2.26.2009

FightTicker: A PreView of Things to Come Installment # 1: Sponsorships


For a while, I have been meaning to start a recurring series on FightTicker, mainly to up the amount of original content I have on there. Well, I finally got off my butt and published the first entry in my new series, "A PreView of Things to Come." Thanks to Puddin' for designing the logo for the series.

Check after the jump for the full article, or you can find the original post on FightTicker here.


For some time now, I have wanted to start a recurring series focusing on current events in MMA. Various things have gotten in the way of that – mostly my own laziness and penchant for procrastination. However, I found a post yesterday that got me looking for other posts on the same subject, those led to more, and so on and so on.

However, don’t let the title fool you – this series will not be only about looking forward to the future of certain developments in MMA, but will focus on looking toward the future given the current state of things (I know, an entirely original concept :) )

As you noticed from the title, the first post in this recurring series will focus on sponsorships in MMA. Fair warning, there are a large number of links in the article.

The sponsorship aspect of MMA has intrigued me for a while. To that end, I have interviewed some people in the MMA clothing industry, to get their thoughts on sponsorships, among other things. These people include Luke Burrett of Silver Star, Tony Palazzo of ToeZup and Rick Brewer from House of Pain. All three had some great things to say about sponsoring MMA fighters; you should check out the interviews if you haven't already.

I am also intrigued by the number of articles that come out about the topic - admittedly, the number of these articles has risen as MMA gains more mainstream acceptance. Even here on FightTicker.com I have posted a few articles about the topic, particularly in instances where brands like Cage Fighter are banned from the Octagon. Cage Fighter has since made a return, as of UFC 92/

Full Tilt Poker

The UFC (mainly Dana White) is famous for its "our way or no way" style of dealing with fighters when it comes to issues like sponsors. Besides the UFC prohibiting its fighters from wearing Affliction apparel, one of the most famous examples of this was when the UFC banned Matt Lindland for wearing an unapproved shirt to the weigh-ins. The shirt that Lindland wore was for an online gambling company, and as the UFC's Sponsor Agreement states,

ABSOLUTELY NO pornography, tobacco, profanity, gambling/gaming, hard liquor, or other MMA orgs allowed as sponsors. Affliction and Extreme Couture products will not be permitted either.

Given this statement, and Lindland's obvious ban, how is it that Full Tilt poker - a gambling/gaming site - has become so prevalent in the Octagon?

The answer lies in the small print, and MMAPayout.com provides this excellent explanation:

Full Tilt Poker has been able to skirt a federal ban on online gaming by the duality of their usage of the .net/.com brands. The .net brand is used for educational/entertainment purposes and is the brand that is advertised through all of the company’s media. The .com is the money site that would raise the ire of regulators, with the .com accessible through using the software from the .net.

As MMAPayout.com states, there is a federal ban on online gambling, and the law surrounding their manipulation of .com versus .net has caused some entities to be skeptical of advertising for them, in spite of the money. Most recently, Spike TV has indicated they will not be allowing Full Tilt Poker as a sponsor on their broadcasts. The word actually came down on Friday, with speculation that Full Tilt might not even be seen on Saturday night's UFC 95 broadcast. However, I saw, as many of you did, that Full Tilt clothing placements were in full effect. Whether this is indicative of Spike's bowing down to a bigger paycheck or a last-minute decision that wasn't enacted, I don't know, but MMAPayout.com had this to say about the situation.

This gray area may [the .com versus .net] be a bit too murky for Spike to sign off on. The Fight Night and Euro Cards on Spike represent a more direct connection from Spike to Full Tilt (as opposed to PPV cards), making them unwilling to sign off on the UFC’s deal.

The same sources did indicate, however that Spike would not black out Full Tilt advertisements when they replayed UFC PPV events, since the events were not originally broadcast on Spike.

The UFC allowing Full Tilt is clearly indicative of its efforts to attract more people to the sport. The UFC, of course, has its own corporate sponsorship deals, with Bud Light, Harley Davidson, and now supplement company, BSN. Curious about how much money the UFC is going to make off that last one? A reported 10 million dollars over three years.

Advertising Banner Restrictions

Most fans are aware of the fact that the UFC is notoriously tight-lipped when it comes to how much money it, as an organization, is making. Pay-Per-View revenue numbers combined with the fighters' reported salaries suggest the UFC is grossly underpaying its fighters. However, that is an issue for another installment. Why that fact is pertinent to this article is that the UFC's closed-door policy combined with their obsessive need for control shows why the UFC has done such things as standardizing advertising banners.

From MMAPayout.com:

By standardizing the format and size of the banners, our goal is to create a more professional appearance and improve their overall effectiveness on behalf of your sponsors. It will simply look better and that’s good for everyone involved in the event.

As has been the practice in the past, however, you may only display one (1) banner during the introductions only. After the introductions have concluded, the banner may not be displayed inside or outside of the Octagon® at any time.

- Total size of banner is 6' (6 feet) wide by 4' (4 feet) tall.

- All artwork (including venue logos) must be placed 6" below the top of the banner, center aligned.

- The venue logo shall be at least 44" wide by 4.5" tall. The font used is Arial Black. The background for the venue logo shall be black and the letters in white.

- UFC logos are to be placed 3" from the left and right edges of the banner, aligned with the bottom of the venue logo. The UFC logos should be separated by 2" gap on each side of the venue logo. The UFC logos shall be at least 5” by 1.5” and also be in white.

- Camps have a 66"x32" workspace located 2.5" below the venue and UFC logos, 3" from the left and right sides, and 3? from the bottom of the banner to display their approved sponsors in.


I have noticed, as I am sure many of you have, the recent prevalence of the venue name and the UFC logo on all of the fighters' banners. Even though it only takes up a small row at the top, many fighters would likely say that such space could be used to throw in an extra sponsor and make some additional money. With the UFC taking control of part of the ad banners, what's next? 360 deals.

360 Deals

Also from MMAPayout.com:

The 360 concept would encompass the UFC getting a portion of all monies received by the fighter in his out of Octagon income in exchange for the UFC putting their promotional muscle behind the fighter. The UFC would play a large role in cultivating sponsor opportunities for fighters, etc. and would receive a large portion of said dollars under the scenario.

The mechanics of this are already being put in place it seems. Sources indicate to MMAPayout.com that Zuffa are directing their sponsors to specific fighters, though they have not asked for a cut yet. At the same time, sponsors are being okayed for some but denied to others, including recent sponsors like Cage Fighter and Full Tilt Poker (which you can read more about here.) Full Tilt was getting approved for fighters on the UFC 91 and Fight for the Troops card while similar deals with comparable sites were submitted and rejected for others, (though this policy was opened up for UFC 92.) One of the regular arguments for the UFC’s lower than boxing payscale is the ability to attract significant sponsor dollars, but these items are all at the UFC’s discretion and aren’t always adjudicated on an equitable basis, accepted for some but rejected for others.

Industry sources also indicate that the UFC has received stakes in both Tapout and MMA Authentics in exchange for sponsorships deals/ access to advertising in the Octagon. Such a strategy of having major holdings in primary sponsors of the UFC isn’t a new strategy. Zuffa has held/does hold significant stakes in UFC sponsor Xyience through the Zyen and Bevanda Magica subsidiaries. The UFC is quietly assembling a backlog of Zuffa-backed product to fill the pipeline to any possible fighters they sign to 360 deals. Such a scenario would be a vertical integration of the sponsorship field by the UFC, with the fight company being the conduit through which any flow of dollars would go.


If fighters start to accept these 360 deals, not only will the fighter/agent relationship suffer, but the fighters will continue to lose more and more autonomy and the UFC will get even more control over their fighters. Many of you remember the recent fight that broke out between the UFC and Jon Fitch and other members of the American Kickboxing Academy over refusals to sign over lifetime likeness rights for the upcoming UFC video game. Both sides did make some concessions, but again, the UFC wanted full control.

The question inevitably arises - so what? Supporters of a 360 deal might say that fighters would get more exposure that way and perhaps make more money. That sounds good in theory, but what about in practice? Left to their own devices, fighters and agents could work out some particularly lucrative deals for fighters that might help a guy like this weekend's KO of the night winner, Paulo Thiago, a relative unknown, make some good sponsorship money going into the event. However, with 360 deals, the feasible plan that the UFC would use would undoubtedly include various tiers, with fighters on the higher tiers making more money and getting more exposure.

In that situation, a guy like Paulo Thiago might not make too much money coming into his first fight in the UFC because he would be getting paid a flat rate under the 360 deal. However, because he was able to negotiate on his own with the help of an agent/manager, it's very likely that Paulo's KO of Josh Koscheck got him some extra money from his sponsors because of the extra post-win TV time he received.

Fighters as Brands

To make good money, it is important for a fighter to "brand" him or herself as an effective tool by which he can sell a company's product. Many of you could no doubt name certain fighters that always wear certain brands -- Rich Franklin and American Fighter, Anderson Silva and Sinister, Joe Stevenson and Warrior, Tito and Punishment Athletics. In some cases, fans can remember this because the fighter owns part of or the whole brand -- in other cases, fans are just so used to seeing fighters in that brand, it is something they automatically associate with the fighter.

Alternatively, fans can associate general brands with the UFC because of the prevalence and/or repetition of logo placement on the fighters' clothing. Condom Depot anyone? However, what drives these companies' bottom line is not recognition but sales. Many of you have seen Condom Depot but how many of you can say you have visited the website? I never did until just a few minutes ago, before I wrote this article. Take a wild guess at what they sell. They do have an interesting tagline, though: "Undisputed World Champions of Safe Sex", and they have apparently been in business since 1996. More importantly, for those of you who actually visited the website, how many of you actually bought something from them? I cannot say I have ever heard of someone ordering condoms online.

But again, so what? If someone gets paid for putting the logo on their clothing, who cares how many Logo Condoms that Condom Depot sells? (Yes, they have Logo Condoms.) Sales become important to the fighters because of some of the newer deals that MMA fighters are making. A typical sponsorship deal often involves the fighter making a set amount of money for wearing the clothing at an event, getting the logo on TV, giving the company a mention during a post-fight interview, things of that nature.

However, a new trend is emerging: royalties. When I spoke with Burrett, one of the things he stressed was giving his fighters royalties. He repeatedly stated that the fighters would make money off of every signature shirt the company sold. At that point, the company's bottom line becomes more important to the fighters. Maybe some sponsors do not want to do this because it would put more pressure on the fighters to make sure they rep the company. On the other hand, sponsors like Silver Star feel this business model will cause the fighter to become more active in the business because the more money the business makes, the more money the fighter makes.

Clothing companies are not the only ones making such a move. Today's press release from Round 5 stated the following:

As in the earlier Series, Carano will maintain creative control of her likeness, including the pose, facial design and shorts. She will have a major hand in creating the final design and will benefit from a royalty agreement that gives her a considerable portion of the proceeds from the sale of her unit.

Carano's deal with Round 5 is not a sponsorship, per se, but it helps her brand herself as a fighter, opening more doors to potential sponsors for her.

How Many is Too Many?

Carano's deal with Round 5 may open new doors for her, but as a fighter's popularity rises, so does the number of opportunities for sponsorship. Clearly, with the banner restrictions mentioned above, and the amount of space available on clothing, there is a limit as to how much space a fighter can utilize to make money. If you have the space, why not use it?

In an interview with XFC trainer and BJJ great Mike Yanez (who at the time of the interview was running Highlander MMA in Louisville), I asked Mike what he thought about the rise of sponsors in MMA. Here is what he had to say:

[It] helps - we need to get paid, so I hope it grows! Ill be a logo whore!

I had to laugh when I initially read that, but even then I was thinking that Yanez had the right idea. If the money is out there, why not get as much of it as you can? Perhaps the best recent example of a "logo whore" would be Dan Henderson in his most recent appearance against Rich Franklin at UFC 93. MMAPayout.com has a picture of the front and back of Dan's shirt that displays all ten of his sponsors. Ten. Think about that -- he has ten separate logos, in addition to his name and nickname, on the shirt.

On the flip side, you have guys like some mentioned above and Mark Coleman, who are paid to exclusively promote one company. In Coleman's case, his shirt showcased only the MMA Authentics brands (i.e. Cage Fighter). But even in Coleman's case, I'm sure the deal he structured was not to pay loyalty to a single brand, but to maximize his earnings. Some companies pay for these exclusive rights while others simply put stipulations on the other logos that can be worn with theirs.

In the same post comparing Henderson's and Coleman's shirt, MMAPayout.com offers an example of such stipulations, which can be found, for example, in a Tapout contract:

Except as set forth above, Fighter shall have the right to add up to four logos of the other companies to the clothing bearing the logo of Company, so long as the other company is not another clothing/gear manufacturer and so long as the other logos are not larger then the Tapout logo.

Companies such as Tapout can easily demand such stipulations because, as the preeminent brand in MMA, they can likely offer fighters better deals than they would find elsewhere.

What the Future Holds

I cannot predict the future. In spite of the fact that I am currently tied for first in the FightTicker.com Prediction Grand Prix, my ability to accurately predict things does not go beyond an occasional lucky guess in the main card fight results (although for UFC 95, I clearly screwed the pooch). If I could accurately predict things, I would definitely spend all my time playing the lottery and the stock market.

However, based on everything I have read in all the articles linked to in this piece, based on the few interviews I have done with industry insiders, and seeing that this past weekend's UFC 95 replay delivered more male viewers (18-34 and 18-49) than any other program in its time slot, I don't need a crystal ball to tell you that sponsor interest in MMA is going to continue to rise.

Now you're probably thinking, "Great, I just read all of that to hear this guy tell me something I already knew? Thanks, idiot."

But the statement is true (the rise part, not the idiot part) -- even on a regional level, more businesses are becoming interested in the impact that MMA is having on their customers. I was speaking with a fight team manager today who told me that he is working on a deal with a local chain of restaurants to pay for fight gear and sponsorship deals for some of his individual fighters. I will not mention the manager or the restaurant chain now since the deal is still being finalized.

But my speculation goes beyond the obvious. The UFC will continue to work towards 360 deals, but not many of them will come to fruition (if any) because such deals are bad for the sport and would ultimately lessen the credibility of the UFC. MMA agents like Ken Pavia would likely not encourage their fighters to sign such deals because of the control the agents and fighters would lose. The UFC would then have to find agents that would let their fighters sign such deals and then, given the UFC's history in other business matters, they would try to block out everyone who would not sign these deals. That would leave the UFC pulling fighters from only a few camps and the level of competition in the UFC would decrease.

Sure, there are probably many fighters out there now who would sign a 360 deal as quickly as they could grab the pen out of Dana's hand, but many of those fighters do not have adequate representation, and this scenario would only lead to more fighters getting taken advantage of by promotions that structured deals like this. There are always complaints about promotions floating around, and that is under the current promotional arrangements where fighters have more control. Would anyone care to bet that a 360 deal would ever leave a promotion in a bad spot? I doubt it. If a promotion has that much control over a fighter and it ever gets dissatisfied with the fighter, who is going to lose out, the promotion or the fighter? The fighter. Probably every time. Sure, a fighter could leave or sue, but look what happened to Randy Couture when he left the UFC -- the promotion froze him out until he came back. Randy only lasted as long as he did outside the organization because he had the money to fight the UFC. There are not very many other fighters who could put up a fight that long.

The UFC will ultimately abandon the concept of a true 360 deal. Even if it did get a few fighters to sign the deals, those who did not would eventually leave the organization and if there is one thing that Dana White does not like, it is helping his competitors thrive, and that is exactly what he would be doing by releasing a large number of fighters into the market.

Some of the regional or smaller promotions could implement something similar to a 360 deal with some success, mainly because the fighters would likely not have many sponsors, and an offer to get sponsors and promotion would appeal to a number of pro fighters. But this goes back to the importance of fighters establishing themselves as a brand. Doing this early in a career could also benefit a fighter in that it would allow a fighter to pick up sponsors and be promoted on a level they have not been exposed to at that point. They could then use that to form a relationship with those sponsors and when their deal expires take their sponsors with them to the next level.

Sponsorship is important to most fighters, but especially those on a regional level. Chad Hinton told me that what he made in his first sponsorship deal was more than in his first few pro fights put together. As MMA continues to grow on the regional and national levels, so will the sponsorships. Not every fighter will be able to quit their full time jobs and train full time, but many of them will likely be able to devote more time to their training, resulting in more fighters being ready to fight and more fighters will mean more events. More events means more MMA for fans to watch and more fans watching means more fans seeing the sponsors' logos and buying the sponsors' product, and then we cycle through all that again.

The true effectiveness of MMA sponsorships on commercialism as a whole will likely not be known for a while. Sure, Affliction sold enough shirts to nearly every Tom, Douche, and Harry out there to make them think they could run a promotion, but where will Affliction be one year from now? Five years? Ten?

If you are interested on the effect, and measuring the effect, of sponsorship dollars in sports in general, make sure to check out this article from SportsBusinessJournal.com.

Thanks for coming along for my inaugural post in the series. I'll try to make the next one shorter :)

-PreView

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