Gross, Folkes, Rossen On Sponsor Tax, EA-Gate
July 9, 2009
Josh Gross of Si.com does some excellent reporting on the sponsor tax and EA MMA UFC situations. Gross’ sources pinpoint the bone of contention for the UFC and the impetus for the change of policy for the sponsor tax:
After discussions intensified inside Zuffa regarding companies such as Full Tilt Poker gaining less-than-cost advertising access for live UFC productions — thus becoming de facto event sponsors by splashing fighters from head to toe with their logo — the decision came down less than a month ago that sponsors would be required to pay a $100,000 licensing fee directly to the UFC for the right to feature their brand on fighters.
It looks like the sponsors were focusing on the micro (the fighters) at the expense of the macro (the UFC), with the UFC deciding to cannibalize the fighters take to shore up their own sponsorship issues. The Full Tilt aspect is interesting. While the sponsorship issue has just recently come to a head, the issue has been germinating for some time, rumblings through the MMA grapevine back in January and February marked the first time i first heard word of it. This time period dovetails with the which Full Tilt seemed to be on the outs with the UFC and would be shortly shown the door. During this time period, multiple sponsors were contacted about the policy, with word getting back to agents and the filtering through to the media, via reports here on MMAPayout.com as well as MMAJunkie’s Fight Biz Column. Some sponsors were alerted of a possible change but not made to fee at this time, indicating that the fee may have been phased in. The January/February time was also when the first rumors of a fracture between the UFC and Full Tilt were reported here on MMAPayout.com. Full Tilt first entered the Octagon with Randy Couture’s return to the Octagon, but they quickly became ubiquitous.
Ben Fowlkes of Cage Potatoe brings the funny, also brings the money when it comes to on the mark analysis of how this Sponsor tax will affect sponsors, fighters, and managers:
So they’ll (small sponsors) bow out, which leaves the heavy-hitters and the “official” sponsors like Harley-Davidson and Bud Light, who went through the UFC and not individual fighter agents/managers in the first place. Fewer eligible sponsors means less competition, which, when combined with the cash those relatively few sponsors are already paying to the UFC, means smaller sponsor payouts to fighters.
Now that we know who’s winning (the UFC, official sponsors) and who’s losing (everyone else), the question becomes, is this ethical? The UFC would argue that it is, because they are the ones providing the platform, the exposure, and the means of communication for sponsors to get their message out. It’s their house, they built it, so they get to make the rules.
At the same time, the UFC is essentially taking money out of fighters’ pockets, and they know it. If they can convince all sponsors to go through them and not fighter agents, they will have turned a fighter revenue stream into a UFC revenue stream, while at the same time gaining more control over both fighters and sponsors.
Jake Rossen of ESPN/Sherdog also sees the devastating impact the tax will have on lower card fighters:
For brands paying out hundreds of thousands to top-level athletes, this makes some sense. But if that blanket $100,000 fee applies to undercard laborers, the UFC is cutting off its own feet. Midtier fighters who struggle to make $15,000 or $20,000 a fight view MMA as a viable career because sponsor money makes training, living and eating realistic. The UFC has built an arena that allows advertisers to subsidize income, which effectively lowers its bottom line: The organization actually has third parties paying its employees and offsetting costs. Isn’t that enough?
A better question for the UFC: Is it ever enough?
Kudos to Rossen, Fowlkes, and Gross for putting these stories in their cross-hairs. The sponsor tax and EA ban are stories that should be covered. As much as these guys should be hailed, we also should take to task those who have just completely taken a pass on any kind of print coverage of these issues on their websites. MMA Weekly seems to have made nary a mention of the controversies in their usually all encompassing coverage of MMA. Ignoring the issue probably keeps their credentialing safe, but it does a disservice to their readership. MMAWeekly is hyping up the UFC press conference on their website, maybe during the press conference they can bring up some of these questions.
Also lacking in coverage have been the content partners at MMAJunkie and Yahoo.com. Steve Sievert at MMAJunkie helped break news on the sponsor tax situation back in January/Februaury, but the site has done no follow up since Sam Caplan’s piece shed new light. That is disappointing. Also totally forgoing any coverage has been the Yahoo team of writers and bloggers. Since they now sell themselves as covering UFC (as opposed to MMA) and have their own PPV distribution deal with the UFC, the question to ask is are you being served by Yahoo’s coverage? I don’t think so, not very well at all. While the usual Yahoo gameplan for covering controversial UFC topics is to bring up the subject and then offer a ham-handed defense of the UFC’s tactics, even that mode of attack has seemed to go by the wayside this time.
Got something to say?
