Why the UFC Must Do Away with the Sponsor Tax

If one issue infuriates the powers that be at the UFC, it’s that of money. The way the UFC manages and maintains its “bottom line” has always been a touchy subject.

Many believe it is a matter of greed, but if you’ve followed Dana White and Zuffa, it becomes clear that most business decisions they make revolve around control.

It’s the one thing they have flatly refused to give up since the beginning. They could have made a television deal far before FOX, but they wouldn’t give up control. They have long believed that no one understands the sport of MMA like they do, and when you consider just how much damage they have sustained to get the UFC where it is today, it’s hard to argue they were wrong.

In the early days, the idea of watching the UFC on free television was a pipe dream. When Zuffa purchased the company, many times it seemed as if they were trying to push a boulder uphill.

They did it by waging one battle at a time. First, it was getting sanctioning with the athletic commissions. Then, it was getting back on pay-per-view. The release of DVDs came next, and all along, surviving to the next show loomed above all like a dark cloud.

They stuck to their guns, ground out year after year, and then they made the first season of The Ultimate Fighter.

We all know the rest of the story. The UFC gets long overdue recognition, attracts more fans, TUF becomes a staple, PPV rates grow, etc.

But when a tale becomes a saga, some things get lost in the shuffle.

It’s always been about the fighters and the fights. People may not like White for whatever reason, but no one can deny that he is about the fights and nothing but the fights, so help him god.

And to be plain, the fights and the UFC are one in the same. One does not exist without the other.

After the fights come the fighters—and that is where things get a bit confusing.

White believes in his fighters just as much as he believes in the sport. He always has. In 2001 and 2003, he sent one of his most popular fighters, Chuck Liddell, to fight in Japan against the best that Pride FC had to offer. Back then, Pride FC was arguably bigger than the UFC, boasting a lineup including Wanderlei Silva, Mauricio “Shogun” Rua, Fedor Emelianenko, Mark Kerr, Quinton “Rampage” Jackson and so on.

White sent Liddell there to prove that the UFC had the best fighters in the world. That venture with Pride FC was the closest the UFC has ever really come to co-promotion.

So, it’s not that he or anyone else at Zuffa don’t believe in the fighters under their banner, because they do.

“It’s nothing personal, it’s just business” as the saying goes.

After having spent so long fighting for the UFC, the company now manages every aspect of their business with the same passion they used to grow it.

Perhaps they will always need someone to fight, so they go from dispatching rival promotions to dealing aggressively with fighter sponsors.

One school of thought says the sponsor tax ensures a level of consistency— that companies that can afford the tax are more reliable when it comes to paying the fighters.

After all, sponsors have stiffed fighters before. Spencer Fisher and Rick Hawn are just two of many fighters who have been shorted the money they were due.

But UFC fighters like Fisher have had problems with sponsors since the tax was implemented.

So, maybe it’s something else.

Maybe it boils back down to control; the UFC has it and doesn’t want to give it up.

The UFC is able to make the fights the fans want to see because it has that control. If it didn’t, one only needs to look to the world of boxing to see the results.

The only time when fighters have any bargaining power is when they sit down to sign their contracts. That is when they can negotiate to the best of their ability. After that, the UFC runs the show, and no one should argue.

But it seems like being far more flexible about sponsorships for fighters would cost the UFC little while helping the fighters greatly.

Make no mistake about it: The fighters want to be great. They want to be legends known for legendary wars.

But it must be hard for fighters to do their utmost when they are distracted by monetary concerns. Financial difficulties are a reality that is hard to deal with in normal life; when coupled with stepping into a cage—where one misstep can see a fighter seriously hurt, not to mention cut from the promotion—then it becomes that much harder.

Yes, fighting is a choice, but that does not mean that those fighters don’t have to contend with more than we can imagine before they set foot into hostile territory.

When fighters are starting in the UFC, they more often than not see most of their income come from sponsorship dollars. It gives them the elbow room needed to overcome the losses and keep marching forward in pursuit of their dreams.

And the hard part comes when a sponsor is suddenly banned after a fighter has signed a contract. Most fighters starting in the UFC live by a budget, just like the rest of us. When a ban is imposed, it can alter the life of a fighter, as detailed by Dan Hardy in an interview with BloodyElbow.com. He said of the sponsor tax:

"

That really hurt the fighters. I went from one fight, where I sold the space on the front of my shorts for $5,000, to six months later, going back to the same company, and only getting an offer of $1500 because of the sponsor fee. I refused it, because someone has got to set a standard. The problem is, when I turn it down, there's another 10 fighters on the undercard that will take that offer, because there's nobody else paying.

"

Obviously, the UFC wants to control which sponsors are displayed on the shorts, caps and banners that a fighter and his corner bring into the cage with them. The UFC's image as a corporation is at sake. If a fighter steps into the cage proudly wearing the name of an adult bookstore, then many will say Zuffa endorses the adult entertainment industry.

But then again, as reported by CagePotato.com, the UFC just signed Benjamin Brinsa, an undefeated fighter who has ties to the Neo-Nazi movement in Germany, so clearly it isn’t too worried about guilt by association.

So maybe the sponsorship tax wasn’t designed to help regulate the promotion of questionable sponsors or police their conduct in any way. The mechanism needed to do that is regulation, not taxation.

Dana White may still think as he did when he spoke on the subject in 2009: “We’re the most lenient sports organization on planet (expletive) earth. When was the last time you saw guys wearing whatever they want in the NFL, Major League Baseball, the NBA, World Cup Soccer?”

But that line of debate doesn’t really work when the league minimum in the NFL, as of 2013, was $405,000 per year for a rookie. And they get bonuses in the NFL as well. If new UFC fighters made even a fourth of that, no one would complain about a lack of sponsors on a fighter's shorts or shirt.

There has to be another way that allows fighters to get the sponsorship money available to them without the UFC losing control of the situation.

It’s hard to imagine that the UFC needs the money from the sponsor tax. And if White and Co. say they do, they still don’t need it as much as the fighters do.

With all the negative talk about fighter pay and the debate of bonuses versus a higher baseline of pay for all fighters, doing away with the sponsor tax would be a good solution to many current problems.

First of all, there would be far fewer complaints about money. The fighters would be making more money in their careers at no cost to the UFC. Additionally, when fighters have an unrestricted cash flow from sponsors (be they small or large), it becomes an incentive to fight harder. It might be Bob’s Rib Shack today, but it could be Nike tomorrow.

Second, fewer fighters would distracted by financial hardship, which in turn would allows them to focus to on their training and bouts. It may seem like small peanuts, but a few extra thousand dollars here or there adds up and could mean the difference between a fighter getting to train full time instead of part time while working another job.

The UFC has long maintained that the pay scale and bonus situation are perfect the way they are—that fighters who make more money are getting to “eat what they kill.”

If that is indeed the case, then fighters should not see their potential to earn money from outside sources taxed as it is now. That income source is of no detriment to the UFC. To step back and allow that money to flow where it is intended would cost the company nothing and aid the fighters a great deal.

The sponsor tax is not a necessary mechanism by which the UFC regulates sponsorship conduct, nor is it a means to make great fighters even greater. If anything, it hinders the potential of up-and-coming fighters and simply sees a rich company made richer as a result.

Such monies are the spoils of the victory, so to speak. The fighters have earned that money through their own blood, sweat and tears, a notion that speaks directly to the ideal of eating what they kill.

Or, maybe it’s just as simple as American author and essayist Edward Abbey says: “Taxation: how the sheep are shorn.”

But I hope not. It would be unseemly to treat those fighters like sheep when they are really lions.