Penick's Take
PENICK: Looking at Lorenzo Fertitta's full ESPN interview on fighter pay, perceived UFC monopoly, Bellator, and more
Jan 16, 2012 - 9:15:37 PM PENICK: Looking at Lorenzo Fertitta's full ESPN interview on fighter pay, perceived UFC monopoly, Bellator, and more

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By: Jamie Penick, MMATorch Editor-in-Chief

In putting together a story regarding fighter pay in the UFC, ESPN conducted an interview with UFC owner Lorenzo Fertitta. As they had spoken with several fighters on the UFC's roster who would not allow their names to be publicized, they wanted to get Fertitta's take on the issues of fighter pay, whether the organization constituted a monopoly, and just why there's a supposed culture of fear amongst fighters from speaking out.

However, the ultimate story put together by John Barr and Josh Gross for the "Outside the Lines" segment on Sunday ignored much of Fertitta's 45-minute interview, relaying convenient snippets and only partially presenting the answers he laid out. The UFC on Monday released Fertitta's entire interview unedited, as they brought their own camera to capture everything that was said for just this purpose.

The "Outside the Lines" segment wasn't the complete "hit piece" that White characterized it as prior to it airing, but it was also a more negatively toned - and not really beneficial - picture of the story of fighter pay. The UFC produced their own positively spun story with their own snippets of Fertitta's interview, as well as interviews done by the UFC with Chuck Liddell, Forrest Griffin, and Matt Serra regarding their experiences with the organization's pay structure as well, which equally didn't effectively convey the picture. But that was kind of the point.

Further, while Barr told Fertitta in August that ESPN welcomed a chance to speak to any fighters on the record, White claimed this week that in fact, the ESPN crew shut down an interview with Serra when they "didn't like" his answers. Now, that's hearsay from White, of course, but with Serra's comments in the UFC piece he would have been someone that could have gone on camera for this ESPN story to give a differing view from what was laid out.

Regardless, that still isn't the entire issue. While the ESPN piece broke down the plight of low level fighters making $6K to show and $6K to win for their debut fights, and tried to paint the the percentage of revenues going to fighters at 10%, they ignored a very key component to the UFC's infrastructure that goes largely overlooked when discussing the fighter's "piece of the pie." It was also something Fertitta spelled out for them clearly.

"What you have to understand about the UFC is our model is completely different from any of these other sports leagues or any other boxing promoter," Fertitta said. "The ability for us to execute and do what we do takes a tremendous amount of overhead. We employ well over 500 people just to make this thing run. We have offices in London, offices in Beijing, offices in Toronto, offices in Las Vegas, and in L.A. Typically, a sports league will take a license fee from a media company, and then that's their revenue and they disperse it as they may. The NFL, or the NBA, doesn't go out and actually take on the cost of producing the program, the show and all the marketing and everything they do. Let's say CBS is going to come in and put on a basketball game, they pay for all of that stuff."

"We are a totally different animal," Fertitta continued. "We are everything. We are the sports entity, we are the promoter, we are the television producer, we are responsible for all of the costs that go into the production; we are talking about millions and millions of dollars. Then on top of that you have all the marketing that we do, all the overhead that it takes to really build this company and build this industry to make it what it is; when we bought the company, there was one state that regulated the sport of mixed martial arts."

"Today there are 48 states that have athletic commissions; 45 of those states [now regulate MMA]. That didn't just happen by happenstance. We have a team of people and infrastructure that have gone out to different states, provinces in Canada, countries all over the world, that are educating these legislators, regulators, telling them what the sport of mixed martial arts is. We have opened up the floodgates for everybody. To just look at however these people are looking at these numbers is not an apples to apples comparison."

There is a massive amount of money being put back into the growth of the company, not only in terms of international expansion but in strengthening the product they already produce and putting on more events as well. That expansion has provides more opportunity for more fighters to get UFC-level money when they may have otherwise been relegated to a regional scene with a lower pay grade than $6k-$6k. But that base contracted pay isn't all the UFC hands out, and Fertitta further discussed the structure of the organization on that front.

"The fighter pay structure is different from, let's say boxing," Fertitta said. "We structured it that way for a reason, and it's why I believe we've been so successful when we've had this meteoric rise. We have a contract with a fighter. He gets paid a stated amount of money, what we call 'show' money. On top of that, we pay a win bonus, so it [gives a fighter incentive] to go out and really perform. We saw in boxing for a number of years where guys would go out, they'd get paid their money, it didn't matter if they won or lost, they'd get into a fight and say, 'you know what, I'm going to make my money either way, so I'm just going to coast.' We want the athletes to perform, we want it to be entertaining, we want to build the business, so we made that part of the contract."

"In addition to that, we pay discretionary bonuses, no different than any other company that may be out there; maybe it's just part of our culture - we came from a corporate background - we pay for performance. There's really two discretionary bonuses that happen: one is a structured bonus… for the Fight of the Night, a bonus for the Submission of the Night, and a bonus for the Knockout of the Night. Typically those range anywhere from $65,000 all the way up to $130,000 for each fight. Now a fighter can win [more than one per event], so you're talking about bringing home a big chunk of additional money. On top of that, we pay discretionary bonuses; discretionary bonuses are essentially, me and Dana, and my brother, sit down and we evaluate the fighter, that fight, that card - did the fighter perform? Did he exceed his [expected] performance? Did he really go out and lay it on the line? And we'll pay out multiples of what's on that fighter contract for those discretionary bonuses."

"We've had guys that maybe were making $200,000 and we said, 'you know what, this guy promoted the hell out of a fight, he performed, write him a check for a million dollars.' ... Then there's the pay-per-view bonus [as well]... Every guy comes in and says 'Hey, i'm the most popular guy, I deserve to make millions.' That's fine, I have no problem with that, but the way we structure things is fighters eat what they kill. If you really are the guy then you're going to be a partner with us on pay-per-view. You'll put up no money, we'll put up all the money, and you'll get a back end of the profits. We've got 29 fighters on our roster that have pay-per-view participation."

Now, the discretionary bonus system is a definite point of contention, largely because it is certainly on the whim of the those in charge in the UFC. However, Fertitta contends that it's not unlike any other corporate business structure, and disagreed with one anonymous ESPN source who claimed fighters needed to "kiss ass" to get those bonuses.

"Is it 'kiss their ass' or do you have to perform, like any other company in America?" Fertitta asked. "You have to perform to be able to be compensated. Since 2005 to today, once we started actually generating enough revenue so we're not losing money, we've paid over a quarter billion dollars to our fighters. Let's take a similar sports entity, kind of an upstart - you can talk about NFL all you want, they've been around since the 1940s, they make nine billion in revenue, same thing with baseball, same thing with basketball - take something new; like MLS. Take every MLS team, their entire salary, add them all up; we pay out multiples more of what they pay the entire league. We've made 39 millionaires since we've owned the company."

"It's no different than anything else. You start at ESPN as an intern, you're not going to be making millions of dollars. You've got to prove yourself. You've got to come into the company, you've got to perform, and you've got to get to that next level. It's the same way in the UFC. You come in, you perform, and you're going to progress; I think that's fine."

Fertitta also doesn't agree with the notion of a "culture of fear" around the UFC, and continued to claim the UFC can still work with fighters if they speak out on these issues.

"You can do an interview on any company you want and you're going to find people that don't think they're making enough money, or they're disgruntled, or whatever it may be," Fertitta said.
"Go to any football team and go to the locker room and you'll find guys that are mad that Tom Brady's making $18 million a year while they're making the league minimum; and they're not going to go on the record because they don't want to get the owner of the Patriots mad at them. It's just human nature, I don't think it has anything to do with how we run the business, I think it's just human nature. It's easy, I could go to any business and find the same thing."

"Anybody can talk about anything [in our company]. We've had plenty of situations where fighters have come out and made statements. That's no secret. There's tons of guys that have made comments about that. Have they been blackballed? Certainly not. You can't name one person... Tito Ortiz [for example]. It's no secret there's been a number of issues where he's come out in the past, criticized the way we did business, criticized us saying he's gonna go somewhere else. He just fought twice in the last 90 days and he's made millions and millions of dollars. There's no problem, he can say whatever he wants; he's still with us."

For Fertitta, it comes down to the fact that it wouldn't make sense for them to black ball fighters that could make them money. If fans want to see certain fighters and will pay to see them, that's who the UFC wants on their roster, regardless of any other issues.

"It's ridiculous," Fertitta said. "Think about it. We're running a for profit business. If a guy is somebody that the fans want to pay for, I don't care what he does or what he says, I want him on our payroll, I want him fighting for us. I couldn't care less. There's no retribution...

"I'm in the business of - yes we want to be a profitable company, we want to be a successful company - what do I have to do to do that? I've got to put on the fights that people want to see. I wish it was as easy as just saying 'this guy said something bad about us, he's gone.' That's not going to be good for my business. Ultimately, it's supply and demand. Does the public want to pay for that person to watch that person? That's what dictates what happens in the UFC, that's why we're successful."

There was also contention from Fertitta on the notion that the UFC being a private company meant they were keeping their numbers hidden from the fighters. While they have no obligation to make things public for all to see, Fertitta said fighters with a pay-per-view percentage in their contract absolutely have a right to see exactly what they should have coming to them.

"If a fighter wants to know, they have rights in their contracts," Fertitta said. "The guys that get a back end of the pay-per-view can walk right in the office right here - in fact, they can bring in an accounting team and go through the whole thing. We're not hiding anything from anybody, it's just we don't publish it for everyone to see. We're not a public company, there's no reason for us to do that; and once again, a lot of the fighters don't want people to know how much money they make because believe me it would make their lives a lot more difficult."

The "Outside the Lines" segment also touched on the issue of the UFC being a "monopoly" after their acquisition of Strikeforce earlier this year. The UFC's continued stance has been that there aren't any barriers to entry in the sport, and Fertitta went into a lengthy explanation as to why he believed they weren't at all a monopoly. Again, however, the "OTL" piece used one tiny snippet of him calling monopoly claims ridiculous. Here's the context in which that quote came.

"That is the most ridiculous thing," he said. "This [Strikeforce acquisition is] the best thing that could ever happen to the consumer. Now that we have the Strikeforce fighters under our roster, this allows us to make the fights that the public wants to see... so from a consumer stand point, they get what they want. Could you imagine if all the teams weren't under the NFL, and the Patriots and Giants couldn't agree to play each other on Sunday? It'd be havoc, so this is a good thing from a consumer standpoint."

"From a fighter standpoint, we have taken these fighters and have given them an opportunity to make more money. There was no pay-per-view revenue there. They were getting a license fee, so there was only so much money that they were going to be able to make... Nick Diaz is a guy that, the most he had ever made in a fight was $175,000, which isn't bad money for one night of work. In this one fight [that he was supposed to have with Georges St-Pierre], because we bought Strikeforce, Nick Diaz is going to make more money than if you added all of his purses up for his entire career in one night. We are giving these guys tremendous opportunity to be able to make more money, have bigger exposure, get bigger sponsors, it is actually a great thing; and when you throw out the term monopoly, it's the most ridiculous thing that anybody could ever say. There are no barriers to entry in this business. The perfect example is look what we did. We took our money, we risked it, we went out and got a promoter's license, we put together a great business plan, we rolled up our sleeves, we worked, and we made this business."

Furthermore, when it was brought up that Bellator CEO Bjorn Rebney wouldn't go on record for an interview with ESPN for the piece, Fertitta pointed to him as a prime example of what can be done if someone wants to get into the business of mixed martial arts.

"Bjorn Rebney is doing exactly what these guys should be doing," Fertitta said. "This is what needs to happen, we need some smart people to come up with a different idea, a different concept; figure out a smarter way and a smarter product to compete with us. Put your money behind it; this is America, risk your capital, work hard, come up with a better idea. More guys like Bjorn Rebney need to do this. And [now] he's got a deal with Viacom, one of the biggest media companies in the world. There [are] plenty of outlets for promoters to go out there to try to compete with us."

From a consumer standpoint, the UFC competes far more with other entertainment and sporting properties than they do with other MMA promotions, and Fertitta ran down the the things they always need to be conscious of.

"You know what I worry about, part of what our competitors are, aside from the other mixed martial arts promoters out there?" Fertitta asked. "I've got a pay-per-view in September that comes a week after the Mayweather pay-per-view; I'm worried about competing with Mayweather, because you know what, he's gonna take a ton of my buys. I've got a pay-per-view in November that comes a week after the Pacquiao fight; I'm worried about competing with Pacquiao. There's nobody who can sit here and say that Pacquiao and Mayweather are not going to compete with us for the wallet of that consumer."

"We're competing with other major sports; I'll tell you what, you're never going to see me put on a fight on a Monday night in the fall, because I'll get crushed. The reality is, we compete with anything that males 18-34 are going to be looking to do. We made a huge mistake [in March], we put on a pay-per-view during March Madness, sounds pretty stupid, we got crushed. We did a pay-per-view and went head to head with Mayweather a year and a half ago; got crushed. We're competing with all forms of entertainment. You're trying to look at this thing in a bucket... we're also competing with the WWE for their pay-per-view revenues; there is a limited wallet for the consumer here so we need to slug it out with these guys."

Barr rightfully countered that they were focusing on how the UFC may constitute a monopoly as far as fighter options go, but Fertitta's response was accurate as well.

"There are a number of outlets for these guys," Fertitta said, to which Barr asked if any were comparable to the UFC. "There never has been a comparable outlet. There never has been. When has there ever been a comparable outlet [to the UFC]? We've dominated this sport, we've dominated this space, because we have a better product, we put up our money, and we were smarter than everyone else... We have created an entire industry that didn't exist before us, and there are people benefiting from our wake in every manner.

"In the state of Ohio, we helped get it regulated there, we might go to Ohio every other year. We might not go for three years. There's 200 fights a year in Ohio. We opened up an industry for promoters, fighters, people that make a living from this. Same thing in California, same thing around the world. Me and my brother put up $10 million to produce The Ultimate Fighter. Spike didn't pay us anything for that. We risked our money, we put it out there, it worked. Now you've got Comcast, NBC Universal, Fox, you've got Viacom, all these other big major networks that want MMA programming; we can't be on all of them. It's impossible. There's room, there's space for every one of these guys to sit down once again, do it the American way, come up with an original concept, put up your money, and compete. It's not like there's not an outlet for these guys, with major broadcasters."

The UFC feels that ESPN has focused on the negatives here with this story, something Fertitta claimed to Barr in this interview back in August.

"You guys are doing the wrong story here," Fertitta said. "The story isn't that, the story is all the millionaires we've made; the story is the industry we've built, the opportunities we've made for everyone. Instead, you guys are doing a story that is obviously biased and negative; guys that are disgruntled."

"We've taken something from nothing and created opportunities for these fighters that they never would have otherwise had."

Ultimately, fighter pay has continued to increase from year to year, and it's ridiculous to think that the rapid growth the UFC has seen in a six year span is something that's just going to continue on a regular basis. They've already seen a significant decrease in pay-per-view business in 2011 from 2010. The new deal on Fox will bring a new stream of revenue, along with a lot more exposure, but that doesn't mean that they'll continue raking in record revenues year after year.

For those in the middle to low end of the UFC's pay-tier, they're still making a much better living in this sport than is available elsewhere, and they're doing so without necessarily bringing anything more to the organization than filling a card. Maybe that's harsh, but it is the way things are. Those that can prove themselves as competitors and become fighters that fans will pay to see will themselves get more money in turn. It's the way that combat sports work, and especially in the UFC. While there could be some room for improvement on the low end of the totem pole, fighter pay is mostly fair, and will continue to improve in the years to come.