The UFC just got in bed with Reebok, and in doing so, threw out a load of its old sponsors. It's the sort deal a grown-up company makes, and also the sort of deal that reminds you that the UFC has some growing up left to do.
The exclusive deal runs for six years for an unspecified amount of money (MMA media is guessing eight-figure per year range), and begins this July. At that point, fighters will no longer be walking billboards for Condom Depot or Dynamic Fastener or whatever, and will have to wear official Reebok apparel at UFC events.
This is reasonable in a lot of ways. If the UFC wants to function as more of a traditional sports league—instead of a cartel, like boxing—then the gear athletes wear is a perfectly reasonable thing for it to take ownership over.
Individual fighters will have personalized looks, so while there's some chance that this improves on the UFC's pervasive aesthetic bankruptcy, chances are strong that this will simply be a Reebok-branded expression of the garish 2002 Cali-bro apparel we have now. (If Reebok had any sense, it would force the issue and make everyone look like they're showing up to a kung fu tournament, but that's a big ask even in dreams.)
All of the up-front money from Reebok will go to the fighters, and will pay out in a tiered system based on official UFC rankings (which are decided by a panel of voters comprising MMA media members regularly cowed by the organization, which will be its own nightmare). Champions make the most, then rankings 1-5, 6-10, and 11-15 earn a different pay grade, and there is a base rate for anyone under that.
How those tiers break down specifically will be crucial, especially at the extremes. Any flattening of payouts is always going to hit the biggest stars—Jon Jones will probably take a hit the same way LeBron does—but the guys at the bottom, the ones just starting out in MMA, often make more off of their sponsorships than they do from their UFC contract.
Fighters also get 20 percent of all royalties for any merchandise bearing their likeness. This is more fraught than it sounds, which Kevin Iole explains in some detail at Yahoo:
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.
Managing merchandising royalties isn't a problem for other leagues, which negotiate their player licensing through their unions. But the UFC doesn't have a union, so its lower class is left to fend for itself. This could work out if the base rate for appearances is solid, but that's another unknown.
It's also believable that the UFC has to some degree nailed its dick to the floor. Back in 2006, the NBA signed an 11-year apparel deal with Adidas for $400 million. At the time, that was a ton of money. But $36 million per year will look a lot different by the time the deal is up in 2017—with its new broadcast deal, that might not even be one superstar's annual salary. (Manchester United will make $130 million per year from Adidas for its merchandising rights.) Then there's the NFL, which got out of its 10-year $250 million Reebok deal a few years back and entered a five-year $1.1 billion deal with Nike. The scale moves quickly, that is to say, and for an upstart like the UFC that should reasonably be looking to scale even more rapidly than more established leagues, six years is a long time.
Any strain from a six-year apparel deal would fall short of the dilution that came out of the seven-year broadcast deal with Fox—which to be fair was for a reported $100 million a year, bigger than MLS's combined deals and within docking range of the NHL's $200 annual broadcast rights—but it's still long enough, early enough in the growth cycle of the sport, that if one thing or another shakes out wrong there are going to be some serious problems.
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