Lawsuit documents reveal more details on UFC’s business, fighter pay

More details on fighter pay from the filings in the UFC antitrust lawsuit.

Last Summer, thanks to the ongoing UFC antitrust lawsuit, we learned a great deal about how much fighters were getting paid by the promotion. In fact, so many new details were revealed by filings from the August hearings that even though I wrote two articles on the subject – the first on the fighters wage share of revenue and the second on the income of the top 20 highest paid UFC fighters – a great deal was still missed.

Here then is a rundown of some of the more interesting tidbits concerning fighter pay that were found buried in the various exhibits.

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Prof. Hal Singer’s First Expert Report

Missed by myself and others (looking at you, fellow Show Money hosts Jason Cruz & Paul Gift) in Plaintiff’s expert, Prof. Hal Singer’s fist report, was a summary of a regression he did. For this particular model, Singer used wage share data of 1,396 fighters participating in 354 events from 2006 through 2016—with 6,942 observations (the total number of individual fighter bouts). The events included every numbered (pay-per-view) UFC event from 2006 to 2016, and every Zuffa Strikeforce, WEC, and non-PPV UFC event (such as shows from FOX, FX, and FUEL) from 2010 to 2016. This means, the only missing events should be non-PPV Zuffa events (UFC and WEC) from 2006-2010.

While Singer’s regression summary does not show us the individual fighter data that he used, it does show us the ranges he worked with. Among the almost 7,000 observations from 2010-2016, the low end for “Fighter Event Compensation” (the amount an individual fighter was paid for a single bout, including bout show, bout win, performance bonuses, undisclosed Letters of Agreement, discretionary bonuses, and pay-per-view shares) was $2,000 — the UFC’s minimum show purse in 2006. The highest compensation was $8 million, which I have been told by several sources was likely Brock Lesnar at UFC 200. Overall the mean average was $100,900.

For Zuffa Event Revenue (the amount of gross revenue earned by Zuffa for a single event), the lowest amount was $161,000, which I assume was a Zuffa Strikeforce Challengers event, while the biggest Zuffa event during this period peaked at $61.19 million. The mean average for all Zuffa events from UFC 57 through UFC 207 was $10.87 million.

The summary also informs us that there was a 3.79% chance of a fighter’s bout payment including an “LOA” ( Letter of Agreement) and a 2.10% chance of it including a pay-per-view bonus.

A less redacted version of the Report was also refiled on August 27, 2019. Unsealed in this version was Zuffa’s “Identity Payments” to fighters from 2011 through midway 2017. Identity Payments include sponsorship payments, video game payments, merchandise royalty payments, and – starting in mid-2015 – athlete outfitting policy payments.

The bump in payments in 2012 was due to the UFC Undisputed 3 THQ video game being released that year. Fighters who appeared in that game received a one time payment. Compensation also increased in 2015, in large part due to the July launch of the Reebok athlete outfitting policy. Identity Payments increased even more in 2016 as the athlete outfitting policy went into effect for the full year.

Fighters also apparently received compensation in 2014 and 2016 for the UFC Electronic Arts video game. According to the document, these payments were made according to a formulaic schedule, by dividing fighters into various tiers. The recommended payment ranges from $2,500 to $25,000 based on a fighter’s “rating,” which included the following categories: “S, AAA, AA, A, B, C, C-.”

Fighters also received royalties on “Fighter IP Sales,” which included such things as action figures, trading cards, t-shirts, and bobbleheads. The report cites a 2014 summary, which indicated that UFC fighters received either 20 percent or 30 percent royalties on “Fighter IP Sales.”

Singer’s report also mentions royalties for JAKKS action figures, with the UFC grouping fighters into “4 Levels: A+, A, B, C” with each level receiving a specified percentage of UFC licensing revenue.”

“A+ level receives 30% of UFC licensing revenue; A Level receives 30% of UFC licensing revenue; B Level receives 20% of UFC licensing revenue; C Level receives 10% of UFC licensing revenue.”

Singer’s report notes that overall 151 fighters received sponsorship payments, 231 received video game payments, and 333 received merchandise royalties.

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UFC Company Overview

One of the more anticipated revelations from the hearings was the share of revenue going to fighters. This we learned was around 20%. What was discovered in later filings was that this 20% included more than just the fight purses. According to a ‘Company Overview’ that was prepared by Zuffa in 2016 and filed as an exhibit in the lawsuit, that percentage not only covered “Athlete Compensation” but also “Other Athlete Costs.”

Athlete Compensation includes the following forms of fighter payment:

• Bout Show Compensation. An athlete’s compensation for participating in a bout, as set forth in his or her agreement(s) with Zuffa.
• Bout Win Compensation. An athlete’s compensation for winning a bout, as set forth in his or her agreement(s) with Zuffa.
• Pay-Per-View (“PPV”) Payments. Payments made to certain athletes, pursuant to their agreements, based on the number of Pay-Per-View purchases made of events in which they participate.
• Letter of Agreement (“LOA”) Payment. Payments made to athletes pursuant to a side letter to their agreements.
• Performance of the Night Bonus. Discretionary bonus for the two best individual performances of the night—generally given to two athletes per event. These bonuses replaced the Knockout of the Night and Submission of the Night bonuses after February 1, 2014.
• Fight of the Night Bonus. Discretionary bonus for the best fight of the night—generally given to both of the athletes who compete in the best fight of the night for each event.
• Other Discretionary Bonus. Individual bonuses paid to athletes, following a bout, at the discretion of Zuffa management.

Other Athlete Compensation includes the following fighter costs:

• Athlete sponsorship
• Athlete outfitting policy (“AOP”) payments. These are payment for wearing Reebok gear during an event and the week leading up to it.
• Medical and drug testing. This includes the USADA drug testing program.
• Insurance. This covers the accidental insurance policy.
• Athlete merchandise royalties

The Company Overview also included details for what the fighters’ share of revenue was for both Athlete Compensation and Other Athlete Costs from 2012 to 2015, as well as estimated projections for what these costs would be for the 2016 through 2019.

The Company Overview shows a large increase for Other Athlete Compensation in 2015. This was apparently due to the Athlete’s outfitting policy (the Reebok deal) and increased drug testing with USADA. Both of these took affect in mid 2015, which explains why Other Athlete Costs skyrocketed from $9 million in 2014, to $14 million in 2015. Other Athlete Compensation was also projected to climb to $21 million in 2016, the first full year for both programs.

With Identity Payments totaling $9 million in 2016, we can estimate that Other Athlete Compensation not covered by the Identity Payments (namely insurance, medicals and drug testing) totaled $12 million that year.

The Company Overview also included a breakdown of the average amount of fighter compensation spent per PPV event and non-PPV events, for the years 2012-2014. Unfortunately, the amounts given for after 2014 were redacted.

Since, the same document includes total revenues from PPVs (commercial and residential) and live event ticket revenues for PPV event, we can also compare the average PPV event revenues with the fighter costs. For 2012 PPV ($175 million) and ticket ($38 million) revenue for numbered UFC events averaged $16.4 million per event. In 2013 PPV ($212 million) and ticket ($40 million) averaged $19.4 million per numbered event. And for 2014, PPV ($116 million) and ticket ($24 million) revenue averaged $11.7.7 million per PPV event.

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January 2015 Minimum Fighter Pay Document

Also filed with the court was a January 2015 document titled “Minimum Fighter Pay.” This was prepared by Zuffa’s Vice President of Strategy, Denitza Batchvarova, “in response to a request from Lorenzo Fertitta and Lawrence Epstein to examine the financial impact to Zuffa of raising the minimum Fighter compensation.”

The document includes chart showing the the cumulative percentage of bouts in 2013 and 2014 at a specific show pay and a page of various pay tiers for different minimum bout show pay. I’ve posted both below along with the percentage of bouts in 2013-2014 that fell in each tier.

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Forms of UFC Compensation Exhibit

The final exhibit is a document that summarizes the various forms of UFC compensation (which we listed earlier) and includes a number of examples for each type of compensation. Here are some of the more noteworthy examples:

Ronda Rousey’s September 2015 contract (Ex. 99) compensated her $3 million total (to show with no win) “if defending or challenging for a UFC belt and $500,000 if not challenging for UFC title.” It also “provided that she would receive $1 for every PPV buy between 200,000 buys and 400,000 buys; $2 for every PPV buy between 400,000 buys and 600,000 buys; $3 for every PPV buy between 600,000 buys and 900,000 buys; and $4 for every PPV buy over 900,000 buys.”

Roy Nelson’s last contract paid a different amount for his show compensation from his win compensation, with only his bout show compensation rising with each win. (50/50, 75/50, 100/50, 125/50, 150/50, 175/50, 200/50). He apparently ended the contract at $100,000 to show and $50,000 to win. Nelson was to also receive a separate LOA payment after each bout.

Gegard Mousasi’s contract was the inverse of Nelson’s, with his to show compensation remaining the same, but his win compensation rising with each victory. (75/20, 75/25, 75/30, 75/35, 75/40, 75/45, 75/50, 75/55).

Quinton Jackson’s 2014 contract indicated he was to receive PPV payments if he is a defending champion, if he is the main event, or if his first bout is UFC 186. He also had a $300,000 LOA for signing his first Bout Agreement and an additional $515,000 for completing his first Bout; $750,000 for Bouts two, three, and four; and Zuffa will “locate and purchase” for Rampage a new “Dodge Challenger SRT Hellcat” vehicle. (Jackson ended up only fighting once under this agreement, returning to Bellator as part of a settlement.)

Gilbert Melendez and Alistair Overeem’s also received PPV points when challenging or defending a UFC belt, while Urijah Faber received PPV payments as a defending champion or if he was challenging TJ Dillashaw or Dominick Cruz for the Bantamweight belt. CM Punk was to receive PPV payments for first bout (which ended up being at UFC 203).

An unnamed fighter at UFC 141 received a LOA payment in lieu of PPV payment. “The parties have specifically agreed that in exchange for increasing Fighter’s total compensation including Bout Agreement compensation from $2,750,000 to $3,000,000, Fighter will not be eligible for or entitled to any PPV for the UFC 141 Bout.” (The obvious guess for this fighter’s identity would be Brock Lesnar.)

In addition to receiving a $50,000 POTN bonuses at UFC 189 (7/11/2015), Conor McGregor also received a $2.11 million discretionary bonus.

Holly Holm apparently had a unique clause in her contract regarding incidental compensation, that also had a rather specific stipulation regarding any fight with Ronda Rousey: “For every non-championship bout, Holly Holm received 2 rooms, 2 economy class flights, $50 per diem for 2 people, 6 tickets to each Bout (within 10 rows of the Octagon if main event), two Bout tickets for her manager within the first 4 rows, two credentials, and the opportunity to pre-sale order 100 tickets to every bout (1,000 tickets if opponent is Rousey).”

As new information comes available to us I’ll be revising my previous posts on the subjects.