Plaintiff's lawyers to get access to UFC's confidential business records in antitrust suit

In the 22-year-history of the company, most of the details of UFC's business have been closely-guarded secrets.

But due to the antitrust lawsuits filed by a number of former UFC fighters, including former top stars like Cung Le, Jon Fitch and Nate Quarry, and a Wednesday ruling in Nevada District Court, things are going to change.

After a decision that opened the case up for discovery, key Zuffa financial information is going to be revealed. The next step will be how much the company will be able to keep confidential, which is expected to be most of it. But even at best, those involved with the case will finally know figures such as the value of television deals, real and exact pay-per-view numbers, and the size of both discretionary and contracted pay-per-view bonuses that top stars like Jon Jones, Anderson Silva, Georges St-Pierre, Ronda Rousey and Brock Lesnar actually earned for their biggest fights, event-by-event revenue and cost and more.

Zuffa will likely attempt to keep this information sealed except to the parties involved. In one Zuffa motion turned down Wednesday, they targeted Rob Maysey, one of the plaintiff's lawyers, from viewing these records, claiming, according to an article in Bloody Elbow, that "discovery would become a back door" for him to gain access to company confidential information. Maysey has been a longtime critic of UFC treatment and pay of fighters, including appearing on an ESPN Outside the Lines piece on fighter pay in 2012. He also has formed the Mixed Martial Arts Fighters Association (MMAFA), an attempt to organize fighters, and is a name well-known to industry insiders.

The UFC has agreed to provide to the plaintiffs and its lawyers event-by-event financial analysis, including live gate, pay-per-view revenue, sponsorship revenue and merchandise revenue, as well as other revenue including fighter pay, and television contract information. They will also provide some arena contracts, a number of which the two sides have yet to agree on. The plaintiffs will also gain access to at least some key contracts of top-name fighters.

Maysey, on the Outside the Lines piece, estimated only five percent of UFC revenue goes to fighters. Estimates for the 2013-2014 fiscal year based on a Standard & Poor's bond analysis were that UFC generated $522 million in revenue. That number should be considerably higher today given the increase in pay-per-view revenue during a strong 2015.

At that time, UFC CEO Lorenzo Fertitta claimed UFC paid its fighters "in that neighborhood" when compared to about 50 percent of revenues that the major team sports in the U.S. like Major League Baseball, the NFL, the NBA and the NHL paid.

Fighter pay has been a heavily talked about and debated issue, particularly since 2006 when Zuffa turned the corner business-wise and got out of its $44 million in red ink during its first several years of trying to build the business.

Some commissions, most notably Nevada and California, release contracted fighter pay. In the case of most fighters, the numbers are relatively close to accurate, although small bonuses, often around $5,000, are given to undercard fighters frequently. Stars who help draw big pay-per-view numbers, even if cuts aren't in their contract, are often substantially bonused. But those bonuses, as well as signing awards, actual pay-per-view cuts and other fighter pay is largely unknown, except in rare occasions, like a court case involving Eddie Alvarez, or a public dispute many years ago involving Randy Couture, where the information has become public.

If nothing else, Maysey and the fighters will gain significant knowledge, far more than anyone but the top people in Zuffa have had access to, on all the key aspects of the Zuffa business. And it is likely that some information, perhaps vague, will get out, particularly if there are any major surprise revelations.  

The key to the case itself is not what percentage of revenues go to fighters, although the difference between five percent claimed by one side and in the neighborhood of 50 percent by the other is enormous. It's whether UFC, as the market dominating brand, has had a hand in anti-competitive business practices over the years and if those practices have caused injury.

UFC became the worldwide market leader roughly around 2006, when its pay-per-view numbers and revenue exploded at the same time its biggest competitor, Japan's Pride Fighting Championships, fell on hard times due to losing its network television deal in Japan. Since that time, UFC purchased two of its biggest competitors, Pride in 2007 and Strikeforce in 2011. Other major organizations in Japan, including Hero's, Dream and Sengoku, also folded due to the Japanese public and television networks losing interest in the sport. Elite XC, a onetime competitor in the U.S., that got the first network television deal with CBS, and first premium cable deal with Showtime, was a public company that was a financial disaster that eventually sold their key assets to Strikeforce. Another Zuffa competitor, the IFL, also folded after tens of millions in losses.

In the case of both Pride and Strikeforce, the companies were looking to sell before UFC was looking to buy. Pride was basically done in Japan, and had already had contract with World Wrestling Entertainment, which decided against acquiring the company, before the sale to UFC. Similarly, Strikeforce was very quietly on the market when its parent company, Silicon Valley Sports and Entertainment, which owned the San Jose Sharks and the SAP Center, the major arena in San Jose, were looking to get out of the MMA business.

The Strikeforce sale in particular left Zuffa with, at the time, all but a scant few of the most marketable and biggest name fighters in the world.

In both cases, buying made sense for UFC, both to acquire key fighter contracts, but also, the tape libraries, which were key components of launching its Fight Pass subscription service. UFC has also purchased tape libraries of companies still in existence, such as Pancrase in Japan and Invicta, as well as those from a number of now-defunct organizations.

Zuffa also arguably has some competition in Bellator, which recently signed top ranked light heavyweight Phil Davis, after providing him with an offer that UFC decided against matching. In 2014, Bellator made a substantial play for Gilbert Melendez, one of the top ranked lightweights in the world at the time when his UFC contract expired. Melendez was able to use the  Bellator offer to get a matching offer from UFC, which helped him get a championship fight later that year with Anthony Pettis.

But cases like Davis and Melendez are rare. Fighter bargaining power is limited. The new Reebok deal, eliminating fighters ability to promote sponsors the week of the fight or on any UFC television broadcasts, significantly hurt the income of many fighters, including many of the company's biggest stars.

Today, using independent ratings of the top 15 male fighters in the eight UFC weight divisions at Fightmatrix.com, 25 of the 120, or 20.8 percent, are not under contract to UFC. The vast majority of those are under contract to Bellator. UFC had 14 of the top 15 in middleweight and flyweight, 13 at heavyweight, but only ten in bantamweight, and 11 in light heavyweight, welterweight, lightweight and featherweight.

On the women's side, UFC had 26 of the top 30 fighters in bantamweight and strawweight, or 86.7 percent, with the other ranked fighters coming from Invicta. But Bellator has not strongly targeted women's MMA just yet. Bellator President Scott Coker was actually a pioneer in presentation of women fighters in MMA, and before that, in kickboxing. However, his organization is expected to target 145 pound and 125 pound weight classes, weight divisions not in UFC.

The case is extremely complicated, even if key issues would be known even without figures available. UFC is the dominant group in the industry with an extremely high market share. Right now they do have a very clear but distant number two competitor in Bellator. Coker has even joked, although with seriousness, that his company's attempt to become a bigger player in the industry is, when it comes to this case, the best thing for UFC.

The key question is whether UFC acquired its industry domination through anti-competitive decision making and if those practices had a measurably negative effect. The fact they have a high market share, if it was acquired through sound and legal business practices, is in and of itself not an antitrust violation.