UFC Sponsorship Policies Hurting Fighters?

December 10, 2010

Jonathan Snowden of BloodyElbow has written an interesting sponsorship piece that argues the combination of the UFC’s sponsorship policies and the bad economy are hurting the fighters. He also suggests that this confluence of factors has perpetuated the fight camp issue over the last year.

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.”

Payout Perspective:

I agree with the basic argument that the combination of the UFC’s sponsorship policies and the current economy have hurt the fighters financially. I also concur that this financial instability has helped to perpetuate the fight camp mentality that is currently wreaking havoc with many UFC divisions. However, I feel as though the article from Snowden unduly frames the UFC as the greedy bad guy in this situation.

It should be pointed out that official UFC sponsors are paying millions of dollars every year for a very particular, and often exclusive, set of rights. What other brands are doing through the sponsorship of fighters inside the Octagon is tantamount to ambush marketing. In that sense, the UFC is justified in charging the excess sponsorship fee as a means of curtailing these ambushing strategies, not of punishing or harming the fighters.

Tapout has become synonymous with the UFC by virtue of its long-held official sponsorship (essentially ownership) of the apparel category. Yet, if we were to erase all memory of Tapout from our collective brains and insert them as official sponsor today – given the current UFC sponsorship climate – does anyone really think Tapout would have a snowball’s chance in hell of becoming as strongly associated with the UFC? No, absolutely not, and that’s the concern here. The level of confusion that exists as the result of ambushing may really hinder a brand’s ability to collect ROI/ROO. This, of course, then has some bearing on the ability of the UFC to solicit sponsorships across its official categories.

However, it’s also fair to acknowledge that the UFC has been less than consistent on this front. Bud Light is the UFC’s largest corporate partner and official beer sponsor, but the UFC has in recent years signed both Miller Lite and Mickey’s Malt Liquor to sponsor its TUF program on Spike TV. The same can be said for Xyience and AMP Energy or BSN and MusclePharm.

The Fighter Sponsorship House of Cards

The ability of brand’s to collect an ROI/ROO is also the reason I believe fighter sponsorship is a house of cards waiting to collapse. Yes, fighter sponsorship has played a pivotal role in helping to support fighters in the early years, but there simply isn’t a strong enough return under the current model to justify the investment. It’s not just a case of the economy being tough, either. It’s a case of the sponsorship industry waking up and finally understanding that this 1980’s model of sponsorship of cash for signage is absolutely ridiculous.

Investors have seen the success of the UFC or Tapout and figure they can achieve something similar. Unfortunately, it’s not that easy. ABG’s acquisition of Tapout, Hitman and Silver Star is just the start of what will likely be a great deal of consolidation in the industry over the next few years. Some of these brands will be purchased by larger holding companies in order to gain market share, capitalize on economies of scale, and accumulate negotiation leverage. Many of the others will close up shop because they can’t differentiate their brand from the plethora of competition.

The brands that do survive are going to be the ones that figure out how to differentiate. Here, I do see a role for fighter sponsorship, but it’s likely to be something far closer to the contemporary endorsement agreement that brands have with today’s top athletes. The brand will pay for likeness rights and commitments to advertising, a set number of appearances, and specific social media interaction with the brand. Any sort of fight night signage will probably end up being a throw in or small percentage of the overall deal.

Why? The value in sponsorship comes from the generation of repeated impressions with an audience across a host of different message channels. The fighter’s appearance on a televised card with minuscule logos on his advertising banner or fight shorts simply is not enough to generate material ROI; and if that’s all the fighter is doing for the brand, there’s likely to be very little ROO, either.

The brands that find a way to create an integrated marketing strategy and then incorporate the fighter into that strategy will be most successful at leveraging his abilities to gain traction with the consumer.

15 Responses to “UFC Sponsorship Policies Hurting Fighters?”

  1. Jason Harris on December 10th, 2010 2:09 PM

    “Jonathon Snowden of BloodyElbow ”

    So take it as though it’s written by a guy who is trying to troll for pageviews and write gossip. Snowden is a joke.

    Obviously, the UFC limiting sponsors is also limiting for fighters, but on the same coin, those guys aren’t going to sponsor them unless they’re in UFC. UFC opens up a whole new world of sponsorship opportunities for guys, and yeah, maybe UFC has limited that somewhat, but nobody is making more sponsor cash to headline Shark Fights 13 than they are UFC.

  2. Tweets that mention UFC Sponsorship Policies Hurting Fighters? : MMAPayout.com: The Business of MMA -- Topsy.com on December 10th, 2010 2:33 PM

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  3. Stan on December 10th, 2010 3:16 PM

    it’s a very mixed subject. As poster above points out, if guys weren’t in UFC the sponsor offers wouldn’t really be there… also, UFC has to limit sponsors because they count on exclusive sponsors since they promote the shows. Most major sports do that

  4. Jose Mendoza on December 10th, 2010 3:52 PM

    Jason, Stan:

    Fighters not getting major sponsorship deals outside of the UFC is not entirely true. For example, Fedor was sponsored by RVCA for the Strikeforce CBS debut show, and RVCA was banned by the UFC shortly after the event. TapouT was set to sponsor Fedor for the Werdum fight on CBS and had to drop the sponsorship last minute (similar situation that RVCA was put into), or else they would have been dropped from the UFC. Luckily for Fedor, Clinch Gear came in last second and sponsored him for the CBS card. Due to the previously described situations, the UFC now requires UFC sponsors to sign exclusive contracts with them to prevent companies from sponsoring fighters in other major promotions. The Fedor-TapouT deal was said to be a multi-year contract worth millions that was slipped out under them.

    To add to the confusion, since TapouT, Sinister and other brands are under one umbrella now, when AB chooses to have sponsorship cutbacks, the entire sport will hurt, so there is a lot on the line right now in terms of sponsorship money from the apparel market. It wasn’t too long ago that Shields and Scott Smith did an interview stating that they raked in VERY good sponsorship money when they fought on CBS. I wonder if that is still the case today.

    As long as MMA will be shown on network TV like Showtime, CBS, Versus, Spike, and FX in the near future, sponsorship opportunities will always exist for fighters. This was a tactical move here by the UFC to not only protect their product, but to also hinder other promotions and fighters with sponsorship revenue. The innocent bystander here will be the fighters, where getting cut by the UFC will not only take away their UFC contract, but also leaves their sponsors and sponsorship revenue behind.

  5. jv on December 10th, 2010 4:12 PM

    If you are small T-Shirt company that wants to play in this space there are lots of other organizations that are accommodating and cheaper. They may not deliver the big bang but if you are getting started you can’t afford the big bang. It would be interesting to see which organization delivers the best return on investment right now. If the UFC prices them selves to high or adds to much red tape then brands will look at other organizations.

    A bigger risk is I think the market for what I call death shirts is saturated and lost it’s cool factor a long time ago. I really think there is an opportunity for a company to come in that is doing some thing different with the designs. If that happens it probably won’t happen in the UFC.

    I take it ROI is Return on Investment. Who is ROO? Those bouncy things in Australia?

  6. Jose Mendoza on December 10th, 2010 4:16 PM

    jv:

    Haha, good one. =)

    Return On Investment vs Return On Objective.

  7. John S. on December 10th, 2010 4:35 PM

    Kelsey, you ignore the bigger complaint many have towards Zuffa: banning companies who sponsor fighters outside of the UFC. This could easily be construed as a restrain of trade act.

    Mr. Mendoza brings up some great examples of this in action. As he noted ” It wasn’t too long ago that Shields and Scott Smith did an interview stating that they raked in VERY good sponsorship money when they fought on CBS. I wonder if that is still the case today.”
    By taking actions like this not only is Zuffa punishing those fighters outside their umbrella, but they are also able to lower their payroll. If a fighter is unable to receive anywhere close to the sponsorship money outside the Octagon as in then they can offer less. Whatever more an outside promotion can offer will be counterbalanced by the lack of sponsor monies available.

  8. DAN DIAZ on December 10th, 2010 9:12 PM

    you are batting about .500 on most of your observations and opinions here. companies are more to blame than you or the companies them selves take responsibility for.

    HITMAN DAN

  9. BrainSmasher on December 11th, 2010 4:23 AM

    I dont really see how Fedor losing his deal means the UFC is ruining it for everyone. Fact is Fedor got what he deserved. As a free agent he made his version of Lebron James’ “The Decision”. He used the UFC and wasted their time when the facts show he never had intentions of signing with them. He was only attempting to tern public opinion against the UFC as if it was their fault the deal didnt happen. When Fedor made sure he could never happen with his demands. Fedor got the hardball rolling and the UFC had every right to use their partnerships the way they see fit. BTW it was Tapout who made the decision and choose the UFC over Fedor. It was Fedor and M1 who claimed they didnt need the UFC. Well it appears in this situation they did.

  10. Kelsey Philpott on December 11th, 2010 8:12 AM

    John,

    I’d prepared a paragraph to address the issue that you cite, but I removed it for the following reasons:

    1. I’m not a lawyer.
    2. I don’t feel that we have all the information in this case to make an accurate assessment as to what’s happening.
    3. I hate jumping to conclusions or making assumptions.

    I agree that the purpose of any sort of exclusivity ban would be to exert more control over the environment, but I’m not seeing a whole lot of proof of this or its ill-effects beyond the Fedor/Tapout deal (which is an issue I choose to view separately, because let’s face it, Fedor and his gang don’t exactly play fair, either).

    Your point about the payroll specifically is inaccurate. The UFC’s disclosed payouts are increasing, not decreasing, and increasing at a level commensurate to what they have over the past four years.

    This feeling that the UFC is really trying to fuck everybody and take all the money for itself is garbage. Yes, the UFC is competitive and sometimes it plays rough (I have no problem calling the UFC on ill-advised moves), but I’ve learned in recent years that there are often things done that we don’t hear about (that I’m not particularly keen on sharing, either) that paint an entirely different picture.

    Remember: it’s human nature to frame a situation in one’s own self-interest. The UFC has its interest and the fighters/agents/rival promotions have theirs.

    Moreover, my larger point is that the current fighter sponsorship method is absolutely broken and this is actually to the advantage of the fighters. Think about it: what creates value for a sponsor? It’s NOT that tiny little logo placed on the inner thigh of a fight short or bottom left corner of a cluttered banner. This is both a problem and an opportunity. If the UFC is exerting an increasing amount of control over the in-cage environment, fine. Negotiate the bulk of the value in the sponsorship contract to exist outside of the cage: likeness rights, appearances, guaranteed social media interaction, etc.

  11. Bill Jennings on December 11th, 2010 11:31 AM

    Having exclusive deals with your sponsors in the mma space is not restraint of trade. You think the NFL would allow their sponsors to work with a competing org?

    Kelsey is absolutely right about sponsorship being a house of cards for start ups. However for established brands who target this demo UFC is the best deal around. I expect the blue chips to increase while the start ups continue to vanish. And once the stigma passes and bidding starts between blue chips the money will skyrocket even more.

    It amazes me how the author of the article that Kelsey cites is complaing about both UFC charging a sponsorship fee and then here in the comments section he’s complaining about how they arrange exclusive deals with sponsors. If anything the sponsorship fee should help these other organizations with getting sponsors and mitigate every sponsor entering into exclusive deals with the UFC.

    Could you imagine if the UFC had no fee? There wouldn’t be a single sponsor who wouldnt enter an exclusive relationship with the UFC. Right now at least there’s a fee whereas a strikeforce or bellator can say they dont have a fee,

  12. John S. on December 11th, 2010 1:20 PM

    Kelsey,

    I can understand your not including the supposed Zuffa boycott, but I felt as though it were a glaring omission. Something that talked about and controversial should at least merit a mention, no? And although it hasn’t been confirmed I do believe it exists, since a friend of mine in the apparel industry informed me it’s becoming a major issue.

    You’re right on my comment about the payroll. I left a “will” out of the key sentence. It should have read. “By taking actions like this not only is Zuffa punishing those fighters outside their umbrella, but they WILL also able to lower their payroll.” Although you do bring up payroll over the last 4 years. If you go back to 2004, then you’d find that disclosed payout has increased 3-fold while total revenues have increased 10-fold.

    I don’t think you would argue the fact that a fighters ability to draw sponsorship money outside the UFC offers them leverage in contract negotiations.

    As for this “This feeling that the UFC is really trying to fuck everybody and take all the money for itself is garbage.” I don’t think I’ve ever expressed that sentiment. I know firsthand some of the kind things they’ve done, above and beyond any contractual obligations. That being said, I think it is very apparent that Zuffa’s plan for business is to exert some sort of monopolistic control over the sport. What makes the UFC so successful is that they’ve been able to clamp down on their stars’ salaries in a way no other sport or popular entertainment has been able to. Do I blame them? No. They’re a business and as such they are in the business of making money. But I don’t think we can ignore what their intents are.

    As for your larger point, I agree full-heartedly that the current situation is not viable. You did an excellent job explaining the current situation, and I feel as if I have a better understanding on the business,

    Thank you.

    PS. I believe his name is spelled Jonathan Snowden.

  13. Kelsey Philpott on December 11th, 2010 2:24 PM

    John,

    Jonathan’s name has been fixed. Thanks!

    I see where you’re coming from. Perhaps I should have made a note. However, I don’t believe it would have been anything substantial other than to say that I’m not certain we have all the facts and I wouldn’t feel comfortable asserting my position on the record at that point.

    I didn’t mean to outwardly accuse you of those sentiments. At that point, I’d sort of moved on to addressing the entire situation as a whole (should have made that clear).

    The issue of fighter pay is going to be a hot topic for at least another 5-10 years, so I’m not surprised to see this sort of response to a series of articles. Yet I will say that much of this outcry still stems from a lack of understanding of the UFC business model. It can’t afford to pay all of these guys a million dollars per year (note: hyperbole). To those that think the UFC should let sponsors make up the difference, I’ll respond in saying that it will not and cannot work that way in the future.

    I appreciate your kind words and your civil tone. This is a niche website that draws a certain type of reader. I’m happy to say you and the rest of the fine folks that visit this site are amongst the brightest and most respectful around the MMA community. Kudos.

    Kelsey

  14. Machiel Van on December 13th, 2010 8:02 AM

    Ugh.

  15. Eric Nitsch on December 14th, 2010 1:15 PM

    Great discussion. I am curious if anyone knows to what extent the UFC holds license over fighter likenesses. I understand that there was some issue with signed fighters using their likenesses on a competing video game. While this was in direct competition with a UFC product, it made me wonder. Now, with Kelsey arguing for a change in endorsement deals involving fighter likenesses, (which I happen to believe is a better model) is there the possibility that the UFC will be able to “approve” such contracts? I have seen some fighters in commercials (Rahsad, GSP) for major companies already, so I wonder how the deals are made and if the UFC gets a say.

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