Why the UFC’s deal with Reebok may not benefit everybody

Not long after UFC CEO Lorenzo Fertitta and president Dana White explained the ins and outs of the company's landmark deal with Reebok to outfit its fighters, two thoughts immediately came to mind:

1. This could work out to benefit the majority of fighters (not just an elite few).

2. It will prove over the long haul to be extremely beneficial to the UFC.

Fertitta and White each stressed that the six-year agreement with Reebok is, from a financial standpoint, the largest non-broadcast deal in the history of the company.

They weren't giving up any details – they never do – but it's a safe guess that the deal will pour at least eight figures a year into the UFC's coffers.

The UFC is less than 25 years old, but in its current incarnation, under the Zuffa ownership of White and Frank and Lorenzo Fertitta, it's less than 14 years old. There is still much room to grow, and these are the kinds of deals that growing businesses are eager to strike.

It's easy to forget that the UFC is still a rookie in the pro sports business. In 1968, the 99th year of Major League Baseball, the minimum salary was just $6,000 and the average salary was only $20,632.

White and the Fertittas are attempting to build a sustainable business that would, in theory, mean the fighters would make significantly more than they do now.

So, the UFC struck the deal with Reebok to bring aboard a blue-chip sponsor that should improve the appearance of the product on television and help increase awareness.

Being able to go to Macy's or Sports Authority to buy a Johny Hendricks shirt or a T.J. Dillashaw cap will only help increase the marketability of the sport and those involved in it.

All of that guaranteed money Reebok is paying, White stressed repeatedly in a telephone conversation with Yahoo Sports, will go to the athletes.

"Every last [expletive] penny of it," White said. "Who else does that? Any reporter who says this isn't a fantastic deal [for the fighters] is out of his [expletive] mind."

There are far too many unknowns at this stage to say whether it is or isn't a great deal for the fighters, but there is no question that it was a banner day at Zuffa headquarters.

Athletes in all sports have relatively short careers and need to make as much as they can as quickly as they can. But UFC management doesn't face the same crunch. Despite the horrible year it has had selling pay-per-views, it’s still making money. Management has the benefit of time.

It can nurture the deal, make sure everyone plays along and says all the right things, and hope it explodes into something much bigger down the line.

Besides, it's not like the UFC is going to go penniless on this deal. Apparel with fighter likenesses will be sold at as many as 10,000 retail locations and, of course, online.

The UFC and the fighter will share in the profits from those sales. There will be a lot of Ronda Rousey, Jon Jones, Vitor Belfort, Anderson Silva and Cain Velasquez apparel sold, but probably not much merchandise with the likenesses of, oh, Walt Harris and Bubba Bush.

The bigger the star, the more apparel that's likely to be sold. It's probable that 20 or 25 fighters will sell a ton of branded apparel and that the vast majority of fighters will sell next to nothing.

It's a good deal for the UFC, though, because for every piece of branded apparel sold, from shirts with the biggest stars to shorts with the logo of the most junior fighter, the UFC will get a cut.

Money from apparel sales isn't the ultimate goal, however.

This deal lays the groundwork for what the UFC hopes to become. Right now, the UFC relies heavily on pay-per-view income, and that's down drastically this year, as it is in boxing and in the WWE.

But if the UFC could earn the majority of its money from its broadcast and sponsorship deals, pay-per-view income wouldn't be so significant.

Fertitta pointed out that major sports leagues in the U.S. require athletes to wear a sponsored uniform. That means in the NFL, all uniforms are made by Nike. It's adidas in the NBA, Majestic Athletic in Major League Baseball, and Reebok in the NHL.

Just as Penguins star Sidney Crosby isn't allowed to sell space on his uniform pants to Tim Horton’s Donuts, neither will Miesha Tate be allowed to sell space on her fight shorts to Dynamic Fastener.

Fighters no longer are going to be permitted to wear logos of sponsors on their outfits after the partnership with Reebok begins in July.

Fertitta noted, though, that there might be one other company that can be a major sponsor and have its logo on the official UFC uniform. He didn't identify which one, but said if it happened, it would be a Fortune 500 brand.

If the sport continues to grow as it has in the first nearly 14 years of Zuffa's ownership, it's a good bet that by the end of the next 14 years, there will be a lot more Fortune 500 companies paying Zuffa a lot more money than they currently do to sponsor the UFC and its athletes.

So fighters in 2030 have that to look forward to if all continues on the right path.

As for the current fighters, even though they're being paid to wear the uniforms, it's anyone's guess.

First, it's not an equitable system, such as the Major League Baseball Players Association set up for its members as part of its licensing program.

Major League Baseball players earn money from the licensing deals based upon their service time in the majors, not from their performance or star status. That's not the case in the UFC.

While it's true that all fighters will make money to wear the uniform, they won't all be paid the same. Their success in the cage and their ability to market themselves outside of it should be reflected in their salaries, without question. The most successful should make the most money.

But given that those at the bottom end struggle to make it on their own – the minimum salary is $8,000 a fight, so a fighter could fight four times and still be guaranteed just $32,000 in salary – a more even distribution of the Reebok money would be fairer.

In MLB, Alex Rodriguez was the highest paid player in the game for years, but in terms of income from licensing, his money was no greater than any other player with the same service time.

In the UFC, champions will make the most to wear the uniform. Then, those ranked one through five will be in the next tier. Fighters ranked six through 10 will be another tier down and paid less and fighters ranked 11 through 15 will be in the following tier.

That will account for 160 of the UFC's roughly 500 contracted fighters (the 10 champions plus the top 15 in each of the 10 weight divisions). The non-ranked fighters will make the least in terms of guaranteed pay for wearing the uniform.

Now, given that we don't know the financial elements of the deal, we must speculate in order to figure how the fighters will benefit in the short term, because more than 90 percent of them won't be with the company a decade from now.

If the deal is for $30 million over six years, that's $5 million a year. Split $5 million among 500 fighters and that's $10,000 a year per fighter if it all were split equally (which it won't be). Of course, whatever each fighter makes from sales of his/her likeness will be on top of that.

If the deal is for $10 million a year, the split would be roughly $20,000 per year per fighter on average. And if it were bigger than anyone is imagining and is $20 million a year, it would net the fighters $40,000 a year on average just for wearing the uniform.

So, to use the middle number, a fighter who lasts from the start of the Zuffa/Reebok partnership in July 2015 through the end of it in July 2021 would stand to make an average of $120,000 over that time for wearing the uniform, not including income from apparel sales.

Since the money will be paid out by tiers and won't be split evenly, it's a safe bet to say that the Rouseys and the Joneses of the world will do pretty well over the six years from the Reebok deal.

The rank-and-file fighters won't make out nearly as well, though.

They're still free to keep their current sponsors, or search for new ones, but because they won't be able to wear the logos on their uniforms into the Octagon, it's likely most of them will lose that money.

That doesn't seem good, but White said without providing figures that the public vastly overestimates how much the average fighter makes per fight in sponsorship dollars.

The Reebok deal guarantees fighters won't have to go out and solicit sponsors if they don't want to do so. It also guarantees they'll be paid.

There have been many UFC fighters who have worn a sponsor's logo on their shorts and did not get paid or who had to hound the company for months, if not years, for payment.

This deal will eliminate that. From that standpoint, it's good for all involved.

Long term, this has an opportunity to be a big win for the fighters. If the UFC continues its growth and the business is bigger 10 or 15 years from now, those fighters will do great as a result of the groundwork from Fertitta and White.

It's the rank-and-file guys who currently make up the UFC who may be the ones who regret having to tug on that Reebok gear three or four times annually.

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