By Shawn Schatzle, Esq. of Havkins, Rosenfeld, Ritzert & Varriale, LLP
“We’re not here to take part. We’re here to take over.” — Conor McGregor
The sport of mixed martial arts has experienced explosive growth in recent years. The increased revenues that have come along with the sport’s growing worldwide popularity have resulted in questions concerning whether the athletes are receiving their fair share. As fighter contracts are typically negotiated on an individual basis, the topic of a fighters union has been discussed over the years, but now may finally be coming to fruition.
The Ultimate Fighting Championship (“UFC”), the sport’s premier organization, was struggling when it was purchased by casino magnates Lorenzo and Frank Fertitta for $2 million in 2001. The UFC had been all but banned from pay-per-view — the organization’s primary revenue stream — due to a public outcry over its allegedly violent content. Despite a significant increase in regulation, the addition of numerous safety rules and a return to pay-per-view, the first few years of the Fertittas’ ownership regime yielded little in the way of financial success. However, in 2005 the UFC debuted “The Ultimate Fighter” reality show, which spearheaded a surge in popularity and an exponential growth in revenue. By 2009, the UFC was popular enough that its centennial event, UFC 100, earned an estimated 1.6 million pay-per-view buys, shattering the prior record for a mixed martial arts event. In 2011, a lucrative television deal with FOX — which resulted in regular events on network television and cable — displayed the strength of the UFC brand, especially with the coveted advertising demographic of males ages eighteen to thirty-four. After all this success, the Fertittas recently sold the UFC for an estimated $4 billion dollars to a new ownership group that includes entertainment powerhouse WME-IMG.
At the outset of the UFC’s surge in popularity in the mid-2000s, many athletes who were previously forced to maintain full-time employment to supplement their fighting incomes were happy simply to be able to earn enough to quit their jobs and devote their time to training. Some of the UFC’s athletes became household names, earning millions from fight purses, pay-per-view percentage points and sponsorship deals. Champions like Chuck Liddell, Georges St-Pierre and Ronda Rousey became crossover stars, appearing in roles on film and television and in national advertising campaigns for blue-chip sponsors. Current featherweight champion Conor McGregor recently became the first mixed martial artist to appear on Forbes’ annual list of the 100 highest-paid athletes. The Dublin-born fighter was also recently named the ESPY 2016 Fighter of the Year, the first time a mixed martial artists was awarded the distinction.
The compensation for lower-level athletes has also drastically increased. In 2008, for example, newly-signed athletes earned fight purses as little as $3,000 to fight and an additional $3,000 to win. Currently, the athletes in the lowest end of the talent pool earn $10,000 to fight and $10,000 to win.
Despite the overall increase in compensation for the organization’s athletes, there have been signs of friction with the UFC’s management over the years, which have foreshadowed the possible need for a fighters union. For example, in October of 2007, then-heavyweight champion Randy Couture announced he was severing ties with the UFC, largely over money. Although he had earned a $250,000 fight purse four months prior for defending his championship against challenger Gabriel Gonzaga, along with a percentage of the pay-per-view revenue that resulted in total estimated earnings of over $1,000,000, Couture was not satisfied with his pay in relation to that of other top athletes. He specifically cited an offer the UFC extended to Fedor Emelianenko, who many consider to be the greatest heavyweight athlete in the sport’s history, as “insulting” to him. He also viewed certain standard terms in the UFC’s contracts, including provisions relating to likeness rights, as unfair to the athletes. The contracts typically required athletes to allow the UFC to utilize their likenesses in perpetuity with no additional compensation. Later, in November of 2008, welterweight Jon Fitch was released from his contract with the organization over a dispute relating to his likeness rights, only to be-signed within days after reaching a resolution. Fitch had recently challenged St-Pierre for the welterweight championship on a pay-per-view event that earned an estimated 625,000 buys.
More recently, in December 2015, the UFC signed an outfitting agreement with Reebok, with the sports apparel company becoming the exclusive provider of uniforms and training apparel to the organization’s athletes. The deal not only provided the organization with a new source of revenue — a rumored $70 million over six-years — but it also served to put the UFC on par with other major sports in terms of having a blue-chip uniform sponsor. Once the deal went into effect, not only could athletes no longer wear apparel from any other company while competing inside the Octagon, but they were prohibited from showcasing the names or logos of any outside sponsors during their fights.
Prior to the Reebok deal, UFC athletes were able to supplement their fight income (often significantly) by adorning their fight shorts with the logos of outside sponsors. Although the figures varied from athlete to athlete, heavyweight Brendan Schaub, for example, claimed to have earned six-figures in sponsorship income for each of his prior six bouts. This was notable as Schaub, despite being an accomplished fighter, had never held a major championship and had only competed in a single main event bout. The UFC did, however, agree to provide the athletes with a portion of the Reebok revenue, but it paled in comparison to what many were earning from prior sponsorship deals. The Reebok payout to each athlete was determined based largely on experience, with amounts ranging from $2,500 per fight for athletes with one to five bouts in the UFC to $20,000 per fight for those with twenty-one bouts or more, and additional amounts for champions and challengers. These amounts have remained the same since the inception of the Reebok deal.
Not all recent changes to the lives of UFC athletes have been related to money. Over a year ago, the UFC announced a partnership with the United States Anti-Doping Agency (“USADA”) for a comprehensive drug testing program that was touted as the most stringent in all of sports. Athletes are now required to provide USADA with constant notice of their whereabouts in order to be available for random drug testing at any time. A first-time offender will typically receive a suspension of two years for certain performance enhancing substances, with the possibility for an additional two years for “aggravating circumstances,” not to mention possible significant financial penalties.
Although developments like the Reebok deal and the USADA partnership are viewed in a general sense as good for the sport, it is difficult to imagine each agreement in its current form if the athletes took part in the negotiations. The Reebok uniforms make the athletes and the sport in general appear more professional. However, the athletes no doubt would have pressed Reebok for some type of concessions regarding outside sponsorship, or otherwise taken some measures to ensure the UFC did not unilaterally remove the possibility of outside sponsors without providing comparable compensation. With regard to USADA, the goal of achieving a clean, drug-free sport is commendable, but had the athletes had a seat at the table, as in other sports, different terms regarding penalties may have been negotiated. Two years is a lifetime in a sport where the average career is less than a decade, and most athletes only compete at an elite level for four or five years.
In recent years, there have been attempts by the athletes to obtain more leverage. In December of 2014, a group of athletes filed an class-action antitrust lawsuit in the United States District Court for the Northern District of California. The representative plaintiffs included former title challengers Nate Quarry and, not surprisingly, Jon Fitch, both of whom were no longer under contract with the organization at the time the lawsuit was filed, as well as Cung Le, who was still a UFC athlete at the time. However, Le had been in a high profile dispute with the organization’s management over its handling of a drug test prior to the lawsuit, and his inclusion was therefore not surprising. The plaintiffs alleged that the UFC was an illegal monopoly under federal antitrust law in that it unlawfully stifled competition from other mixed martial arts leagues. According to the allegations, the UFC’s unlawful conduct denied athletes the opportunity to obtain fair market value for their services, and instead provided the UFC with the opportunity to pay the athletes low wages and impose strict employment restrictions. In terms of relief, the lawsuit sought monetary damages as well as injunction requiring changes to the way the UFC deals with its athletes. Although the UFC had spent considerable resources over the years buying out potential competitors — including popular organizations like Pride Fighting Championships, World Extreme Cagefighting and Strikeforce, where Le made his name — one of the primary issues in the lawsuit is not whether the UFC has dominant market power, but whether it achieved it through unlawful, anticompetitive means. The lawsuit, Le v. Zuffa LLC, 15-cv-01045, is still pending after a motion to dismiss from the UFC was denied by a federal judge in September 2015.
A significant issue often raised by advocates for the athletes is the split of revenues in the UFC as compared to other major sports leagues. For example, Major League Baseball (“MLB”) players receive a share of the league’s revenues in the range of forty-three to fifty percent, whereas National Football League (“NFL”) players receive roughly forty-seven percent, according to a Bloomberg report in July. There is no revenue sharing agreement between the UFC and its athletes, and it is difficult to determine the exact percentage of revenue that is paid to the athletes as the UFC is a privately held company that does not publicly release its financial information. However, based on available information, estimates have placed the number in the range of thirteen to fifteen percent.
One potentially major hurdle to a fighters union has been the lack of high-profile athletes speaking out in support of it. In order to create a maximum amount of leverage, the involvement of athletes with drawing power in a potential union would seemingly be necessary. The UFC can easily replace athletes without a large following, as doing so has little to no effect on their bottom line. However, it takes time, resources and some luck to develop a legitimate star, and therefore such athletes are not so easily replaceable. As a result, the UFC would no doubt be more keen to negotiate with a union if not doing so meant possibly losing out on the revenue associated with their highest drawing athletes. Over the years, such athletes have largely been remiss to speak out about a possible union, and some have opined that the reason is so as to not bite the hand that feeds, so to speak. Recently, however, there appears to have been a sea change on this issue.
At UFC 200 on July 9, 2016, heavyweight contender Mark Hunt lost a decision to former champion and pay-per-view powerhouse Brock Lesnar. Following the bout, however, it was revealed by USADA that Lesnar had tested positive for an undisclosed banned substance in a pre-fight drug test, the results of which were not obtained until after the bout. Lesnar, who is also a popular professional wrestler with World Wrestling Entertainment, also tested positive for the same substance in a test conducted on the night of the bout. Hunt, a popular former decorated kickboxing champion, was furious. Generally, a fighter must submit to USADA testing for four months before being allowed to compete in the UFC. However, Lesnar, who had not competed in mixed martial arts since a loss to Alistair Overeem in 2010, was granted an exemption to this rule. Hunt subsequently strongly came out in favor of a fighters union, noting various other issues he had with the UFC’s management. Former UFC champions Carlos Condit, T.J. Dillashaw and Benson Henderson have also recently expressed support for a fighters union, or for some action to obtain better terms with the UFC. Conor McGregor, arguably the sport’s biggest star, for his part recently came out in support of a union and acknowledged the fact that a fighter of his stature would need to be involved in order to give it teeth. However, he also noted that he would only consider “spearheading something like that … in the future” as he is currently focused on the demands associated with his stature.
All of these recent developments effecting athlete relations — including the Reebok deal, the USADA partnership and growing concerns over compensation — may have finally created the perfect storm for a fighters union. An organization known as the Professional Fighters Association (“PFA”) was recently established with the goal of obtaining collective bargaining for the UFC’s athletes. The PFA hopes to obtain union recognition from the National Labor Relations Board (“NLRB”). Notably, the PFA has received public support from the majority of the major sports unions, including those representing athletes in MLB and the NFL. The leaders of the organization include Jeff Borris, a longtime baseball agent, and economist Andrew Zimbalist. Lucas Middlebrook, a labor attorney who represented former welterweight contender Nick Diaz in a high profile dispute with the Nevada State Athletic Commission, is also involved. In a recent interview with sports journalist Ariel Helwani, Borris cited his review of a bout agreement for Nate Diaz — Nick’s brother and a star athlete in his own right — as a catalyst for his desire to form a union. In his opinion, some of the terms of the contract were not “legal, valid or enforceable.” Borris noted that a union would seek to collectively bargain for items like medical insurance, a pension, pay minimums, a drug policy, licensing deals and uniform contracts.
In order to establish a union under the NLRB, the PFA will need to establish that the UFC’s athletes are employees, not independent contractors, which is how they are currently designated in the organization’s contracts. A union’s members must be employees in order for it to obtain NLRB classification. In light of the NLRB’s decision in FedEx Home Delivery, 361 NLRB No. 55 (Sep. 30, 2014), there are eleven factors that must be evaluated to determine whether an individual is an employee or an independent contractor, and the weight of each factor “will depend on the factual circumstances of the partial case.” The factors include the extent of control by the employer, the skill required for the work, whether or not the work is part of the regular business of the employer and whether or not the individual is engaged in a distinct occupation or business, among others.
In a recent ruling that could potentially be favorable to the UFC’s athletes, the NLRB recently determined that collegiate football players from Northwestern University who had received “grant-in scholarships” qualified as employees and were therefore entitled to unionize. In the decision, NLRB regional director Peter Sung Ohr noted that the student-athletes spent forty-to-fifty hours week on football-related activities during the duration of the football season, and that they had a virtual year-round commitment to the program. He noted that the scholarships received by the players at issue effectively served as compensation, and the requirements of their participation in the football program was such that the university controlled their activities.
The UFC appears to exert substantial control over its athletes. The aforementioned uniform requirement and the requisite USADA testing are just some examples. The UFC also determines the location and dates of its events, and largely has control over who a particular athlete may compete against. Although athletes are technically free to reject a particular opponent, doing so, particularly for lesser-known athletes, could have negative career consequences. The UFC will likely point to the fact that, other than the actual fights, its athletes have control over where and how they prepare for fights and the training methods utilized, among other items, although it is unclear if this will be sufficient to deem the athletes independent contractors before the NLRB, if the issue is ever decided. For his part, Jeff Borris is confident that the UFC’s athletes are better classified as employees, not independent contractors, noting that the UFC tells the athletes “where to fight, when to fight [and] what to wear when they fight.”
With the recent announcement of the PFA, and its goal to organize the UFC’s athletes, this is just the beginning of the road for a potential fighters union. When Conor McGregor earned a knockout victory in his first UFC main event and declared that he and those like him were “not here to take part [but to] take over,” he was referring specifically to Irish fighters. Although unintended, his words are appropriate for the fight mixed martial artists seemed prime to undergo against the organization that has helped many of them become household names. Throughout the relatively short history of modern mixed martial arts, individual athletes have often displayed incredible skill, toughness and determination in overcoming seeming insurmountable odds and earning spectacular victories. In order to reap the benefits of their chosen profession, they will need to come together and face a daunting challenge. They are not here simply to take part in the UFC, but to take it over.
