night that maybe Avatar or X Men or some other movie that clearly was targeting our core demographic was going to be released.

  1. COO Lawrence Epstein believes exclusive fighter contracts were necessary in order to promote hundreds of fights per year and get television networks to agree to long-term broadcasting deals.

Q. And in fact, the exclusivity provision – one of the purposes of the exclusivity provision was to prevent that, right?

A. The purpose of the exclusivity provision is to make sure that we know that the fighters are available so we can put on 30, 40 fights per year. You’re talking about hundreds of fights we have to put on every year. You cannot do it if they are not under exclusive agreements. You cannot do it.

Q. So your testimony is that if there was no exclusivity provision that there would not have been fights shown by other promoters?

A. Not nearly to the level that we’re doing right now because we have a television broadcast deal with Fox broadcasting that requires us to deliver a certain number of events.

It’s impossible to deliver on a contract, and no television network would ever contract with you if you didn’t have these arrangements with your athletes to deliver them for bouts.

So what would happen under what your laying out here is that the ecosystem would crash. There would be many, many less fights because no network is going to agree to sign a long-term deal with you for many, many fights when you can’t deliver fighters to them and put on events.

So what will happen is that the number of fights will decrease, and the fighters will be free to do the on-off events here and there, but the total output will significantly decrease.

That would be true for us, that would be true for Bellator or anybody else. If they didn’t have exclusive arrangements, which they all do, they wouldn’t be able to deliver on their Spike contracts, One FC be able to deliver on its television agreements in Asia, and the list goes on and on.

  1. ESPN allegedly thought the Reebok uniform deal was the best decision the UFC ever made.

In a section of Epstein’s deposition immediately following a redacted portion, the UFC COO appears to be talking about the old days of in-cage fighter sponsorships when obscure brands such as Dynamic Fastener and Condom Depot would adorn fighter shorts and posters. He then offers two explanations for the promotion’s old sponsor tax and ESPN’s reaction to the 2014 Reebok deal – that the UFC would allegedly “get more coverage.”

Epstein: As I’m sure you’ve seen during, you know, maybe you watch videos of bullfights [sic] just a tremendous amount of clutter, different brands, many brands that were inappropriate like Condom Depot and Dynamic Fastener and all these brands that just did not fit with a top tier sports organization.

 So the concept was let’s require brands that are substantial enough to pay an exposure fee, and if they do that, then they have the ability to also sponsor athletes.

Q. And so, the tax you’re referring to here is this exposure fee you’re referring to –

A. Yes.

Q. And that’s a payment by a sponsor or merchandiser to [UFC]?

A. Correct, to give them the opportunity if they want – to also sponsor fighters too, yes. But we needed to clean up the clutter. It was not becoming at all.

In fact, when we did the Reebok deal, one of the first calls we got was from ESPN saying: This is the best decision you ever made. You’re going to get more coverage on ESPN because we can now know whether UFC product is actually in the video.

And number two, we’re not in the business of exposing brands for free. So we’re not going to advertise these brands that are all these fighters. So you’re going to get a lot more media coverage from ESPN, which is incredibly important to the success of the UFC brand, to the success of all our athletes’ brands, and to successful pay-per-view events, which our athletes are partners in.

  1. Other MMA organizations would try to copy the UFC, according to Epstein, and so preventing customer confusion was one of the reasons for sponsor exclusivity.

Epstein sat for multiple days of deposition testimony. One day was dedicated to sponsorships since the UFC’s use of exclusive sponsor contracts was one part of Plaintiffs “monopoly broth” theory of anticompetitive conduct that allegedly raised rival MMA promoters’ costs.

Q. So under that clause, is it fair to say that the sponsor was not allowed to sponsor any fighters who fought for Bellator, let’s say?

A. As we indicated in the answer that you had me review previously, there are many reasons why we had this exclusivity language in these documents. One of them was customer confusion.

The strategy of all of our competitors was to make their product look as close as it possibly could to our product to confuse the consumer into thinking that Bellator, EFC, whatever the list goes of promoters you want to – you want to lay out there, to confuse the consumer to thinking that it was the UFC product, and so the sponsors that were associated with our brand were identifiers of our brand, and so we wanted our sponsors to either be a sponsor of the UFC or not.

If they don’t want to be a sponsor of the UFC, they’re free to go and sponsor Bellator, EFC, ONE FC, the dozens and dozens of leagues that are out there, but one of the important reasons for us was to prevent customer confusion, because there were brands that were very highly associated with our brand that created customer confusion, and it was the explicit strategy of our – of our customers (sic). I mean, I had other organizations tell me that’s exactly what they were trying to do. Create – copy everything that we did to confuse the customers to thinking that the products were all the same.

  1. Epstein believes Bellator’s initial contract offer in February 2014 to then-restricted free agent Gilbert Melendez “made no commercial sense for anyone” and Bellator “had no intention of ever living up to it.”

The UFC reportedly matched Bellator’s offer sheet to Melendez in early 2014, making him one of the highest paid MMA fighters at the time. But in a partial portion of Epstein’s deposition which was missing the prior page, it appears Bellator’s initial offer was particularly unusual and possibly couldn’t be legally matched.

Epstein: …that didn’t make commercial sense. You can’t guarantee – what if he loses. This is a ten-fight, 60-month deal fight [sic]. So what if he loses five fights in a row, how can we guarantee him anything when it comes to being a main event. You just can’t – you can’t do all those things because you have to deliver a product that the customer is willing to buy.

As I mentioned previously, we’re in a hundred percent turn business. We’ve got to sell people every single time to put a pay-per-view on TV. If we put an inferior product on TV, no one buys it.

So there’s just a variety of things in this deal that – it’s not a matter of wanting. It either legally wasn’t possible or made absolutely no commercial sense to do that.

Q. Commercial sense for [UFC]? 

A. Made no commercial sense for anyone because Bellator was never going to live up to this, so they were submitting an offer that they had no intention of ever living up to.

Q. At this time, did you want Melendez to fight in the UFC?

A. Yeah.

Q. And you didn’t want to sign him because you didn’t feel like you could match the terms of the offer that they were putting in front of you from Bellator; is that correct?

A. The answer to the question, we wanted to sign him. The offer that was submitted by Bellator was, as I said in the email, ridiculous. It was commercially unreasonable, and legally, we couldn’t do it. So it wasn’t a decision one way or the other. We really didn’t have a choice in the sense whether we could accept this thing.

So we wanted to sign him. He presented an offer to us that was legally and commercially just didn’t make sense.

Q. When Mr. Fertitta was writing you to tell Melendez not to sign anything, what did you understand Mr. Fertitta to be trying to accomplish?

A. I think that he wanted to reach out to Gilbert again and see if he could figure out a way to sign the guy. We obviously weren’t going to match it, so was there more money we could throw at him or something to get him to stay with the UFC.

  1. UFC President Dana White doesn’t think Bellator is good at running its business.

Q. Okay. And is it true, though, that your – your view was that the fight between [Stephan] Bonnar and Tito [Ortiz] literally meant nothing?

A. Yes.

Q. Okay. Is that because they were at a point in their careers where, you know, they were, you know, not ascending as fighters and the types of fighters that UFC would want in its promotion?

A. No. It’s my opinion. It’s my opinion that it wasn’t [sic] because I run my business completely different than Bellator runs theirs. I’m good at it and they’re not.

  1. When venue space was blocked for a rival promoter like the World Series of Fighting (WSOF), it was usually because of non-MMA events.

Plaintiffs claim that UFC exclusive contracts with venues contributed to the monopoly broth theory of raising rivals’ costs. Former WSOF CEO and current Professional Fighters League (PFL) President Carlos Silva had a different take in his deposition.

Q. Have you ever had any issues scheduling either events or venues for events? 

A. Have I ever had any issues?

Q. Yes. Be it – there’s a conflict because there’s another MMA event or your broadcaster won’t take the show because of?

A. Generally not because of an MMA event. Generally because of Disney On Ice or the Harlem Globetrotters. That’s not a joke.

  1. “Generally all” of WSOF’s $109,000 television licensing fee would go to production costs.

The notion that production costs gobbled up all of WSOF’s roughly $100,000 in television money has been swirling around the rumor mill for a while now. I first heard it after exploring the business structure of WSOF over at Bloody Elbow, back when the question on some pundits’ minds was if the promotion would soon fail. On April 18, 2017, one day before WSOF re-branded as the PFL, Silva was in a Las Vegas deposition answering questions under oath about WSOF and competition with the UFC.

The business side of MMA is often very opaque, so I always take any opportunity to confirm additional financial details from executives under oath. In one part of his deposition, Silva appeared to confirm that “the television licensing fee precommission” is $109,000 and that “generally all” of it is devoted to production costs, which WSOF paid itself. In another part, Silva revealed how much WSOF sponsors pay per show:

  • Alienware: “35 — $34,000 a show”
  • Kawasaki: $15,000
  • Miller Lite: $10,000
  • Auto Shopper: $10,000
  1. Silva supported some of the legitimate business justification for exclusive, multi-bout fighter contracts the UFC is offering in its defense.

Q. What is the normal term of World Series of Fighting’s contracts with its athletes?

A. Generally, four fights and 20 to 24 months.

Q. Would you characterize that term as long-term?

A. No, I would not.

Q. Are there benefits to the World Series of Fighting of having exclusive, multibout contracts with its athletes?

A. Yes.

Q. What are those benefits?

A. It’s the industry norm.

Q. Is one of the benefits of having exclusive, multibout contracts that you can see a return on investment when you invest with a fighter and you have some time with them to build them up?

A. Yes.

Q. And is another benefit of having exclusive, multibout contracts that allows you to promote that athlete over a period of time?

A. Yes.

Q. Is another benefit of having an exclusive, multibout contract with athletes to help with scheduling in the sense that if a fighter gets injured, you have others on the roster who can fill in for them?

A. Yes.

  1. Plaintiff and former UFC welterweight title challenger Jon Fitch took around a 50 percent pay cut after being cut from the UFC and signing with WSOF.

The UFC is using this as evidence that it pays fighters more than its competitors. While Fitch tried to explain that his notoriety dropped when he was “forced into basically the minor leagues,” it may be quite a leap for the judge to disregard this and other evidence showing increasing UFC fighter pay over time and higher pay relative to rival MMA promotions.

Q.  Okay. And you said that when you left… I think you said when you left, you got paid a lot less money by WSOF; is that correct?

A. Yes. My – by being cut by the UFC, my notoriety dropped, and I was forced into basically the minor leagues. And I took a severe loss on the – you know, I was making 66 and 66 for the Maia fight, I think is what it was. And I got plopped into somewhere around 30/30, so it was about a 50, 60 percent drop in pay just because I was forced out of the UFC.

All the exhibits included in the filing were the UFC’s. The plaintiff fighters will have a chance to respond in September. Forbes SportsMoney will be there to cover the key details.

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