Follow up on the Oklahoma PPV tax
May 23, 2012
Last week, the Oklahoma Attorney General decided that the state’s tax on pay per views was unconstitutional. MMA Payout takes a brief look at the potential legalities behind this question.
As those who have been following know, the UFC threatened to sue the state of Oklahoma for its 4% tax on pay per views. As a result, there was a possibility that the state would have to shut down the regulation of MMA events within the state. Since the initial issues, the state Attorney General reviewed the PPV tax and determined it could not defend the constitutionality of the law.
So we postulate on what the AG could have looked at to determine why it could not support the law.
State regulations and state taxes that burden interstate commerce can be challenged under the dormant commerce clause of the US Constitution if they place an undue burden on interstate commerce. Essentially, even if Congress has not acted with respect to a state/local law affecting interstate commerce, it would fall under the purview of federal law. Under the Dormant Commerce Clause, there is a strong presumption against state discrimination against out-of-staters. Any tax related to this would be struck down. The US Supreme Court has made it clear that states cannot use their tax systems to help in-state businesses at the expense of out-of-state businesses.
In general, taxes specific to out of state commerce are never allowed while nondiscriminatory taxes are much more likely to be permitted.
In Complete Auto Transit, Inc. v. Brady, the issue was whether a tax was unconstitutional because it was applied to an activity that was a part of interstate commerce. A tax was placed on Complete Auto as it hauled General Motors vehicles from out of state to in state car dealers. The US Supreme Court upheld the law and applied a four part test in concluding that a state tax does not violate the commerce clause. The four part test ask if:
1) It is applied to an activity with a substantial nexus to the taxing state;
2) It is fairly apportioned so as to tax only the activities connected to the taxing state;
3) It does not discriminate against out-of-staters; and
4) It is fairly related to services provided by the state.
Without going through an exhaustive analysis of the test (since the issue has been decided), arguably the state PPV tax could fall within the Complete Auto test if the tax was similarly applied to in-staters (#3, the nondiscrimination element). However, as explained in this article, most of the OK State Athletic Commission’s revenue came from out of state PPVs. The AG probably looked at the likelihood of successfully arguing in favor of the PPV tax and determined that the law could not be successfully defended.
Obviously, there were other legal issues it factored into its analysis but this was one of the likely hurdles the state decided it could not overcome.
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Bellator 69: 209,000 viewers
May 22, 2012
MMA Junkie reports that Bellator 69 scored a season high average of 209,000 viewers. The average continues the 3 week trend upward for the company on MTV2.
Bellator 68: 169,000 viewers
Bellator 67: 165,000 viewers
Bellator 66: 109,000 viewers
Bellator 65: 163,000 viewers
Bellator 64: 175,00 viewers
Bellator 63: 140,000 viewers
Bellator 62: 175,000 viewers
Bellator 61: 108,000 viewers
Bellator 60: 169,000 viewers
Payout Perspective:
As we stated last week, if the last two shows for season 6 sustains the positive ratings trend, Bellator could frame the season as a step in the right direction. This week’s ratings are a success in comparison to the TUF Live’s disappointing low. While this season’s average may not be as good as its predecessors, the trend of steady, positive ratings will reflect signs of improvement in maintaining its audience.
UFC 146 Primetime Ep 2: 544,000 viewers
May 22, 2012
MMA Junkie reports that the second episode of UFC 146 Primetime scored an average of 544,000 viewers on Friday night on FX. Last week’s debut featuring JDS and Frank Mir had an average of 542,000 viewers.
First episode – 542,000 viewers
Second episode – 544,000 viewers
The previous UFC Primetime, Jones vs. Evans, grabbed an average of 560,000 viewers. The first UFC Primetime on FX: Diaz vs. Condit, averaged 540,000 viewers. A strong showing next week could eclipse this.
Payout Perspective:
Its hard to say whether the UFC and Fox are pleased with the ratings but at least it is in the relative same ballpark as the previous two Primetimes on FX. The numbers definitely reflect an adjustment to Friday nights. With such a low number pulled by lead-in TUF Live this week, one would have to think that this week’s Primetime rating was encouraging. If it can pull off a decent number this week, it may do better than the Diaz/Condit series.
TUF Live Ep. 11: 821,000 viewers
May 21, 2012
MMA Junkie reports that last Friday’s TUF Live on FX scored an all-time low of 821,000 viewer average. Its the second time this season that the series has set its all-time ratings low.
TUF Live Episode 1: 1.28 million viewers
TUF Live Episode 2: 1.1 million viewers
TUF Live Episode 3: 1.2 million viewers
TUF Live Episode 4: 1.1 million viewers
TUF Live Episode 5: 947,000 viewers
TUF Live Episode 6: 1 million viewers
TUF Live Episode 7: 1 million viewers
TUF Live Episode 8: 929,000 viewers
TUF Live Episode 9: 954,000 viewers
TUF Live Episode 10: 948,000 viewers
Payout Perspective:
This is disappointing considering there were two fights on the card and we got to know the fighter that would replace Dominick Cruz. We’ll see what the numbers are for the Countdown show which followed TUF Live. If it did better, we might deduce that TUF Live just isn’t doing it for UFC fans this time around.
Sonnen is Rome’s 2012 King of Smack
May 20, 2012
Chael Sonnen used his art of smacktalk to compete in sports radio personality Jim Rome’s annual “Smackoff.” The annual contest held this past Friday on Jim Rome’s nationally syndicated radio show features Rome’s listeners calling in to determine who has the best “smack”.
Sonnen became one of the few celebrities to appear as a contestant. The purpose of the show is to determine the show’s best caller. Jim Harbaugh, Tom Tolbert and Jay Mohr have also appeared. Rome has a nationally syndicated radio program with over 200 affiliates in the US, Canada, online and touts 2 million listeners. He has amassed a cult following and the “Smackoff” is a spinoff of the popularity.
Rome was an early convert to the UFC and has had many stars on as guests including Dana White, BJ Penn and Sonnen. Sonnen’s smack talk didn’t focus on Anderson Silva or anyone in the UFC but on other sports including the NFL, NBA and NASCAR.
Payout Perspective:
The contest is subjective as there is no fan vote or poll but is up to Rome and his crew. Rome has monetized this contest so that there are sponsors. Last year, it included a UFC-themed gift package. No word on whether Sonnen gets a prize for winning. Since the UFC has bought radio time on Rome’s show, one could argue that Sonnen should be disqualified. But, winning the contest is beside the point here.
The underlying value of Sonnen appearing on the show is that Rome promoted his July 7th fight prior to his appearance. It also helps get Sonnen out there to Rome’s 2 million listeners on a day in which a high volume of Rome fans tune in to hear the smack talk. Sonnen’s smack talk amounted to a preview of the hype leading to what the UFC hopes to be the fight of the year. Expect more from the reigning king of smack leading up to July 7.
Does Jones arrest hurt Jones, UFC?
May 20, 2012
Jon Jones was arrested on suspicion of DUI in upstate New York early Saturday morning as it was first reported by TMZ. The arrest blemishes the Jon Jones brand as he was easily becoming the face for the UFC.
Jones’ manager, Malki Kawa released a statement in lieu of the arrest:
“I can confirm that Jon Jones was arrested early this morning on suspicion of DUI. ”While the facts of this situation are still being gathered and situated, First Round Management fully supports Jon and we are asking for fans and media to respect the privacy of Jon and his family during this time.”
Although Jones will go through the legal process to determine the facts surrounding the arrest, TMZ reports that Jones crashed his Bentley into a pole and was arrested at the scene. He was bailed out by his mother a couple hours later.
Payout Perspective:
Drinking and driving is a serious offense. While we might say that it was a mistake and a stupid thing to do, many innocent people have died due to drunk driving. With that being said, there have been many professional athletes that have overcome offenses like this (and even worse crimes) without it affecting their careers. Will it hurt Jones’ sponsorship opportunities? It certainly will take him off of any beer ads. How about the blue chip sponsors? Depending on the facts of the case and how Jones proceeds with this (legally and from a PR standpoint), it may be just a blip on his screen. Jones may still have a chance at sponsor deals but he may have to wait a while. If you look at Ray Lewis and Kobe Bryant, they have been able to overcome off the field/court issues to regain sponsors. Tiger Woods lost major sponsors and his play has not helped him recover from the misdeeds of a couple years ago.
To a lesser extent, the Jones arrest may hurt the UFC. TMZ’s main picture of Jones has him adorned in a UFC shirt. Jones is one of the faces of the UFC and a likable figure that sponsors could gravitate toward. Remember, he stopped a purse snatcher and then won the world title in the same day. There aren’t too many American fighters that the UFC could promote. Certainly GSP and Anderson Silva are draws but Jones is the only true big star coming from the US right now. Will it hurt the UFC’s quest for blue chip sponsors? While it could harm the potential for sponsors, I don’t think it would affect it in any way. It probably would have been a bigger deal if he tested positive for an illegal substance.
It would be in the best interest of Jones to accept responsibility and move forward. He could cut PSAs about his mistake and the perils of driving while under the influence. Not sure if the UFC really needs to punish Jones right now. It wouldn’t hurt to remind its fighters to be responsible when out and have a driver if they decide to have a little fun.
Zombie and Cowboy top list of UFC on Fuel TV 3 money earners
May 18, 2012
MMA Junkie reports the salaries from UFC on Fuel TV 3. The Korean Zombie, Donald Cerrone and TUF alum Amir Sadollah received the highest pay from Tuesday night.
Via MMA Junkie:
Chan Sung Jung: $34,000 (includes $17,000 win bonus)
def. Dustin Poirier: $14,000
Amir Sadollah: $48,000 (includes $24,000 win bonus)
def. Jorge Lopez: $6,000
Donald Cerrone: $60,000 (includes $30,000 win bonus)
def. Jeremy Stephens: $24,000
Yves Jabouin: $20,000 (includes $10,000 win bonus)
def. Jeff Hougland: $8,000
Igor Pokrajac: $34,000 (includes $17,000 win bonus)
def. Fabio Maldonado: $11,000
Tom Lawlor: $24,000 (includes $12,000 win bonus)
def. Jason MacDonald: $19,000
Brad Tavares: $20,000 (includes $10,000 win bonus)
def. Dongi Yang: $12,000
Cody McKenzie: $20,000 (includes $10,000 win bonus)
def. Marcus LeVesseur: $6,000
T.J. Grant: $30,000 (includes $15,000 win bonus)
def. Carlo Prater: $10,000
Rafael dos Anjos: $32,000 (includes $16,000 win bonus)
def. Kamal Shalorus: $11,000
Johnny Eduardo: $12,000 (includes $6,000 win bonus)
def. Jeff Curran: $8,000
Francisco Rivera: $12,000 (includes $6,000 win bonus)
def. Alex Soto: $6,000
Payout Perspective:
Korean Zombie only made $34,000 but cashed in with 2 bonuses with a reported total of $114,000 for the night. Cerrone avenged his loss to Nate Diaz and that loss doesn’t look too bad now considering Diaz’s victory last week. Also, Amir Sadollah received a slight bump in pay as he’s getting $24K + $24K win whereas his past couple fights he was at $20K/$20K.
Oklahoma PPV tax declared unconstitutional
May 17, 2012
MMA Payout has learned that the Oklahoma PPV tax has been declared unconstitutional by the state Attorney General of Oklahoma. The tax has been challenged by the UFC as it threatened litigation prior to a review of the issue by the Oklahoma AG.
In an email correspondence to MMA Payout, a representative from state representative Tom Newell’s office stated that after extensive research and legal analysis of the issue, an attorney on behalf of the Athletic Commission concluded that the law could not be successfully defended.
Representative Newell is sponsoring SB1533, a bill that would grant the Oklahoma Athletic Commission $200,000 to fund combat sports in the state. “SB1533 Oklahoma Athletic Commission PPV law is assigned to a conference committee with language deleting the unconstitutional fee. We don’t anticipate having any problems,” stated Representative Newell in an email to MMA Payout. Thus, despite striking down the tax, SB1533 should pick up for the loss of the tax revenue.
Below is the fiscal analysis from the Conference Committee Report from today:
The measure deletes the State Athletic Commission’s Gross Receipts Assessment as it pertains to certain telecasts and pay-per-views. Prevailing legal opinion is that these assessments are unenforceable therefore; the measure brings current statutes into conformity with the prevailing legal opinion. The Commission expects to loose (sic) approximately $240,000 annually in revenue as a result of the assessment no longer being collected; however this fiscal impact is not a result of HB 2746, but a result of the legal determination that the assessment is unenforceable. The measure has no direct fiscal impact on the State Budget or Appropriations
Payout Perspective:
MMA Payout will have more on this news in the coming days. It may have boiled down to an analysis of the Dormant Commerce Clause as it affected interstate commerce. According to representative Newell’s office, the tax had been thoroughly examined by the state’s attorneys to determine the constitutionality of the law. The good news is that based on SB1533 it looks like combat sports will continue in Oklahoma.
Attendance, gate and bonuses from UFC on Fuel 3
May 16, 2012
MMA Weekly reports gate, attendance and bonuses for Tuesday’s UFC on Fuel 3. The event took place at the Patriot Center on the campus of George Mason University in Fairfax, Virginia. event took place at the Patriot Center on the campus of George Mason University in Fairfax, Virginia.
The 10,000-seat arena at the Patriot Center was half full with the official attendance at 4,592 with a gate of $343,175.
Bonuses for the night were $40,000 each:
Fight of the Night: Korean Zombie/Dustin Poirer
Submission of the Night: Korean Zombie
Knockout of the Night: Tom Lawlor
Obviously, it was the Korean Zombie’s night. Both KZ and Poirer put on a great fight for the fans. Apparently, it was fortunate that Tom Lawlor received the bonus and fight earnings. According to Cagewriter, Lawlor has borrowed money from friends and family the past year and a half to get by while waiting for a fight.
Payout Perspective:
It’s hard to compare UFC on Fuel 3 with the prior 2 when it comes to gate and attendance. The first UFC on Fuel scored 7,120 fans for a gate of $406,000. But that card was headlined by Diego Sanchez and Jake Ellenberger. For Ellenberger, he was fighting in his hometown so there was more a draw from the local fans. The second Fuel card was held in Sweden and received big numbers (15,428/$2.23 million) since it was the first time the UFC came to the country. Also, it featured local product Alex Gustafsson in the main event.
Despite the attendance on Tuesday, I think the smaller setting and college campus atmosphere is a good idea for the UFC. It attracts its targeted demo and the young fans will sure to be excited about the fights. It could potentially attract sponsors to do on campus promotions in hyping the events.
UFC on Fuel TV 3: 173,000 viewers
May 16, 2012
MMA Junkie reports that Tuesday’s UFC on Fuel 3 event scored an average of 173,000 viewers. The ratings show a steady decline in ratings from the past 2 live Fuel events.
Via MMA Junkie:
February’s UFC on FUEL TV 1 event holds the all-time UFC-FUEL TV ratings record with 217,000 viewers, and April’s UFC on FUEL TV 2 show ranks second with 197,000. However, UFC on FUEL TV 3 topped all four of the cable channel’s previous preliminary-card broadcasts for UFC on FOX and UFC on FX events from earlier this year.
Payout Perspective:
An impressive main event, but unimpressive ratings. This may be due in part to the Tuesday night viewing audience and the fact it went up against the NBA and NHL playoffs. Another problem may be that the event started early on the west coast. With prelims on Facebook starting in the late afternoon Pacific time, it forecloses on an audience. Conversely, having the fight on too late may hurt east coast viewers and the actual attendance at the fight since it was in Fairvax, VA.
Despite the ratings, it was a good test to see the type of audience it could receive on a Tuesday night. This may come into play with future programming choices. I still see Tuesday night as a viable option for live programming during the week as more often than not it would not compete with other events.
