Managers express concerns over Bellator's sticky contracts

Managers have expressed concern over some of the provisions inside Bellator's contracts. After examining a few of the agreements their concerns may be well founded.

It goes without saying that for most fighters mixed martial arts can be a very difficult profession. A fighter's career is numbered in years not decades, and the amount of time a fighter can compete at the top of his division is even narrower. The window of opportunity for a fighter to make their money is therefore very small.  In a best case scenario a fighter will be able to negotiate while he is at his most valuable, when he is a champion or a top contender, free from any contractual restraints. In the worst-case scenarios, which are more typical in MMA, the fighter is forced to sign a deal when his leverage is at an ebb, coming after a loss and/or when constrained by a promoters contractual rights.

This situation is not unique to MMA, as boxers can attest to. Senator John McCain said as much during a 1998 hearing, when he pointed out how fighter were often duped "into signing long-term contracts that represent nothing more than a sophisticated version of indentured servitude." This was in fact one of the motivations behind the passing of the Muhammad Ali Boxing Reform Act.

In an article for the Fordham Law Review, Scott Baglio described how such coercive contracts were used to bind a boxer to one promoter for the duration of his career:

In contracts between a boxer and promoter, especially those signed early in a boxer's career, the provision stating the term of the contract is very important because of the impact it can have in later negotiations. Though a boxer may have little bargaining power during the initial stages of his career, rising to contender or champion status obviously provides greater negotiating leverage. The boxer would therefore benefit most if the initial contract was for a term of only a few years, which would permit renegotiation of contractual terms should the boxer experience early success. Although most promotional contracts extend for terms of two to four years, the most successful boxers are not permitted to renegotiate due to the use of a term that has become standard in the boxing industry... This automatic extension has the effect of contractually binding a champion boxer to one promoter for his entire career without ever having a chance to renegotiate.

According to many fighters and managers, the same problem exists in mixed martial arts today, with fear of promoters using their contracts to trap fighters with nearly endless extensions. According to some fighters and managers Bellator contracts are the stickiest they've seen.

I have been given an opportunity to examine several Bellator promotional contracts and have spoken to several different managers and agents who represent fighters signed to the promotion, each of whom independently verified the details. I have also conferred with several attorneys and law professors, taking advantage of their expert opinions.

The managers complaints focused on a few provisions that they thought were particularly egregious in comparison to what is found in other MMA promotions' agreements.

The most objectionable part of the contract, according to a consensus from my sources, was found in what many refer to as the "champion clause." Back in September of 2009, MMAPayout posted the text for this clause, which read:

"If, at any time during the term, FIGHTER is declared the champion of his weight class, a Tournament winner, or a Tournament runner-up, the Term shall be automatically extended for a period commencing on the Termination Date and ending on the earlier of (i) eighteen (18) months from the Termination Date, or (ii) the date in which FIGHTER has participated in three (3) bouts promoted by PROMOTER following the Termination Date ("Extension Term"). Any reference to the Term herein shall be deemed to include a reference to the extension term where applicable."

The one change Bellator seems to have made since then is the insertion of the phrase "by the PROMOTER" into the clause, so that it now reads:

"If, at any time during the term, FIGHTER is declared by the PROMOTER the champion of his weight class, a Tournament winner, or a Tournament runner-up"

Fighting under these terms, Eddie Alvarez, Hector Lombard, and Ben Askren - all of whom were tournament winners and a champion in their weight class - saw three additional fights added to their agreement as part of the extension detailed above. Once these additional bouts were completed though each was free to contact and negotiate with other promoters (although Bellator did retain matching rights). While the tournament wins and time as champions obviously increased Lombard and Alvarez's value, as evidenced by the rather lucrative (by MMA standards) deals they ended up receiving, current and future Bellator champions are unlikely to have the same opportunity to cash in on their in-cage success.

According to our sources, Bellator has informed the fighters and managers that this extension can be enacted each time a fighter is declared "the champion of his weight class, a Tournament winner, or a Tournament runner-up" and that the extensions accumulate. What this means is that a tournament winner who then fought and won a Bellator title would have two extensions added to his contract, one for being declared a Tournament winner and one for being declared a champion of his weight class. There also does not seem to be a limit to the number of extensions that can accumulate, so that a fighter who wins or reaches the finals of multiple tournaments or who wins the championship on separate occasions or in different weight classes could have 3, 4, or even more extensions added to his deal.

MMA promotional agreements, including those for Bellator, typically come with a guaranteed number of bouts during the contracted period. But for the "Extension Terms" in the Bellator contracts we examined there doesn't seem to be any minimum bout requirements. The fear that one manager expressed was that Bellator would not be obligated to provide any fights for the duration of the twelve or eighteen-month extension.

The fact that fighters and their managers are now aware of these provisions does not necessarily mean fighters will refuse to participate in a tournament. Thanks to how most Bellator contracts are structured, non-tournament bouts usually pay much less than tournament bouts - as little as 1/5 of what is guaranteed in a first round tournament match. Fighters therefore may feel financially compelled to take part in a Bellator tournament, potentially adding further extensions if they reach the finals.

In addition, Bellator has added an option clause to many of their agreements that gives them the right to continue promoting a fighter for an additional bout ("Option Bout") if the fighter is a champion in his weight class at the end of his contact. To exercise this option Bellator only has to give written notice to the fighter and pay an option fee.

If the fighter wins this first Option Bout, or the fight ends in a draw or no decision, Bellator has the option for a second Option Bout, which they can exercise by giving the fighter written notice within a set number of business days and paying another option fee. If the fighter wins (or if it ends in a draw or no decision) this next Option Bout, they have an option for yet another bout. The total number of potential Option Bouts for a Bellator champion could be as high as 5 or more.

What does this mean for a promising fighter who signs a 6-fight, 24-month contract with Bellator and has hopes of eventually testing the open market or going to another promotion? Well, if they win their tournament and then win the title, Bellator could interpret this as extending the deal for an additional 6-fights or 24-months. And if the fighter were the champion after meeting the requirements of these extensions the promoter would possibly have the option for up to five additional bouts. Thus the original 6-fights agreement could turn into one for 17-fights or even more, lasting for years.

Facing such lengthy extensions a fighter will readily agree to a new contract which may provide better compensation but is still much lower than what they could have negotiated if they were free to field offers from other promoters. This new contract may also prove more restrictive then the previous deal, as the fighter feels compelled to accept the terms in order to receive an increase in their pay.

The opinion amongst all the managers I spoke to is that the current Bellator contracts represent, from a fighter's perspective, the least favorable contracts of any promotion. As one manager said, "They are the worst contracts in MMA. By far the very fucking worst."

The problem, according to Leon Margules, executive director of Warriors Boxing Promotion, isn't the contracts per se but the fact that they are being used for MMA. "They're boxing contracts."

According to Margules, who has worked with Bellator during their first season when they visited the Seminole Hard Rock Hotel & Casino, the contracts really demonstrate the very different business models used by MMA and boxing.

Often it takes years and numerous fights, sometimes as many as 20, to develop a young boxer. During most of these early fights a promoter is actually losing money on the deal. Contracts, like the one used by Bellator, allow the promoter to get a return on this investment, by guaranteeing that when and if a boxer "makes it" the promoter will be able to recoup the money paid to the prospect and hopefully profit as well by airing a bout that will draw a paying gate or receive a television fee.

"But in MMA," says Margules, "after 5 fights you can have a fighter on TV or headlining a show. A few fights in and a promoter is making money."  Therefore while it makes financial sense for a young boxer to agree to such terms, for a mixed martial arts fighter  the same deal greatly weakens their negotiating ability.

In addition to the Extension Terms and Option Bouts, the managers I spoke to were also troubled by a few of the other terms found within Bellator's contracts:

In the case that a bout has to be postponed for any reason, be it injury, suspension, failed drug test, retirement, or any other similar reason to either fighter, Bellator can apparently extend the terms of the agreement as long as necessary to reschedule the bout. This could be interpreted to mean that if a fighter's opponent is injured before their fight Bellator could extend the uninjured fighter's contract as long as it took for the other fighter to be healthy enough to rebook the fight.

In addition, upon completion of the contract, Extensions Terms, and Option Bouts, there is also the matter of the matching clause. According to the  managers we spoke to and the contracts that we examined, the promotion has changed the wording on their right to match since the Eddie Alvarez case.

After a ninety-day exclusive negotiating period, Bellator now retains the exclusive right to match the "material terms" of any agreements offered to a fighter for a "period of eighteen months." This is 6 months longer than what existed in Askren's and Alvarez's contracts.

It's also worth noting the use of "material" in light of the Eddie Alvarez dispute.  Alvarez's attorney filed a brief on his behalf that argued "The fact that Bellator was required to match the Zuffa Offer on the ‘same' terms" and that they instead attempted to modify the agreement so that they were required to instead "match the material terms."

For how the addition of "material" might change the agreement, my colleague Ben Thapa, provided me the following example:

To those who know good food, Thomas Keller is not the same as Guy Fieri. However, in another view, they're both famous, have high prices and can cook food far better than the average chef.

So are they materially the same? Would swapping Fieri for Iron Chef Morimoto change anything? Is a Bellator PPV the same as a UFC one? Is a Spike TV reality show better than an FS Sports 1 reality show?

This use of "material" could therefore help mitigate a claim of bad faith in any negotiation where Bellator was unable to make an exact match and instead had to make a substitution.

I also asked Justin E. Klein, the Fight Lawyer,  to take a look at the "matching clause" and he offered the following analysis:

First, what does "any" agreement mean - bout agreement, promotional agreement, agreement concerning another sport, e.g., boxing, or something else entirely?   Second, the term of 18 months should be unenforceable.  Theoretically, a fighter could sign a six-month promotional agreement with another organization (let's say the UFC) that Bellator chooses not to match, the fighter could win all of his/her fights with the new organization and then, after the fighter gets his/her new promotional agreement with the UFC, Bellator could try and step in and match.  In my example, the matching clause is being used to create an 18 month window to derail a fighter's trajectory or take a shot at a competing promoter. 

Third, what are the "material" terms of the hypothetical agreement that Bellator is attempting to match?  Are purse, venue, televised media, i.e. network or pay-per-view, ring or cage, night of the week, and strength of other fights on card "material?"  We can all agree that purse is material, but is the form that purse takes material, for example guaranteed purse as opposed to win bonus as opposed to some share of potential pay-per-view buys?  Stated differently, what exactly is Bellator obligating itself to match? 

Finally, while I can't speak to the current contract, the Alvarez contract provided that once the fighter provided the other promotional offer to Bellator, it was treated as an irrevocable offer by the fighter to Bellator.  In other words, if the new promoter gave a former Bellator fighter a low-ball offer, no matter how insulting, the fighter would still be compelled to relay that offer to Bellator (regardless of whether or not the fighter had any intention of accepting that offer) - as an irrevocable offer from fighter to Bellator-- and Bellator could accept the low-ball offer and bind the fighter to the very terms the fighter had no intention of accepting from the other promoter.   

At the end of the day, what this provision does is it creates uncertainty for a fighter looking to move on.  To challenge Bellator's restrictions a fighter will need money and time (neither are in abundance in the sport at most levels and especially with a 90 day exclusive negotiation period with Bellator) to litigate these issues.

When asked why they would allow their fighters to sign agreements they viewed as being unfair, almost all the managers I spoke to replied that 1) they only learned that  Bellator viewed the extension term as accumulating after the fact; 2) their fighters had little option. As disliked as Bellator's contracts are (and the UFC's were not above criticism either) they represent an opportunity for a fighter to get exposure for sponsorships and potential advancement in an MMA landscape where those are few and far between.

The situation, according to one manager, was that fighters were stuck between one promotion that has no competition and thus feels no need to make a worthwhile offer and another promotion that can't compete and resorts to preventing its fighters from leaving via use of their contracts.

For this story I had asked Bellator if they would verify the use of these of provisions and their interpretation of them, and in reply I received an email from Anthony Mazzuca, Director of Communications for Bellator, stating:

Some of our contracts have those clauses, some of them don't, each is individually negotiated with the manager for the fighter.

Each contract stands on its own and the terms in each are negotiated individually.

Some promotional agreements are negotiated with us that have longer extensions and some shorter. Some have Championship options and some do not. Each contract is different.

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