Court denies World of Boxing’s request for Wilder emails re Meldonium in continuing legal drama

March 21, 2018

The United States District Court in Southern New York has denied a Motion to Compel in the World of Boxing/Alexander Povetkin lawsuit against Deontay Wilder.  Previously produced documents from Wilder’s attorney were determined to be work product by the Court.

The case has a long and winding history and while a jury determined that Povetkin had Meldonium in his system post-January 2016, the legal issues related to $7.15 million still held in escrow as well as allegations that Wilder breached his contract.  A breach of contract carries liquidated damages of $2 million.

Order on Motion to Compel by JASONCRUZ206 on Scribd

Central to the latest legal wrangling is a Motion to Compel documents originally filed last year by World of Boxing and Povetkin (“WOB”).  The motion was stayed (held off on a decision) until the end of last February’s trial.  The Court has now ruled on the issue and denied WOB from receiving emails from Wilder’s camp which discuss Meldonium.

The issue concerns 15 emails sent by Wilder’s attorney John Wirt after it was discovered that Povetkin tested positive for Meldonium.  Wirt has sent a letter to the escrow agent holding the purse money indicating that it not be released until resolution of the matter since it was Wilder’s position that Povetkin breached the Bout Agreement due to his positive drug test.  WOB objected to the letter which precluded the release of funds.

The emails were originally produced in written discovery but when WOB produced them at deposition, Wilder invoked a “claw back” provision which allows for the return of documents deemed attorney-client or work product.  On its privilege log, a list of documents withheld which lists the reason for not producing, it noted that the emails were attorney-client privilege.

Wirt’s emails were not sent to Wilder but his reps including Lou DiBella and Al Haymon.

According to the Court,  “The Wirt Email analyzes the WOB Parties’ mid-May [the fight was set to take place in late May 2016] explanation for the failed drug test that is at the heart of this dispute and discusses possible responses to it. Wirt recommends a course of action to the individuals receiving his email.”

Notably, there are subsequent emails from Shelly Finkel (Wilder’s co-manager) with his thoughts and the email is to employees of Wilder’s promoter, Lou DiBella.

WOB argued that the emails were discoverable because they were labeled as attorney client privileged and not work product.  Furthermore, they were not prepared in further anticipation of litigation which is a requisite in protecting a document via work product.  WOB argued that in deposition testimony by DiBella and Alex Dombroff, they were not thinking of a lawsuit.

The Court indicated that it could make the decision to deem the documents work product even if Wilder did not.  Secondly, it disagreed with WOB’s argument.  The Court writes that Wirt’s email was sent to protect the interests of Wilder in the prospect of litigation as Povetkin had failed a drug test and there was potential for the fight to be called off.  Moreover, Wirt had to protect his client’s interest with respect to the escrow money.

After an “in camera” [looking at the documents] review of documents, the Court determined that the emails were work product. Additionally, they stated that WOB did not show a “substantial need” for the documents and the Court determined that the emails were protected under work product.

Payout Perspective:

This case seems to be far from over as the fight over which side breached the Fight Contract and who should receive the $7.15 million in escrow.  Wilder was set to make over $4.5 million while Povetkin was going to make $1.9 million.  The winner would have earned an additional $715,000.  However, Povetkin’s promoter, who made the successful purse bid, would like the money back.  In addition, they claim Wilder breached his agreement to travel to Russia despite the news of Povetkin’s drug test.  The contract indicates a liquidated damages penalty of $2 million.  One has to wonder the importance of the emails as WOB has seen the contents.  It’s a matter of being able to utilize them in evidence.  Since the Court has determined them to be work product, they cannot be used at all.

MMA Payout will keep you posted.

Show Money Episode 21 talks antitrust lawsuit, Project Spearhead and more

March 8, 2018

In this episode of Show Money we talk antitrust lawsuit, project spearhead and more with Paul Gift and John Nash of Bloody Elbow.

UFC 222: Payout Perspective

March 7, 2018

Welcome to another edition of Payout Perspective.  This time we take a look at UFC 222 which took place at the T-Mobile Area in Las Vegas.

Cyborg easily handles Kunitskaya

Cris Cyborg took care of Yana Kunitskaya as the UFC women’s Featherweight champion earned the TKO victory in round 1 of their championship bout.  The former Invicta champ earned a takedown in the beginning seconds of the bout and had a couple fleeting moments of offense before being overwhelmed by Cyborg.  It was clear that Kunitskaya did not want to do anything with Cyborg’s striking and was an easy victory for the champion.

In a division that does not have many challengers, Cyborg may fight  Amanda Nunes in a “superfight” or go after Megan Anderson.

Ortega KO’s Edgar for next title shot Brian Ortega made his presence known in the Featherweight division with an impressive KO of Frankie Edgar.  The durable former lightweight champ went down for the first time.  He had never been submitted or was stopped before in his UFC career.

Ortega looked great and the high-level blackbelt also showed his striking ability.  A matchup against Max Holloway is next.

Attendance, Gate and Bonuses

UFC 222 drew 12,041 for a gate of $1,367, 672 according to the UFC.  The event took Saturday at the T-Mobile Arena in Las Vegas. The last event in Vegas was UFC 219 in December which featured Cris “Cyborg” Justino and Holly Holm.  The event drew 13,561 for a gate of $1,760,628.74.

The bonuses were awarded to Brian Ortega, Alexander Hernandez, Sean O’Malley and Andre Soukhamthath each earned $50,000 fight-night bonuses at Saturday’s UFC 222 event.

According to SeatGeek, the average resale price on the secondary market was $222.

Payouts

Cris Cyborg led the list of athletes Saturday night earning $500,000.  Brian Ortega earned $100,000 plus another for his win over Frankie Edgar.  Ortega also earned another $50,000 for his KO.

The rest of the payouts via NAC:

Cris Cyborg: $500,000 (no win bonus)
def. Yana Kunitskaya: $100,000

Brian Ortega: $200,000 (includes $100,000 win bonus)
def. Frankie Edgar: $195,000

Sean O’Malley: $44,000 (includes $22,000 win bonus)
def. Andre Soukhamthath: $19,000

Andrei Arlovski: $275,000 (no win bonus)
def. Stefan Struve: $77,000

Ketlen Vieira: $60,000 (includes $30,000 win bonus)
def. Cat Zingano: $35,000

Mackenzie Dern: $50,000 (includes $25,000 win bonus)
def. Ashley Yoder: $12,000

Alexander Hernandez: $26,000 (includes $13,000 win bonus)
def. Beneil Dariush: $48,000

John Dodson: $82,000 (includes $41,000 win bonus)
def. Pedro Munhoz: $34,000

C.B. Dollaway: $92,000 (includes $46,000 win bonus)
def. Hector Lombard: $62,000

Zak Ottow: $36,000 (includes $18,000 win bonus)
def. Mike Pyle: $55,000

Cody Stamann: $40,000 (includes $20,000 win bonus)
def. Bryan Caraway: $21,000

Jordan Johnson: $28,000 (includes $14,000 win bonus)
def. Adam Milstead: $12,000

The Reebok payouts are listed here.  Notably, Edgar and Arlovski are in the rare 21 UFC bouts or more category garnering $20K.

Promotion of Event

The biggest promotional event was a joint endeavor with the city of Las Vegas and other sports helding events in the city this past weekend as the Ultimate Vegas Sports Weekend.  A “pep rally” was held at the Toshiba Plaza on the Wednesday before the fight.

Sponsorships

Modelo, Toyo Tires, Harley Davidson, MetroPCS, Monster Energy and EA UFC 3 were in the Octagon.  Notably, Dollar General was also present in the octagon.

Just a little over a month releasing its latest version of its video game, EA has reduced the price due likely to poor sales.  During the PPV, it advertised the sale.

The movie “Hurricane Heist” was given some airtime during the UFC broadcast.

Ratings

The UFC Prelims drew a respectable 905,000 viewers with the peak happening during the last quarter hour for Mackenzie Dern’s fight.  The event drew 11,009 viewers streaming.  Dern’s fight peaked at 1,076,000 viewers.

The prelim showed had a higher than normal viewership with 431,000 viewers on FS1.  The Post-Fight show drew 177,000.

Also on Saturday night, were two boxing telecasts on HBO and Showtime.  Deontay Wilder’s fight on Showtime drew an impressive 1,055,000 viewers on the network which beat out HBO’s fights featuring Sergey Kovalev.  The boxing events occurred during the PPV and did not compete with the FS1 Prelims.

Odds and ends

The biggest bit of business news coming out last week was that Amazon has signed on to stream UFC PPVs.  Similar to ordering via Fight Pass or UFC.com, it cost $64.99 and you have access to the PPV for 24 hours.

There were rumors that Conor McGregor offered to fill-in to save UFC 222.  Of course, this sounds like someone trying to stay relevant while taking time off.

Mike Pyle retired after his loss on Saturday.  A good career despite going out with a loss.

Mackenzie Dern has a lot to work on but the UFC is hoping she turns into another mainstream star similar to Ronda Rousey.

There were 7 Embedded episodes with 6 of those coming before Friday ended.  Most were done to promote potential new stars Dern, Sean O’Malley and Ortega,

Over 200,000 google searches for UFC 222 on Saturday night.  Same for Deontay Wilder.

Conclusion

All indications pointing toward this PPV doing between 340,000-380,000 PPV buys based on the prelim ratings, google trend searches and past history with Cyborg on PPV.  Not an exact science, but if this does mid-300s, you have to think this is a success considering that the card was built on one fight (Max-Frankie) that fell through.

 

Korean Zombie sues Venum over use of his name

March 7, 2018

The Korean Zombie, also known as UFC star Chan-Sung Jung filed a lawsuit for trademark infringement in the U.S. District Court for the Central District of California.

According to the complaint, Jung has filed a lawsuit against DBV Distribution, Inc. which appears to be the company which owns the MMA brand Venum.  Jung alleges that he was approached by the defendants with the possibility of licensing his trademark, Korean Zombie for use on its apparel.  Jung has held the trademark since January 2013 having used it since June 2007.

He claims that in December 2013 and January 2014, defendants approached Jung about the license.  However, Jung states that he “unequivocally rejected” the proposals through his representatives.  Nevertheless, in January 2018, t-shirts and other products bearing “Venum Zombie” appeared for sale.

KZ’s reps sent a cease and desist letter on February 8, 2018 but had not received a response.  The lawsuit was filed on February 27, 2018.  The lawsuit alleges trademark infringement, Jung’s right of publicity, unauthorized commercial use of likeness and unfair competition under the Lanham Act.

Complaint by JASONCRUZ206 on Scribd

H/t: NorCal Record via Alexandra Roberts

Payout Perspective:

The timeline on the communications seem as though there was a huge gap between January 2014 and January 2018 which seems to need more explanation.  Jung did serve in the military for South Korea from 2014-2016.  He has returned to the UFC since then.  But, that does not explain Venum’s use of the name and likeness which seems to be the case.  Venum may argue that the use of “Zombie” does not necessarily refer to Jung and that is within the purview of Fair Use.  However, evidence of having a license rejected and then using Zombie seems like bad facts.  Of course, there is another side to the story which we should hear from Venum.

UFC on Fox 28 draws 2,037,000 viewers; prelims draw 1,214,000 on Fox

February 28, 2018

The official live and same day ratings for UFC on Fox 28 revealed the show averaged 2,037,000 viewers on the network Saturday night.  The prelims which aired on Fox prior to the main card drew 1,214,000 viewers according to Nielsen Media Research.

The prelims started 30 minutes later than scheduled due to an overrun from a college basketball game.  It was the best prelims telecast on Fox since July 2016.  On Fox Sports Go and Fox Now the telecast had an average minute audience of 11,814.  The prelims featured Renan Barao and Brian Kelleher with the New York native earning the victory over the former champ.

UFC Fight Night on FOX averaged 2,037,000 viewers on Saturday according to Nielsen Media Research. The ratings include the overrun which saw Jeremy Stephens stop Josh Emmett.  Saturday night’s performance was 15% better than last month’s 1,771,000 viewers. On FSGO and FOX Now the telecast had an average minute audience of 11,067.  The show peaked with 2,731,000 viewers from 10-10:15pm ET.

The fast overnights had the main telecast with 1.82 million viewers.

The FS1 UFC Post-fight show drew 192,000 viewers.

Saturday night provided stiff competition on the networks as NBC’s coverage of the 2018 Winter Olympics drew 11,422 viewers.  The NBA on ABC Saturday featured Golden State and Oklahoma City with the Warriors blowing out OKC.  But, the game drew 4,051,000 viewers.

Payout Perspective:

The ratings did improve from last month which is a positive for this event.  It did have some stiff competition.  Surpassing 2 million viewers overall is an achievement for this card.

Amazon to stream UFC PPVs

February 28, 2018

Amazon is picking up the rights to UFC PPVs according to a report from the Sports Business Journal.  Terms and length of the deal were not disclosed ahead of a formal announcement later this morning.  The company will stream UFC 222 this Saturday for a priced of $64.99 HD.

As with UFC.tv, the PPV will be available for purchasers for 24 hours on Amazon.

The UFC is shopping its media rights and the Amazon deal indicates it is willing to split its properties into digital and television.  The UFC’s current deal with Fox is reported to be $120 million per year and $160 million in the last year.  Fox has made an initial offer to the UFC for $200 million annually.  The UFC claimed to want $450 per year over 10 years.

The move reflects Amazon’s continued move into sports rights.  Last year, it obtained the right to stream NFL Thursday night games.  It also is bidding for Premier League streaming rights.

Payout Perspective:

Digital streaming rights is competitive as Amazon is competing with YouTube and Facebook for rights to digital events.  Obtaining rights to the UFC likely means the end to sales of its PPV on its own site (or at least a significant loss in sales).  With many people cutting the cord, streaming rights are becoming more valuable to a core audience.  Still, the key to the next UFC television deal will be finding a partner that will be willing to improve on Fox’s initial offer of $200 million.

Plaintiffs’ expert in UFC Antitrust lawsuit takes turn picking apart Zuffa’s economic expert

February 26, 2018

Dr. Andrew Zimbalist had the opportunity to offer a rebuttal report in response to a UFC’s economist undressing of his opinion on the damages in the plaintiffs’ case in the UFC antitrust lawsuit.

In the report he goes after Zuffa’s economic expert, Dr. Roger Blair as he claims that his analysis “provides no insight into Zuffa’s market power or monopsony power.”  As is the case with most rebuttal reports, Dr. Zimbalist picks apart the analysis from Dr. Blair.  He notes that while Dr. Blair pointed out that he did not originally define a market in his original expert report, it was not in his assignment to do so.  Thus, the critique “makes little sense.”

Here, Dr. Zimbalist has the opportunity to critique Dr. Blair’s definition of the market in stating that the basis of revenue generated, not the number of bouts or events.

Thus, the belief is that Dr. Blair is being too broad in his analysis of the market whereas Dr. Zimbalist is being more centralized.

Dr. Zimbalist also defends his use of the “yardstick” method in his original report:

The yardstick method I use to calculate damages, namely, selecting a group of comparators with as much similarity as possible with the target industry or company is one that is used commonly in real estate appraisals. It is also one of the three basic methodologies (comparable sales) employed to value companies: asset based valuation; discounted cash flow valuation; and, comparable sales valuation. More importantly, as Dr. Blair admits, the yardstick approach is a “recognized” approach to calculating damages. However, he claims that my yardstick approach is not acceptable because my comparators are not sufficiently similar to UFC, save the different organizations of their labor markets.

He also defends his use of boxing data in his original report:

Moreover, I also use professional boxing as one of my yardsticks, which suffers from none of the defects Dr. Blair suggests infect my team sport comparators. Boxing is similar to MMA in virtually every respect other than the amount of monopsony power the promoters can
exercise over the athletes, and the absence or unenforceability of many of the challenged
contractual terms due to the Muhammad Ali Act. Boxing has similar total revenues to UFC and
is therefore of similar scale and scope. Boxing promoters have an identical business model to
MMA promoters, with identical sources of revenue such as gate, PPV receipts, licensing fees,
and merchandise. Boxing promoters also incur identical costs to MMA promoters, such as purses for athletes, advertising and promotional expenses, timekeepers, referees, judges, and medical personnel. They also incur some television production costs As in MMA, boxers do not
collectively bargain. Indeed, none of Zuffa’s experts points to any distinguishing characteristic
that would make boxing an inapt yardstick. The only criticism Zuffa’s experts raise is with my
calculation of fighters’ share of revenue in boxing. I address that criticism below.

He also picks apart Dr. Blair’s arguments that the UFC’s conduct is procompetitive citing the flawed comparisons with pro sports free agency.  In this case, he takes issue with the examples of the NFL’s Andrew Luck and Von Miller used by Dr. Blair:

However, the specific examples that Dr. Blair discusses illustrate the important
contextual difference between the relatively competitive market for NFL athlete services and the
current UFC-dominated market for top MMA fighters. Dr. Blair cites the contract negotiations for two NFL players, Andrew Luck and Von Miller.  Both players negotiated contracts with their respective teams without reaching unrestricted free agency Andrew Luck’s team, the Indianapolis Colts, signed Luck to a five-year contract extension prior to the final season on Luck’s rookie contract. The total value of Luck’s contract was $122.97 million with $87 million guaranteed. Von Miller’s team, the Denver Broncos, applied the Franchise Tag to Miller after his final season on his rookie contract and, before the season under the Franchise Tag began, the Broncos signed Miller to a five-year extension worth $114.1 million with $70 million guaranteed. As both Luck and Miller approached free agency, the availability of a competitive labor market allowed them to negotiate contractual terms which allowed them to capture something close to their marginal revenue product, and reflected substantial increases from their prior contracts. UFC fighters have no such prospects.

As noted by Dr. Zimbalist, the issue in the above negotiations rested on the amount of guaranteed money as opposed to the overall contract number.

Also an interesting specific comparison is Dr. Blair’s analogy between the UFC’s “champion’s clause” and the “NFL’s franchise player rule.”  While the NFL’s rule is advantageous for the player that is “tagged,” the champion’s clause does not present the same reward.  Some of the portions of the report are redacted as to the champion’s clause discussion but the arguments remains true that

The report also addresses Zuffa’s other experts which we will get to in another post.

Payout Perspective:

The rebuttal is allowed of the plaintiff as a form of response to the defendant’s report.  Similar to the defendant’s report it is meant to poke holes at the opinion formulated by the opposing side.  Key to note in Dr. Zimbalist’s rebuttal to Dr. Blair’s critique is how he explains how free agency in other sports is different from that in the UFC as it relates to allege procompetitive benefits.  The negotiations differ since the NFL contracts are fought over the amount of guaranteed money in a contract versus the overall value of the contract.  This is due to the fact that many contracts of exorbitant amounts are never paid out that amount, are renegotiated for lower terms or terminated prior to payment.

UFC on Fox 28 draws 1.82M viewers in overnight ratings

February 25, 2018

UFC on Fox 28 drew 1.8 million viewers on Fox Saturday night’s fast overnight ratings.  Despite stiff competition from the NBA and the Olympics the event was able to stave off its worst ratings since being shown on the network.

The event drew 1.82 million viewers, a 0.6 rating in the A18-49 demo and a 3 share according to Television By Numbers.  The ratings do no include the overrun into the 8pm PT hour.

The telecast featured Jeremy Stephens taking on Josh Emmett in a featherweight matchup.  Stephens KO’d Emmett to earn the victory.

The UFC on Fox went up against the Winter Olympics on NBC, the NBA on ABC and a rerun of Big Brother on CBS in the first hour and a 48-Hours rerun in the second.  Both replays on CBS outdid the two hours of MMA on Fox.

UFC on Fox Ratings
Overnights Live + SD
UFC on Fox 1 5,700,000
UFC on Fox 2 4,570,000
UFC on Fox 3 2,250,000 2,400,000
UFC on Fox 4 2,360,000 2,400,000
UFC on Fox 5 3,410,000 4,400,000
UFC on Fox 6 3,770,000 4,220,000
UFC on Fox 7 3,300,000 3,700,000
UFC on Fox 8 2,040,000 2,380,000
UFC on Fox 9 2,410,000 2,800,000
UFC on Fox 10 2,550,000 3,220,000
UFC on Fox 11 1,990,000 2,500,000
UFC on Fox 12 2,020,000 2,500,000
UFC on Fox 13 2,270,000 2,800,000
UFC on Fox 14 2,820,000 3,049,000
UFC on Fox 15 2,430,000 2,745,000
UFC on Fox 16 2,290,000 2,800,000
UFC on Fox 17 2,280,000 2,781,000
UFC on Fox 18 2,430,000 2,685,000
UFC on Fox 19 2,130,000 2,500,000
UFC on Fox 20 2,440,000 2,975,000
UFC on Fox 21 2,200,000 1,983,000
UFC on Fox 22 2,690,000 3,178,000
UFC on Fox 23 2,020,000 2,189,000
UFC on Fox 24 1,740,000 1,996,000
UFC on Fox 25 1,640,000 2,046,000
UFC on Fox 26 1,780,000 2,107,000
UFC on Fox 27 1,590,000 1,770,000
UFC on Fox 28 1,820,000

Payout Perspective:

The low ratings were expected.  If there is any solace is that it improved on last month’s dismal UFC on Fox ratings.  It also improved from PBC on Fox ratings last week.  Up against the Olympics which drew over 9 million viewers and NBA basketball chipped away at any sort of casual viewership.

Zuffa’s economic expert dismisses Plaintiffs’ opinion on damages in Antitrust lawsuit

February 23, 2018

In the latest round of filings in the UFC Antitrust Lawsuit, the UFC provided an expert report from Roger D. Blair.  Dr. Blair’s report was meant to rebut the assertions made by Plaintiffs’ expert Andrew Zimbalist.

Dr. Blair’s report argues Dr. Zimbalist’s “yardstick” method of assessing plaintiffs’ damages in the lawsuit was inappropriate and flawed.

Dr. Zimbalist does not conduct a yardstick analysis. He does not search for a
business that is comparable to Zuffa in all important respects. Instead, he uses the sports leagues that he has available to him (NFL, MLB, NBA, and NHL) and some limited data from boxing. He then calculates an average PTRR across these five sports. Even if the PTRR were relevant, which it is not, this average across five different sports cannot serve as a yardstick for Zuffa’s but-for PTRR.

Dr. Blair does not identify a relevant market as he claims that Dr. Zimbalist “never identified a relevant market, nor assessed concentration in any market.”  He does suggest that if you were to define the relevant market it would consist of “all promoters that promoted an MMA athlete who previously competed for the UFC, then the shares of the qualifying promoters within that market and HHI could be calculated.”

Notably, Dr. Blair reviews contracts of the Big 4 leagues in comparing with the UFC contract terms in showing that exclusionary practices through contract extensions are procompetitive.  Dr. Blair gives examples of contracts such as Andrew Luck, Von Miller and Mike Trout.

Despite the claim that the UFC contract’s are exclusionary because they impose exclusivity on athletes, he notes contractual language in other sports that limits athletes:


 

Dr. Blair notes that there are two ways to estimate damages:

Further in the report, Dr. Blair claims that Dr. Zimbalist’s method of calculating Zuffa’s pay-to-revenue ration (PTRR) is not valid:

Dr. Zimbalist calculates Zuffa’s pay-to-revenue ratio (PTRR) as the ratio of UFC athletes’ compensation to Zuffa’s total revenue. Similarly, he calculates PTRR for each of the sports in his yardstick. Dr. Zimbalist’s measure of damages is the difference between the UFC athletes’ compensation as a fraction of Zuffa’s total revenue (Zuffa PTRR) and the average of the fraction of total revenue going to athletes in boxing and the four major league sports in North America (proposed yardstick PTRR) multiplied by Zuffa’s revenues. This measure of damages is fatally flawed.

Here, Dr. Blair claims that labor share of total revenue can vary widely.

Dr. Blair also claims that the comparison with the four major leagues are incorrect because each has a union and bargained collectively with management.

…the athletes in the four major leagues are unionized and bargain collectively with management, while MMA athletes are independent contractors and are not unionized. Collective bargaining likely impacts compensation in the four comparator sports leagues in myriad ways, but at minimum, one would expect that unionized athletes would have increased leverage to demand higher pay, which would impact the percentage of revenue they receive. As a result, one likely cannot compare compensation between unionized and non-unionized athletes in a yardstick analysis because the compensation outcomes would differ regardless of the differences in competition between the yardstick and target firm.

Here, readers may view this as a concession that a union would be better for athletes since unions have “increased leverage to demand higher pay.”  While this may have been an indirect concession on the part of Dr. Blair and the UFC that unions are successful vehicles for better wages, the argument was that the yardstick method claimed by Dr. Zimbalist was not correct.

Further, in his report, Dr. Blair makes this assertion about Dr. Zimbalist’s opinion on multi-year contracts:

Dr. Zimbalist appears to assume all multi-year contracts will be found to be anticompetitive, despite their presence across the comparator sports used in his proposed yardstick. To the extent the court or jury does not find all multi-year contracts to be anticompetitive, they will be left with no valid estimate of damages from Dr. Zimbalist.

He also asserts that Zuffa’s bout compensation various tremendously by Athlete.  However, this section of Dr. Blair’s report is redacted in its entirety.

Payout Perspective:

Dr. Blair’s report is as expected from the UFC.  It was clear that it would oppose the damages claim from Dr. Zimbalist and would criticize the method in which he came up with his damages estimate.  Dr. Blair outlines the differences between the big 4 leagues as well as the small amount of data he used in boxing.  The argument is that Dr. Zimbalist method is not sound when contemplating damages in this case is because it is different from the 4 pro leagues and there is just not enough data from boxing to make the comparison.  The question would be what would have satisfied the UFC’s economic expert?  As we see in Dr. Zimbalist’s rebuttal report, he takes issue with Dr. Blair’s critiques.  With the UFC filing a motion to exclude Dr. Zimbalist, the battle of the experts is a key issue in this lawsuit if it goes to trial.

What should the UFC expect in negotiating the next media deal?

February 22, 2018

Earlier this week, Deadline.com posted a story asking whether the UFC could still attain a TV deal to their liking despite less-than-stellar ratings.

Notably, in the article it reveals that UFC Fight Pass has 400,000 subscribers for its digital service.  Previously, the number has never been posted publicly.  The article notes that prior to Endeavor’s purchase it had 330,000 subscribers.  Thus, for whatever reason you might attribute, it has increased since the new ownership took over.

The UFC indicated last spring that it would be looking for an annual TV rights fee of $450 million per year which is a huge increase from the $165 million per year average of its current 7-year deal.  Reports have Fox offering $200 million per year to renew with the network.  This would be significantly lower than anticipated by the company.

But, the overarching issue with the UFC is that due to the number of cards it produces, ratings are decreasing.  Gone are the days of anticipating a big PPV event as there are ones every month (now at an increase of $65 per event).  If PPVs are not to you liking, the UFC has events almost every weekend on FS1 and an occasional event on UFC Fight Pass.  The glut of events are necessary to fulfill its obligations with its network partners and fighters but the lack of stars is a glaring issue.

Gone are the Brock Lesnar, Ronda Rousey or Conor McGregor.  Even the current champions such as Stipe Miocic and Daniel Cormier do not garner PPV buys as a Conor McGregor PPV.  Notably, this past Sunday’s UFC Fight Night peaked halfway through the telecast for Sage Northcutt.  The chiseled 21-year-old is a polarizing figure in the UFC as he’s commanded pay higher than his peers despite not being as skilled.  But, clearly, his look and “aw schucks” persona attracts a casual fan base that other fighters do not.

Despite the ratings stagnation, Deadline.com, notes that this should not be confused with money issues:

As with the NFL or other sports leagues whose ratings are faltering, the linear TV trajectory should not be confused with overall financial performance. Endeavor has a more global footprint than the Las Vegas-based Fertittas and has made international deals and sought to boost licensing, sponsorship and distribution prospects. Modelo came aboard as a sponsor and Monster Energy renewed its commitment.

Yet, with the announcement by Dana White that he is starting Zuffa Boxing, the question of whether the UFC has peaked is a natural question.  While boxing was thought to be dead several years ago, it has regained a foothold.  Recently, Brin-Jonathan Butler wrote a piece indicating that its boxing that may save the UFC’s doldrums as opposed to their positions several years ago.

Via Deadline.com

“Everyone now knows that the bloom is off the rose,” a major sports rights stakeholder told Deadline. “It has become a lesser, watered-down product and there is an array of other options for viewers, especially the core UFC demo.”

The question is how will the UFC adapt to the changing landscape.  While it still draws in a healthy share of the young male demo, that demo that started with the company in the 2000s is getting older.  Butler cites a Sports Business Journal article from last June which shows that the UFC has had the biggest change in viewership in the median age of its base between 2006-2016.  The increase saw it go from 34 years of age to 49 years of age.  Remember, median is not the average age.  Boxing’s median age is also 49.

Can it roll with the punches like boxing?

One of the suggestions made in the article is to evaluate a possible digital deal even without a network tie.  Twitter, Amazon, YouTube and Yahoo have been linked to the streaming of sporting events.  With the success of the NFL streaming on a digital platform, the possibility for the UFC to go strictly digital is out there.  But, as pointed out in the article, this might seem as a slight for the company and a demotion from the deals secured by other major sports organizations.  One question posed by a Syracuse professor and former ESPN exec is if Fox re-ups with the UFC, can it “repackage the package.”  This would infer that distribution would occur differently than it presently is with the current TV package.

With Fox securing Thursday Night Football earlier this year for more than $3 billion, one has to wonder if there’s anything left in the budget for the UFC.  There is Turner Network Television, but with an antitrust case ongoing over its merger with Time Warner, any deal may have to wait.  NBC Universal might be an option and so might ESPN.  With a new streaming service rolling out later this year, it might be an option.  But, its unlikely the UFC  will want to be OTT only and will it need to envelope its current digital network into a deal.

Payout Perspective:

Maybe Zuffa was projecting the worth of its worth or wishful thinking but it would seem as though $450 million deal it had touted in an Sports Business Journal feature this past November may not come to fruition.  It’s clear that the traction for a deal is waning considering its ratings and meager PPV buy rates for 2017. Certainly, Mayweather-McGregor was stellar, but if you look at the pure UFC product, it took a step back in ratings and PPVs.  Of course, they are still making money and with the sponsorship deals and popularity overseas there is still room to grow.  But, will networks see the same value?

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