MMAPayout.com Special Contributor Todd Martin gives his take on the Fitch situation, what happened to Werdum and how both situations tie into the general UFC negotiating landscape. Todd has followed the business of MMA since its inception and has written about the business for a variety of publications including the Los Angeles Times, SI.com and CBSSports.com.
Reflections on a Changing MMA Financial Landscape
By Todd Martin
Over the past few weeks, there has been a shift in the financial landscape of mixed martial arts. The demise of EliteXC and the IFL; the struggles of Affliction, Dream and World Victory Road; and an economic meltdown resulting in a dearth of venture capital available to any potential startups created an MMA scene overwhelmingly dominated by the industry leader Ultimate Fighting Championship.
The UFC has now begun to flex its muscles, exploiting this advantageous position. The most notable move was the UFC’s hard line stance towards the American Kickboxing Academy. However, the abrupt cutting of heavyweight standout Fabricio Werdum sent a similar message. These decisions are likely to be followed by further bold moves in 2009 as UFC works to consolidate its power and dictate future financial terms to its fighters.
This shift will have serious effects on the UFC and on the careers of fighters, and both sides will need to be negotiate carefully. Here are four principal suggestions for how to navigate the landscape, two from the perspective of fighters and two from the perspective of the UFC.
-Fighters: Now is Not the Time to Play Hardball with the UFC
This is not a point that it brings me any pleasure to make. Any business is healthier when management and labor are each able to exert significant pressure on the other. But the fact of the matter is that right now the UFC has much more leverage in negotiations than do fighters. Individual fighters don’t need to become martyrs in an uncertain financial world.
The UFC’s brief firing of Jon Fitch may have been made with passion, but it was not made rashly. It sent a strong and unmistakable warning to fighters and agents. UFC wants cooperation from its fighters, and it can afford to make examples.
It is better right now for fighters to stay on the UFC’s good side, and benefit from the certain paydays, high profile fights and notoriety that come with being a UFC fighter. This isn’t to say that fighters and agents shouldn’t work hard to negotiate the best possible deals. But it’s the wrong time to get into a game of chicken with UFC management.
-Fighters: Seek Your Money Upfront
The UFC, like the NFL, has set up a system of mostly one-way contracts. Fighters are bound to the UFC for the terms of the contract, but if the fighter loses the UFC can release him. Fabricio Werdum negotiated a healthy per-fight guarantee, but that meant nothing when he lost to Junior Dos Santos and was cut. If anything, the high per-fight guarantee simply gave the UFC incentive to cut him.
MMA agents must be aware of this reality, and negotiate contracts in the same way that NFL agents do. The only financial guarantee in an NFL contract is the signing bonus, so the size of that bonus is the primary focus of negotiations.
A UFC contract with a big signing bonus and small per-fight guarantees reduces the financial risk a fighter faces and also serves UFC’s purposes since signing bonuses aren’t publicly known. This also encourages UFC to keep fighters around even if they lose, providing them greater visibility and making them a more valuable commodity when they next negotiate a contract.
-UFC: Don’t Count on Future Fighter Goodwill
The UFC’s cutting of Jon Fitch was a risky move. It was designed to create fear among the UFC’s fighter base, and it did. However, such a harsh stance will do nothing to win the hearts and minds of fighters who UFC management likes to regard as partners.
Fitch is an ideal employee. He trains hard, focuses on improving himself, and goes about his job with a workmanlike attitude and without complaint. When finally presented with a title shot, he demonstrated tremendous heart and fought through unbelievable punishment.
To cut Fitch prior to his next fight over a licensing dispute is not something that fighters will overlook. Many fighters are likely to question just how much loyalty they have from the UFC if UFC would treat someone like Jon Fitch in the way that they did.
UFC ultimately won the battle with Fitch. He signed the agreement as the UFC desired and was brought back into the fold. In the short term, the company holds so much leverage over fighters that they are likely to win similar contractual battles. However, UFC also has to be aware that at some point a legitimate challenger to their MMA hegemony may come along. At that point, many fighters aren’t going to listen to arguments about loyalty. They will reciprocate the UFC’s cold attitude.
-UFC: Be More Forward Thinking
The whole situation with Jon Fitch could very well have been averted with better future planning. UFC was in a pressure situation to get the contracts it needed for its video game, and didn’t have the time or patience for drawn-out negotiations with AKA management. AKA management may well have been unnecessarily combative, but with time it would have been easier for UFC to smooth things over.
This will be not the last contractual agreement that UFC needs to reach with its fighters as it expands its business. There are a host of revenue streams that UFC has not yet fully capitalized on, from fighter-specific clothing and DVDs to collectibles to video games. Many of these revenue streams will require specific and unique agreements.
The UFC needs to do a better job anticipating what will be needed in the future as its business expands. Lawyers should be drawing up contracts now to prepare for business partnerships that have not yet been finalized. This will create less in the way of time sensitive disputes, reducing tension in negotiations with fighters and creating a more cooperative spirit as the sport continues to fulfill its potential.
Todd Martin can be reached at ToddMartin4L@aol.com.
