MMA Payout takes a look at the 158-page expert report provided by plaintiffs’ economic expert Andrew Zimbalist. Its Dr. Zimbalist’s opinion that Zuffa is attempting to exclude from the case at hand as they take issue with his calculation of damages.
As with most of the filings containing sensitive information about Zuffa contract and financial information, there are parts of the report that include heavy redactions.
In addition to a review of the NBA, NHL, NFL and MLB, Dr. Zimbalist reviews the history of boxing’s payment scale. He identifies “at least five different boxing promoters who are prominent enough to promote major championship fights each year, and probably more than ten.”
In estimating damages, Dr. Zimbalist explained his methodology:
“For each sport that I use as a benchmark, I apply the athlete compensation share of revenue to the reported Zuffa bout revenues to arrive at what Zuffa’s fighters would have been paid if they received the same share as the athletes in these other sports where competitive labor markets prevail. I then take the mean of these but-for compensation levels from the different sports and compare it to the total event-related fighter compensation paid out of Zuffa’s athletes. The difference is the basis for my estimate of the total amount members of the bout class were underpaid due to the challenged conduct.”
In the next paragraph Dr. Zimbalist gives his explanation for using player share rather than the actual pay levels. He believes that it would control the state of the industry and differences between the popularity and thus demand for each benchmark as compared to MMA.
Dr. Zimbalist includes Golden Boy Boxing Revenues and Expenses in his report as a comparison to MMA. The information was disclosed in the Al Haymon-Golden Boy antitrust lawsuit.
Notably, the Fighter share of revenue was over 55% of the total revenue in 2014, 2015, and 2016.
He also provides a table reflecting share of revenue in the NFL and MLB.
Dr. Zimbalist includes a quote Zuffa LLC’s then CEO and co-owner Lorenzo Fertitta gave to ESPN’s Outside the Lines in a story on fighter pay in 2012. Fertitta stated fighter pay was “not far off what the other sports leagues pay as a percentage of revenue.” When informed that the players share in the big 4 leagues was around 50 percent, Fertitta agreed that the UFC’s fighter pay was comparable. Dr. Zimbalist notes that this was an untruth.
He then gives his estimate and damages calculations.
Below, I calculate annual damages to the bout class by comparing UFC athlete share of event-based revenue to the average athlete share of revenue in the selected benchmarks discussed above: the NFL, MLB, NBA, NHL, and boxing. For those leagues whose competitive seasons nm between two calendar years, the year identified is the fiscal year. Hence, the 2014-15 NBA season corresponds to fiscal year 2015 and is represented as 2015. My source for Zuffa’s revenues and fighter compensation are Zuffa’s annual financial statements.
We don’t exactly know his damage estimate since it is redacted from the public report. Dr. Zimbalist did base UFC fighter pay and revenues based on Zuffa annual financial statements (likely) provided in discovery.
Payout Perspective:
While Dr. Zimbalist believes his calculations are conservative, it’s clear that Zuffa thinks otherwise. The “yardstick method” is at issue here as Dr. Zimbalist comes to the conclusion that the UFC used anticompetitive conduct which would lead to anticompetitive effects for a firm with monopoly or monopsony power. He also believes that the rationale given for the conduct are not procompetitive are invalid, do not theoretically apply to MMA and there less restrictive conduct in its labor market. Utilizing the “Big 4” sports and boxing to come up with a comparable estimation for damages is contested by Zuffa here as they make the assertion that the 4 sports leagues have unions which facilitate athlete compensation. But, UFC fighters do not. The data used from boxing is based on 2.5 years from Golden Boy Boxing so the argument there is that the analysis is incomplete and from a short span of time.
MMA Payout will have more on this and Dr. Zimbalist’s rebuttal report in the near future.
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