MMA in New York Not Happening in 2011

June 21, 2011

As predicted (and as in past years), the MMA bill has again stalled in the New York State Assembly after passing the New York Senate and overwhelmingly passing the two committees where it was debated in the Assembly–Tourism, Parks, Arts and Sports Development and Codes.

Unfortunately, the next committee in the process, Ways & Means, has issued its Agenda on this last day of the legislative session and it does not include the bill that would legalize MMA in New York.

While the legislative session could go a few days longer — until Wednesday or Thursday perhaps — the bill would still need to pass through W&M and Rules before going to the floor for a vote.  This is not going to happen as Herman Farrell, Chair of Ways & Means, has voiced his distaste for MMA:

The Ways and Means chairman said that he’s “looking at” the bill, but said he’s far from a mixed-martial arts fan.  “I don’t think very much of the sport,” Farrell said. “Next we’ll give them clubs with spikes on the end; that will be good.”

Moreover, Sheldon Silver, Chair of Rules and Speaker of the Assembly, has stated that he is not “enamored” with the sport.

Despite the setback, there is some room for optimism this year.  Indeed, there was more mainstream media attention to the issue, which I believe and have previously written will be critical if we are going to get this done.  Moreover, the votes (when votes occurred) were more favorable to MMA than past years.

The fight resumes in 2012.

Fight Lawyer

Justin Klein is an attorney at Satterlee Stephens Burke & Burke LLP in New York City where he concentrates his practice in commercial litigation and represents clients in the fight industry. He regularly addresses current legal issues that pertain to combat sports, including efforts to legalize MMA in New York, at his Fight Lawyer website. He is a licensed boxing manager with the New York State Athletic Commission as well as the founder and Chairman of the Board of the New York Mixed Martial Arts Initiative, a non-profit organization that gives inner city youth the opportunity to experience the emotional and physical benefits of martial arts training. Justin lives in New York City where he trains in jiu jitsu and boxing.

DISCLAIMER

The information in this post and on my site consists of my opinion only, i.e., it is not the opinion of my employer or anybody else. In addition, and because this is my opinion, it is not intended to be (and is not) legal advice or an advertisement for legal services. This post provides general information only. Although I encourage interested parties to contact me on the subjects discussed in the articles, the reader should not consider information on this site to be an invitation for an attorney-client relationship. I disclaim all liability in respect to actions taken or not taken based on any contents of this post. Any e-mail sent to me will not create an attorney-client relationship, and you should not use this site or my site to send me e-mail containing confidential or sensitive information.

Troubling Statements from Assembly Sponsor of Bill to Legalize MMA in New York

June 3, 2011

I just read an article, The fate of mixed martial arts bill uncertain, and was troubled by Assemblyman Englebright’s (the bill’s sponsor and Chair of the Tourism, Parks, Arts and Sports Development Committee where the bill originates in the Assembly) comments because they are telling and signify the bigger issue with legalization here in New York.

Specifically, he says:

There is a healthy controversy. There are very concerned members of the majority who can’t support it this year, as they could not support it in years past, . . . I imagine we’ll have similar blockage or stoppage, . . . But, you never know. There are quite a few new faces in the chamber this year. I haven’t seen a sea change, but I have seen subtle changes.

As I have posted before, the majority — the democratic leadership in the Assembly — is allowing the bill to stall out in Committee before reaching a floor vote, where it in Englebright’s opinion should have enough support to pass. This is the “blockage” and “stoppage” that Englebright is referring to.

If you follow my blog, you will recall that last year Assemblyman Englebright said essentially the same thing:

“If we were able to get it to the floor, we’d probably pass it with Republican votes,” Englebright said. “But there is a desire, I think, on the part of many of the members of our Democratic majority to resolve this matter satisfactorily within our own [party] before submitting it to the uncertainties of a debate.”

Hopefully, Englebright, as the bill’s sponsor and a member of the senior leadership of his party, can convince the other members of his majority to let the bill go to the floor for an up or down vote (i.e. let the so-called democratic process play out).

Otherwise, we may be having this same conversation one-year from now….

One last note, I am told that the bill will be taken up in the Tourism Committee next week and that there are a significant number of assembly members pushing the Assembly Speaker to let the bill go straight to the floor for an up or down vote after passage out of the Tourism Committee.

Fight Lawyer

Justin Klein is an attorney at Satterlee Stephens Burke & Burke LLP in New York City where he concentrates his practice in commercial litigation and represents clients in the fight industry.  He regularly addresses current legal issues that pertain to combat sports, including efforts to legalize MMA in New York, at his Fight Lawyer website.  He is a licensed boxing manager with the New York State Athletic Commission as well as the founder and Chairman of the Board of the New York Mixed Martial Arts Initiative, a non-profit organization that gives inner city youth the opportunity to experience the emotional and physical benefits of martial arts training.  Justin lives in New York City where he trains in jiu jitsu and boxing.

DISCLAIMER

The information in this post and on my site consists of my opinion only, i.e., it is not the opinion of my employer or anybody else. In addition, and because this is my opinion, it is not intended to be (and is not) legal advice or an advertisement for legal services. This post provides general information only. Although I encourage interested parties to contact me on the subjects discussed in the articles, the reader should not consider information on this site to be an invitation for an attorney-client relationship.  I disclaim all liability in respect to actions taken or not taken based on any contents of this post. Any e-mail sent to me will not create an attorney-client relationship, and you should not use this site or my site to send me e-mail containing confidential or sensitive information.

“Huge” Full Tilt Poker Sponsorship Deal With UFC Off Table After Indictment

April 18, 2011

MMAPayout detailed what it meant to the MMA landscape after Friday’s shocking news that Full Tilt Poker, along with other online poker sites, were seized by the FBI and indicted for bank fraud, illegal gambling, and money laundering.

Today, CNBC’s sports business reporter specialist, Darren Rovell, reported the following on his twitter:

“The UFC had a huge new sponsorship deal on the table with Full Tilt that will now go out the window with the feds bust.”

MMAPayout spoke to members and managers within MMA industry, all sharing the same sentiment. They claim that the new deal would have been huge for the UFC, Strikeforce, and the fighters, but specifically, it really hurts the fighters as Full Tilt Poker is one of the better paying sponsors out there for those trying to make a living from the sport.

On Friday, MMAPayout reported that Full Tilt Poker was ramping up their promotional efforts with Strikeforce after Zuffa had acquired them, not to mention the big deal made between Fertitta Interactive (also owners of the UFC) and Full Tilt Poker a few weeks prior pending on legalizing online gambling in the United States, a bill that is being pushed by UFC/Station Casinos/Fertitta Interactive backed Nevada Senator Harry Reid.  With the growing relationship, Full Tilt Poker was going to be heavily involved in future UFC events and promotional efforts that would have brought a good money to Zuffa and the fighters.

MMAPayout has also learned that Full Tilt Poker was expanding their sponsorship efforts within MMA (outside of the UFC) and was working on some other pretty big sponsorship deals that have since fallen through as well.

 

Payout Perspective:

As to what type of money MMA gets from Full Tilt Poker, Rovell discusses it a bit more here in his write-up breaking down the poker FBI bust. Brian Belasbough of Poker Royalty talked about some of the ramifications for the poker industry after Friday:

When Pokerstars, Full Tilt and Absolute Poker left the US market, 95 percent of the market share for US poker players absolutely disappeared and with that so did $200 million worth of marketing money and advertising money that these companies spent in order to acquire new customers. What that means is basically poker television shows like “The Big Game” on Fox and “Poker After Dark” on NBC are completely gone. So the poker landscape has changed dramatically in a very short period of time.

In addition to the poker television shows going away, there are a number of other sponsorship opportunities which have disappeared as well. There are 100 online poker players with sponsorships which likely will disappear. In addition to that there’s an entire industry of covering poker tournaments in the media in conjunction with that. ESPN had a $22 million deal with Pokerstars, which has to be over now and then the live events like the World Poker Tour, like the North American Poker Tour.

The other question that you have to ask here is that with the big sponsorship void left by Full Tilt Poker in MMA, what type of companies will step in and take their place?  We also have to wonder what it says about MMA as a sport considering that one of its biggest sponsors was an illegal gambling company that had been operating and generating revenue through banking and legal loopholes.  Big mainstream sponsors is something that the UFC and MMA has coveted for years, but luring them in hasn’t been as easy as once expected.  The addition of new sponsors and TV networks could reveal a telling story about the ceiling of the sport in the next few years.

Focusing on the fighters, they have been taking bigger blows outside of the ring/cage than inside as of late.  The removal of Full Tilt Poker as one of their bigger sponsors wasn’t the only blow dealt to them in the past year. When Authentic Brands Group purchased Sinister, Tapout and Silver Star (MMA apparel) and then decided to scale back their sponsorship money in MMA, it dealt an equal sized blow.  One has to wonder with the lack of big MMA promotions outside of Zuffa and with the recent trend of dying sponsors, how difficult it will be for fighters to make a living in the sport, which wasn’t an easy task before either.

FullTilt Poker & Others Indicted, MMA Sponsorship Status, & UFC’s Involvement

April 15, 2011

MMAJunkie broke the news that FullTiltPoker.com, PokerStars.com, and AbsolutePoker.com were seized today by the FBI and indicted for bank fraud, illegal gambling, and money laundering.

The implication of these charges could have a great impact on MMA, as FullTiltPoker.com (among other poker sites) invest a great deal of money into sponsoring MMA promotions  such as the UFC and Strikeforce,  as well as individual fighters.

Sam Spira, owner of Xtreme Couture management said the following:

“This is a disturbing development,” Spira told MMAjunkie.com (www.mmajunkie.com). “Full Tilt was one of the remaining pro-fighter sponsors that has strongly supported MMA over the past few years. The importance of the ongoing interplay between supporters and fans of poker and supporters and fans of MMA cannot be underestimated.”

Ken Pavia of MMA Agents gave some input as to what the poker companies are going through right now:

“The online poker companies don’t have a complete handle on it at this time, but they’re doing their due diligence to find out what the full impact is,” Pavia said. “In the short-term, it will severely impact fighters’ sponsor revenue, which traditionally matched their show pay for our televised clients. I would venture to say the poker industry is equal to apparel industry as the No. 1 sponsor of fighters outside the UFC.”

Jene Gene of Magnetic MMA points out that the “.net” versions of the poker sites are the ones sponsoring the promotions and fighters, and that they are compliant since they are for educational and entertainment purposes, not for gambling (FullTiltPoker.net is still functional).  As for Zuffa’s newly acquired MMA promotion Strikeforce, which FullTiltPoker is a major sponsor, they told MMAJunkie that  they are “looking into the situation specifically how it relates to our deal”, and would not comment any further.

 

Payout Perspective:

ESPN goes into more details regarding the charges on the poker companies:

The Manhattan U.S. Attorney announced the indictments of those involved with the online poker sites as well as those who were responsible for the financial transactions. The 11 defendants are Isai Scheinberg and Paul Tate (PokerStars), Raymond Bitar and Nelson Burtnick (Full Tilt Poker), Scott Tom and Brent Beckley (Absolute Poker) and Ryan Lang, Ira Rubin, Bradley Franzen, Chad Elie and John Campos (involved with payment processors).

Manhattan U.S. Attorney Preet Bharara said in the indictment: “As charged, these defendants concocted an elaborate criminal fraud scheme, alternately tricking some U.S. banks and effectively bribing others to assure the continued flow of billions in illegal gambling profits.

The companies are all based overseas. The indictment sought $3 billion in money laundering penalties and forfeiture from the defendants.

As for the penalties the companies are facing:

The charges are conspiracy to violate Unlawful Internet Gambling Enforcement Act (UIGEA), violation of UIGEA, operation of illegal gambling business, conspiracy to commit bank fraud and wire fraud, and money laundering conspiracy . Maximum penalties from these charges range from five years in prison and a $250,000 fine to 30 years in prison and a $1,000,000 fine (or twice the gross gain or loss).

“These defendants, knowing full well that their business with U.S. customers and U.S. banks was illegal, tried to stack the deck,” said Janice Fedarcyk, FBI assistant director-in-charge. “They lied to banks about the true nature of their business. Then, some of the defendants found banks willing to flout the law for a fee. The defendants bet the house that they could continue their scheme, and they lost.”

Zach Arnold of FightOpinion.com points out the potential severity for the MMA landscape:

This is enormous news. Full Tilt is a Strikeforce sponsor and they also recently made a deal with the Fertittas to try to work on getting legalized gambling in the states. (Harry Reid and others in Congress were on the same wavelength.) The huge irony — this same prosecutor is one that Dana White thanked in fighting piracy of UFC footage.

When discussing this story, you simply can’t avoid the politics of it. The political climate was growing in the US Congress to work out legislation for online gambling in the States. Harry Reid, who Zuffa management helped out politically in his 2010 re-election campaign, was receptive to the idea of legalization. Several other key players, like Barney Frank, were also keen on the idea. After all, legalize-and-tax made perfect sense. The political climate became so positive that the Las Vegas casino power players like Steve Wynn and the Fertittas got involved in deals with companies like Full Tilt Poker.

Arnold points out the irony involving the prosecutor in this case, which is the same who Dana White publicly thanked in being aggressive in anti-piracy efforts relating to copyright issues with Zuffa property.

Another interesting point to note is that due to the charges, Forbes reports that Steve Wynn has cut ties with PokerStars, one of the poker sites indicted, after announing to team up with the company only a few weeks ago.  The UFC and the Fertittas are in the same boat, as  Full Tilt Poker and  Fertitta Interactive just announced an online poker deal just weeks ago and the UFC was working on promotional deals with FullTiltPoker for upcoming events and would further it’s involvement if the online gambling bill was ever passed.  Strikeforce has expanded their promotional dealings with FullTiltPoker since they were acquired by Zuffa as well. The Las Vegas Review-Journal has the story behind Fertitta Interactive and FullTilt:

Online gaming giant FullTilt Poker and Fertitta Interactive, which is co-owned by the family that founded Station Casinos, have struck a partnership to operate an Internet poker website if the activity gains federal approval.

The agreement covers only potential federal legislation for Internet poker, said Tom Breitling, who co-owns Fertitta Interactive with brothers Frank Fertitta III and Lorenzo Fertitta and his longtime business partner Tim Poster.

“We believe that a federal law for online poker is the way to go,” Breitling said. “We do believe that a federal online poker bill would be good for Nevada. Nevada is a leader in gaming regulation, and we need the thousands of high-paying high tech jobs and the millions in tax revenues associated with online poker.”

The political and gambling ties don’t stop there for the Fertittas, who own Station Casinos and backed up and openly campaigned for Nevada Senator Harry Reid, who is now trying to legalize online poker, a move that could make UFC and Station Casino owners a good amount of money. ESPN also ran with a story titled “UFC Pikcing Political Sides”, stating that UFC’s Chuck Liddell, Randy Couture, and Dana White were openly campaigning and swaying the UFC fanbse to become supporters of Reid.

The Wall Street Journal reports on Reid and the gambling bill:

Mr. Reid, who has opposed online gambling in the past, is holding his cards close to his vest regarding plans to move forward with the legislation. Passing such a measure is highly uncertain as the heated session winds down, given the sensitive nature of the subject.

Previous attempts at online-gambling legislation haven’t moved forward, but casino interests believe that given Mr. Reid’s powerful position atop the Senate, he might be able to push the poker measure into another bill, according to people familiar with the discussions.

The legislation would overturn a bill passed in 2006 that bans financial institutions from processing online-gambling transactions. That led publicly traded companies to pull out from operating online sites in the U.S. In their place, offshore sites have gathered an estimated 10 million U.S. poker players, according to the Poker Players Alliance.

According to the draft of the bill reviewed by The Wall Street Journal, Mr. Reid’s office is considering language that would allow only existing casinos, horse tracks and slot-machine makers to operate online poker websites for the first two years after the bill passes, which could limit the ability of other companies to enter the market.

Back in October of 2010, BloodyElbow’s Luke Thomas wrote a piece titled “UFC Tries to Help Nevada Senator Harry Reid, Deepens Political Involvement”, which delves deeper into UFC’s political involvement regarding the legalization of MMA, legalizing online poker, fighting internet piracy, and their ability to make and use political allies to accomplish future goals and further expand their bottom line.

Media Education Necessary for Legalization of MMA in NY

January 18, 2011

On Thursday January 13, 2011, the Ultimate Fighting Championship conducted a press conference at Madison Square Garden “to announce a plan to bring UFC to The World’s Most Famous Arena, as soon as the sport of mixed martial arts is approved in New York.

As you may recall from my earlier article, “A History Lesson (or History’s Lesson) on Mixed Martial Arts in New York,” one of my observations after tracking the history of MMA was that “the media (and public opinion) can have a significant effect on the legislative process in this state.”

Based on this observation, I reached the conclusion that “if through events like the MMA World Expo and other grassroots movements we can convince the media that the sport is not what it once was, we may be able to move the legislature towards legalization.”

With this in mind, the UFC press conference at MSG seemed like a great opportunity to outline a “plan” to educate the media, and by extension the public, on the true nature of the sport in 2011 as we move towards legalization.

Certainly one way to educate is to shed light on the economic benefit of legalization, i.e. economic impact to the state if MMA is legalized.  This angle occupied a significant portion of the press conference (and the entirety of the post-press conference press release) as the UFC unveiled a new economic impact study created by HR&A Advisors.

This new study estimated that the net economic activity for two UFC events in New York State would be approximately $16M and the economic impact from other, non-UFC, promotions would be $6.7M .  The HR&A Advisors study also estimated that legalization of MMA in New York would lead to the creation of 212 jobs, $1.3M in State Fiscal Benefits, $12.9M in Direct Ticket Sales, and Annual Attendance of 145,000.

Notably, the $1.3M figure representing direct revenue to New York if MMA is legalized is a decrease from the revenue figure proposed in former-Governor Paterson’s proposed Executive Budget last year, i.e. $2.1M.

It should come as no surprise (and I have written about this before) that the non-MMA media in attendance quickly picked up on just how small this direct revenue figure is when viewed in light of New York’s massive budget gap.  See e.g., New York 1 (“$1.3 million annually in state revenues – [is] a drop in the bucket when it comes to closing a $9 billion budget gap”).

While the media in attendance certainly grasped (and articulated in subsequent articles and videos) the economics presented in the HR&A Advisors study, it is still apparent, as Cage Potato notes, that “local media outlets were forced once again to confront the question: ‘What’s Mixed Martial Arts, anyway?’”

And this is where I think there is room for improvement in the MMA legalization effort.  Economic benefit to the state alone may influence some politicians, but it is clear that there has to be an understanding about the sport, the safety record, the regulations in place, the need to curb unregulated “underground” fighting in the state etc. within the local non-MMA media before we can expect the voters in New York to voice their support for the bill.

In this regard, during the press conference Dana White was asked about a Marist poll from January 2010 where 68% of New York voters responded that they were opposed to legalizing MMA in New York.  Dana responded that the origin of the poll needs to be analyzed and he predicted that if you polled 18-34 year olds in New York, 100% would be in favor of legalizing the sport.

Dana was obviously exaggerating, but his point about the popularity of the sport in this demographic is well established.  That said, I know many people in New York in this age demographic who could care less about MMA and whether it is legalized – and who know very little about the sport and still believe it is as they remember it from the early 90’s.

Importantly, however, the poll – whatever its flaws may be – likely shows that voters’ perceptions of the sport need to change.  This can be accomplished by educating the media first who can then educate the public.

This message, it appears, is not lost on the UFC.  As Bill King notes in his excellent Sports Business Journal article, UFC goes another round in effort for N.Y. sanction:

Lobbying is the top-down piece of the UFC’s legislative equation. There’s also a piece that works from the bottom up. Since 2008, Zuffa has employed Global Strategy Group to design and manage a campaign to mobilize MMA fans to push for legislation. Zuffa paid Global $35,000 a month in 2008 and the first half of 2009, and $22,500 a month since then to build a grassroots campaign and drum up conversation online and in the media. The website it created and manages is packed with information that argues for sanctioning. It also offers easy ways for fans to e-mail legislators and craft letters to their local newspapers.

How long it takes to successfully implement this approach is anyone’s guess, but part of this effort should focus on inviting the media to events like those that are planned by the Coalition to Legalize MMA in New York.  At this point the Coalition is planning a roundtable with politicians and gym owners to discuss the real impact that legalization of the sport will have on the state and its businesses and constituents.

Fight Lawyer

Justin Klein is an attorney at Satterlee Stephens Burke & Burke LLP in New York City where he concentrates his practice in commercial litigation and represents clients in the fight industry.  He regularly addresses current legal issues that pertain to combat sports, including efforts to legalize MMA in New York, at his Fight Lawyer website.  He is a licensed boxing manager with the New York State Athletic Commission as well as the founder and Chairman of the Board of the New York Mixed Martial Arts Initiative, a non-profit organization that gives inner city youth the opportunity to experience the emotional and physical benefits of martial arts training.  Justin lives in New York City where he trains in jiu jitsu and boxing.

DISCLAIMER

The information in this post and on my site consists of my opinion only, i.e., it is not the opinion of my employer or anybody else. In addition, and because this is my opinion, it is not intended to be (and is not) legal advice or an advertisement for legal services. This post provides general information only. Although I encourage interested parties to contact me on the subjects discussed in the articles, the reader should not consider information on this site to be an invitation for an attorney-client relationship.  I disclaim all liability in respect to actions taken or not taken based on any contents of this post. Any e-mail sent to me will not create an attorney-client relationship, and you should not use this site or my site to send me e-mail containing confidential or sensitive information.

UFC presses on with PR presence in NY

January 11, 2011

Dana White and the president of Madison Square Garden Sports will appear together at a press conference this Thursday to lobby for the legalization of MMA in New York. This week’s Sports Business Journal reports on another high profile attempt for the UFC to garner momentum for the right to fight in New York.

In this instance, the press conference will be used to educate the skeptics about the economic windfall the Big Apple should realize if the UFC could hold shows in New York. On the same day, tickets for UFC’s March 19th PPV to be held at the Prudential Center in New Jersey will go on sale.

The press conference is another strategy used by UFC in its efforts to legalize its sport in New York. Thus far, the article reports on the UFC efforts, only for it to fall on deaf ears.

Via Sports Business Journal (subscription required):

So begins the latest installment in a push that began late in 2007, when UFC parent company Zuffa paid a well-connected upstate New York firm a $10,000 retainer to lobby on its behalf. Since then it has spent more than $1.5 million on lobbying and public relations campaigns in the state. It also has contributed $165,000 to election campaigns.

The result: steady coverage of the quest in newspapers and on television, a percolating cauldron of grassroots chatter on the Web, a broadly acknowledged shift in attitude toward the sport by many legislators and, perhaps most importantly, a steady stream of bills — all of which died on the vine.

The article breaks down last year’s costs dedicated to New York:

The tab for lobbying in New York last year eclipsed $500,000, based on public filings and interviews with UFC executives. Zuffa also contributed $130,000 to political campaigns, including $36,800 to incoming Gov. Andrew Cuomo, $34,000 to Democratic campaign committees, $10,000 to Republican campaign committees and $1,000 to $3,800 to a dozen different influential state senators and assembly members. Zuffa spent $530,000 lobbying in New York in 2009 and $595,000 there in 2008.

A lot of money that did not achieve its targeted goal.

Finally, the article points out a difference between the UFC lobbying strategy and other sports leagues:

The UFC’s legislative strategy is similar to that of other sports properties. It lobbies in support of legislation that favors its business interest. The difference is that, while most properties operate on the national landscape and monitor legislation on a range of issues, the UFC works in individual states with a singular goal: To pass state laws that allow for and regulate mixed martial arts.

Payout Perspective:

This is a great, comprehensive article on the exhaustive efforts the UFC has employed for the legalization of MMA in New York. It has invested a lot of money, employed a lot of consultants and lobbied many politicians to no avail. The latest efforts seek to establish relationships with venues to guarantee it will bring the UFC, and revenue, to New York. But, even these promises may fall short if the proper politicians do not agree to legalize MMA in New York.

Based on its investment in the lobbying efforts, the UFC believes that it can foster the correct relationships within government to get legislation passed in New York. The latest efforts point to the fact that it will guarantee shows at MSG and other NY venues in an effort to attract support.

From a PR standpoint, it is hard to determine what the UFC is doing wrong since it seems as though the UFC has employed every possible strategy. The article indicates that the UFC has tried the “top-down” and “bottom up” (grassroots) approaches. While the strategies may obtain some benchmarks (positive media impressions, fan support and some political alliances), the ultimate goal of legalizing MMA has yet to happen.

Zuffa’s Piracy Fight– Winning The Battle, But Can It Win The War?

November 10, 2010

“The piracy of live sporting events is illegal; it kills jobs, and threatens the expansion of U.S.-based companies.”  Lorenzo Fertitta, CEO of Zuffa, LLC, owner of the Ultimate Fighting Championship® (UFC®), prepared statement before the United States House of Representatives Committee on the Judiciary.

In a statement before the House Judiciary Committee in December 2009, Lorenzo Fertitta informed the Committee that Zuffa offers 12-14 pay-per-views annually to residential and commercial customers and has “been the largest pay-per-view provider in the world since 2006, with over 22 million residential transactions during that time frame.”  He also stated that the “UFC® is also the largest distributor of content to commercial locations via our network of over 5,000 restaurants and bars in North America.”  Given this strong dependence on the pay-per-view model (unlike other sports organizations – most of which have network television deals) and the spiraling rate of piracy in the United States and abroad, it should come as no surprise that Zuffa has launched a multi-pronged attack against this threat to its business model.

Over the past year, Zuffa has been stepping up its efforts to curb theft of its intellectual property through the use of (1) direct private actions against website operators that provide free streaming of UFC events; (2) subpoenas to streaming sites that permit third-parties to upload content to their sites; (3) direct actions against bars that illegally show broadcasts of UFC pay-per-view events in their venue; and (4) efforts to educate Congress about the growing problem of piracy and its deleterious effects on commerce.

While Zuffa has been successful on a case-by-case basis, completely curbing piracy is a daunting (perhaps impossible) task given the global reach of the Internet and the ease with which content can be illegally redistributed.  Accordingly, the question is whether Zuffa is simply engaged in a frustrating game of “whac-a-mole” with no real probability of long-term success.  Let there be no doubt, however, that Zuffa is committed to the fight and has had its successes.

In this article I will address some of these efforts and Zuffa’s successes, including as recently as this week.

Direct Private Actions Against Website Operators

On November 3, 2010, Zuffa was again successful in its efforts to shut down Internet websites allegedly streaming UFC pay-per-view events for free over the Internet.  Specifically, Zuffa obtained a preliminary injunction against Daniel Wallace, a United Kingdom resident that is the alleged “owner and operator” of livevss.tv and livevss.net.  Judge Kent J. Dawson entered a preliminary injunction ordering, in relevant part, that pending a full trial on the merits:

A. Defendant, defendant’s agents, servants, employees and/or all persons acting in concert or participation with defendant are prohibited from copying, manipulating, adapting, reproducing, uploading, distributing, sharing, selling or displaying any of Plaintiff’s Copyrighted Broadcasts and are prohibited from copying, manipulating, adapting, reproducing, uploading, distributing, sharing, selling or displaying UFC 120 in any manner;

B. The domain name registrar, eNom, Inc., shall immediately transfer the <livevss.tv> and <livevss.net> domain name registrations to Plaintiff for the pendency of this action;

This approach by Zuffa, i.e. filing a lawsuit and seeking an injunction shutting down websites that allegedly stream UFC events without authorization, has been successfully utilized on more than one occasion.

As you may recall, in September 2010, Zuffa successfully obtained a permanent injunction (by stipulation) against Johnny Tike, who acknowledged that  “he created the ‘hq-streams’ website in question and has copied, manipulated, adapted, reproduced, uploaded, distributed, shared, sold and/or displayed Zuffa’s Copyrighted Broadcasts or used the UFC® Marks in any manner, or has permitted others to do so.”

In instances where Zuffa has been able to identify the relevant websites and the operator of the allegedly infringing sites and has spent the requisite money in legal fees and costs to initiate a cause of action, Zuffa has been enjoying success.  That said, it is questionable whether Zuffa has (and will) recoup the money it spends to litigate and there is a broader question concerning whether individuals operating these sites will be deterred—especially if the culprits operate outside the United States.

Subpoenas to Streaming Sites to Obtain the Identity of Uploaders of Illegal Content

Zuffa has also obtained subpoenas under the Digital Millennium Copyright Act (DMCA) and served them on streaming sites to obtain the identity of users who allegedly broadcast illegally uploaded content, including UFC events.  While it is not clear from the publicly filed documents, it is certainly plausible that Zuffa obtained the identities of Tike and Wallace (above) through subpoenas it has served on streaming sites.

As you may recall from a recent Zuffa press release, it obtained subpoenas issued by the United States District Court for the Central District of California in April 2010 and served them on two streaming websites, Justin.tv and Ustream.tv.  In the subpoenas, Zuffa sought “[d]ocuments or electronically stored information in possession of or available to Justin.tv [or Ustream.tv] sufficient to allow Zuffa, LLC to identify the infringer(s) who made available for streaming on Justin.tv the video recordings described in the Notice of Copyright infringement attached as Exhibit A.”  Thus, Zuffa was not seeking the identity of those individuals who may have viewed the stream, i.e. it is concerned with the individuals or entities providing the stream.  As an aside, there is an interesting legal question concerning whether an individual can be held liable for viewing an illegal stream. For my analysis on this issue, click here.

Direct Actions Against Bar Owners Who Illegally Show UFC PPVs

Zuffa has also gone after a number of bar owners (and bars) for alleged violations of the Federal Communications Act (47 U.S.C. 553 and 605) and the Copyright Act (17 U.S.C. 501).  Zuffa files a number of these lawsuits each month and they all follow a similar pattern.  In these actions, Zuffa alleges that defendants intercept broadcasts of UFC pay-per-views and published it for a commercial gain.  Zuffa seeks damages for the defendants’ alleged “willful” acts.

Zuffa asserts that there are a number of ways this alleged infringement occurs, including, inter alia, using an illegal satellite receiver, splicing a coaxial line running to a residential address, registering a commercial establishment as a residence, and/or taking a lawfully obtained residential box into a commercial establishment.  In July, Zuffa globally settled a number of these actions, but has since continued to file these lawsuits throughout the country and on a consistent basis.

Frankly, I am not surprised that Zuffa globally settled these complaints because it is questionable what, if anything, Zuffa really hoped to recover from what are mostly small local bars.  Perhaps there is a deterrent effect based on Zuffa’s willingness to sue, but monitoring and enforcing infringement that is occurring throughout the country at bars showing UFC events on a monthly basis is most likely very costly and Zuffa can’t possibly hope to catch all (or even most) of those bars engaging in infringing  activity.

Zuffa’s Efforts In Congress

Zuffa has also taken its case to Congress to create awareness concerning the proliferation of piracy and its deleterious impact on Zuffa’s business.  Specifically, on December 16, 2009, Lorenzo J. Fertitta, Chairman and Chief Executive Officer of Zuffa, appeared before the United States House of Representatives Committee on the Judiciary, in the Judiciary Committee’s hearing on “Piracy of Live Sports Broadcasting Over the Internet.

These congressional efforts may be paying off.  On September 20, 2010 the Senate (not the House) introduced a bill, The Combating Online Infringement and Counterfeits Act, which would give federal law enforcement authorities additional tools to crack down on websites engaged in acts of piracy over the Internet.   The text of the CCICA is available here.   The bill would have important enforcement implications because it gives the Justice Department the ability to seek an injunction forcing the domain registrar or registry to stop resolving the allegedly infringing site’s domain.

Zuffa’s Efforts To Persuade the Courts To Read the DMCA “Safe Harbor” Provision More Narrowly Was Unsuccessful—So Far

Zuffa’s efforts to combat piracy have not all been successful.  Indeed, Zuffa (with other interested parties) filed an amicus brief in the Viacom International, Inc. et al. v. Youtube, Inc. and Google, Case No. 1:07-CV-02103-LLS, (S.D.N.Y. 2007), arguing that the DMCA “safe harbor provision” should be read more narrowly to preclude service providers who intentionally and knowingly facilitate copyright infringement on the Internet.

By way of background, in Viacom the plaintiffs were arguing that defendants (YouTube and Google) would only take down copyrighted videos after being asked to do so and that this put the burden of policing content on the copyright holder and allowed defendants’ site users to post the infringing copies again as soon as they were removed.  Defendants relied on the “safe harbor” provision of the DMCA and argued that as long as they quickly removed allegedly infringing third-party posted content after being informed of its existence, they were shielded from liability.

In the Viacom case, the defendants were successful as the Court granted their motion for summary judgment holding that they were entitled to the Digital Millennium Copyright Act’s (“DMCA”), 17 U.S.C. § 512(c), ‘safe harbor’ protection against all of plaintiffs’ direct and secondary infringement claims, including claims for ‘inducement’ contributory liability, because they had insufficient notice, under the DMCA, of the particular infringements in suit.

That case is now on appeal to the United States Court of Appeals for the Second Circuit.

Conclusion

Despite all of its successes outlined above, it is important to remember that shutting down infringing streaming sites around the world is like the old game of “whac-a-mole,” i.e. just as quickly as you shut down one site, another site pops up and so on.  Further, while Zuffa continues to file after the fact lawsuits against bar owners for publishing unauthorized broadcasts of UFC events, the problem is obviously continuing as is evidenced by the sheer number of lawsuits Zuffa is filing each month.

There is, of course, a deterrent effect – perhaps a website operator will be less likely to illegally stream a ppv (or a bar owner will be less likely to illegally publish a broadcast in its bar) knowing that it may be sued down the road, but clearly the deterrent effect alone will not completely curb the problem.

Further, the international nature of some of the streaming sites would, I imagine, make it even more difficult to obtain effective relief in the US courts.

Justin Klein is an attorney at Satterlee Stephens Burke & Burke LLP in New York City where he concentrates his practice in commercial litigation and represents clients in the fight industry.  He regularly addresses current legal issues that pertain to combat sports, including efforts to legalize MMA in New York, at his Fight Lawyer website.  He is a licensed boxing manager with the New York State Athletic Commission as well as the founder and Chairman of the Board of the New York Mixed Martial Arts Initiative, a non-profit organization that gives inner city youth the opportunity to experience the emotional and physical benefits of martial arts training.  Justin lives in New York City where he trains in jiu jitsu and boxing.

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Politics not usual: UFC campaigns for Reid in Nevada

October 31, 2010

When the mid-term elections are held Tuesday, the UFC will be an interested party when voters hit the polls.

The UFC gave a helping hand to Senator Harry Reid of Nevada as he attempts to defeat challenger Sharron Angle. Reid, a notable UFC fan, has received received help from Dana White, Chuck Liddell, Frank Mir and Randy Couture. Recently, White and Liddell made an appearance with Reid at UNLV. Reid is a fan of the UFC and has even used tickets to sit with him and Dana White at a UFC event as a fundraiser.

UFC fighters were not the only sports figures endorsing Reid. As you may have seen on HBO’s 24/7 Saturday night, you saw Manny Pacquiao take a break from training to make an appearance on behalf of the Democrat from Nevada (according to the show, the appearance was made at the request of Bob Arum).

The Political web site, Politico, wrote about Reid using White, et al. as campaign endorsers.

Reid’s partnership with the UFC comes at a time when Democrats are delivering harsh criticisms of World Wrestling Entertainment under former CEO Linda McMahon, now the Republican Senate nominee in Connecticut.

But, the UFC’s support of Reid makes sense since he has been an ally of the UFC in its efforts to legalize the sport in New York.  Politico adds,
New York legalization is UFC’s “holy grail,” said Ted Butryn, professor of sports psychology and sociology at San Jose State University who studies the sport. “It makes perfect sense that Dana White would look for powerful friends like Harry Reid.”

Payout Perspective:

White and the UFC are new to political campaigns. However, politicians see the popularity the UFC has with the 18-34 male demographic and hope that its endorsement will help. Conversely, the UFC hopes its involvement in politics will curry favor for its interests (e.g., NY regulation).

It is interesting to note that Republican Randy Couture actively came out to campaign for Reid. His endorsement makes valid sense since Reid’s support could help the expansion of the UFC.

It may be hard to judge to see whether the UFC influence helped or hurt Senator Reid, but the partnership of Reid and the UFC reflects the popularity the UFC has with the 18-34 demographic.

UFC overtakes WWE in PPV buys

October 6, 2010

Barron’s  featured former WWE CEO/Senatorial Candidate Linda McMahon and the decline in finances of World Wrestling Entertainment. As McMahon’s political career heats up, the WWE business is cooling.

The article points out that the past three years; WWE popularity has taken a nose dive whereas the UFC has taken over in PPV dominance.

Revenues began to slip at WWE well before Linda [McMahon] left and eventually won the Republican nomination to face Democrat Richard Blumenthal in what looks like a tight contest. In 2009, total sales of $475 million were down 10%. But [WWE] Chief Financial Officer George Barrios proudly notes that profit margins have generally improved since he arrived in 2008. He says WWE earnings should rise when the company finds new performers that connect with its fans. “We are actually pretty happy with the way we’re doing,” says the financial chief.

Payout Perspective:

A reason for the decline in the WWE PPV buys has to do with the poor economy and the frequency of PPVs. Not only does the WWE compete with the UFC for PPV dollars, it is being challenged by rival wrestling organization, TNA, a league that includes Hulk Hogan, Ric Flair and Cactus Jack – notable wrestling figures albeit older. As Barrios indicates, the WWE needs to find a new performer to connect with fans. Although John Cena is a viable candidate, he cannot carry both its Raw brand on USA and Smackdown on the SyFy network. If you do tune in, there are many younger wrestlers that have been given the chance to become the next big thing. But, they have not found the popularity or gimmick that will sell them to the fans.

PPV fatigue can be another reason for the WWE decline in numbers. As mentioned, the lack of recognizable stars along with the saturation (WWE has 3 or 4 original programs on per week) on TV plus the tightening of discretionary income may equal the decline of WWE PPV buys.

The UFC rise in popularity the past couple years is another reason for the decline of the WWE PPV numbers. With the slowed economy, many fans are choosing the UFC over the WWE when it comes to spending their discretionary income on PPVs.

It will be interesting to see how the UFC PPV numbers will be for UFC 121 as the UFC seems to be heavily promoting this show hoping for a big gate and PPV buys. Also, after UFC 121, Zuffa will have done 4 live shows in the past 30 days. The lukewarm reviews of UFC 119 were a red flag for many UFC fans that usually made the monthly PPV purchase. Bloody Elbow notes how some have criticized the UFC for possible PPV-fatigue which has shown through lack of production innovation and a failure to stock its monthly cards with marketable stars. Certainly, the WWE decline in PPV buys could happen to the UFC down the road. It will be up to the UFC to see how it can sustain its market of PPV buys.

MMAterial Facts (07/09/10): Australia, Canada, Germany and China Notes

July 9, 2010

  • Two-year Vancouver trial MMA period disappoints, fires head of athletic commission
  • Ultimate fight: to convince Victoria
  • UFC Hires Leadership to Open China Office
  • UFC Announces Anti-Piracy Settlements with 500 Businesses and Individuals
  • Strikeforce’s  Upcoming Schedule; UFC 119, 120, 121 Announcements

Two-year Vancouver trial MMA period could end with only one pro event having been held

Ongoing insurance and indemnity issues surrounding professional mixed martial arts in the city of Vancouver could well see the two-year trial of regulated MMA pass with only a single professional event having been held, according to Vision Vancouver city council member Dr Kerry Jang and licensing staffer Tom Hammel. (Vancouver Sun)

***

Vancouver fires head of athletic commission

City council fired the head of the Vancouver Athletic Commission on Thursday after city staff and others complained about his conduct during the recent debate over allowing an Ultimate Fighting Championship event.

Citing a lack of confidence in Mirko Mladenovic, the council appointed Dave Rudberg, a longtime city bureaucrat, to replace him as head of the commission when it reconvenes later this month. (Vancouver Sun)

Ultimate fight: to convince Victoria (Australia)

THE Ultimate Fighting Championship will use Geelong star George Sotiropoulos and the lure of a $15 million tourist injection to convince the Victorian government to allow cage-fighting into Melbourne, after the sport was again rejected by the state.

Having sold out its debut Australian event at the 17,000-capacity Acer Arena in Sydney in February within 90 minutes, the UFC will be returning early next year but wants to infiltrate the Victorian market, with figures suggesting the state harbours the most mixed martial arts fans in the country. (Sydney Morning Herald)

UFC Hires Leadership to Open China Office

The UFC’s global expansion has become a business in and of itself lately, and the next stop for the promotion will be in China.

Just weeks after the UFC opened an office in Canada – with former CFL commissioner Tom Wright leading the charge – the company hired a leader for a new office in China, which should open in the next few weeks.  (MMAWeekly) … (MMAPayout Perspective)

UFC Announces Anti-Piracy Settlements with 500 Businesses and Individuals

The organization today announced it has reached “confidential settlements” with more than 500 businesses and individuals as a result of illegal broadcasts and viewing of UFC events…The settlements span over the past two years.

“We are committed to standing toe to toe with anyone trying to illegally broadcast or stream UFC events,” UFC President Dana White stated. “Today’s announcement further drives home the fact that we are fully prepared to pursue any business or individual that steals our programming.”  (MMAJunkie) … (MMAPayout Perspective)

Strikeforce’s Upcoming Schedule; UFC 119, 120, 121 Announcements

Strikeforce Houston Card (8/21): “King Mo” Lawal (7-0) vs Rafael “Feijao” Cavalcante (9-2) [LHW Title] , Tim Kennedy (12-2) vs “Jacare” Souza (12-2) [Vacant MW Title], KJ Noons (9-2) vs Jorge Gurgel (13-6), Bobby Lashley (5-0) vs TBA, POSS: Sergei Kharitonov (16-4) vs Antonio “Big Foot” Silva (14-2) … all announced for the card at the Toyota Center.  Erin Toughill (10-2) vs Shana Olsen (4-0) is also now rumored for this event, where the winner would take on “Cyborg” Santos in a future 145 lbs Title bout.

Strikeforce Phoenix (8/13): J. Riggs (32-11) v L. Taylor(6-1), D. Cormier (2-0) v TBA, Women’s 1-Night 135 lbs GP: Maiju Kujala (4-1), Hitomi Akano (15-7), Miesha Tate (9-2), and TBD.

Strikeforce Washington (7/23): Shane Del Rosario (9-0) v Lolohea Mahe (4-1), Sarah Kaufman (11-0) v Roxanne Modafferi (15-5) [135 lbs Title], Mike Kyle (16-7) v Abongo Humphrey (7-1), Corey Devela (9-4) v Bobby Voelker (21-8).

***

UFC 119: A rematch between heavyweights Frank Mir (13-5 MMA, 11-5 UFC) and Antonio Rodrigo Nogueira (32-6-1 MMA, 3-2 UFC) headlines September’s UFC 119 event.  (MMAJunkie) ..  this event is also set to have Ryan Bader vs. Antonio Rogerio Nogueira as the co-main event, which would be the first time in UFC history to have twins headlining an event.

UFC 120: A middleweight bout between Michael Bisping and Yoshihiro Akiyama will be part of October’s UFC 120 event in London.  (MMAJunkie) .. the event is also set to have Dan Hardy vs Carlos Condit as the co-main event, which is scheduled to be televised on Spike TV from London.

UFC 121 : Was originally rumored to be taking place in Germany, is now reported to be on the move by MMAJunkie, likely heading to California.  Germany is currently trying to make the UFC reconsider their plans of moving into the country, as was reported back in March when Germany officials banned the UFC from television.  The rumored main-event here was Vitor Belfort (19-8) versus the winner of Anderson Silva (26-4)/Chael Sonnen (24-10).

UPDATE: Brock Lesnar vs Cain Velasquez signed for UFC 121 (MMAFighting). Belfort versus either Silva or Sonnen possible as the co-main event.

PICTURE OF THE DAY


QUICK HITS

  • FC: The Uprising Airing Live on Viewers Choice Canada (The Fight Network)
  • HDNet to Broadcast ‘HDNet Fights: DREAM 15’ Live (PRESS RELEASE)
  • SUFFER Signs Robert Drysdale Endorsement Deal (MarketWatch)
  • Strikeforce’s August schedule headlined by ‘King Mo’ title defense (LA Times)
  • Sifting through the rubble of the Fedor fallout (Yahoo! Sports)
  • STRIKEFORCE Looks to Phoenix’s Dodge Theater for AUG. 13 (ULTMMA)
  • Strikeforce Defy Boycott, Put Card in Arizona (Exile In Fightville)
  • German UFC lightweight Dennis Siver hoping for MMA acceptance in home country (MMAJunkie)
  • Voting ends Saturday for 2010 ESPY voting, UFC’s St-Pierre and Edgar nominated (MMAJunkie)
  • Faber Out of WEC 50, Expected Back in September (Sherdog)
  • Riggs-Taylor Heads Up Aug. 13 Strikeforce Challengers (Sherdog)
  • Strikeforce Champion’s Clause an Issue in Fedor Talks (MMAFighting)
  • Brock Lesnar vs. Cain Velasquez Won’t Happen at UFC 119 (MMAFighting)
  • CAIN VELASQUEZ WAITING ON A CALL FROM THE UFC (MMAWeekly)
  • SYLVIA VS. BUENTELLO IN AUGUST; PULVER RETURNS (MMAWeekly)
  • Erin Toughill Likely For August 21st in Houston (MMARising)
  • Torres vs. Valencia Slated For Co-Main Event Of WEC 51 (Heavy)
  • UFC 121 In The Works For Oct. 23 in Anaheim (Heavy)

TV LISTINGS

  • HDNet Fights: XFC: The Next Generation at 9 PM ET on HDNet (07/09/10)
  • Fighting Words with Mike Straka (Frank Shamrock) at 1 AM ET on HDNet (07/10/10)
  • HDNet Fights: Affliction Day Of Reckoning at 1:30 AM ET on HDNet (07/10/10)
  • HDNet Fights: DREAM.15 at 3 AM ET on HDNet (07/10/10)

UPCOMING EVENTS

  • HDNet Fights: XFC: The Next Generation at 9 PM ET on HDNet (07/09/10)
  • HDNet Fights: DREAM.15 at 3 AM ET on HDNet (07/10/10)
  • Strikeforce Challengers: Del Rosario vs Mahe at 10 PM ET/PT on Showtime(07/23/10)
  • HDNet Fights: K-1 World Max 2010 Final 10 PM ET on HDNet (07/23/10)
  • HDNet Fights: K-1 World GP 2010 at 10 PM ET on HDNet (07/23/10)
  • UFC on Versus 2 : Jones vs Matyushenko at 10 PM ET on Versus (08/01/10)
  • Strikeforce Challengers: Riggs vs Taylor 10 PM ET/PT on Showtime (08/13/10)
  • HDNet Fights: KOTC: Imminent Danger at 9 PM ET on HDNet (08/13/10)
  • UFC 117 : Anderson Silva vs Chael Sonnen at 10 PM ET on PPV (08/18/10)
  • WEC 50: Cruz vs Benavidez at 9 PM ET on Versus (08/18/10)
  • Strikeforce: King Mo vs Rafael Feijao at 10 PM ET/PT on Showtime (08/26/10)
  • HDNet Fights: Sengoku Raiden Championships 14 on HDNet (08/27/10)
  • UFC 118: Edgar vs Penn 2 at 10 PM ET on PPV (08/28/10)

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