UFC heavyweight accepts 15 month USADA suspension

October 21, 2016

UFC heavyweight Abdul-Kerim Edilov will serve a 15-month sanction for an anti-doping policy violation after a positive drug test on January 7, 2016.

Edilov tested positive for meldonium following an out-of-competition urine test.  Per the USADA release, “USADA accepted Edilov’s explanation that the meldonium was a prescribed medication he was taking in a therapeutic dose under the care of a physician and without the intent to enhance his athletic performance.”  Despite this fact, USADA concluded that since Edilov’s use continued after the official prohibition on January 1, 2016, he required a Therapeutic Use Exemption in order to avoid violating the UFC Anti-Doping Policy.

The suspension is retroactive from the date of the failed test of January 7, 2016.

Payout Perspective:

Edilov’s suspension is interesting when you consider meldonium is relatively new on the WADA prohibited list and there are issues with its detection and use.  Notably, UFC lightweight Islam Makhachev was cleared of any fault or negligence in connection with a test that showed meldonium in his system.  However, the key is that Makhachev appears to have ceased use prior to January 2016.

UFC Canada office hit hard with layoffs

October 19, 2016

The UFC has cut more positions within the company as Ariel Helwani of MMA Fighting reports that many within the UFC Canada office including Tom Wright, the executive vice president and general manager for operations in Canada, Australia and New Zealand were dismissed this morning.

80% of the department in the UFC office in Toronto were let go.  The layoffs follow up news that the UFC reduced its work force company-wide including Garry Cook, Marshall Zelaznik and UFC Asia chief Ken Berger.

The company, which was purchased by WME-IMG for $4 billion in July, is downsizing which seems to include a lot from satellite offices outside of its home base of Las Vegas.

It is not known whether more cuts will come.

Payout Perspective:

The reduction in many of its overseas offices might infer that either the UFC will focus its operations in Las Vegas or that there will be less focus on international expansion and conducting events abroad.  The latter suggestion would seem to go against the prior regime’s thought of global expansion as a way to increase its fan base and revenues.  While there still may be international cards in the future, it would seem the focus by the new owners would be on domestic events and focusing on producing big PPV shows stateside.

GSP’s legal team maintains UFC breached contract

October 18, 2016

Georges St-Pierre’s legal team has maintained that the former welterweight champ’s contract with the UFC is over due to the company’s breach per an ESPN report.

After GSP proclaimed that he was a “free agent” in an interview Monday on The MMA Hour, the UFC rebutted the statement with one of its own stating that he was still contractually obligated to fight for the company.

GSP’s lawyer, Jim Quinn of the law firm Weil, Gotshal and Manges out of New York, maintains that GSP’s contract is terminated.  He indicated that the UFC could take legal action or offer a new contract to the fighter.

One of the issues GSP’s lawyers contend that caused a breach was the lack of fights given the St-Pierre.  His lawyers state he has never received an actual bout agreement.  St-Pierre’s lawyers gave the UFC 10 days to offer St-Pierre a fight.  According to his laweyrs, the UFC responded on the final day in which it offered St-Pierre former welterweight champion Robbie Lawler.  But that did not come to fruition.

GSP’s current contract was signed in 2011 per ESPN.  Of course, the UFC has evolved since then.  Notably, as pointed out in the story, is that the UFC has Reebok as its official clothier.  Also, fighters are no longer able to have outside sponsors (aside from official UFC sponsors) to promote during fight week.  St-Pierre had (or has) a deal with Under Armour in addition to other non-UFC sponsors.

Although not mentioned in the ESPN story, the UFC anti-doping policy came into effect in 2015.  It’s not known whether GSP signed an addendum to his contract binding him to USADA testing.

Payout Perspective:

It appears we may have a new legal dispute on our hands.  To be fair, GSP’s lawyers gave an artificial deadline (unless a 10-day deadline to settle this type of dispute was set forth in GSP’s contract) for the UFC to offer St-Pierre a fight.  But, it seems that the UFC could have made strides to keep GSP either by offering a fight and/or come to a contract extension under new financial terms.  Whether or not an actual bout agreement is mandatory as an offer for a fight appears to be a big question in this legal dispute.  We will see if the parties will attempt to resolve the situation short of a lawsuit.

UFC cuts significant number of its own work force

October 18, 2016

ESPN’s Brett Okamoto reports that there were “significant layoffs” at the UFC.  The layoffs were expected per the tweet.

MMA Fighting adds that multiple sources have indicated that 60-80 employees would be let go.  The report indicates that the UFC had employed “approximately 350 people” prior to the work force reduction.  The layoffs are not just taking place at UFC’s Las Vegas headquarters but across the company’s overseas offices as well.  The layoffs also include high-ranking executives according to MMA Fighting sources.

The news comes just 3 months after the UFC was sold to WME-IMG for $4 billion.  In recent weeks, longtime UFC matchmaker Joe Silva announced that he would leave the company and PR executive Dave Sholler left for a job with the NBA’s Philadelphia 76ers.

Payout Perspective:

While the UFC broke ground on a 180,000 sqare-foot Las Vegas campus late last year which might have inferred expansion, the layoffs were likely to happen with the transition in leadership.  With the change, it seems as though there is an effort to streamline the company and cut costs.  We will see how deep the cuts will be and whether the losses will affect events and/or the fighters.

UFC states GSP still under contract

October 18, 2016

The UFC has responded to claims that Georges St-Pierre is a free agent.  Not surprisingly, the UFC denies claims that GSP is free from his contractual obligations from the UFC.

On The MMA Hour on Monday, GSP declared that he was a free agent per his attorney.  His claim was that the UFC did not provide GSP with a fight and as a result his contract was terminated.

In a prepared statement, the UFC responded later in the day:

“Georges St-Pierre remains under an existing agreement with Zuffa, LLC as his promoter.  Zuffa intends to honor its agreement with St.-Pierre and reserves its rights under the law to have St.-Pierre do the same.

Payout Perspective:

It looks like we may be heading to a legal dispute over GSP’s contract.  The declaration of a terminated contract by GSP was reminiscent to Rampage Jackson’s claim that he was free from Bellator’s contract due to not fulfilling certain things within the contract.  As you recall, a lawsuit occurred and was subsequently settled.  You can bet that the UFC would oppose GSP from fighting in another organization if it boils down to it.  GSP’s lawyers seem confident that there was breach of the contract, and/or an unmet requirement within the contract which allowed for the termination.  We will see if the parties can come to a resolution prior to litigation.

WSJ article notes UFC sale as example of questionable buyout-loan strategy

October 17, 2016

The Wall Street Journal reports on the UFC sale and how the structure of the deal is being seen as too liberal with adjustments to earnings which enables more borrowing for transactions.

The Federal Reserve had warned Goldman Sachs (Deutsche Bank AG is also a lender) the entity that marketed the debt to investors, of the abuse in inflating the earnings before interest, taxes, depreciation and amortization.  The EBITDA for the UFC was pegged at $170 million but then was estimated up to $300 million when presented to debt investors helping finance the sale.  The higher EBITDA allowed WME borrow $1.8 billion for the deal without running afoul of the guidelines which prevent borrowing for more than 6x a company’s EBITDA.

According to the article, $48 million in expected “future step up payments to television contracts and other licensing agreements,” helped bring the EBITDA up to $300 million.

Payout Perspective:

The UFC deal is an example brought to light by the WSJ article.  The story also writes about the acquisition of event-management software firm Cvent and IT firm SolarWinds as other examples in which EBITDA climbed.  The issue that banks and regulators are concerned with is that the forecasted EBITDA may not be a realistic estimate.  Nevertheless, debt investors were bullish with the UFC debt despite the caution.

GSP declares himself a free agent

October 17, 2016

Georges St.-Pierre is a free agent according to the former UFC welterweight titleholder in an interview on The MMA Hour.

Rumors of GSP’s imminent return were strong but according to GSP his lawyer terminated his UFC contract after the UFC failed to offer him a fight.

GSP’s last fight was in November 2013 at UFC 167 against Johny Hendricks.  GSP has remained active despite not being in the Octagon.  According to the interview via MMA Fighting, GSP was offered Robbie Lawler but Lawler is taking time off from fighting after losing his title in July.

Payout Perspective:

Obviously, there are two sides to each story and we will have to see if the UFC confirms that St. Pierre is indeed released from his UFC contract.  If so, this would be big news for other organizations such as Bellator.  GSP is a popular fighter despite being away from active competition since 2013.  His return to MMA would spark interest with any promotion he might land with in the near future.  Now let’s hope this does not get pulled into litigation which might keep GSP from returning.

Nevada clarifies Conor’s fine

October 17, 2016

MMA Fighting reports that Nevada’s Athletic Commission’s executive director Bob Bennett has clarified the fine assessed to Conor McGregor from his bottle-throwing incident.  He states that the fine is $75,000 and not the $150,000 as previously reported.

Despite the fact that the $150,000 number was indicated at an open hearing of the commission, Bennett clarified that the fine was $75,000 and the value of a public-service announcement McGregor must do for the commission is valued at $75,000.

McGregor reportedly made $3 million from UFC 202 not counting undisclosed bonuses or PPV points.

The state attorney general originally recommended a $25,000 fine, 25 hours of community service and media training.  The commissioners believed that amount was not enough.

McGregor was not a fan of the $150,000 fine stating that he would not fight in Nevada in the foreseeable future.

Payout Perspective:

The backtracking to clarify the fine and then blame media seems like a mishandling of the situation by the NSAC and a way to reduce the fine without drawing an appeal.  The $75,000 value seems like it was pulled out of the air without any evidence that a PSA would cost this much.

USADA arbitration rules amended for UFC fighters

October 15, 2016

The UFC announced changes to its USADA arbitration rules which go into effect on November 1, 2016.  The changes include a refund schedule for those that might appeal an arbitration.

Thus far, under the current arbitration rules, no athlete has taken their case to arbitration.  However, Jon Jones is scheduled to arbitration his positive drug tests which kept him from competing at UFC 200 on October 31st.

The protocol and rules for challenging a flagged test by USADA are relatively the same and are outline here from our initial review of the rules.

The addition reflects the potential for a refund of the $2,700 fee to file for arbitration.  An athlete that might file for arbitration, but decides to settle or withdraw their case prior to an appointment of an arbitrator may have the fee refunded up to 100% (minus a non-refundable $250).  It could be refunded up to 50% minus the non-refundable $250 if the arbitrator is chosen but prior to the pre-hearing scheduling conference.  25% of the fee could be refunded minus the $250 if the arbitrator is chosen after a pre-hearing scheduling conference but prior to any contested motions being heard or pre-hearing briefs.

In addition, 13.7 was added which allows for a full refund of the arbitration fee if there is an arbitration finding that there was “no violation” or “no fault or negligence.”

Payout Perspective:

Perhaps there was reason to hold Jones’ arbitration hearing prior to the new changes.  Maybe not.  But, the additions to the existing USADA arbitration rules seem to create more opportunity for an athlete to contest a drug test as there is a possibility to seek a refund of the fee to appeal.  Of course, a fighter can also seek a waiver of the fee and/or reduction based on economic condition.  So, the refunds might not be that big of a deal.  Then again, it clarifies the fee portion of the appeal process.

Jones USADA arbitration set for Oct. 31

October 14, 2016

Jon Jones will be the first UFC fighter to have an arbitration hearing pursuant to the UFC anti-doping policy.  His hearing is set for October 31st according to MMA Fighting.

Jones’ hearing against USADA will be held in Los Angeles.  The hearing is based on his positive drug test which pulled him out of his unification bout against Daniel Cormier three days before UFC 200.  The fighter, beset with a multiple out-of-octagon issues, denied knowingly taking any illegal substance.  The Nevada Athletic Commission revealed that the banned substances found in Jones’ samples were hyrdoxy-clomiphene and Letrozole, anti-estrogen agents.

Jones faces a maximum one-year suspension from USADA.

Payout Perspective:

Unless there is a last-minute settlement between the parties, this will be the first and last arbitration under the current UFC-USADA format as the company sent a letter to all its contracted athletes detailing new procedures for the USADA appeals process.  Just a few months ago, Jones seemed upbeat about a possible return sooner than later.  We will see if that holds up at arbitration.

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