UFC-DraftKings announce sponsorship deal

February 25, 2015

The Sports Business Daily reports that fantasy sports operator DraftKings has signed an exclusive partnership with the UFC.  The deal, which was rumored to occur earlier this month now makes DraftKings an official sponsor of the UFC.

The deal will include “offline and online branding assets for DraftKings” including “in-octagon signage” (which we’ve already seen) at UFC events.  One of the notable elements of the partnership is the unique UFC prizes for DraftKings players which include “trips to events, VIP experiences” with Dana White and “fighter meet-and-greets.”

Although the article indicates that daily fantasy MMA games lag behind football or basketball there’s promise that it may grow.

The UFC becomes one of several league partnerships for DraftKings which includes Major League Baseball, NHL, the Breeders’ Cup and the World Series of Poker.  It also has individual team deals with various NFL, NHL and NBA teams.

The deal was brought together by venture capital firm The Raine Group, an investor in the Boston-based fantasy operator.  It was at an investor conference earlier this month where it was reported that the deal appeared imminent.

This past December, DraftKings announced a deal with Jon Jones and the launch of Fantasy MMA on its site.

Payout Perspective:

The deal is done and makes sense considering the fantasy sports industry is booming right now.  With the UFC’s roots in the gaming industry, it was just a matter of time before this sponsorship was finalized.  It will be interesting to see if DraftKings will seek out individual MMA fighters for sponsorship opportunities.

Mayweather-Pacquiao set for May 2nd

February 20, 2015

The long-awaited fight between Floyd Mayweather, Jr. and Manny Pacquiao is taking place May 2nd at the MGM Grand Garden Arena.  Mayweather posted a picture of a piece of paper which he states was the signed contract for the fight.

It is being reported that the purse split is 60-40 in favor of Mayweather.  One would assume that Pacquiao would probably make up the split in international television rights although that is not being reported.

Pacquiao confirmed the fight was on via Yahoo! Sports and Kevin Iole.  It is expected that Floyd is making $120 million (not counting the ancillary business which is sure to propel him higher) and Manny will make $80 million.

While the biggest gripe about this fight is that its happening past both of their primes, it is sure to set Nevada gate and attendance records as well as closed circuit and PPV buy rates.

For those wondering, the biggest gate occurred a couple years ago with Mayweather-Canelo at the MGM Grand.  The attendance was a little over 16,000 but a gate of over $20 million.

A Floyd-Manny PPV would certainly break or near the reported 2 million PPV buys of Mayweather-Canelo and Mayweather-Oscar.

Although no specifics were reported, one assumes that this is a Showtime PPV since Floyd still has two fights left on the deal.

Payout Perspective:

Its clear that this fight will receive a ton of media as fans have been waiting for these two to fight for ages.  Expect a PPV price that will be more than the $75 for the Canelo fight.  Perhaps $100?  In my opinion, it would not surprise me.  We will be treated to a great deal of shoulder programming including, what I anticipate, an extensive All Access 360 covering both of their camps.

Minutes after the fight was officially announced, MGM Grand has sold out its hotel.  Expect much of the strip to be sold out the first weekend in May.

We will keep you posted on the business end of this fight as May 2nd nears.

UFC calls for policy on drug testing

February 19, 2015

The UFC announced a “Call to Action” on Wednesday which it hopes will address the issue of the usage of illicit drugs in the sport.  The organization earmarked July 1, 2015 as the date for the new policy to take effect.

Dana White, Lorenzo Fertitta and UFC COO Lawrence Epstein announced the new policy at a news conference on Wednesday.  On July 1 of this year, all fighters will be subject to random performance-enhancing drug testing. It intends to partner with a third-party to administrator overseeing its vision for drug testing its fighters.

There are obvious issues that must be hammered out here.  MMA Junkie points out four big questions.

The UFC is also in favor of longer suspensions and harsher penalties doled out by state athletic commissions.  The UFC is in favor of a two or four year suspension.  Having commissions comply with a new UFC drug policy seems like an easy fix but it’s clear that the impact may reach farther than the UFC.

Payout Perspective:

It will be interesting to see how the drug testing policy plays out.  In August, ironically the same month that the Cung Le debacle occurred, it was reported that the UFC was looking into a drug testing protocol with third-party organizations. Now, it seems Zuffa will have to pick up where it had previously left off with seeking out an organization that will oversee its drug testing.

The UFC will take a hit here with how much it will need to spend in drug testing but for the integrity of the sport and from a public relations standpoint, it will need to spend whatever is needed to ensure that more fighters are not caught taking PEDs.  

Based on Wednesday’s news conference, the UFC’s use of a third party regulatory body to administer drug testing should solve the issue of what happens (like in Macau) where there is not a regulatory authority to oversee drug testing.  

 

While the announcement on Wednesday appears to be a move in the right direction.  There are a lot of things the company needs to do to hammer out a policy and its clear that it has to figure out whether state, provincial and international regulatory authorities will comply with the UFC.  Hence, the legal implications are far greater than one might think and the company will need to rely on the department that Dana White said “screwed up” the Cung Le issue. It was alluded to that contracts will need to be reworked so that the new policy would be a part of each fighters’ deal. Obviously, submitting to a third party (assuming that is the way the UFC goes) drug testing facility could create issues including liability.

Although just a thought, the new drug policy may be worked into the standard UFC Code of Conduct Policy as well.

As for independent agencies, at least one applauded the announcement Wednesday. 

Tygart has been an advocate of blood and urine testing in the UFC for a while.

We will see where this goes.  MMA Payout will keep you posted.

Draft Kings dealing with potential class action lawsuit

February 17, 2015

Although the UFC and Draft Kings have yet to formally announce an exclusive sponsorship deal in which the fantasy sports operator will become the company’s official sponsor, the two organizations have something in common:  people filing class action lawsuits against them.

As The Legal Blitz brought to light in his ATL Redline post, the Boston-based DraftKings is being sued in federal court in Florida claiming that DraftKings violated the Florida Deceptive and Unfair Trade Practices Act.

Essentially, the lawsuit claims that Draft Kings misrepresented the term “free” in its advertisements in order to induce consumers to deposit money to the website.  Commercials and ads which indicate “free sign-up bonuses” that match up to 100 percent of deposits for the site are untrue according to the complaint.  As described in the complaint, customers must enter fantasy contests and receive bonuses “in incredibly small increments” and rather than the 100 percent deposit match, they receive just 4 percent of every dollar they play.

In this case, the named plaintiff deposited $25 and only received $1 in return when he played in the fantasy contests.  It’s likely that if this case gains momentum, there will be lawsuits all over the country simulating this according to The Legal Blitz.

But, as he points out fantasy sports players registering with DraftKings probably did not know that they agreed to mandatory arbitration.  He points out a 2013 U.S. Supreme Court case which dictates that arbitration provisions are binding and enforceable.

While this may not be the ultimate result in litigation, it’s probably a likely outcome.

Payout Perspective:

It’s always advisable to have arbitration agreements in contracts to reduce the potential of litigation as well as control the potential legal costs. Many things that people sign have these types of clauses.  The way the clause is drafted is the ultimate issue on whether it may be enforced.  The class action lawsuit filed here is an interesting take on the fantasy sports “gaming” industry and how closely it resembles actual gambling.  Obviously, the enticements about “free” are stretched and while many consumers were likely duped into thinking that they’d be getting an incentive for playing, they will probably “let it go” in order to play.  Unfortunately, Zuffa probably does not have as easy a road to resolving its class action lawsuit.

UFC-Draft Kings close to sponsorship deal

February 11, 2015

The New York Business Journal reports an “imminent” deal between Boston-based startup DraftKings and the UFC which would make the fantasy sports operator an exclusive sponsor of the UFC.

Prior to UFC 182, Draft Kings announced a sponsorship deal with Jon Jones.  At UFC 183, its logo donned the Octagon mat.  Now, it soon will be the official fantasy sports operator of the UFC.

The deal was announced by one of Draft Kings’ venture capital investors at a conference in New York on Tuesday.

Draft Kings indicated that a one-year deal will include “prominent DraftKings signage at events, a large web presence, and broadcast features designed to bring UFC fans to the fantasy site.”

The company has produced $30 million in revenue last year as it brokered deals with the NHL and Major League Baseball.  Financial terms of the deal were not disclosed. Draft Kings and rival Fan Duel own 90% of the fantasy sports market.

draft kings

Payout Perspective:

The deal make sense as fantasy sports is hot at this time.  The article indicates that fantasy sports could grow to a $20 billion market.  With the NBA’s commissioner Adam Silver acknowledging that gambling should be regulated and it is inevitable, fantasy sports operators have been signing deals with leagues and teams to be its official sponsors.  The growth in this market reflects a correlation between fantasy sports, gambling and the interest in owning statistics for its use.

Ruediger and Danzig latest to file lawsuits against Zuffa

February 5, 2015

Former UFC fighters Gabe Ruediger and Mac Danzig are the latest to file a lawsuit in the Antitrust class action in the San Jose Division of the Northern District of California.  Captioned Ruediger et al v. Zuffa, LLC, the Complaint dated February 4th mirrors the other 3 lawsuits previously filed by the other former UFC fighters.

A new law firm has emerged on behalf of the Plaintiffs, the Philadelphia-based Spector Roseman Kodroff & Willis, P.C. appears to have its hand in representing Ruedigger and Danzig although the pleadings were signed by attorney Joseph Saveri.

Bloody Elbow has obtained the lawsuit and you can find it here.

If you’ll notice, the paginations in this lawsuit are slightly off and seem to indicate a cut and paste into the pleadings.  The observation is neither here nor there, it’s just an observation.

Ruediger was a part of TUF 5 and fought with the UFC in 2006.  After time away, he had two more fights in the UFC in August 2010 and February 2011 (specifically 4 years ago as of the date of this writing).  He also fought in the WEC.  His last fight was in May 2013 for the Bamma USA organization.

Danzig is a recognizable name as you may recall he was the TUF Season 6 winner back in 2007 and had a long career with the organization.  You may recall he fought on a UFC on Fox 9 event without taking any money from sponsors.  He announced his retirement from fighting early last year.  Danzig was critical of the UFC in an interview with MSNBC this past January.

Payout Perspective:

Ruediger and Danzig are names that many UFC fans can recognize as the number of fighters joining the lawsuit increases.  Danzig is an interesting addition to the lawsuit as he seems like an articulate individual with definite opinion.  As previously reported, Zuffa is seeking to transfer the lawsuit to Nevada.  Also, the Plaintiffs have sent subpoenas to YouTube and Twitter to obtain the accounts of several key UFC employees.

MMA Payout will keep you posted.

Silva and Diaz fail drug tests prior to UFC 183

February 3, 2015

According to Yahoo! Sports’ Kevin Iole Anderson Silva and Nick Diaz have failed drug tests.  Silva tested for two types of performance enhancing drugs.  Diaz tested positive for marijuana use.

The report indicates that Silva tested positive for two anabolic steroids: drostanolone and androstane.  The test occurred “out of competition” (as defined by WADA) as the test administered on Silva occurred on January 9th but it was not discovered until today, February 3rd.  Diaz had marijuana metabolites in his system.  Its the third time that Diaz has been caught.

Commission chairman Francisco Aguilar stated to Iole that he does not know why the commission received the test results so late.  If the commission received them prior to UFC 183, Aguilar would have not allowed Silva to fight.

The UFC made this statement on Silva:

“On February 3, 2015, the UFC organization was notified by the Nevada State Athletic Commission that Anderson Silva tested positive for Drostanolone metabolites on his Jan. 9 out of competition drug test. UFC’s understanding is that further testing will be conducted by the Commission to confirm these preliminary results.”

“Anderson Silva has been an amazing champion and a true ambassador of the sport of mixed martial arts and the UFC, in Brazil as well as around the world. UFC is disappointed to learn of these initial results.”

“The UFC has a strict, consistent policy against the use of any illegal and/or performance enhancing drugs, stimulants or masking agents by its athletes.”

UPDATED:  The UFC has issued a statement on Diaz:

“The UFC has been notified by the Nevada State Athletic Commission that Nick Diaz has tested positive for marijuana metabolites following his fight with Anderson Silva at UFC 183 on Jan. 31 in Las Vegas, Nev. The UFC has a strict, consistent policy against the use of any illegal and/or performance enhancing drugs, stimulants or masking agents by our athletes. As a result of his positive test, Diaz has been informed that he has violated the UFC Fighter Conduct Policy and Promotional Agreement with Zuffa, LLC. The UFC organization will fully respect the Commission’s final decision relating to Diaz at a disciplinary hearing set for February 17.”

Payout Perspective:

Interesting enough, Silva stated this to MMA Junkie late last year about those that use PEDs:

“This is not bad for me, this is bad for the sport,” Silva told MMAjunkie. “People around the world love the UFC, but the kids love the UFC, and the families love UFC. It’s bad for the sport. I don’t think this is good because the sport can change the lives of the kids and the people in the world.”

“When the guys test for the steroids, (they should have) no more fights,” Silva said. “When you use the steroids, you use them for a long time. When you use the steroids for a long time, you have a problem. It’s a drug and it’s not good for the sport.”

Until now, Silva has a documented history of being clean.  Maybe it was recovering from his horrific leg injury that caused him to want to take PEDs but that is not an excuse.  This mark on his career is unfortunate and does not bode well for his legacy in the sport.  For the UFC, this is a disaster as the first two big events of the year, its two biggest stars have failed drug tests.  As Silva pointed out, it’s bad for the sport.  It’s also bad for UFC business.  The Diaz drug test is less surprising but still not good for the company.

A story to continue to follow is how was it that the commission did not receive the test result prior to UFC 183.  We saw a similar mishap with the out of competition testing of Jon Jones.

 

More on Zuffa’s motion to transfer Antritrust lawsuit to Nevada

February 3, 2015

MMA Payout gives you a little more detail in what is going behind Zuffa’s request to move the Antitrust lawsuit filed by Plaintiffs in Northern California to Nevada.  Zuffa’s biggest arguments about the reason for transferring the case is that the Plaintiffs signed contracts/agreements which had forum selection clauses and that for convenience of the litigants, much of the case deals with information and individuals residing in Nevada.

Forum Selection Clauses

Zuffa argues that four of the seven Plaintiffs agreed to “forum selection clauses” in their contracts which would avail themselves to the jurisdiction to the state court or District of Nevada.  The other three Plaintiffs “agreed to forum selection clauses” which indicated that “any disputes arising from or relating to” their agreements would be determined in the state court of Nevada.

Convenience Factors

In addition to the argument that the Plaintiffs agreed to settle legal disputes in Nevada, Zuffa argues that for “convenience of the parties” a transfer to the federal court in Nevada “unequivocally favors” the move of venue.  Zuffa contends that the “contracts and business relationships of Zuffa” are located in Nevada as well as the potential witnesses and documentary evidence is located in Las Vegas.  Zuffa also contends that non-party witnesses are located in Las Vegas which include executives from WSOF, Top Rank, the Wynn Las Vegas and Muay Thai promoter Lion Fight Promotions.  Its not clear from the pleadings whether Zuffa intends to call these witnesses or if these are examples of the argument that there’s an obvious need for the transfer of venue.

Zuffa argues Plaintiffs signed agreements with forum clauses

In its pleadings, Zuffa argues that Fitch, Garza, Le and Vera agreed to “at least one Bout Agreement, Merchandise Agreement, or Promotional and Ancillary Rights Agreement containing a “forum selection clause” which gave their consent “to the exclusive personal jurisdiction and venue of the state and federal courts located in Clark County, Nevada for any action brought by either party to interpret or enforce any provision of this Agreement.”

Plaintiffs Quarry, Hallman and Vasquez have different forum selection clauses which dictated that any dispute arising from their contracts be decided in “the Eighth Judicial District Court for the State of Nevada, sitting in Las Vegas.”

Limited contacts with San Jose

To buttress its argument that the venue should be transferred to Nevada, Zuffa also compares the amount of events it has held in San Jose (5), where the lawsuit is currently filed to Vegas where it states has staged “more than 30 major MMA events in Las Vegas.”  It also points out that only Cung Le is the only Plaintiff residing in San Jose while all the others do not reside in that forum.  It also states that while Strikeforce was based in San Jose, all of the pertinent document reside at Zuffa headquarters in Vegas.

In its legal arguments, Zuffa asserts that the District of Nevada is an appropriate forum because this lawsuit could have been filed there rather than in San Jose.  It also cites case law which it argues should be the authority to enforce forum selection clauses in contracts. Thus, since the Plaintiffs signed its contracts, they should abide by the forum selection clauses in the contracts.

One of the key legal distinctions made by Zuffa is that it claims that Plaintiffs engage in “artful pleading” when it filed its Complaint as the Plaintiffs argue that they are not individually enforcing their contracts and thus their claims fall outside of each Plaintiffs’ individual contract.  Zuffa contends that this is not the case as the contracts are “inextricably linked” and thus must avail to the forum selection clause.

Possible Zuffa Counterclaim?

It also indicates in one of the last sections of its motion to transfer pleading that it might seek to counterclaim with a breach of contract claim against the Plaintiffs.  Basically, the breach would be the Plaintiffs filing a lawsuit outside of Nevada despite signing a contract indicating that it would avail itself to the jurisdiction of Nevada.

When will this be decided?

The motion will be heard by the US District Court for the Northern District of California in San Jose – the place where the Plaintiffs filed its lawsuits.  Zuffa would like to have this motion decided sooner than later and has requested a “Motion to Advance the Hearing Date” from May 7, 2015 to March 26, 2015.  They have also indicated that the motion should be heard “on the papers” rather than oral argument.  Basically, Zuffa would like the Court to decide the motion based on the pleadings filed with the Court which may happen with the discretion of the Court.  This will obviously not sit well with the Plaintiffs who would probably want a full briefing schedule as well as oral argument.  The parties have already butted heads on these issues.

Zuffa Motion to Transfer Venue by JASONCRUZ206

Motion to Advance Hearing by JASONCRUZ206

Payout Perspective:

We are beginning to see the legal maneuvering that is occurring with the pre-discovery procedure between the parties.  Obviously, Zuffa’s motion will be met with opposition from the Plaintiffs as well as opposition to the motion to have the motion heard in advance.  So, two distinct procedural issues before we even get to Zuffa actually answering the Complaints.  This does not even consider the probability of a Zuffa Motion to Dismiss the Complaint which could occur after this initial transfer issue is decided.  Lots of paper in the next couple months before we even get to something substantive in this lawsuit.

UFC files motion to transfer Antitrust lawsuit to Nevada

February 2, 2015

On Friday, Zuffa  lawyers have filed a motion to transfer the venue of the Antitrust lawsuit in the Northern District of California in San Jose to Nevada where the Zuffa headquarters are located.  The hearing date is set for May 7th although Zuffa requests to advance the date to March 26th.

In its filing, Zuffa anticipated that the discovery process will be “contentious” as it appears that the parties already dispute a briefing schedule to file pleadings.  Zuffa also cites to subpoenas issued to third-parties for this case which Zuffa indicates violates the federal rules. Zuffa was granted an extension to address the three complaints filed by the plaintiffs.

Instead of an Answer to the Complaint, it has filed a Motion to Transfer Venue.

Payout Perspective:

We had predicted this possibility back in December when the Complaint was filed in San Jose.  Zuffa is based in Nevada and has a viable argument under the federal rules of civil procedure that it should be able to defend its lawsuit in its state.  Zuffa argues that plaintiffs signed UFC contracts with the proviso that any legal dispute is filed in Nevada.  Essentially, they agreed to the “forum selection” as part of a clause in their contract.  It also argues that for convenience purposes the lawsuit should be transferred since most witnesses are located in Nevada.

MMA Payout will keep you posted.

UFC officially raises its PPV prices

January 29, 2015

MMA Junkie reports that the UFC has permanently raised its pay-per-view prices $5 due to what the company calls “rising costs in producing live events.”  For most, the usual $54.99 HD PPV fans have been accustomed to pay will increase to $59.99.

For those that purchase their PPVs in SD, the price will increase from $44.99 to $49.99.

Prior to this official statement to Junkie, it was thought that the first three UFC PPVs of this year would be $59.99 due to the special nature of the events.  In December 2013, UFC 168 increased its PPV price point by $5 as well.

Payout Perspective:

As we discussed earlier in the year, White had previously stated that PPV prices would never go up.  The UFC then raised the price for UFC 168.  With the relative success of UFC 182, one had to know that the price increase was going to stay permanent.  While it may be true that rising production costs may have forced the company to pass along those costs to its fans, the way it has introduced the new prices seems a little disappointing.  It’s not that the prices were raised (at least in my opinion), but how it was done.  The issue of raising PPV prices had been thought to be happening and there had been no answer from the company, until now, that the UFC would raise prices.  Instead, it appeared that the prices would be raised for special events – a form of dynamic pricing.  It now will permanently keep the price adjustment and consumers are now upset.  While boxing has seen its PPV prices rise as well, there are fewer events to choose from.  Still, charging $65 and $75 for Manny Pacquiao and Floyd Mayweather still has fight consumers upset.

From the UFC perspective, the slight increase in pricing helps its bottom line.  A part of the reason why Standard & Poor’s lowered its credit rating and financial outlook were due to 2014’s poor PPV numbers.  The additional revenue it may receive from the price increase should mitigate its increasing production costs and help with its overall financial outlook in 2015.

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