UFC Sponsorship Policies and Bad Economy Hurting Fighter Earnings

via Tapout.com

As the UFC continues to record record profits at events around the world, it's never been harder, in the post Ultimate Fighter world, for a fighter to secure a lucrative sponsorship deal. This is particularly true for fighters outside of the Zuffa empire - and it's not just a product of an economy staggering and reeling like Zab Judah after a Kosta Tsyzu flurry. It's part of a calculated campaign by the UFC to hurt its competition. Unfortunately, the primary victims are the men and women trying to make a living in the cage.

In many ways, this is just a reality of today's business climate. While we often think of the UFC as an established monolith, the Fertitta brothers have actually owned the company for less than a decade. It's still a very young business, run by the hyper-competitive Dana White. He wants the UFC to be associated with MMA the way professional football makes fans immediately think "NFL." And he's not afraid to play hardball with sponsors and rival fight promoters to get there.

"As the market collapses and the major sponsors keep cutting back, television fighters are losing their leverage. Guys without names are being pushed out of the market entirely," one agent told Bloody Elbow anonymously for fear of retribution. "Clients outside the UFC are in even worse shape. Apparel companies are walking on eggshells and essentially won't touch anyone outside of the UFC they don't already have a deal with. No one wants to get banned."

It started 18 months ago when the UFC began tightening down on what gear fighters could wear into the cage.  Businesses that wanted to sponsor fighters for UFC events had to pay UFC President White first, for some companies amounts up to $100,000 annually. But there was more to it than that. Certain outfits, like Full Tilt Poker, were suddenly sponsoring multiple fighters on every card. It appeared that they were trying to rebrand the entire promotion in their likeness. White couldn't allow that to happen without the UFC collecting a premium. They had spent too much money and time building their brand. They weren't about to let anyone come in and splash their own logo all over everything on the cheap. It was going to cost, up to $1 million per quarter for high level sponsors.

Some could afford to pay. Some bought in anyway and disappeared as the economy continued to collapse all around us. In some cases, it was the fighters being hurt, especially savvy athletes who had built their own clothing brands.

"It's like they were sticking their hands in my pocket," fighter Dan Henderson said, telling the LA Times that the UFC charged his apparel company $10,000 for a four month window to advertise in the Octagon in 2009. That was money that could have gone to the fighters.

While the UFC surcharge didn't quell Clinch Gear, many sponsors who were just testing the waters, working with fighters on the undercard or opening television matches, immediately eliminated UFC fighters from their ad budgets. When you are paying fighters less than $50,000 a year to wear gear, a $50,000 UFC tax is hardly economically viable. White told the press it was a quality control move and that companies were charged a different amount based on their ability to pay:

"Depends on how big or how small your business is and how much you pay. We are the most lenient sports organization on planet f**cking earth. When was the last time you saw guys wearing whatever they want in the NFL, Major League Baseball, the NBA, World Cup Soccer? Do guys wear whatever they want when they walk in? No they don’t."

MMA Agents respond in the full entry.

As one agent with experience in the auto racing industry explained, in some ways this is a bit of a faulty metaphor. The NBA and NFL are leagues made up of teams, spread all over the country with different market realities in each region. The UFC is more like Nascar, where race teams are sponsor driven and rely on outside investment and endorsements to support their continued development. Like fighters who use sponsor money to train full time, Nascar teams take sponsorships to grow, research how to make their cars better, and continue to survive. When fighters can't put together decent sponsorship packages, it becomes extremely difficult to train and prepare like a world class athlete. That's what give established camps like American Kickboxing Academy, Greg Jackson and Mike Winkeljohn's MMA, and American Top Team an advantage. Fighters coming up in the sport may be living on bunks in the gym or sleeping on a teammate's couch, but they still have access to some world class training partners and coaches.

"When Dana White says he is lenient, well guess what, in a lot of ways the UFC is, but you just have to have the experience in the sports business arena to know that," agent Dean Albrecht said. "And now with the WEC expansion and global expansion, well guess what? There are a lot more fights and fighters to sponsor and the apparel companies didn't automatically increase their sales by 30 percent, so something has to give. If the apparel and mma type companies continue to want to cover more guys then the amounts paid have to go down if the companies are running themselves responsibly."

Albrecht, an agent who has brokered mega deals for Quinton Jackson and Frank Mir among others, says the economy is a huge factor, but that a lack of creativity and experience in the MMA management community also shares some of the blame.

"First and foremost it about the state of retail, that makes it more difficult yes, most of the companies that are known to sponsor fighters have sales that are flat to a little bit down to growing like wildfire. I'll bet that pretty much any company that has grabbed on to the rocket that is the UFC is thankful as heck that they are lucky to be in an industry and involved with an organization in some shape or form that is growing," Albrecht said.  "They are very fortunate. Just look around the hardships that most people are facing in their financial lives. To be successful in this game, you have to make the effort to cultivate relationships with outstanding companies with outstanding people who see the value in sponsoring or advertising on fighters or having a UFC fighter endorse their product. The UFC with few restrictions allows us to do that. In many industries, parts of the genre outgrow others. Many games for computers a few years back outgrew the PC wherein the PC's weren't fast enough or powerful enough to experience the game. That chasm has closed pretty much with faster chips. In UFC MMA specifically, the event has grown fast, faster then many of the companies have been able to keep up with the demand from the fighters for the sponsorship dollar. This is good in my opinion. It causes the people involved in the sport to go outside the typical mma sponsor and bring in new sponsors. Right now, MMA is the cheapest sponsorship opportunity on the planet.

"That goes for corporate sales and the individual sponsorships sales on each fighter. It will catch up as more and more sports marketing companies get better at explaining this to corporate sponsors. The UFC is right around the corner from becoming the first Global PPV brand that really has the ability to attract buyers from literally every corner of the earth and we are in the epicenter of it and invited to garner sponsors and endorsement deals for our clients who are involved in it. They are now in half a billion homes around the world. In a few years when more companies get how broad an appeal this sport has the numbers are going to be huge for sponsorships and endorsements. We just have to get better at sharing the message."

Consistent with his history and temperament, it didn't take White and UFC vice president for business and legal affairs Mike Mersch long to realize that controlling sponsorships in the UFC could be more than a financial boon - it could also be used to punish White's growing list of enemies. When Henderson considered signing with rival promotion Strikeforce, Clinch Gear was no longer allowed to be seen on UFC broadcasts. RVCA, sponsor of UFC stars like B.J. Penn and Vitor Belfort, was also out for having the temerity to sponsor Fedor Emelianenko

Even Tapout, the venerable clothing brand most closely associated with the UFC wasn't above White's wrath. When they entered into an agreement with Emelianenko earlier this year, White was said to be furious. M-1 Global President Vadim Finkelchstein told Sherdog.com that Tapout thought they could weather the storm:

"The person from Tapout management told us that, no, there weren’t going to be any problems, that Tapout was a company that was older than the UFC and they were a company which has been in the market with fighters that don’t necessarily fight in the UFC."

White killed the deal and Fedor ended up sporting Clinch Gear in the cage. Tapout, once the shining light in many fighters lives, a grass roots company that sponsored fighters from around the world and in every organization, was suddenly exclusive to the UFC. Of course, the sport's most famous line had other problems. 

The company struggled in the first half of 2010, cutting back dramatically on sponsored fighters, looking to cut debt in advance of being acquired by Authentic Brands Group (ABG). Many fighters on multi-fight deals were told they wouldn't be re-signed and were offered unconditional releases to go elsewhere and secure longer term relationships. Similar moves were going on at other big MMA sponsors like Silver Star. Fighters were being cut free, but potential saviors were nowhere in site.

"One of my fighters had several fights left with one of the major clothing brands," a manager said in confidence. "We got sent a letter saying we were done. They asked us to send a fax if we wanted out of our contract. They were going to release us to pursue a new deal."

In the end, the sponsor crisis is a supply and demand issue. When the economy was rolling along, fighters up and down the card were doing well. The UFC is a brand that reaches hundreds of millions worldwide. In many ways it's a pretty cheap investment relative to the television time and the built in youth demographic.

The global economic meltdown changed everything. And it couldn't have come at a worse time, because in the MMA community there was a meltdown of equal proportion - the loss of the Tapout brand as a sponsor for fighters at all levels and in all promotions.

The ABG umbrella has hurt fighters across the board. They are sponsoring fighters like they were a single brand - when just months ago the companies under their control were three of the largest sponsors in the industry. Combined with a reluctance to sponsor fighters outside the UFC, and it's a very rough time for the industry.  It's especially hard on fighters who aren't competing in the Octagon. Maximum Fighting Championship owner Mark Pavelich, for his part, has had enough:

I am disgusted by the way MMA clothing brands are buckling to "DW's" handling of contracts regarding the sponsorship of specific fighters.

It's almost comical - not on his part but on the part of these clothing companies. They cave in and pay his organization a great deal of money just to have the opportunity to sponsor fighters, who they then pay an individual fee to as well. What these clothing brands fail to understand is that the entire organization that "DW" runs is sponsored by a competing clothing company.

These other brands are paying to represent themselves, yet they will never get the brand recognition they are seeking since the company itself has what would be considered a title sponsorship with another clothing brand - probably the most-recognizable brand in the industry. You are competing in an uphill battle that you can never win.

Now "DW" has instructed these other clothing brands that they have to stop sponsoring other MMA events or they will not be allowed to sponsor fighters in his event - even after fully paying him for the right to sponsor and paying the fighters individually. He is collecting money by the armored truck full from these companies, and yet he's still able to tell them where to spend the rest of their money at the same time. Has he or anyone in his company ever heard of something called "restraint of trade?"

In a million years, you would never get away with this is other sports. I would like to see Nike, Adidas, or Reebok be told how and where they can spend their sponsorship dollars. It would never happen.

It's easy to say that brands should take a stand and cut ties with the UFC, sending a message that they won't be bullied. But it's more complicated than just the 15-90 seconds of air time fighters get wearing the brand on UFC PPV. A UFC-approved sponsorship deal also allows apparel companies to use fighter likenesses and the UFC logo for branding both online and for in-store placement. The UFC brand, that simple logo, can be insturmental in securing partnerships and floor space - it's not something sponsors will give up lightly.

Many companies are still sponsoring lower-profile fighters on smaller cards, including brands like Bad Boy, Sprawl and Tapout. But those exceptions are few and far between. As larger companies move to exclusive UFC deals, opportunities for fighters are dwindling. I'm not sure how the system can be repaired, and for many fighters, there are tough times ahead.

MMA fighters have been lucky. In most mainstream sports only the superstars are making meaningful money from endorsements and sponsors. A midlevel fighter like Joe Lauzon, who has long-term sponsorship deals with companies like Sprawl, Dethroned, MMA Warehouse, and Versa Climber, makes more from endorsements than the vast majority of his hometown Boston Red Sox. Eventually we may see a paradigm shift where fighters like Georges St. Pierre and Brock Lesnar take most of the endorsement income, leaving just scraps for everyone else. That's consistent with what we've seen in other sports, but of course, in other sports Peyton Manning will be on screen much more frequently than one of his linemen. In the UFC, fighters in the opening match will get potentially the same amount of airtime as the main eventers.

It's important for fighters to maximize opportunities now. The less talented agents who don't sell their fighters outside of the MMA genre are going to be picking away at the pie that hasn't grown and cannibalize each other. It's never been as important to have a good agent, the kind that can bring in companies from outside the incestuous MMA apparel market as some have done with Zappos, ecko, Vegas.com, and Under Armour. It's those type of value added agents and managers who will be the survivors of tomorrow. The agents and their clients.

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