Eddie Alvarez v. Bellator Fighting Championships: A Legal Primer

First off, a little bit about me. I am a third year law student at Drake University Law School in Des Moines, Iowa. I've taken several courses on intellectual property law, entertainment law, licensing, and contracts. There really isn't a big "business of MMA" market out there and most of the articles about this subject don't really discuss the issues in a proper legal context. I'm as qualified as anyone so I'll throw my hat in the conversation.

This issue fell by the wayside with news of Bellator signing Greg Jackson, Frank Shamrock, and Randy Couture to coach their "Fight Master" program. However, that just amplifies the significance of this issue, I'll get to the reasons why a little bit later. Not only that, but Chris Hall wrote a piece on Bloody Elbow and Eddie Alvarez got in Rebney's face on the MMA Hour. So lets get into the legal issues shall we?

First off the issue is that Bellator has a "right of first refusal" for Eddie Alvarez for a period of time. Eddie signed a contract for a period of time, and at the end of this period Bellator has a right of first refusal for his next contract. This is what's the "match" of the issue. We all know what happens after this, the UFC gave Eddie a very handsome offer and Bellator claims that they have matched. There are things that the UFC has offered that Eddie and his legal team feel Bellator cannot, or will not, offer. Whereas Bellator feels that they just need to offer only what's guaranteed.

This is where the rubber meets the road. The issue now is what constitutes a "match" in this sense. Eddie's team has a strong argument. UFC offers him just as much guaranteed money Bellator does, but they offer him a much larger platform to build his star power. They're a business that makes a significant chunk of money from PPV, and they're offering Eddie a share of that revenue stream. They're also offering Eddie Alvarez an appearance on network TV and an opportunity to make money talking MMA on Fox and I'm sure a TUF appearance may not be out of the question.

Bellator is offering the same things, at least that's what they claim. However, Bellator to date has NOT put on a PPV broadcast. Furthermore, they don't have a network TV broadcast partner. There were some other things that Rebney brought up that were offered to Eddie that weren't in the UFC offer. Now, Bellator is saying that they are planning to do a PPV and that they've lined up broadcast partners to match the broadcast TV offer.

So now we have to consider what is a "match." Typically the meaning of this is dictated by the terms of the contract, given that there's a lot of conflict over this and there was actually a hearing regarding an injunction I'm fairly certain that this wasn't defined in the contract. For larger entertainers you can better believe that what constitutes a match is included.

From the start there's some pretty big differences in opportunity between what the UFC offers and what Bellator is offering. Now, it seems like Bellator is going out of their way to guarantee what the UFC is guaranteeing. Technically they may offer the same floor that UFC offers, though we'll get to that in a second, but explicitly the UFC contract has the ability to pay Eddie Alvarez more than the Bellator contract. There's really no way that it does not pay him more. The fact that Bellator is bending over backwards to give the appearance that these offers are a match and Bjorn Rebney has said "we've done what we're legally required to," pretty much says all that needs to be said. The UFC offer has a much higher potential payout than the Bellator deal.

Second, Eddie wants to go to UFC. He has said that he has no problem fighting for Bellator but he considers the offers to be considerably different. The argument that Alvarez should make is that Bellator cannot match the offer from UFC. Of course they can say that they can offer the same things, but they cannot deliver the same promotion and opportunities that the UFC can. There's a number of arguments that he can make. If I were Mr. Alvarez's counsel these are the ones I would make:

1.) Bellator has never done a PPV fight. The UFC sort of grew up on PPV. They've had strong buy numbers in the past. 155 got around 600K, 154 did around 700K, 153 (despite no title fight and a card that fell completely apart) did 410K, 152 did 450K, and while 150 and 149 didn't do that well they still cracked the 150K threshold that Alvarez would need to start getting shares. The worst PPV buy rates in recent memory was 147, no title fight, no one in the top 10 of their division on the main card (sans Werdum who was the 2nd fight on the main card) and a card that missed its main event. This was the worst post TUF PPV ever, and it did 140K so just short of the threshold. At the very least the UFC seems to be pretty competent at putting on PPV fights. Especially lately they've learned which fighters sell PPV buys and which ones belong on FOX. Bellator has never done a PPV show, so the buy rate is hard to judge. The MMA promotions that typically did big PPV buys have gone by the wayside and yet the UFC is still here, despite other organizations having MUCH bigger stars than Bellator. That should tell you something.

2.) The UFC is significantly more popular than Bellator. The ratings don't lie. UFC 156's prelims set the FX viewership record. 1.9 viewers more than doubles the viewers of last week's Bellator show. When Bellator put two title fights on their card and their two best fighters there they barely drew over a million viewers. The scrubs in UFC do better numbers than that. So since there's more people willing to watch the "scrubs" of the UFC than the stars of Bellator on cable (especially comparing saturday night to Thursday evening), it would stand to reason that more people would be willing to pay for the stars of UFC than the stars of Bellator. The Ultimate Fighter, a reality show with quasi-UFC level talent, does better numbers than Bellator's broadcast. Last season on Friday nights TUF outdrew some Bellator cards. Furthermore they can compare the Spike numbers and talk about how much better the UFC did on Spike than Bellator.

3.) Since his contract is based on PPV buys this popularity matters. It would be better if Ed could access what other MMA promotions did on PPV (the Batista fight comes to mind) and if he had more UFC PPV numbers to bolster his case, but I think he can make it just based off of ratings. The most popular MMA fighters in the world fight for UFC, Bellator cannot provide him the same opportunity for PPV buys as the UFC can. In the UFC they can put him on a PPV and let him ride the coattails of Georges St. Pierre, Jon Jones, Anderson Silva, or whoever the HW champ is, whereas in Bellator him and Chandler would probably be the main event. There are few coattails for him to ride in Bellator, whereas in UFC he can ride the coattails of proven larger buys. I'm unsure he'd like to make this argument but it's definitely one that effects the decision. There is undeniably an opportunity to make more money in the UFC versus Bellator.

4.) Bellator can offer whatever they want, but their ability to deliver the opportunity to sell break the 600K buy mark isn't the same. Bellator can offer them ten dollars a buy for buys over 600K, but that doesn't mean that they can get anywhere close to doing those kinds of numbers. He should build an argument off of the proven track record of the UFC and how upstart MMA organizations do on their first few PPVs.

5.) Fox. The UFC has a deal on Fox, a broadcast network with a national brand. A much bigger brand and better brand than Spike. Rather than being next to shows like "Manswers," "Bar Rescue," and "Fake Tits, Fake Tans, and Pink Polos" Alvarez has the opportunity to pull a broadcast audience on a network that also airs the World Series, the Super Bowl every three years, and big time college football (IIRC, it's the Big XII that they work with). I'm not exactly sure how sponsor deals work out, though from the fighters I know the gist I get is that you get paid the bigger name you are, the bigger opponents you fight, and the platform you fight on. Surely, the ability to fight on Fox and Fox Sports will attracts a more affluent audience, bigger sponsors, and more viewers. Even outside of PPV, there is no platform that Bellator has that's the level of Fox or Fox Sports. And while they're not guaranteeing anything more than a Fuel show, I doubt UFC will pay him 250K and 75/75 just to have him fight on Fuel. Dana offered co-main on a card where two of their five biggest names fought for the Light heavyweight Title and guaranteed him a Fox show.

Bellator's argument is basically this: we offered the same stuff, doesn't matter whether we can deliver we offered it. The Spike/Fox loophole here is a bit damning to them, but largely they've offered the same thing, despite that the opportunities aren't the same.

Remember, the standard here is preponderance of the evidence. This is employment law so if Eddie can prove that Bellator didn't match the offer or cannot match the offer he wins. The metaphor I like is a law professor. Suppose you're a law professor and you teach at my school, a tier three law school, and NYU (a top five law school) offers you a deal. Drake can offer the same benefits, same schedule, and same pay but teaching at NYU affords you opportunities for speaking, publishing, and prestige that Drake does not. Furthermore it offers you New York. Sure Drake can say that they'll let your kids go to school for free just like NYU will, but the market value on those things is not the same. If I'm Eddie's legal team this is the case I'm making. The metaphor he used also works: McDonalds/Tavern on the Green.

Now, Eddie can still lose. The injunction was a shot in the dark. 159 will sell 600K+ and that will just give Ed all the evidence he needs to show that UFC is the better offer and strike a huge blow to Bellator's credibility so the judge should NOT allow that. If Eddie does lose the question becomes whether he sits and waits for their matching period to expire or fights with Bellator. This is just another demonstration of what happens when entertainers sign dumb contracts or get bad advice. Guys wind up Broke after taking bad advice, in terrible situations, or whoring themselves out on places like Thuzio to pay collection agencies. If you are an entertainer surround yourself with competent and loyal people. Competence is less common to think, however you can generally find it anywhere if you look. It's weird, but accolades and "brass" don't necessarily imply competence. Nor do they mean that this person will work their ass off for you like they would all their other clients. And they especially don't mean that they have your best interests in mind or they're concerned about you five to ten years down the road. Choose your help wisely.

The question I found myself asking was "why?" They have Michael Chandler, who is a younger better fighter, as their LW champion, what do they need Ed for he's not even a top ten fighter? Sure he's a big name but Bellator's tournament system allows contenders to gain notoriety and build themselves as a worthy opponent. Ed's old and what are they doing offering him this much money publicly? Now Chandler, Askren, Curran, and King Mo know what to hold out for in their next contract negotiations. It's never a good idea for a company to publicly disclose what they pay their stars. It also forces Bjorn to put himself in a position where he has to tell one guy he's not worth what a guy that isn't a champ is worth.

Not only that, they've put themselves where they may have to go to court to keep a guy that isn't even top ten in his division. Furthermore, if Ed loses you have two outcomes: 1.) Ed loses and you have a pissed off guy that hates the company as one of your biggest stars or 2.) He sits out a year to avoid fighting for you. Neither is a very good outcome. Both make you look bad and stubborn and besides I'm pretty sure most fighters/fans view UFC as the better promotion and that their offer was better, so you've lost the publicity war twice. Wonderful.

Entertainment law is a tricky subject, mainly because it encompasses several aspects of law but also because your clients aren't normal people. They do dumb things left and right DESPITE the best advice you can give them and they have egos that are exponentially inflated by the figures over four that they get paid. They get paid four figures? Ego is squared. Five? Ego is cubed. Six ego is raised to the 4th power, etc. They'll do something like say "I can't talk about this," yet in the very next breath give away the case. They give away very lucrative contract figures for a guy that isn't a champion.

I know I've bashed Bellator quite a bit here, but don't get me wrong. Bellator is a great place for an up and comer. All of my fighter friends say that the UFC doesn't use their whole roster and it's hard for the unknowns to get exposure. Whereas, Bellator has a much smaller roster and does 26 shows a year. They HAVE to use their whole roster. If you sign with Bellator you can get fights, not only that there's a tournament structure so if you're not a particularly well known name there's a path open for you. Which is good if you're a Josh Neer or a guy stuck on the Undercard, not so good if you're a Fabricio Werdum or a Lyoto Machida. If you aren't a big name you get a shot that the UFC won't give you or if you're on the back nine of your career like Josh Barnett or Rampage Jackson you get to be a big fish in a small pond. There's lots of reasons to like Bellator if you're a fighter. That being said, it's still a small pond. It's not a place for the Anderson Silvas, Dan Hendersons, Georges St. Pierres, or Carlos Condits of the world. What do they want with a fighter that their current champ handedly beat?

However, there may have be some method to "Bjork's" madness.

1.) Other UFC fighters know the going rate for a free agent lightweight. This contract forced Dana to give Ben Henderson a raise.

2.) Lets other fighters know that Bellator can pay you, they are owned by Viacom after all.

These are good things, but the costs outweigh the benefits. Yeah Dana has to pay Bendo, and yeah it lets fighters know that they'll pay you if you get good...but there's other ways to do this. What's the benefit? You get Alvarez/Chandler II and Chandler mauls Ed again?

Then Bellator signed Randy Couture, Frank Shamrock, and Greg Jackson. After that it became clear that they aren't just trying to be the 2nd best MMA promotion. They're trying to build a promotion that can actually compete with the UFC. I mean, they're ripping off what the UFC does wholesale but they're trying to compete. Bellator has no interest in being number two, they want to be the best or at the very least a close second. I'm unsure this will work. UFC is an established known commodity with the ten most well known MMA fighters on the planet fighting for them. They have the established brand and they've became almost synonymous with MMA. Most laymen would call "mixed martial arts" fights "UFC" fights no matter the company. The "octagon" is part of the lingo, and UFC has that trademarked. They kill in ratings, they have a 700M contract with Fox, and unlike Bellator (owned by Viacom) all they do is MMA.

Bellator is making waves, though. Paying a non champ top dollar, signing two legends (and one guy that was one of UFC's best ever), and the best trainer in MMA to work their reality show, and the move to Spike. I'm unsure what the future holds for Bellator. I don't know whether they should try to go head to head or stay a respectable second being content with building stars and letting Dana pay them big bucks when they're on the downslope of their careers. All I know is this:

(there is violence and profanity)

"Bjork" would be wise to heed such warning.

Like it? Hate it? Think I'm full of it? Let me know in the comments.

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