E:60 tackles whether or not the UFC is a monopoly

[Warner2BruceTD]

I love how on one hand, Lorenzo in this interview, and Dana all time, refer to UFC as the most valuable sports franchise in the world (laughable), then on the other hand, pay their prelim fighters roughly $30k per year.

I would think a company that prides themselves on being on level footing as the big four would pay their athletes comparable wages, no?

[Liquidrob]

Forbes.Com is covering the ESPN vs UFC fight.
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The Unionization of UFC fighters: Fair Fight or Punchy Argument? by Patrick Rishe

To the victor goes the spoils.

And in tournament style competitions, incentive structures typically exist that try to elicit maximum effort from a sport’s competitors.

But when a sport rakes in significant windfalls of cash while exposing its athletes to significant health risks, don’t those athletes have the right to collectively fight for their short-term and long-run financial best interest?

The issue of athlete unionization in the sport of mixed martial arts gained significant exposure recently following (1) an ESPN Outside the Line piece on the subject and (2) Dana White’s response to the ESPN piece. Mr. White is the President of the UFC Tour.

First, I highly encourage readers to watch both of these videos to gain greater perspective on the issue from both sides.

Second, let’s distinguish between different professional sports.

For the major teams sports in North America, each is governed by a collective bargaining agreement between team owners and the league’s players union. These CBAs define how league revenues are to be measured, identify what percentage of league revenues will go to players (except baseball), otherwise identify other financial considerations such as minimum and maximum salaries, and address health and retirement issues that cover players after their careers are completed.

This stands in stark contrast to sports like tennis or golf, where athletes are more along the lines of independent contractors. They have to fend for themselves.

Their pay for a given week is solely dependent upon their performance that week.

The better they play, the more exposure they receive.

The more exposure they receive, the more likely they may further boost their income with supplemental earnings from endorsements.

===

TOURNAMENT THEORY IN ECONOMICS AND ITS APPLICATION TO SPORTS

Tournament theory in economics, developed by economist Edward Lazear and Sherwin Rosen, argues that wage differences arise due to relative differences in individual performance.

This theory can be used to explain certain personnel moves seen in corporate America. For example, a company like Enterprise hires thousands of entry-level workers annually to man their rental offices across the country. Those that excel relative to their peers get promoted and thus earn greater pay, while others either remain at their current standing or leave the company. America’s best universities hire new assistant professors in the hopes they’ll produce significant research. Those that do get tenure and an increase in pay and rank while those that don’t make tenure often end up at schools with lower pay scales and less acclaim.

Applied to sport and considering a sports world that is ever dependent upon media revenues, tournament theory yields pay structures that are skewed towards the top of the pay scale in order to elicit the greatest amount of effort from tournament competitors. The thinking being that if all competitors are exuding maximum effort, this may make for more competitive sport…thereby boosting consumer interest from live spectators as well as a television or internet audience.

The sport of golf is a perfect example of this model. Take last weekend’s Sony Open in Hawaii won by Johnson Wagner and review the pay scale posted on the PGA Tour’s website. The total purse for the event was $5.6 million, and Mr. Wagner’s winner’s share was nearly 18% of the purse. Comparatively, 4 players tied for 2nd place and each received 6.5% of the purse. Then the 4 players tied for 6th each received 3.2% of the purse. Players outside the top 22 received less than 1% of the purse, and players that didn’t make the cut after the first 2 rounds received nothing.

Similar income distributions can be found in tennis as well as auto racing, although in auto racing the percentage gaps between earnings of one place versus another are not as large so as to not over-incentivize the drivers which could make a dangerous sport all the more dangerous.

===

In this sense, mixed martial arts fighters are very much independent contractors as their golfing, tennis, and auto racing brethren. They compete in unique events which lend themselves to a tournament-style revenue allocation system.

The major difference of course – especially when compared to golf and tennis – is the incidence of physical contact is much higher and the likelihood of both short-term bodily harm as well as long-run physical damage is far greater.

Given the highly visible struggle that NFL players have waged for greater pensions and disability, coupled with the epidemic of concussions that seemingly has plagued the NHL this season, one can certainly see the dichotomy that arises when we analyze the plight of the middling UFC fighter.

On the one hand, Dana White and Lorenzo Fertitta have provided a forum for fighters to compete and earn a living. And there is no question that some fighters have made a handsome living. Mr. Fertitta noted that UFC has made 39 fighters millionaires since 2005.

On the other hand, there is a major cloud over the truth associated with how much of the sport’s revenues do fighters receive. Some interviewed in the ESPN piece (both fighters as well as officials from competing fighting associations) estimate that fighters collectively receive between 5-10% of revenues. Conversely, Mr. Fertitta implied that the fighters’ share of revenues was closer to what the NFL and NBA have negotiated with their players…or in the neighborhood of 50%.

That’s a pretty big discrepancy. Either one side is poorly informed about the facts and is guessing low for reasons motivated by sympathy-seeking or sour grapes…or one side is overstating its managerial generosity in an effort to stave off unionization in order to protect its bottom line.

More to the point, my conflict regarding this issue is this. On the one hand, these fighters choose to engage in UFC fighting…so why should UFC executives have to wipe their blood off the mats. At the same time, without these fighters, there would be no show and no revenues. In that light, don’t UFC executives owe a little more resources in the way of training and medical expenses as a show of appreciation for the show put on by fighters.

If you miss the cut in a golf tournament, you don’t get paid at all. UFC execs would probably use this example to argue why they pay lesser or middling fighters so little. And I’m largely sympathetic to that. It’s pay for play.

But then again, unless you’re paired with Happy Gilmore, you’re not going to walk away from the golf tournament with a broken nose or fractured ribs.

===

At the end of the day, I come away with these thoughts:

- For having the foresight to envision an era where this type of sport would become so popular so quickly, Mr. White and Mr. Fertitta should be commen

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From: CAINtheBULL
Posted: 6 hours ago
Edited: 01/17/12 6:40 AM Member Since: 4/5/11
Posts: 591 Ignore | Quote | Edit | Warn Admin | Vote Down | Vote Up | Delete Post
CONTINUES.....

At the end of the day, I come away with these thoughts:

- For having the foresight to envision an era where this type of sport would become so popular so quickly, Mr. White and Mr. Fertitta should be commended for their business vision and acumen;

- For a sport whose competitors seem more akin to golfers, auto racers, and tennis players in how competitions are structured, offering a compensation structure that motivates effort and performance seems entirely fair;

- Given the inherent dangers in this sport, the athletes need better collective representation so as to ensure that basic needs such as training and medical expenses are not coming out of their pockets to the same degree as they are now. As such, a collective voice is much more warranted in the UFC than on the PGA or ATP tours…especially when you consider that the average fighter is not coming into the UFC world from an affluent personal socioeconomic background that would make such expenditures trivial.

Ultimately, to overcome the fear that the rank-and-file have that they will be blacklisted by UFC management, they will need to find a strong union leader from another industry that has experience in union formation.

And just remember, UFC fighters, your baseball brethren of a different generation were similarly fearful of management retaliation until men like Curt Flood and Marvin Miller appeared on the scene.

Who will be the Curt Flood and Marvin Miller of the UFC world, and will they surface anytime soon?

Stay tuned.

===

Lastly, 7 interesting facts obtained while researching this topic…along with questions that I’d still like to know the answers to:

1) 29 guys get a cut of pay-per-view revenues, according to ESPN interview with Mr. Fertitta.

Question: What percentage is that of all the guys in UFC, and what is the aggregate payout as a percentage of revenues?

2) UFC executives claim that they have created 39 millionaires since 2005.

Question: And this is out of how many UFC fighters that have suited up for matches since 2005?

3) There is a graduated pay scale such that fighters receive $6,000 in “show money” (simply showing up) for their first fight, which is matched if they win (or a total of $12,000). This increases to $16,000 for the 2nd fight ($8,000 in show and $8,000 for the win) and $20,000 for the third fight. Assume a fighter engaged in 3 fights per year, they could start their career with $48,000 in earnings if they win their first three fights. Comparatively, the league minimum salary in the NFL is $350,000 and for the NHL is $500,000.

Question: What percentage of fighters earn their max after their first 3 fights? And what is the common training and medical expenses paid by these and other fighters?

4) The Muhammad Ali Boxing Reform Act requires “disclosures to the boxers” including “amounts of any compensation that a promoter has contracted to receive”.

This Act applies to boxing…not for the UFC.

5) It is not uncommon for the revenue split between boxers and promoters for a given fight to be 70% for the boxers and 30% for the promoter. This is a far cry from what happens in mixed martial arts, but then again, the sport of boxing is broke and its popularity has dwindled.

6) Recently the UFC inked a seven-year deal worth a reported $100 million annually with FOX, its first significant broadcast agreement with a major network.

7) According to a May 2010 “Standard and Poor’s” report, 75 percent of the UFC’s revenue comes from live pay-per-view events. The remainder comes from merchandising, distribution agreements and other live and taped television broadcasts. Industry insiders estimate UFC’s annual revenue to be between $350-450 million, with the median fight payout per fighter being between $17,000 and $23,000.

******************

Dr. Patrick Rishe is the Director of Sportsimpacts and an Associate Professor of Economics at Webster University in St Louis, MO.

Follow Patrick on Twitter @PatrickRishePhD or visit www.sportsimpacts.net

[EmpireWF]

Surprised the accident insurance for every fighter hasn't been mentioned in anyone's report yet...or even by the UFC I believe.

[clovett]

During my 3 fight stint with the UFC the paid me exactly 150% what they were contractually obligated to pay me. That is without a KO/Sub/Fight of the night bonus of any kind. That is even though I lost 2 of my 3 fights.

I got a discretionary bonus after all 3 of my fights, even an amount equal to my what would have been my win bonus after my embarrassing performance against Stephan Struve. I was told that was given to me based strictly on the effort I put in to promoting the fight, and not because of how I performed.

I am currently unaware of any pro sports franchise that pays any player more money than they are obligated to do so.

Sponsorship wise during those 3 fights I made an average each fight of about 75% of what I was contracted to be paid by the UFC. So if my purse for fighting was $10,000 I made approximately $7,500 in sponsors on average.

Take an average fighter's reported pay for a televised fight, and double it, and you'll have a rough number of the amount he made on that fight. So if a guy is reported at $12,000 to show, and $12,000 to win, chances are he'll make around $50,000 by the time it's all said and done for that fight.

[Warner2BruceTD]

Sounds like someone is angling for a job....

[Liquidrob]

Trying to get back in the UFC

[EmpireWF]

Trying to get back in the UFC

Sounds like someone is angling for a job....

Now I realize I'm going to get hit with "you're just kissing the UFC's ass because you want back in", and that's fine. Because if I said negative things about them, it'd be "you're just mad that they cut you, so you're trying to settle the score." I lose either way, so I might as well be honest.

http://www.mixedmartialarts.com/mma....&page=1&pc=265

[Warner2BruceTD]

Why doesn't Zuffa just open up the books from their last three shows, and put this baby to bed?



rhetorical, I suppose