Not a punch was thrown in Las Vegas this week in the antitrust case against the UFC. But there was still a big fight with potentially huge ramifications for the industry-leading promotion.
The long-running suit broke new ground this week as experts for the plaintiffs and defendants got face-to-face with a Nevada federal judge in Las Vegas.
The evidence heard is expected to inform a decision on whether former UFC fighters Jon Fitch, Nate Quarry, Cung Le and others can band together in a class-action suit against the promotion. A judge has denied the UFC’s previous motions to dismiss the case.
Citing internal UFC documents and experts, the plaintiffs’ attorneys argue the promotion engaged in anti-competitive conduct that created a monopsony – a market structure where a single buyer substantially controls the market as the major purchaser of goods and services – and wound up shorting fighters hundreds of millions over a seven-year period (2010-17). The promotion’s defense attorneys deny such a scheme and cite rising payouts over the same time frame.
Money – and how the UFC has divided it up over the past decade – was the main topic of this week’s testimony.
There’s currently no timeline on when Nevada federal judge Richard Boulware will rule on whether to certify the fighters as a class. But the decision carries huge implications for the UFC. A yes draws the promotion closer to a trial that carries the risk of an adverse ruling, which because of antitrust statutes could carry “treble” damages – or triple the potential payout to the plaintiffs. To avert a huge financial blow, the promotion could be forced to seek a settlement with the fighters.
Here are some key takeaways from this week’s developments from BloodyElbow.com reporter John Nash, Forbes.com’s Paul Gift and MMAPayout.com’s Jason Cruz, who were in the Las Vegas courtroom.
Financial information on display
The week started with a dispute over information as UFC attorneys fought unsuccessfully to seal information on fighter payouts from public view. Judge Boulware erred on the side of disclosure while also providing for redaction of specific financial information.
According to Gift’s report on Forbes.com:
Detailed financial information and fighter-specific financials may be dealt with on a case-by-case basis, but “aggregate” financials were going to be unsealed, specifically all redacted aggregate information in the expert reports in the “next day or two.”
With that settled, court attendees got a glimpse of internal UFC documents revealing fighters’ share of revenues.
According to Nash’s report on BloodyElbow.com, the revenue shares were split into two categories: Fighter compensation as a percentage of UFC event revenue, and compensation as a percentage of PPV event revenues.
Compensation as a percentage of UFC event revenue includes:
2001: 0 percent
2002: 0 percent
2003: 0 percent
2004: 24.18 percent
2005: 13.87 percent
2006: 20.31 percent
2007: 25.85 percent
2008: 20.48 percent
2009: 21.83 percent
2010: 22.00 percent
2011: 18.45 percent
2012: 18.64 percent
LTM as of Q2 2013: 20.10 percent
2013 (estimated): 19.77 percent
Compensation as a percentage of UFC PPV event revenues includes:
2001: 41.23 percent
2002: 40.82 percent
2003: 41.03 percent
2004: 23.48 percent
2005: 10.27 percent
2006: 17.31 percent
2007: 23.34 percent
2008: 18.49 percent
2009: 19.55 percent
2010: 20.89 percent
2011: 17.42 percent
2012: 15.93 percent
LTM as of Q2 2013: 17.23 percent
2013(estimated): 16.34 percent
Yearly totals and percentages for UFC pay
Another internal UFC document totaled the yearly payouts to fighters and the percentage of promotion revenue shared with fighters, including projections up to 2020 that were prepared after Endeavor’s acquisition of UFC parent Zuffa in 2016. According to Nash, it was revealed that a total of $626 million was paid to UFC fighters between Dec. 16, 2010 through June 30, 2017, which is defined as the “class period” under examination.
Here are the yearly payouts and percentage revenue shared:
2012: $71 million (16 percent)
2013: $91 million (18 percent)
2014: $72 million (16 percent)
2015: $113 million (19 percent)
2016 (estimated): $135 million (20 percent)
2017 (estimated): $147 million (20 percent)
2018 (estimated): $160 million (20 percent)
2019 (estimated): $188 million (20 percent)
2020 (estimated): $196 million (20 percent)
Where competitors stood
To illustrate the disparity between UFC fighters and their counterparts, the plaintiffs’ attorneys compared revenue sharing figures with other MMA promotions including the now-defunct Strikeforce, which was acquired by UFC parent Zuffa in 2011, Bellator and World Series of Fighting.
Monday’s hearing revealed that Strikeforce shared 63 percent of its revenue with fighters, while Bellator shared 44.7 percent between 2010-17.
Gift also revealed a chart displaying revenues for all promotions between 2009 and 2016. It clearly showed the UFC’s revenues dwarf all other promotions in terms of money generated.
A tale of two experts
Dr. Hal Singer, the plaintiffs’ expert, argues overall the fighters overall wage share best illustrates the effect of the UFC’s alleged anti-competitive conduct, while Dr. Brian Topel, the promotion’s expert, claims wage levels – or how much fighters take home from fight purses and other sources – more accurately represents a fighter’s position in the marketplace.
It should be noted that wage share has rarely been used as an argument to prove monopsony power. But according to Jason Cruz of MMAPayout.com, the plaintiffs’ expert scored early points.
Dr. Singer came across as a calm expert defending his report while attempting to aid the Court in why he did what he did and the outcome. Clearly, it’s his purpose to be an advocate for his position and was unwilling to concede certain items suggested by Zuffa’s attorneys on the cross-examination. At times, he did appear too willing to provide Judge Boulware with explanations, but overall his testimony provided the Plaintiffs with a good shot at clearing the hurdle of Class Certification.
Gift said Singer overcame disadvantages in his model through persuasive communication:
After reading the numerous rounds of expert reports in the case, I gave the UFC’s Topel the advantage as we entered the hearings. In my mind, the plaintiffs needed a big week and they seem to have gotten one thus far, especially Wednesday.
While Singer’s work is out of the economic norm, he’s been eloquent and persuasive, clearly explaining things in a way a non-econometrician like Judge Boulware can understand, even though the judge says he has regression experience.
Meanwhile, Gift likened defense attorneys’ attempts to discredit Singer as “pulling teeth.”
It was their chance to cross-examine Singer and as they tried to guide the judge through the nuances of Singer’s work and lay a foundation for future testimony, Boulware was largely not having it. He sometimes appeared confused as to where UFC attorneys were trying to take him and other times didn’t get any value from a long equation displayed on court monitors. His consistent theme was to keep to the contents of the expert reports.
The UFC’s attorneys did succeed in raising some doubts about a model Singer created to illustrate downward pressure on fighters’ share of wages. Topel, meanwhile, seemed to struggle on the stand, per Gift.
In attempting to explain why wage share is an inherently unreliable metric for examination and diagnoses of monopsony power, Topel said a revenue surge wouldn’t cause worker wages to change in a competitive labor market, thus leading wage share to decline even though no employer had monopsony power. But when monopsony power is present, worker wages would rise.
This would haunt Topel throughout his direct and cross-examination testimony. Every time he tried to explain an experiment to the judge where fighter compensation either wouldn’t change or increased in allegedly monopsonistic years versus early competitive years or post- versus pre-Strikeforce acquisition, the judge would interrupt and say something to the effect of, “You told me earlier that wages could increase with monopsony,” even though Topel’s earlier reference was to a demand surge.
And this wasn’t the only time a missed opportunity confronted Topel. In another exchange, he conceded to the judge that perpetual UFC contracts would be anticompetitive, yet didn’t specify that his definition of perpetual was different from Singer’s. To Topel, perpetual is forever. To Singer, it simply covers the average length of a fighter’s Zuffa career (Zuffa is the parent company of the UFC).
By Wednesday, Nash speculated momentum is shifting toward the fighters’ side.
Final shots (for now)
This week’s testimony was scheduled to include a star witness, former UFC matchmaker Joe Silva. But reportedly due to health concerns, Silva was nixed from a Thursday appearance and may not appear until late September.
If experts – and more importantly, their theories – are to determine whether or not the UFC engaged in a scheme that suppressed fighter pay and bullied competitors, the judge may have all the information he needs.
