More unredacted footnotes detail proportionality of revenue and origins of UFC sponsor tax

August 4, 2019

In our second installment of reviewing the unredacted portions of the expert report of Hal Singer, MMA Payout examines the argument that Zuffa retained its fighters despite not needing them.  It also looks at the comparative market between boxing and pro wrestling.

A link to the first report is here.  As I explained in the first post, Zuffa had requested portions of the report to be sealed due to trade secret or confidentiality purposes.  It has now unredacted portions which reveal a little more of Singer’s report which helps the reader deduce how the economist came to his conclusion.

The inference is that the arguments placed in the report would support the Plaintiffs’ contentions in its lawsuit.  Singer, an economist, goes meticulously through the discovery and depositions in the report.  Zuffa objected to the public seeing some of the information and hence were redacted from view.  It has now proposed a new version of the report for the public which reveals more of the report.

Proportion of revenue:

The impact of the Sponsor tax:

Singer’s report details the issue with the sponsor tax and how it had an impact on fighters and their existing relationship with sponsors.  The UFC tax put a premium on showing a brand and logo on fighter shirts or shorts.  The UFC charged $50,000 per sponsor, $35,000 for Strikeforce and $75,000 for both if a sponsor wanted to be included in each promotion at the time.  This effectively eliminated many small brands.

The tax meant the end to many smaller companies that attempted to get their brand out there through sponsoring fighters. Many fighters lost sponsors.  This included the likes of Jiu Jistu Pro Gear, Hooligans United and even basketball brand And1 which Nate Quarry wore in the Octagon for a while.  In correspondence to Quarry, UFC attorney Michael Mersch, wrote, “if And1 (or any other sponsor) doesn’t want to pay a fee or negotiate to pay ato ssociate their brand name with the UFC, they’re not going to be allowed to sponsor anyone.

 

The new fee also hurt fighters:

Mersch appeared to be one of the UFC execs on the front lines in letting fighters and their managers know that there were no exceptions to the tax policy.  Even, relishing in providing the news.

The fighters were financially hurt since sponsors that could pay the tax would have to work through the UFC and those that could not would no longer sponsor the fighters.

The move to the sponsor tax was an indication that the UFC brand equity was firm and company execs believed that this would add revenue.  Perhaps the foreshadowing was that the UFC would turn to what it has now.  All sponsorships controlled by the UFC.  As a repercussion, its independent contractors took a hit for the loss of its own payout.  Singer’s report highlights the cutthroat nature of ending off a major source of income for fighters while bolstering the company’s bottom line by diverting sponsor revenue from fighters to the UFC.  The details that are forthcoming from the report based on discovery reveal what some may see as heavy-handed tactics for the UFC’s financial benefit.

One Response to “More unredacted footnotes detail proportionality of revenue and origins of UFC sponsor tax”

  1. UFC lawsuit docs shed light on potential PPV paydays for McGregor, Rousey, Jones and Lesnar - Physical Education Sports News,American Football,Soccer,NBA Basketball,Baseball,Tennis on August 8th, 2019 4:03 PM

    […] Some of the most revealing details come courtesy of previously redacted passages from an expert report composed by Hal J. Singer, an expert witness for the Plaintiffs. Passages from Singer’s report come to us thanks to Jason Cruz, of MMAPayout and Bloody Elbow’s ‘Show Money’ podcast (hosted … […]

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