14 for 14: No. 11: UFC continues global expansion

December 27, 2014

The UFC held 22 events outside of the United States in 2014 in its continued expansion of the brand.  The expansion will not end as 2015 will bring one more event in the new year making 23 events to be held outside the United States.

Arguably, Mexico City, Mexico and Dublin, Ireland were the two hottest spots for international events for the UFC this year.

In recent days, the UFC has hired Ken Berger to direct UFC’s Asian division.  Zuffa let go of Mark Fischer in August and promoted Garry Cook from the UK region to UFC’s Chief Global Officer.

In April, the UFC visited Abu Dhabi and Quebec City, Quebec.  It was the first time the UFC made it to Quebec City and the second to Abu Dhabi.

In May, the UFC visited Berlin for the first time.

In June, the UFC and Vale Tudo Japan announced a partnership which would help the Japanese organization in promoting its fighters.  Although no news has yet come down, the two companies announced a TV show featuring Japanese fighters would be produced in the future.  Dana White indicated that this show would be available on Fight Pass.  The UFC held an event in Japan this past September which aired on Fight Pass.

The UFC also visited New Zealand for the first time in June.

In July, the UFC visited Dublin for UFC Fight Night 46 featuring Conor McGregor.  The event was a success with McGregor defeating Diego Brandao before 9,500 fans.  MMA Fighting reported that he ticket demand was high and nearly all the tickets sold within hours of going on sale.  The event was a Fight Pass exclusive and White indicated it was the biggest event on the platform to date.  The success of the event sparked interest of a potential stadium show in Ireland likely featuring McCregor.

The UFC also visited Nova Scotia for the first time in October.

Similarly, UFC 180 in Mexico City was a sellout within 8 hours as 21,000 tickets were scooped up for the intended main event of Cain Velasquez versus Febricio Werdum.  Unfortunately, Velasquez was injured prior to the event and Mark Hunt stepped in.  The injury likely hurt PPV buys.

The UFC announced a stadium show for January 2015 in Sweden where native Alexander Gustafson would take on Anthony Johnson as part of the January UFC on Fox event.

The UFC’s signature series, The Ultimate Fighter included a TUF Nations Edition (Canada vs. Australia), TUF Brazil, TUF China and TUF Latin America.

Payout Perspective:

Despite its recent credit downgrade in October, Standard & Poor’s indicated that one of the positives for Zuffa was its international expansion.  With big shows in Dublin and Mexico City this year, there is hope of building new audiences in these areas.  Of course, that is dependent on the country’s stars (i.e., Conor McGregor, Cain Velasquez).  According to the Las Vegas Review Journal, for 2015, its Reebok deal will mean UFC logo gear in retail stores around the world, expansion of the UFC gym business globally and targeting Russia, South Korea, Scotland and Panama or Costa Rica.

14 for 14: No. 12 Rousey wins CSAC arbitration hearing against Fight Tribe

December 26, 2014

Earlier this year, Ronda Rousey split with longtime manager Darin Harvey and his management company Fight Tribe Management.  After an arbitration hearing in which both sides participated, it was determined that Rousey could be released from her fight contract and was not responsible for payments claimed by Harvey due to him.

Harvey filed a “Petition to Compel Arbitration” in LA Superior Court and requested that the briefing be sealed which precludes the public from reviewing the documents filed.   After the hearing held this past March, the CSAC determined that Rousey’s “Service Agreement” with Fight Tribe was void as to the “professional fighting services only.”  The arbitrator determined that Harvey had not followed the rules promulgated by the California State Athletic Commission with respect to fight contracts.

From our post earlier this year:

The ruling, in favor of Rousey, is premised on Harvey not properly executing the fight contract on “printed forms approved by the commission.”  The Commission ruled that, “[t]he controlling contract was the subject “Representation Agreement”, which was entered into in California and specifically binds the parties to be governed by California law.” Hence, the rationale by the Commission would lead it to conclude that since the contract was not on its printed forms, the contract was void as to the fighting portion of the contract.  In addition, the Commission ruled that “a fighter-contract” is not valid unless both parties appear at the same time before the Commission, and the contract receives the Commission’s written approval.”  This did not happen as the contract, which was originally drafted in May 2012, was not executed until January 2013.  Regardless, it was not done before the Commission.

Even though Harvey’s “Representation Agreement” did not comply with the Commission rules, he still argued that he was entitled to “quantum meruit” (latin for “what one has earned”).  This is a theory in contract law allowing a party to be compensated for actual work/services performed.

Under this theory, Harvey was seeking to recoup losses incurred from representing Rousey.  Harvey indicated in an exhibit at arbitration that from January 1, 2010 to January 31, 2014, he collected $25,608 in income from Rousey fights, $23,180 from PPV fights and $20,830 from income of sponsorships.  This is offset by Harvey’s claim that he paid $170,376 in expenses related to Rousey’s fighting career which makes Harvey at a loss of $85,818 from representing Rousey.  The paid expenses included paying for training including strength and conditioning, sparring partners and living expenses.

Longtime California promoter, Roy Englebrecht empathized with Harvey’s situation but also advised:

I have seen this happen a number of times over the years, where well intentioned people want to get involved in the fight business, but never take the time to learn about the business and some of the rules that govern it. This situation with Ronda and Darin could have been avoided if Darin knew the CSAC rules and followed them. This manager/fighter agreement or promoter/fighter agreement in California is unique to the sport, and if not followed you will lose, as this ruling showed.

The issue of the contract between Rousey and Fight Tribe with respect to representation outside of “professional fight services” still remains in state court in California.

Payout Perspective:

This is a textbook example of the ills of manager representation in sports.  Certainly, Harvey and Fight Tribe should have followed the rules of the CSAC.  While the representation of Rousey probably was a “handshake agreement” at first (note that there was an 8 month lag between Rousey actually signing contract and the date of Representation Agreement), it was not until Rousey started to become popular that issues began to occur. Rousey signed on with William Morris Endeavor and Fight Tribe likely felt like it was being boxed out of its representation.  We shall see if 2015 brings a resolution to the issue.

14 for 14: No. 13 Cung Le drug testing suspension overturned

December 25, 2014

After losing his match against Michael Bisping at UFC Fight Night 48, the UFC determined that UFC middleweight Cung Le had failed a post-fight drug test.  As a result, Le was suspended by the UFC for one year.  However, Le’s representatives noted the faulty drug testing methods and requested arbitration.

The suspicions about Le using PEDs occurred after an Instagram pic showed the 42 year old more chiseled than he had ever been.  A drug test after his fight with Bisping showed elevated levels hGH in his system.  However, Le and his representatives denied his PED use citing a faulty drug testing policy.  The UFC acted as the commission in Macau as the country had no regulating authority to administer the drug tests.  However, the UFC did not use a WADA-approved lab to examine Le’s tests.  Even if the lab had used the same procedures as WADA, Le’s reps pointed out that there was a lab that was accessible to take the results.  There was also the contention that taking the sample after the fight may not prove an accurate test for elevated levels of hGH.

In addition, it was not clear what the appeal process was for Le.  Based on some of the speculation of the grounds for appeal, it was clear that an appeal process when the UFC is the acting regulator for a failed drug test was not readily spelled out.  It turns out that the arbitration would be under AAA rules which meant that there would be an evidentiary hearing as well as evidence submitted prior to the actual hearing.

Soon after the request for an appeal of the suspension and arbitration was made, the UFC rescinded the suspension of Le.  In a release, the UFC indicated that “based on the lack of conclusive laboratory results” UFC officials determined to rescind the suspension.  Backtracking on the suspension  could be seen as a PR hit by the UFC as one might infer that it did not want to go through a hearing and reveal its drug policy, or lack thereof.

Payout Perspective:

As we pointed out back in October, the UFC did not want to go to arbitration as it would have likely exposed the UFC’s drug testing policy (or lack thereof).  Rescinding the suspension did not mean that Le was not guilty of taking illegal substances; it’s just that the process for testing was faulty.  Regardless, this episode shows that the UFC drug testing policy must be retooled to address issues in its testing and appeal process.  As the company continues to expand in new countries and regions, it must have a concrete drug policy or work with the local commissions.

We will see what 2015 holds for this particular issue.

14 for 14: No. 14 Gil re-signs with the UFC

December 25, 2014

Back in February, Gilbert Melendez re-signed with the UFC after it was initially reported that he had agreed to a deal with Bellator.  But, the UFC exercised its “right to match” in Gil’s contract.  The move showed a newfound Bellator strategy to become more competitive with the UFC

Melendez became a free agent after his contract with Zuffa ended with his fight against Diego Sanchez at UFC 166.  Melendez was given offers from Bellator and the WSOF.  It was thought that Bellator had secured the lightweight but the UFC agreed to match the terms of the Bellator deal.  Melendez also received a title shot for the lightweight title and became a coach on TUF opposite Anthony Pettis.

Via MMA Fighting:

Per the terms of the agreement, according to several sources, Melendez’s deal guarantees that at least 75 percent of the 31-year-old’s fights will be contested on pay-per-view moving forward. Additionally, income earned from Melendez’s contracted pay-per-view points will kick in at a lower minimum buy rate than for any contract in UFC history, meaning Melendez will still earn pay-per-view point earnings on an event that performs poorly at the box office.

Payout Perspective:

The Gil deal makes the list because it revealed some key points that his representation was able to get on his behalf.  This drew the envy, of some fighters.  Shortly after Gil’s deal, Nate Diaz went on a twitter rant about his unhappiness with his UFC contract and asked to be released.  Gil’s deal was a rare example of fighter leverage and the invocation of the “right to match” clause.  We recall the problems occurring with this in the Eddie Alvarez legal battle.  Here, there were no problems, and in fact, Gil made out well.  Of course, his next fight was a loss to Anthony Pettis at UFC 181.  He made a base of $200,000 and should receive PPV points from the PPV buys.

With the recent UFC lawsuit filings in San Jose, new uniform deal, potential new sponsors in the UFC and the rise of Bellator, it will be interesting to see if/when another top free agent comes up, how the UFC deals with the negotiations.

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