The Business Side of MMA: Sponsor Fees and Sponsor Tax

One of the most argued and discussed points amongst MMA fans is fighter pay. Those making the case for greater pay often cite the UFC's financial take home vs what the fighters receive. For those that take Zuffa side, they will often bring up the mythical "locker room bonus" and that fighters are getting paid by sponsors, which is making up for the lower pay. Personally, I find myself bouncing back and forth between these two sides. One thing that I am in favor of though is the UFC's sponsor tax. 

Some of you will remember the Nate Quarry/Fight Mafia debacle in 2009. To summarize, Nate wore a shirt by a company called "The Fight Mafia" for his fight against Tim Credeur. Quarry was paid a flat fee up front and then was promised a cut of the t-shirt sales. Quarry was never paid for those sales and took to the internet to try and find a resolution using the Underground. It culminated with Fight Mafia owner Noel Brooks making a youtube video claiming his money was "too green and too crisp" for Nate Quarry.

I spoke with Nick Palmisciano of Ranger Up early last month to talk about Zuffa's sponsor tax and why his company chose not to pay the fee. Ranger Up only sponsors six fighters currently under contract with Zuffa which means that there could be months where they would be paying a fee without having any branded fighters in the Octagon or Strikeforce cage. Ranger Up instead has found success with sponsoring fighters on the regional level. 

In a story published today on MMA Fighting, Ben Fowlkes spoke with MMA agent Dean Albrecht about the sponsor tax and how it affects his fighters. Albrecht surprisingly takes a "glass half-full" approach: 

"Not all up-and-coming companies can afford to pay [the tax]," Albrecht said. "But the companies who can afford to pay it, usually you have less risk with them, because you know they're a better capitalized company. So believe it or not, the UFC in effect is protecting the fighters by putting a monetary entry fee to the sponsorship game. Before, when anybody could sponsor a guy, you'd have companies not paying and that hurts everybody." 

Fowlkes also caught up with Ken Clement, the co-owner of Hayabusa. Clement echos Albrecht's statements regarding the sponsor tax: 

"Some of these companies think they're going to come in here and get these huge, immediate results, and that's their plan for how they're eventually going to pay these guys," said Clement. "A lot of them are agreeing to deals that they're never going to be able to afford to pay. The UFC putting that tax into place is like, if you can't afford to pay that tax, you're probably not going to be able to pay your fighters." 

The question for many is if the cost for the placement is worth the return on investment. For a start up company such as Training Mask, the end goal is advertising their new product. According to CEO Casey Danford, the placement on the shorts is just one part of the overall goal. His company doesn't lock fighters into a long term deal with different tiered payouts. He instead opts to do one offs for maximum exposure. As he told Fowlkes:

"You've got to think, we're buying advertising space," Danford said. "So do I want to see a guy end the fight in 20 seconds? Absolutely not. It happens, but that's not what we'd like to see. Whether I'm paying $3,000 or $15,000, I don't want to see the guy get knocked out in 30 seconds. I want to see the fight go 15 minutes." 

Fighting in the cage is just a single part of sponsorship. Many sponsors don't see a benefit in just providing a logo on the banner or fighter's t-shirt and shorts. With fighters in the gym for a large portion of the year, there is also a need for the products and logos to receive eyeballs while in training. For a company like Bad Boy, sponsoring goes far beyond the cage. Troy Ponce de Leon of Bad Boy explains to me that cage time is only one part of the process: 

"Getting value out of sponsorships is a long process, and something you need to work diligently for. It’s rare for a fighter to get a full hour of time in the cage on broadcast per year so the majority of the value comes from what is done around that. Having a year round ambassador, like Mauricio Rua or Demian Maia, builds positive awareness and creates new opportunities for a brand. Getting "cage time" for your brand is incredibly valuable, but it’s just the first step." 

Much more goes into sponsoring fighters than what fans see as the end result. The sponsor tax may have limited the amount of companies that can show their logos in the cage but it has also offered a bit of protection from people such as Noel Brooks who don't have an understanding on how the business works. By taxing sponsors, Zuffa has ensured that the approved companies are able to pay their debts.

The end goal for all of these brands is create awareness and the time spent in the cage is just a single part of this process. Many companies will sponsor entire gyms providing banners and cage placements. In some cases these brands will go as far as sponsoring grappling events or fight cards. Ranger Up was the primary sponsor for the All Army Combatives tournament while Bad Boy has sponsored gyms in the San Diego area. When a company has a business plan and strong sense of goals, they are able to build a strong brand. When this happens it doesn't matter if Zuffa implements a sponsor tax, the fighters and brand will both benefit from the overall process. 

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