Saudi Arabia and a $1bn fighters lawsuit threaten UFCs future

The UFC has been accused of engineering a monopoly over the world of mixed martial arts. But its leverage may soon be severely weakened

As the UFC prepares for its upcoming showcase event on Saturday, the real fight is set to take place outside the octagon, within the confines of a courtroom.

Last week, the UFC lost its bid to revoke class action status from hundreds of mixed martial arts fighters who are suing for more than a billion dollars in wages. The lawsuit accuses UFC parent company Zuffa LLC of illegally acquiring and maintaining a monopoly over the MMA industry, which resulted in fighters being paid “a fraction of what they would earn in a competitive marketplace.”

Now, with a pivotal ruling from the US ninth circuit court of appeals, the lawsuit is scheduled to start in April 2024.

The plaintiffs, who could include more than 1,200 fighters who competed in the UFC from 2010 to 2017, are seeking between $800m and $1.6bn in damages. If successful, the lawsuit could reshape the landscape of MMA and redefine how the UFC operates.

In 2006 – following the collapse of Japan-based PRIDE FC – the UFC solidified its grip on the MMA industry, effectively becoming the undisputed power in the sport. This ascendancy granted the UFC substantial leverage when it came to negotiating with fighters.

One of the most significant consequences of the UFC’s dominance was a noticeable decline in fighter pay. The UFC held a virtual monopoly over the MMA industry, leaving fighters with limited bargaining power. With few viable alternatives, fighters faced a stark reality: accept the terms offered by the UFC or risk being left without anywhere else to fight professionally.

As a result, fighters’ pay failed to reflect the growing popularity and profitability of the sport, leaving many athletes struggling to make ends meet. Unlike the vast majority of sports leagues and organizations, where athletes receive anywhere between 47% and 50% of revenue, the UFC has historically paid out between 16% and 19% of its revenues to fighters.

Moreover, the UFC’s dominant position allowed it to pressure fighters into signing long-term contracts that often included restrictive non-compete clauses. These clauses effectively prevented fighters from participating in other MMA organizations, locking them into exclusive agreements with the UFC. This not only limited fighters’ earnings and career flexibility but also raised concerns about the fairness and competitiveness of the sport. Fighters found themselves trapped in these agreements, unable to explore other opportunities or seek better compensation elsewhere.

Meanwhile, the UFC continues to generate record revenues. According to its parent company Endeavor’s SEC filings, the organization generated $1.14bn in 2022. During the first two quarters of 2023, the UFC produced $611.9m in revenue, up 16% from the first two quarters of 2022.

The combination of reduced pay and contractual restrictions led a group of former UFC fighters to file an antitrust lawsuit against UFC in December 2014. Now, nearly a decade after the initial filing, the case appears to be heading to trial.

If the plaintiffs secure a favorable ruling, the consequences could be profound. It not only implies a substantial financial burden for the UFC to compensate fighters, it could also trigger a shift in the way the organization conducts its business. This transformation may encompass a reevaluation of the revenue distribution between the UFC and its fighters, granting fighters greater bargaining power, and potentially allowing them more control over the use of their likenesses in areas such as advertising. Such adjustments could have a significant detrimental impact on the UFC’s business model and overall profitability.

The UFC is also dealing with a follow-on antitrust lawsuit filed by a pair of former UFC fighters. While the initial lawsuit covers fighters up to the cut-off date of 30 June 2017, the second lawsuit covers fighters who competed from June 2017 to the present day.

Considering the risks associated with proceeding to trial in an antitrust lawsuit, the UFC may explore the possibility of reaching a settlement with the plaintiffs. Although a settlement would undoubtedly entail a financial burden for the organization, it serves as a means to steer clear of a less favorable outcome that could arise from a jury trial.

Beyond the UFC’s class action concerns, the organization is also facing the threat of competition after Saudi Arabia’s $100m investment in the Professional Fighters League (PFL), a UFC competitor. The deal is among the latest examples of the kingdom’s unprecedented sports drive, which includes investments in soccer, golf, Formula One, and boxing.

During the first earnings call for Endeavor’s TKO Group – the public company created by the merger of UFC and WWE – its CEO, Ari Emanuel, played down concerns that Saudi Arabia’s investment in the PFL would be problematic for his organization, citing the UFC’s own plans to host a Fight Night event in the kingdom next year.

“Competition’s not new for the UFC or the WWE,” Emanuel said during the call. “MMA is probably the fastest growing sport and we’re encouraged by the interest. Rising tides lift all boats, in my opinion. We don’t see it as a zero sum game.”

Nevertheless, Saudi Arabia’s interest in MMA could spell trouble for the UFC. Earlier this year, the US-based PGA Tour and its Saudi-funded rivals LIV Golf announced plans to merge their businesses after a bitter battle for control of men’s professional golf. The surprising turn of events highlighted Saudi Arabia’s financial power, as the kingdom succeeded in orchestrating the capitulation of a major US sports organization by investing billions of dollars in launching a rival league, luring top players with lucrative contracts, and pressuring the PGA through expensive legal actions.

Although the UFC may not encounter an outcome similar to that of the PGA Tour, it has already experienced a glimpse of Saudi Arabia’s competitive influence. After a lengthy contract dispute, former UFC heavyweight champion Francis Ngannou was stripped of his title and released from the organization as a free agent. He went on to sign with the PFL and secured a mega fight against heavyweight boxing champion Tyson Fury in Saudi Arabia – a bout that reportedly netted him more money than his entire UFC earnings combined. Ngannou’s success could spur more fighters to explore free agency in pursuit of more lucrative opportunities elsewhere.

With the imminent specters of antitrust litigation and a kingdom harboring boundless aspirations, the UFC finds itself confronting an existential fight unlike anything it has faced in the past – the outcome of which could reverberate throughout the MMA and sports landscape.

• Karim Zidan writes a regular newsletter on the intersection of sports and authoritarian politics.
  

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