Five months ago, the UFC announced a groundbreaking sponsorship deal with sports apparel company Reebok, a deal that would include mandatory sponsorships for every UFC fighter and a revenue split that had yet to be announced. Well, it was announced yesterday and the feedback wasn’t overwhelmingly positive, to say the least.
In a conference call, UFC brass including president Dana White, CEO Lorenzo Fertitta and COO Lawrence Epstein, explained how those numbers came about.
“How we came up with them is a lot of pain-staking hours in a conference room going through the options with our analyst team and trying to figure out the best way to distribute the money,” Fertitta said, according to MMA Fighting.
“A lot of the provisions in the policy are as a result of discussions we had with athletes,” Fertitta added. “I’m sure there will be those that aren’t excited about the policy, but I can tell you that the vast majority of athletes that we’ve spoken to are excited about the opportunity. They are excited about getting equipment designed specifically for the sport that they get to keep, they are excited about the uniforms and they are excited about the possibility of selling merchandise with their name on it.”
Epstein explained, that every athlete will receive 20-30 percent of gross merchandise sales for his particular Reebok apparel kit. But stores can decide, which kit they want to feature, and obviously, Chris Weidman’s kit is more likely to be featured than one of a Sam Alvey or Jake Collier.
“Certainly we knew going into this thing that we’re not going to make everybody happy, that’s an impossibility,” said Fertitta. “What we tried to do was get as much intelligence as we possibly could by talking to managers and fighters managers over about an 18-month period and literally creating an entire database of where we felt the market was for fighters who were at different tiers, and we felt like we did a pretty good job of replicating the compensation that they were getting. […] Also, when you look at it from a risk-return standpoint, these are guaranteed payments. They’re not going to have to run down sponsors, maybe not get paid. This money will be paid ten days after they have effectively competed in the event and adhered to the athlete outfitting policy. And then in addition, they get royalties on the gear that is sold with their name and likeness, and in addition they can continue to keep those [existing] sponsors.”
Fertitta also noted that there will be periodic reviews of the compensation numbers, based on the revenue created by the Reebok sales.
“These are minimums,” Fertitta said. “We’re always going to continue to review this. Obviously we’re making a bet that this is going to be a successful retail launch, and we’re hopeful that there is going to be additional revenue associated with that, but what we’re able to guarantee at this point is based on the guarantee payments that will be given and flowed through to the fighters.”
Fertitta made clear, that the “vast majority” of the revenue created by the Reebok sponsorship deal will go to the fighters, the rest will be used exclusively to finance the new sponsorship model.
“The only revenue that is coming through from Reebok that is not included to be distributed to the fighters will be used to cover direct operating costs for this program,” Fertitta said. “So, as you could imagine, in order to be able to pull this off, it’s very challenging from an operational standpoint. We essentially went out and we hired an equipment manager who had experience with the NFL. We’re going to have to have a staff of people who are going to be managing this process literally around the world. It’s actually way more complicated than running an equipment program for a professional sports team or a Division I college program because of the international nature of that. […] As we get into this relationship, we’re having to deficit finance for at least the first two or three years into the millions, so we’re obviously looking to go out there and raise money through sponsorship to help defray those costs of this program.
“Once again, this is an investment that we’re making in the future. Why would we do a deal like this that doesn’t on the surface look as though it’s going to make any money and cost us millions of dollars at least for a couple years? Quite honestly, we believe this is going to be successful. We are in it for the long term. No different than when we invested tens of millions of dollars into the UFC with the hopes of turning it into what it is today. We believe that the retail component of this program with Reebok as it pertains to the fighters is going to be very successful, which means that royalty payments to the fighter are going to be substantial. It means that we will be able to generate enough revenue then for the UFC to make this a profitable venture for us.”
Time will tell, if it will be a profitable venture for the fighters, too.
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