Will UFC Pay for Making Enemies?

By Zach Arnold on June 17, 2011
The Ali Act does not apply to Mixed Martial Arts contracts in the United States

Showtime’s Ken Hershman found out that dealing with Dana White is not something to exactly be happy about….

This is a question that comes to mind when I read all of the reports about the FTC’s rumored long-term investigation into Zuffa LLC, the parent company of the UFC. Interestingly enough, the boxing media is paying close attention. Most MMA writers, however, largely are disinterested and don’t see an end game to the story. In other words, they are asking themselves why this story is getting any play and why anyone thinks the FTC will do significant damage to Zuffa.

A lot of the difference in perspectives between the two media groups has to do with history. Boxing has had a history of scandals and police investigations. Anyone with a cursory knowledge of what has happened in the sport of boxing understands that no promoter is infallible. Most members of the MMA media are largely young and come from backgrounds where they didn’t follow other professional sports intently.

The biggest reason, however, for the boxing media being so interested in what the FTC may or may not be investigating is because of the financial model that UFC has created for itself. It is a one-promoter system right now for the major leagues of MMA. They control everything and no one is even remotely close to being a business threat. Once they bought out Strikeforce, the lower-tier MMA group promoted by Showtime, UFC’s only chief competitor in the States was eliminated. All Zuffa business policies regarding contracts and sponsorships have been transferred over to Strikeforce. Strikeforce is simply a different company in name only. It’s UFC Lite for all intents and purposes now until the Showtime television deal expires next year.

The UFC’s ‘take no prisoners’ style of business management is certainly cold and calculated, but also very successful. Is it better to be a nice pushover or a hated bastard with a ton of enemies who can do nothing to dethrone you? With UFC’s recent success on PPV, a lot of promoters in the boxing world have wondered whether or not they should adopt the all-in-one business model approach. Golden Boy is obviously one operation that could pull it off. Top Rank is another. However, the idea of Arum and De La Hoya trying to buy each other out and work together is just simply not a concept that will fly. 

Which is why when Bob Arum recently brought up the term ‘anti-trust’ in an interview about UFC’s purchase of Strikeforce, immediately everyone who could respond did respond. UFC is obviously very defensive about their current business positioning and they should be. They have managed to make a lot of enemies over the years. They managed through the backdoor to take over Xyience, the energy drink company that Russell Pike was involved in. Pike was a former high school buddy of Dana White and the Fertitta Brothers in Las Vegas. Xyience was also an early sponsor of the UFC and it was embarrassing to watch fighters try to pitch the energy drink on camera after fights. After buying out Xyience, they ended up getting into a war with PRIDE and ended up buying the PRIDE assets after a yakuza (mafia) scandal took down the Japanese organization. Remember, a casino family is taking over assets from a person (Nobuyuki Sakakibara) who got labeled repeatedly in Japanese media publications for being connected to questionable people. The Nevada Gaming Commission didn’t do anything towards Zuffa in regards to the deal. So, there’s that. Throw in UFC’s war with t-shirt company Affliction, which led to Affliction running a couple of MMA events before going back to Zuffa and cutting a deal in which Affliction pays Zuffa the right to do business deals with UFC fighters. In addition to the battles UFC has had with t-shirt companies and sponsors, they’ve gotten into wars with their own fighters over signing away their likeness rights to video games for life. Compounding matters, UFC has had some wars with agents (including agent Ken Pavia, who they are legally going after in court for allegedly giving the Bellator promotion ‘trade secrets’) that have gotten intense. Plus, UFC got into legal wars with Randy Couture (Couture settled), Tito Ortiz (settled), and Ken Shamrock (Shamrock inexplicably lost in court and had to pay UFC’s legal fees, to boot.) For such a young company, the promotion has ruthlessly gone after anyone, in my opinion, who does not give into their demands fully.

Having all of these enemies is why it’s hard to get a good read on what the FTC is investigating. One media report claims that Zuffa has four attorneys working on the matter. Because there are so many enemies and so many contentious business battles that Zuffa has been involved in, they are a ripe target for a government agency like the FTC to go after. This is why a lot of people in the boxing world are so fascinated by what is happening. Yes, promoters like Gary Shaw say that White is a good businessman, but they also see a promotional model that is so tightly controlled that it is wide open for governmental regulation. Remember, the Ali Act does not apply to Mixed Martial Arts contracts in the States. Fighters may have insurance under the Zuffa banner, but only for the life of the contract and not after it is terminated. They are still classified as independent contracts despite the fact that they cannot fight for other promoters. In boxing, it is hard to see how promoters like Lou DiBella or Gary Shaw could pull off in the boxing world what Zuffa has done in the MMA world. This is why I think so many in boxing (from Al Bernstein to Bob Arum) look at UFC with a mixture of fear, disdain, fascination, and an attitude of “how are these guys getting away with it when we could never get away with such a monopoly in boxing.”

A large part of the UFC business model is similar to WWE, the pro-wrestling powerhouse organization. The self-contained, self-controlled, self-produced operation is something that you don’t see in boxing. In boxing, an office may consist of a company of people, a FAX machine, some computers, and a lot of outsourcing. Zuffa has over 125 employees at their Las Vegas office, including a large in-house marketing team. WWE used to have as many as 500 employees at what was called Titan Towers in Stamford, Connecticut. Because the television networks like Showtime and HBO are the real sugar daddies for boxing promoters, you simply do not see self-contained office operations for Golden Boy or Top Rank. This is why the boxing and MMA business worlds are like oil and water. It’s also why Ken Hershman found out that dealing with Dana White is not something to exactly be happy about. As soon as Zuffa purchased the Strikeforce assets, the company went to work right away in taking away anything that made the Showtime television contract valuable. Nick Diaz, the top American ratings-grabber for Strikeforce, immediately signed a UFC contract to fight Georges St. Pierre this October. Many Strikeforce fighters with expiring contracts are now being issued standard UFC-style contracts with reportedly similar legal language. Dana White has always made his disdain for Ken Hershman clear, so it was no surprise for those in the MMA media to see what was coming. Shockingly, when UFC took over Strikeforce, I was told by a reliable source that Ken Hershman was happy about how things were playing out and was optimistic. Wonder how he’s feeling now that the joke is on him? 

UFC has decried the methods of boxing promoters. They have their own in-house production team and do not want a TV network controlling their operations. This is why you see UFC hiring their own TV announcers—because they do not want to be subjected to a television network bringing in their own announcers with independent points of view. UFC’s operation is exactly like WWE’s in this regard. Dana White has said repeatedly that UFC will not sign a TV deal that takes away their creative control. This creative control also, ultimately, includes matchmaking decisions. UFC has their own matchmakers in Joe Silva and Sean Shelby. They book the fights they want to book. A TV network does not tell them what to do. When Strikeforce was operated by Scott Coker, it was Showtime that heavily influenced the production, promotion, and matchmaking facets of the MMA operation. 

As far as what the FTC investigation means for the UFC, the bottom line is that it is an important development. Even if the FTC doesn’t initially sanction/punish Zuffa for their past business dealings, it does signal that the company is on the U.S. Government’s radar and that is never a good thing. The blowback from Dana White towards Gary Shaw and Bob Arum for their largely, in my opinion, accurate viewpoints is an indication of an ‘us versus the world’ mentality that has taken UFC to great heights so far. With that said, there is always a price to pay in the end for burning so many bridges and getting into so many legal wars with people who have money and connections. That, more than anything, is something that not a lot of MMA writers want to focus on because a decline for the UFC means a decline in their own career bottom line as well.

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  1. Paul 12:00am, 06/16/2012

    I think an important factor in comparing Boxing to MMA in terms of promotion is the size of these sports. Arum could run his own promotion, with only his fighters, but with the spread and expanse of boxing worldwide, Arum’s (UFC like) promotion would be a dot in the ocean. The UFC is really more like some circus side-show. And the fact is that there are actually many MMA promotions. This fact is just distorted by the disproportional share of the market the UFC has.

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