By Marc Wilson
I promised controversy with my articles, but this one will waver on the side of surprising rather than controversial. For those of you who know my business and what I do for a living you may be surprised by my view on this topic. Don’t think that this is me supporting the Zuffa Sponsorship Fees, simply taking a business standpoint of the new costs involved in sponsorships in the UFC and now Strikeforce as well.
We have probably all read something about the Sponsorship Fees or as I affectionatly call them “Dana’s Paycheck”. These fees clearly affect the business of brands looking to market themselves in a very popular and relatively young market. The MMA market is a slightly older viewership than something like board sports, but not as old as a sport like Hockey or Baseball. With media and personal popularity of MMA as a sport it makes a seemingly logical marketing avenue for brands looking to gain popularity with this genre of fan/consumer. HOWEVER… not every brand can (or should) spend the money on sponsoring such a highly toughted market like the UFC. MMA yes, but to sponsor in the UFC or even Strikeforce would be the MMA equivilant of the NBA over International Basketball, MLB over AAA or AA baseball, etc, etc, etc. There are many companies and brands who sponsor across smaller leagues without such major exposure and have massive success. I bet you everyone has heard of Easton Baseball bats, but very few – if any – in the MLB use Easton bats and I think they are ok with that… I’m sure the executives of Easton-Bell (they also make bicycle products, helmets and hockey sticks) are doing ok without being a major player in the Major Leagues.
So, why the fee?
The fee isn’t just for Dana and the Ferrita’s to make some extra cash (I’m sure it is a nice bonus) but it is also to protect it’s promotion and their fighters. Some have inappropriately said that it is a popularity contest and Zuffa only wants certain companies to sponsor in their promotion. Those at Zuffa will be the first to tell you that if you are willing to commit to this fee and prove that you can (win or lose) pay your fighter who is promoting your product (most fighters are paid AFTER the fight – read: Nate Marquart vs Fight Mafia) and are loyal to your agreements to the fighter, companies are welcome to sponsor in Zuffa promotions. These fees can range depending on what type of sponsorships you are doing. Logos on shorts obviously don’t cost as much as branded apparel that can range from $50,000 to over $100,000 per year depending on commitments, and cut it in half for Strikeforce. To further on the thought of protecting everyone involved, I’m sure we have all seen X-Box as a major player in sponsorships, and even full fight kits for fighters. That is a company who is not trying to sell their shirts or fight shorts, they are promoting a company who is not waiting by the phone the next day hoping to sell enough X-Box shirts to cover their fees. I bet if you called X-Box and wanted to buy Demitrius Johnson’s fight shorts they would laugh at you and hope you buy Gears of War instead. Too often we think of clothing companies as main sponsors, because they are trying to get their specific products seen by the masses but it isn’t always the case.
Which brings me back to waiting by the phone… Also, protecting their fighters. I won’t name any names, but we have all seen the brands who spend hundreds of thousands of dollars sponsoring fighters only to have their products seen but never widely accepted by consumers for whatever reason. An example I give is a brand whose accronym based name is very ironic (because it was the last thing they did) who spent all their money on sponsoring some very high profile fighters, but their designs and business sense were far from “up to par”. They did not have the ability to sustain themselves as a business when the sales of their products were much (MUCH) lower than their sponsorships. Not only that, but when seen in comparison to other brands in the same industry – sometimes on the same fight card – it was clear that they were not on the same level. This company would continue to spend money on sponsoring fighters and events hoping that the phone would ring off the hook the next day for sales of their products and it never happened. Now that company is bankrupt and fighters were left unpaid for work that they have done, and more left looking for new sponsors when they had long term deals. Had these sponsorship fees been in place, or more info supplied to Zuffa when sponsorships were agreed upon maybe things would have been different. Essentially the fees force companies to REALLY think about the Return on Investment of their marketing.
So let’s imagine the extrapolation and also the business logistics of the Fees knowing the direction that Zuffa is going in the very near future…
Stay with me here, because I know that at this early stage of UFC’s mainstream takeover it can be hard to compare the UFC with the likes of major, mainstream sports who have nightly TV coverage, Multi-Million dollar TV deals and much larger exposure.
When Adidas purchased Reebok, part of the purchase of the brand included an agreement that Reebok had just negotiated with the NBA. Less that 2 years into an 11 year agreement the re-negotiation of the remainder of that contract with the NBA cost Adidas an estimated $400 million. When a player signs to a league like the NBA their name and likeness is now owned by the league and can be used in licensing agreements for the league or its contracted third parties (like licensed apparel). Lets assume that you are not a LeBron James who signs a sponsorship agreement with Nike for $90 million before you walk on an NBA court, and more like you are role player on a decent team. Your name is now owned by the NBA and your name can be used to sell as many (or as little) products as they decide and you will not see A DIME from that use. You could have the best selling jersey in existence and someone else will be rolling in your money.
In MMA, a very common negotiating term for payment is a set fee plus a cut from sales of the products they endorse and sometimes even more! – I will talk about this in another article called “Name Brands”. This means that how a fighter performs and acts inside and outside of the octagon, etc. can ultimately increase their salary and sponsorship for the brand that they are loyal too. Fighters don’t get a salary from the UFC (in most cases), so between fights they require the assistance of sponsorships and other business ventures to sustain their costs (coaching, training, food, etc.) in order to keep fighting. Big names aside, sponsorships pay much more over longer periods of time and are more reliable than hoping for Fight of the Night honors every time you fight. The healthiest of fighters may only fight 2 to 3 times per year and I don’t know about you, but if I only got paid 2 to 3 times a year I would have trouble saving my cash.
Now if Zuffa continues to make strides in the direction that they are and a TV deal is reached where PPV events are not the main source of income for the company maybe we will see something similar to what we see with major sports. As we wait for UFC on FOX to really come true, maybe FOX and/or others will make a long term deal with Zuffa and we will see fights on a weekly basis like NFL football. This past weekend had a major event with a championship fight with one of the most exciting fighters Dominick Cruz (who is pretty mainstream on his own – Famous Stars and Straps, Beats by Dr. Dre, formerly with Metal Mulisha – no MMA brands) that was not even a PPV event! Now this weekend UFC heads south for a PPV event and Expo in Houston with one of the best cards I have seen in a while. Seems that they are not far from a weekly TV deal the likes of the NFL if they can prove to FOX that they can bring in the viewership on a consistent basis.
Maybe then fighters could look forward to a salary instead of sponsorships, and people like myself won’t have to hear from “Managers” on a daily basis. If that is the case, what company would be the Official Uniform Supplier of the UFC? Before recent changes with TapouT I would say they would be a shoe-in. I doubt it would be Affliction. Tito could maybe “Punish” his way in. Dan Henderson could probably take over Strikeforce (Clinch Gear pretty much already has). I personally see it this way: After rebranding of UFC apparel and even opting out of sponsors in TUF shows I would say that everyone would be decked out in UFC Apparel for every fight and maybe the UFC would sell the jerseys of their fighters. In some cases we can see this starting to happen when UFC Apparel has some of the best fighters sponsored despite the existing deals they have for walkouts and in-fight gear… Maybe I am letting the proverbial “cat out of the bag”.
Marc Wilson
Owner – Derailed Industries
www.derailedindustries.com
great article, although I think you meant Nate Quarry, not Nate Marquardt