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UFC Merchandising Agreement Bad For The Fighters? (Update)

UFC logoWhen it was first announced that the UFC would be coming out with a line of action-figures courtesy of a new merchandising deal with Jakks Pacific, my first question was whether or not the fighters were being compensated for the use of their likeness. For those unfamiliar with the standard UFC contract, a fighter is forced to sign away his likeness, and does not receive any additional money when his likeness is used to sell a UFC product, such as event DVD’s. It turned out that fighters did sign a separate merchandising agreement which would pay them a share of the revenues and royalties. Sounds good, right? The UFC is finally doing the right thing. Wrong, at least that’s what many of the fighters and managers involved with the UFC believe.

Josh Gross of digs up the dirt on this intriguing story.

But the company’s claim has raised ire by mixed martial artists and their managers over issues such as undefined terms of compensation, the loss of likeness rights in perpetuity and the inability to audit since Zuffa is a limited liability corporation.

Cesar Gracie (who guides The Ultimate Fighter 5 winner Nate Diaz), J.T. Stewart (who handles business affairs for former UFC middleweight champion Rich Franklin) and a handful of other managers who asked not to be identified in this story are in the growing phalanx of those who have voiced concerns. Specifically, they’re concerned about the more than half-dozen “deal-breaker” clauses in the agreement — mainly: the indefinite term of perpetuity, made worse by a fighter’s inability to opt out.

Cesar Gracie had this to say about the agreement.

I thought it was a good deal for the UFC. I thought, financially, it was not a good deal for the fighters. Making a few dollars is better than making no dollars, and that would be the only reason to making a deal like this happen, but there are too many negatives right now, too many ways to get screwed, where it’s not worth it in my opinion.

J.T. Stewart added:

If they do a tenth of what they say they can do, it’ll mean a ton of money for Rich. I hope they make it happen and I hope Rich is a part of it. But you’ve got to do it in a fair and equitable way that gets the best deal for your client. And their first pass at this was not the best deal. Hopefully, they’ll come back with a different version.

I can’t even begin to think about entering into an agreement where I don’t have auditing rights and I have to depend upon someone else’s expertise and skills to tell me how much money I’m not making.

And therein lies the main problem—the fighters and managers have no idea how much the UFC is actually making from the merchandising deals, so they have no way of knowing if they are being properly compensated. Now, that sounds more like the UFC.

While many fighters and their managers have declined to enter into the agreement, there have been a few that believe it is a good deal, notably Dean Albrecht.

Having a licensing department and licensing director that wants to use your mark, your name, your likeness in a positive way to promote you, and is offering to share in the equity on a go-forward basis, [is a positive thing]. [The fighters] don’t have to do the accounting of it, they don’t have to do the sales of it, they don’t have to do the upkeep of it — all they have to do is show up every once in a while and help promote the brand. I don’t see how that’s unfair.

It’s also important to mention that the higher profile fighters, such as Chuck Liddell and Anderson Silva, are believed to have their own revised versions of the agreements, with higher percentages. That’s fine if you’re Liddell or Silva, but if you’re someone like Nate Diaz, who only has the standard agreement as an option, you would be locked into it even if you became a star down the line who was deserving of the Liddell and Silva like agreements.

I’m happy to see many of the fighters holding out. There’s no way I would ever sign an agreement that a) I couldn’t opt out of, and b) there’s no way of knowing if I’m getting what is owed to me or if I’m getting screwed. It’s good to see the people who the UFC’s policies affect are recognizing these types of issues.

The whole story is very interesting. I highly recommend you read it in its entirety.

[UPDATE 6/24/08 9:06PM ET]Rob Maysey has a extremely in-depth article about the agreement with analysis on all of the provisions. Some of it is absolutely absurd and I can’t believe any fighter agreed to those terms. Dean Albrecht would never be my manager. I highly recommend checking it out. CR:

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