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UFC brass outlines why it believes Reebok compensation terms are a win for fighters

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When the UFC announced in December that it had comes to terms with Reebok on an exclusive six-year outfitter and apparel deal, many questions were still left unanswered.

On Wednesday, five months later, and just about two months before the deal really goes into effect in July, many of those questions were finally addressed.

UFC CEO Lorenzo Fertitta, UFC president Dana White and UFC COO Lawrence Epstein held a media conference call moments after e-mailing all 586 current UFC fighters the financial breakdown and terms of the deal, which can be found here.

"We believe that the introduction of this outfitting policy is very beneficial for the athletes," Fertitta said. "It's an investment that we're making as a company, and we think it's going create long-term value for the athletes, the UFC brand and for the sport.

"This athlete outfitting policy is going to create guaranteed income, thus eliminating the burden of acquiring sponsors."

Some highlights from the call:

* Each fighter can have their own apparel and non-apparel sponsors outside of the UFC-Reebok deal, however, they are not allowed to represent those sponsors in the cage or when participating in official UFC-sanctioned events (e.g fight week activities).

"It's no different than any other sport," White said. "In other sports, lots of guys are sponsored by different brands outside of the NFL, outside of the NBA. It's no different than that. The UFC is just catching up now. And there's going to be clothing companies out there and other sponsors, if your business is mixed martial arts, you're going to want some of the best guys and some of the most popular guys in the sport to represent your brand and shoot commercials and billboards and wear your stuff."

* According to Fertitta, "the vast majority" of the revenue that the UFC is receiving from Reebok will be distributed to the fighters.

"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, but the money is being distributed to the fighters."

* There will be a periodic review of these compensation levels.

"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."

* Based on the terms of the Reebok deal, the UFC has the ability to showcase one more sponsor on the fighters during their bouts. That revenue will not go to the fighters. The UFC will however ask these secondary sponsors to sponsor certain athletes, as we've seen recently with the likes of Monster Energy and Bud Light.

"As we get into this relationship," Fertitta said, "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."

* Every fighters' kit will be made available online for purchase, however, retailers will decide whose kits they will feature in stores. According to Epstein, fighters will receive 20-30 percent of gross merchandise sales.

* If a fighter refuses to wear the kit, it will be considered a violation of the UFC's code of conduct. Fighters may be fined as a result, however, a percentage has not been decided. The UFC will deal with those situations, should they come up, on a case-by-case basis.

* Each fighter and their team will be allowed to keep all the gear they received for their fights.

* Only Reebok decides which fighters will receive separate sponsorship deals from the company, such as the ones Ronda Rousey, Anthony Pettis and Paige VanZant and a select few others recently signed.

* And how did they come up with these numbers?

"How we came up with them is a lot of painstaking 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.

Moments after the financial terms were announced, several UFC fighters took to Twitter to voice their displeasure. Others, including managers, picked up the phone to do the same. This doesn't necessarily surprise the UFC brass.

"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."

He later added: "Certainly we knew going into this thing that we're not going to make everybody happy, that's an impossibility. 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."

The deal goes into effect in July for UFC 189.

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