Payout Revisited: Minimum Fighter Payouts

July 2, 2010

MMAPayout.com hasn’t done a Payout Revisited segment in quite some time, but upon reading an article from the Canadian Press on the cost of living for high performance athletes, I thought it might be time to revisit one of my first and most talked about pieces on fighter payouts.

Minimum Fighter Payouts was a part of a much larger Fighter Salaries series in which I talked about all things related to fighter compensation. If you haven’t read the series or don’t remember what I’m talking about, you might get a kick out of running through the gamut again. Here’s a snippet from Minimum Fighter Payouts:

A major interest of the fighters is to be able to provide for themselves and their families. And from a business perspective, it’s probably within the UFC’s interest to provide top-notch fights while also not having to pay anything more than it has to.

 

Talking about the interests of the fighters begs the question, what kind of expenses do they need to provide for? Therefore, taking into consideration monthly expenses such as the money spent on housing, food & supplements, transportation, and saving contributions I have come up with the following rough, yearly before tax requirement that fighters need to meet in order to be financially secure:

 

 

A simple estimate of fighter expenses on a monthly basis (see footnotes following article for explanation of estimate) makes it easy to see why the minimum payouts need to be raised in order to meet their interests (some would call them basic needs). A fighter signed to one of these $3,000 show/win contracts that fights four times a year is lucky to make $24,000 before tax.

 

Keep in mind that there are discretionary and other performance bonuses in a fighters contract, but that they are in no way guaranteed. The sponsorship money for low-end fighters has to be considered minimal, although to be fair there really aren’t a lot of estimates kicking around right now. Also, theindustry standard for an agent’s percentage of a fighter’s purse is around 20%.

 

All of the above were not included in the monthly expense calculations because ultimately they were not necessary to prove my point. However, they deserve mention as additional food for thought.

 

The Solution

 

Get rid of the show/win contracts altogether by moving to a flat-fee and institute a minimum fight payout for all UFC contracts at $10,000/fight.

You’ll understand why I wanted to revisit the issue of minimum fighter payouts when you read the Canadian Press article discussing the living expenses of high performance athletes:

VANCOUVER — High performance amateur athletes in Canada earn about $10,000 a year less than what it costs them to live, train and compete, according to a report prepared for the federal government.

 

Carded athletes reported an average income of $29,649 in 2008, according to the study conducted by Ekos Research Associates Inc. The average Canadian’s personal income that same year was approximately $38,000.

 

At the same time, athletes said they were spending about $500 a month more in sport-related expenses than in 2004, when the last study was conducted.

 

Add in living costs and shelter and the average athlete faces $39,576 in expenses.

Payout Revisited:

I always wanted the chance to revisit this article, because I felt as though it was misunderstood. I did not suggest that a “minimum wage” be implemented within the regulatory system for mixed martial arts. This would imply further government action and the setting of a standard across the industry that most promotions would ultimately be unable to meet. It would be a mess.

However, I did suggest implementing a payout floor through which the UFC would voluntarily pay every fighter at least $10,000 to show. My rationale here was simple: it costs roughly $40,000 a year for these guys to live and train; so, guarantee the fighter $10,000 a fighter (or $40,000/year if he fights in an average of four bouts per year); then, let his sponsorship money cover the difference created by taxes and agent fees.

What’s the benefit to the UFC? A superior in-cage product. If the fighters are able to focus on training – and not a second job – the caliber of fighting will increase to the point that fans see a noticeable improvement in the overall fight product. The quality of the fight product correlates pretty strongly with revenues; for evidence of this, look no further than a comparison of the buyrates between title and non-title bouts.

Moreover, an increase in minimum fighter payouts is also an act that’s bound to generate goodwill within the fighter ranks. This is something the UFC could truly benefit from given its unpopular stance on DVD and video game royalties or the entire sponsorship approval process.

How is this feasible? There are typically only 2-3 fighters per card that make less than $10,000 per fight. If you consider the average minimum payout in the UFC is currently ~$6,000, you’re probably looking at a maximum of an extra $12,000 per (or $360,000 per year). That’s a $360,000 investment to secure the future of the sport.

Might this commit the UFC to even more money in bonuses? No. To ensure that the UFC pays out no more than the extra $360,000 (or whatever rough approximation that may be), it could simply shift the structure of these contracts towards more guaranteed money and less bonus money. For example, a fighter that’s currently signed to a $7,000 show/win contract would instead make $10,000 to show and $4,000 to win (rather than $10,000 show/win or $10,000 show and $7,000 to win).

Why isn’t the UFC already doing this? The UFC may not be guaranteeing fighters a minimum of $10,000 per fight, but its system of discretionary bonuses may very well already pay every fighter on the card a minimum of $10,000. The truth is we don’t know exactly how much each fighter is making. But we do know what each fighter is being guaranteed, and that’s enough to make an argument from the standpoint of cost-of-living.

I could go on for another day about all the arguments for and against increased fighter pay – there are many – but I’ve largely covered a lot of this topic in the aforementioned Fighter Salaries series. If you’ve got some time over the weekend, take a look (it’s lengthy…).

20 Responses to “Payout Revisited: Minimum Fighter Payouts”

  1. joseph on July 2nd, 2010 10:45 AM

    Not only would I like to know more about fighter compensation, but I would also like to know more about zuffa llc and its financial situation… damn private companies!

    More disclosure is necessary for mma/ufc to get depart from its historically shady back room dealing past and into a more regulated/public/highly visable/stable company.

    Shows that they have nothing to hide.

  2. Machiel Van on July 2nd, 2010 12:01 PM

    Well, the UFC is certainly not going to cave in to public outcry when it comes to disclosed fighter salaries. While it may be frustrating for those of us who are interested in financial information such as revenue, liquidity, and payouts of Zuffa, LLC, the fact that those things are managed behind closed doors is and will continue to be an asset for the company. Sports organizations never benefit when financial matters are made public, and it tends to lead to prolonged contract disputes and more lengthy negotiation periods. When an individual’s salary is a matter of public record it is both invasive and disconcerting to that individual, no matter what their occupation is. Public perception of someone’s salary will undoubtedly weigh-in on contract negotiations. Now, when an athlete’s income is mostly kept out of the public eye, and is instead an understanding between the athlete and their employer, it makes it much more risky for the athlete to publicly complain.

    Many of you may remember when the Randy Couture contract fiasco was covered in the media, the UFC felt compelled to release photo copies of checks that Couture had cashed for PPV bonuses. These cashed checks were proof that Couture had received substantially more compensation than he had claimed, and his bonuses were 3-4 times the amount of his guaranteed, disclosed salary. While it wasn’t a ton of money when compared to the UFC’s take, it showed that Couture had made a few million on two fights and had a big effect on how the dispute was portrayed by the media. This set a precedent, and has not been necessary ever since. It was a tiny window into Zuffa’s payout system for its stars, and that window has not been opened since, as no other high profile fighter has made as brash of claims as Couture (honestly, I doubt another fighter outside of Liddell at the time could’ve gotten away with this, and Couture only got away with it because of the momentum he had established going into the dispute by recapturing the heavyweight title and defending it as a heavy underdog), possibly due to the fact that it backfired for him.

  3. Machiel Van on July 2nd, 2010 12:26 PM

    This situation applies to high profile fighters, but as far as the base pay for new talent goes: it is important to remember that MMA is still a very new sport, and therefore has a very new market for athletic talent. What we have seen in the past few years is an increase in guaranteed fighter pay (in the UFC) that is wildly out of proportion to the increase in the company’s revenue stream, hence the public outcry, and to a lesser extent, fighter outcry. There are 2 factors that are the root causes of this situation:

    1.) The MMA market sets the value for MMA talent. Since fighters will fight for the amount of money the UFC chooses to offer, there is no reason for them to increase that amount. There is very little competition for the UFC in terms of high profile MMA fight promotions, due to the fact that they do not have the financial capability, or possibly the infrastructure to employ all of the fighters who are UFC caliber. Strikeforce, DREAM, and World Victory Road are the largest promotions outside the UFC, and the gap in financial and infrastructure resources between these companies and the UFC is huge. It really is more of a deep chasm than a gap. So market forces dictate that the UFC will set the value for talent in MMA. To sign the same level of talent, the other organizations are forced to spend more money due to the fact that they can’t offer the same amount of exposure or competition that the UFC can, making them a less attractive option. They must spend more with less resources, and I believe that this is why Dana White believes that these companies will inevitably fail (which makes it so odd that he even bothers to comment on them in the media when they are not a threat ). Successful fighters MIGHT be able to make more money in Strikeforce of in Japan, but they will not have the opportunity to fight the same level of competition, fight as frequently, or get as much exposure (less sponsorship money). From what we’ve seen, the UFC is run in a much more professional manner than other MMA organizations (people always seem to forget this is largely due to the fact that Zuffa, LLC is a ten year old company with ten years of experience, not that they are just organically “better” than the others), and is more appealing in that regard as well. Since the UFC sets the market value, they can quite literally determine contracts on a fighter by fighter basis, locking up the most talented fighters in restrictive Zuffa contracts while paying new talent whatever they deem them to be worth. It’s becoming more and more glaringly obvious that the UFC is THE big MMA promotion, and its well managed league model will be difficult (perhaps impossible) to replicate for companies with more limited resources.

  4. Machiel Van on July 2nd, 2010 12:34 PM

    Keeping financial matters behind closed doors is ideal for Zuffa because it can always claim, as Dana White recently did in regards to Shane Carwin’s compensation for UFC 116, that these fighters are getting paid much more than what is disclosed by state athletic commissions. If a fighter disagrees the UFC proved with Couture that they can and will prove it if necessary. This puts the fighter at odds with the company brass, which is not a good situation to be in moving forward. There is heavy risk involved with fighters complaining about their pay, with almost no promise of positive results. The UFC can and does argue that all forms of fighter revenue come through the UFC: sponsorship money? Oh, you are getting that because of the exposure the UFC is giving you. Money you make on your image? Well since the basis of the profitability of your image comes from being a UFC fighter, just go ahead and give us those image rights so we can manage them for you. Notiriety? Your getting that because of your affiliation with the UFC brand. This is Zuffa’s credo, and if a fighter crosses it, they can’t expect anything good from the company.

  5. Machiel Van on July 2nd, 2010 12:43 PM

    2.) There is no fighters’ union. This is the greatest cause of why fighter pay and treatment won’t be standardized and regulated. Why no fighters’ union? There simply isn’t any kind of unified front among fighters. MMA fighters, for the most part have very individualistic ambitions and concerns, and simply don;t have the resources to band together for the greater good. The low salaries are part of what keeps this dynamic in place: in order to band together and force the UFC to accept some sort of league minimum, they would have to be able to handle the backlash from the organization. None of the top fighters will go along with this, since they are taken care of and paid well, and it is those same fighters who hold the small amount of leverage there is to be had against the UFC. Newer or lesser talents simply can’t afford to blackball the UFC due to the possibility of being banned by the organization and the proposition of losing out on money they already desperately need. If there were no player’s union in the NBA, do you think the league would pay players the same amount out of sheer adherence to prudence? Absolutely not. No collective bargaining means the UFC is holding all the chips. It’s unfortunate because base level fighters certainly DESERVE to get paid more money, and many need to be paid more, but this is reality and reality sucks.

  6. Machiel Van on July 2nd, 2010 12:48 PM

    Until there is a fighters’ union, or a REAL competitor arrives to challenge the UFC’s spot as the most popular proving ground for the sport, the UFC will dictate the payouts in the industry. Affliction Entertainment learned a painful lesson in it’s death, and the entire MMA world was watching. If there ever is an MMA fighters’ union, I believe Zuffa will be harder to get on board than a screaming and kicking child on the way to a family Christmas photo shoot.

  7. Michael Rome on July 2nd, 2010 4:45 PM

    I still think this is problematic. Would the UFC have signed Jon Jones out of nowhere if they had to pay him $10,000 under their own policy? Even if voluntary, the natural effect will be to take less chances on outside talent that is unproven. Sometimes stars come out of nowhere. The economic effect of this kind of policy, even if voluntary, is entrenchment of known commodities.

  8. Brain Smasher on July 2nd, 2010 5:22 PM

    Kelsey why is the article cut off on the left? It makes it hard to read. I skimmed the article. I agree with the fighter minimiums need to go up a little. But i dont think the show/win bonus need to go. If the UFC brings a no name rookie up from the middle of no where and he is 5-0 with wins over untalented guys. He gets a chance to see if he deserves to be in the UFC. If he goes 0-3 he really doesnt deserve to be set for over a year on 3 poor performances. Getting a fight in the UFC on the undercard with as many fighters as they need to fill the shows they do per year. Shouldnt be like a lottery ticketf or card fillers. Some up can comers deserve more. But then the UFC brings in guys(IMO) to feed other young fighters. Like the Danny Downs kid in the last WEC. That guy had no business fighting in the WEC. I have seen better fighters on play grounds. A guy like that should not be set for a year.

    Also the UFC runs their events on a budget like every other business. IF they have to add more to dead end fighters at the bottom then its going to come at the expense of the middle level fighters. Fighters might get 10K garenteed but then when they work their way up to guys like Marcus Davis and still make 10K it wont be worth it. Its better the bottom guys with little to no potential get screwed than the good fighters who have worked their way up.

    If the low end fighters are worthy of being in the UFC then they will get more money after their 3 fight deal. At best a guy will have it rough for just 1 year. Most of the guys at this level are being helped by training partners, coaches, and family. Also we are not talking about a 30 year old who has been making 3/3 in the UFC for 3 years. That dont happen.

  9. Kelsey Philpott on July 2nd, 2010 5:36 PM

    Mike,

    I can’t say with absolute certainty that the UFC would, but I think a rational management team does. Just look at the numbers:

    The UFC signed Jon Jones to a $7,000 show/win contract, which is only $3,000 less than the above proposed contract structure under a loss and no different under a win. If the guy loses two in a row, they cut bait and send him packing (limiting their extra spend on new talent to an extra $6,000).

    That’s not a huge investment or risk, given the potential return on fight quality and goodwill among the fighters.

    Moreover, I don’t see how this proposal serves to entrench known commodities. The UFC can pay a guy like Phil Baroni or Paul Buentello 25/25, or it can take a chance on younger, cheaper talent with potential.

    The short-term outcome is still the same: neither Baroni or a young prospect like Jon Jones will have any sort of impact on gate or ticket revenue.

    The long-term outcome, as we’ve seen, is very different: Baroni still isn’t going to impact the gate/PPV sales; but, Jon Jones is on his way to becoming a star (a star that was treated right from the start and likely to have a better relationship with the UFC moving forward).

    That’s my take! Enjoy the weekend my man!

    Kelsey

  10. Brain Smasher on July 2nd, 2010 7:15 PM

    I dont think there will ever be a fighters union and to be honest im glad. The top fighters are the ones who get screwed. A Brock Lesnar is not going to take a pay restructuring to give all other fighters a pay cut. Which is estentially what a union does. Balances out the salaries of fighters. As long as thats the case the most famous and successful fighters wont join and a Union would have no leverage.

    I think the UFC acts as a union in itself. The Brocks dont get Mayweather money but the non mainstream fighters get paid much better than their boxing counterparts. You are not going to make 10K+ a fight in boxing wth only 5-10 fights. A guy like Tim Sylvia wont make 100K+ in boxing because everyone hates him.

  11. joseph on July 2nd, 2010 9:49 PM

    Dear Michael Van:

    Can we be friends? It refreshing to read commentary about the business behind MMA. If it weren’t for this site (thank you adam and kelsey and jose) my appetite for sophisticated mma discussion would not be quenched.

    SO. thank you all.

    Enjoy 116 tomorrow

  12. Kelsey Philpott on July 3rd, 2010 8:26 AM

    Brain,

    Sorry, I didn’t see your post. This isn’t the first time you’ve had problems, right? The article looks fine on mine, which leads me to believe it might be a resolution issue on your end. There’s nothing within the post itself that’s out of the ordinary.

    KP

  13. Brain Smasher on July 3rd, 2010 1:34 PM

    Thanks Kelsey. You are right. My work Comp shows it just fine. My laptop has the first word on each line chopped in half.

  14. Bill Hardiek on July 5th, 2010 10:26 AM

    Kelsey, you continue to write compelling articles, thank you once again.
    This is a topic very close to my heart, the proposed fighters union and lower tier to middle tier fighter pay and treatment. Michael Van, I have to agree with most everything you wrote, excellent break down. The top end fighters will not get on board, but, I dont think it takes all the top end to form a fighters union. From the best of my knowledge, in order to start/ratify a union contract, only a simple majority of potential members is required. The one thing that Zuffa stands to gain from a fighters union is performance. Let’s face it, fighters are under a ton of pressure, not only from their coaches to practice, but, from management to perform and from fans to produce exciting fights and on top of all that pressure, throw in the pressure of being a husband, parent or bread winner. The amount of mental toughness that is needed to be a fighter his beyond my comprehension. The Union “could” help ease some of the pressure on the home front, I understand, Zuffa isnt willing to throw around their money to prospects. But, everyone that is an avid fan of mma has heard of the Octagon jitters. Look at some of the established fighters. Even former Pride fighters had a hard time adjusting to the cage. Now, imagine how much pressure a young fighter feels. Dana has spoken of this pressure before, so from a business standpoint, anything he could do to elevate pressure is only going to help his bottom line. When a fighter cracks under the pressure, it hurts UFC/WEC. The fans are the ultimate indication of how a product is recieved. It seems to me too be counter productive, to place so much pressure on a young athlete and always expect results. The potential increase in minimum pay could help lessen the amount of pressure on a young fighter. The UFC/WEC are holding all the leverage currently, a union only slightly helps tilt that power towards the fighters.

  15. Bill Hardiek on July 5th, 2010 10:38 AM

    Moreover, a union would shift the responsibility to Zuffa/.management to only bring talented, mentally tough prospects. It would act no different then in a team sport, talent evaluation isnt a science. In the NFL, for example, every Bill Polian is out numbered by 10 Matt Millens.
    The fighters have built the UFC and are building WEC. At some point, they should all be compensated for their sacrifices and contributions. Another problem fans like myself have, is lack of facts. Everything we have all wrote on here could be a moot point. Being a private company, Zuffa doesnt have a responsibility to the public to disclose their profits. For all we now, Zuffa takes great care of its employees, and this is all a waste of time. Not until another fighter like Randy Couture speaks out do we truly see behind the curtain.

  16. You guys bitching about Carwins pay still don't get it - Sherdog Mixed Martial Arts Forums on July 6th, 2010 11:26 AM

    […] People that claim they know how much fighters make are the annoying ones. All we can say for sure is that he made 40K. he probably made more, but no one knows for sure. Think about the motivations involved here. Carwin won't want to piss off his boss so he's not gonna say how much they really pay him, Dana wants to give the impression that his fighters are well cared for but only pay as much as he has to so he's gonna play coy and not say whats really being paid out. You're right that carwin is probably doing fine but no one can say for sure. I think people's real problem is that carwin's pay is indicative of overall MMA payouts which often times are not even adequate for cost of living and training without a second job. If you want (or need) an intelligent perspective on this issue check here: Payout Revisited: Minimum Fighter Payouts : MMAPayout.com: The Business of MMA […]

  17. You guys bitching about Carwins pay still don't get it - Page 2 - Sherdog Mixed Martial Arts Forums on July 6th, 2010 11:30 AM

    […] without a second job. If you want (or need) an intelligent perspective on this issue check here: Payout Revisited: Minimum Fighter Payouts : MMAPayout.com: The Business of MMA I absolutely guarantee Carwin made in the hundreds of thousands for that fight considering how […]

  18. I Am So Sick Of People Saying UFC Fighters Are Under Paid - Page 3 - Sherdog Mixed Martial Arts Forums on July 23rd, 2010 7:06 PM

    […] Lol @ "intelligent comments only! " if you really want to read something intelligent on the subject, check here […]

  19. I Am So Sick Of People Saying UFC Fighters Are Under Paid - Page 4 - Sherdog Mixed Martial Arts Forums on July 23rd, 2010 7:16 PM

    […] comments only! " if you really want to read something intelligent on the subject, check here Very good post. People you really should follow that link, it breaks the money down very well. I […]

  20. skip duncan on May 12th, 2011 5:11 PM

    how much if they are not pros?what kind of perks shuld they get
    i really dont undrstand brock l

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