The economics of UFC fight-night bonuses

Say you’re a first-time UFC fighter. A stretch for most of us, I know, but bear with me.

Say you built up a nice record on regional MMA events, stayed motivated and hungry and constantly in shape, then you got the call. You’re going to make your debut on the preliminary portion of a UFC pay-per-view. This is your big chance.

And your pay for this big chance? $8,000 to show and another $8,000 to win. Not exactly a jackpot, but it’s a start. Then again, once you factor in taxes and management and the cost of your own training camp just to get to this point, you might be lucky if you have enough left over to get you to the next fight.

Only – hold on – things aren’t as bad as they seem. There are three different bonus awards up for grabs at the end of the night, and each one is worth about three times your entire take for fighting and winning. And you? You’re eligible for them. Hell, you might even win more than one. You could show up to fight for $16,000 and end up pocketing an extra $100,000 just for doing a really good job. What’s not to like about that?

In theory, it sounds like a pretty sweet deal for prelim fighters. It’s just that, once you actually look at how it shakes out in reality, you realize their odds aren’t so great.

For instance, look at this graph from MMA analyst Reed Kuhn. After looking at roughly eight years’ worth of UFC end-of-the-night bonuses, Kuhn found that, statistically, prelim fighters are unlikely to actually win one of those bonus awards. According to Kuhn’s analysis, 36 percent of main event fighters took home some form of bonus (most often the “Fight of the Night” bonus), while fighters in the 12th spot on a card – typically the first fight of the night – won a bonus just seven percent of the time (including zero “Fight of the Night” bonuses).

Throughout the prelims, the numbers look similarly depressing. The six and seven spots – the two fights just before the main card begins – offer the best hope for a bonus, but even those fighters win a bonus award only 14 percent of the time. The chance of two prelim fighters combining for the “Fight of the Night” is even worse. As Kuhn pointed out, “A fighter in any given spot on the main card will average a 14.7 percent FOTN bonus rate, while being on the prelim card results in a measly 3.2 percent FOTN average. That’s a huge drop, and a far larger drop than Knockout and Submission averages across the card.”

This brings us back to UFC President Dana White’s recent suggestion that the UFC might do away with fight-night bonuses in response to compensation complaints from lower-level fighters.

“You don’t like the structure? All right, we’ll pay the lower-level guys more money – no more f—ing bonuses,” White told reporters before UFC 162 earlier this month. “You guys come in, you negotiate your contracts, and we do away with all bonuses. That’s what I’m thinking about doing.”

White has since backed away from that suggestion, saying during a conference call this week that the bonuses were here to stay. “After I said (we might eliminate them), I got a lot of feedback,” White said. “The fighters want the (fight-night) bonuses and they want the discretionary bonuses to stay the same. So that’s that.”

Assuming that support for the UFC’s bonus system truly is as unanimous as White makes it sound, and also assuming that his original suggestion of eliminating bonuses in order to redistribute that money to lower-level fighters was a genuine one (two big ifs to begin with), you have to wonder if that wouldn’t have been a better deal for prelim fighters. With $50,000 per bonus award, and three separate awards that go to four fighters per fight card, that’s an extra $200,000 that could be spread around to undercard fighters. As Kuhn points out, “An even salary allocation would give an additional $14,286 to each undercard fighter for the typical 12-fight card.”

For the guys making eight and eight, that sounds like a pretty good deal, especially if their position on the fight card makes winning a bonus statistically unlikely to begin with. So why didn’t we see those fighters jumping up to accept White’s initial proposal?

Part of it is that most lower-level UFC fighters probably don’t want to risk the boss’s wrath by talking publicly about money. If you’re on the prelims, it usually also means you aren’t on the firmest of ground with your employer. You’re expendable, and complaining about pay doesn’t do much to help that situation.

But just based on my own private conversations with fighters, it seems like White is right. Most of them like the bonuses. Even fighters who have never won one seem to think it’s a fair and equitable system, and they don’t want to see it disappear. Statistically, it seems like they’d be better off trading a relatively small chance at a big financial reward in exchange for a smaller, though guaranteed increase in show money. So why won’t they get on board with that idea?

According to Seth Gitter, a professor of Economics at Towson University in Baltimore, it might have something to do with the psychology that motivates someone to become a fighter in the first place.

“Most economic theory assumes that most people want to avoid risk,” Gitter said. “That’s why we buy insurance. But in some cases people are risk-loving.”

A sport where people lock themselves in a cage with other humans who are trying to smash their faces may just be one such case. By its very nature, fighting isn’t the kind of sport where you can afford to be content with second place. The 25th best tennis player in the world might make a good living with relatively minimal risk, but the 25th best welterweight in the UFC is going to have to bleed a lot for not much cash in the end. The big money is this sport goes to those at the very top of the pyramid.

That aspect of fighter compensation, Gitter said, brings to mind the economic concept known as “tournament theory.”

“The idea is that in many situations most people receive really small wages with a small chance of big wages,” Gitter said.

Those wages are determined not so much according to actual value, but rather on relative value among the individuals. That’s why winning a fight usually pays twice as well as losing it, and why the champion usual makes many times more than the challenger. Financially, being No. 1 in MMA isn’t an incremental improvement on being No. 2 – it’s a colossal one.

Obviously, it’s not just wins and losses that factor into an MMA fighter’s pay. There’s also a lot to be said for popularity, as well as for differences in weight classes. Heavyweights not only knock each other out more often, but they also have a greater chance of ending up on the main card, so your typical heavyweight has a better shot at big money than the average bantamweight. There’s also the chance that circumstances will come to your aid. Take James Krause, who won $100,000 in bonuses for his UFC debut on the prelims of UFC 161. His was one of only two fights that didn’t end in decision that night, and he had the only submission on the card. Thanks in part to the disappointing relative performances on the rest of the card, he was able to beat the odds.

Still, tournament theory might help explain why fighters are often content to compete for very little in the hopes of one day hitting it big. It also might be a very savvy way of doing business, from the UFC’s perspective.

“Economic theory developed under tournament theory suggests the most effort will be put into production when there is a big difference between winning and losing payouts,” Gitter said. “I think the prizes provide exactly the incentive an economist would recommend.”

In order to make it work, all you need are people willing to take the risk. You need people who either aren’t calculating the odds that the bonus system will work in their favor, or else people who so overestimate their own abilities that they assume they’ll be one of the lucky ones who ends up being the exception rather than the rule. In other words, you need the kind of people who want to become pro fighters in the first place.

As famed MMA trainer Greg Jackson likes to say, “Fighters have to be optimists.” There are just so many things that can go wrong, both in the fight itself and in the lead-up to it, that you have to believe things are going to work out in your favor even when it seems unlikely. The same could be said about a career in MMA. The bonus system, and indeed the compensation system in general in this sport, seems designed to attract the aggressively optimistic sort of person who assumes they’ll be different.

The UFC offers bonuses as an incentive to produce exciting fights and spectacular finishes, but they also operate as a sort of lottery for the fighters who are toiling on the undercards for small payouts and little recognition. There’s always the chance – however slight it might be in reality – that you can fight your way into the big money.

The fact that it won’t happen for most prelim fighters means you have to be a special talent, or operating under special circumstances, in order to beat the odds. But then, if you didn’t think you were special to begin with, what are you doing in a televised cage fight on a Saturday night?

(Pictured: James Krause)