What Francis Ngannou's Struggles Can Teach Us About Incentives And Ethics In Combat Sports

Francis Ngannou is the Baddest Man With the Best Contract

Francis Ngannou has a new home. MMA’s most imposing heavyweight has signed a revolutionary contract with the PFL. Highlights of his deal include:

• A “high 7-figure” purse for each fight

• A split of the events net profits

• A signing bonus or salary to serve as a brand ambassador for PFL

• The right to have his own sponsors in the cage

• Non-exclusive with regards to boxing

• No champions clause or other extensions

• A minimum salary (possibly as high as $1 million) for his opponent.

The deal is lucrative, one of its kind for mixed martial arts, and carries important contractual clauses that make supporting Ngannou an ethical responsibility for all mixed martial arts fans. That’s not hyperbole.

What Ngannou did by denying the UFC monopsony his labor has the potential to be a history defining moment in mixed martial arts. It also has the potential to turn the PFL into another Affliction. A bankrupt, bygone promotion whose own heavyweight bets never fully paid out.

Time will tell if the Ngannou gamble actually pays off for the PFL. I’m not going to speculate on that either way. Today we are going to look at the facts surrounding this surreal situation, what they mean for the business of mixed martial arts, and us, its consumers.

It’s Just (Hurt) Business

I started training mixed martial arts at the end of high school. I was fortunate enough to grow up in the mixed martial arts hotbed of the San Francisco Bay Area.

San Francisco hosted the legendary Muay Thai brand Fairtex, San Jose was home to the dominant MMA gym American Kickboxing Academy, and Cesar Gracie’s fighters, before they were known as the Skrap Pack, were sprinkled all over the region. I ended up training with one of Gracie’s original talents, two time UFC title challenger Gil Castillo, at a small gym called Combat Fitness.

While Castillo hardly knew me at the time, he ended up giving me some of the best advice I've ever received, “If you’re not a world champion, you’re just a paycheck.” Obviously that’s not literal. Combat sports can’t function without challengers, prospects, and journeymen across the sport; but Castillo’s point was sound.

Even today mixed martial arts is hardly a career path. If you’re not going to be one of the best, you’re not going anywhere financially. To wake up at 35 with limited transferable skills and more traumatic brain injuries than digits in your savings account is close to a death sentence for many people living in the US.

Combat sports are a powerful, poetic, and painful microcosm of life. We quite literally watch people lift themselves out of poverty through grit and aggression. It can be brutal, border on exploitative, and one of the most powerful displays of human will that you’ll ever see. Some people exit the industry with outsized returns. More often than not it isn’t the men and women actually creating the product.

As fate would have it, since news of Ngannou’s contract broke, more information about the state of the UFC’s business has come out. Veteran reporter John Nash has been documenting the UFC’s finances for years. About a week ago, Nash released this article that break’s down the UFC’s 2022:

• $1.140 billion in revenue

• $387 million in profit

• $167 million from sponsorships (up from $52 million in 2015)

• Operating costs decreased 3% from 2021 to reach $326 million in 2022

• Athlete costs reduced by $32.8 million

• Fighter pay was around $146 million; roughly 13% of revenue

The fighters’ share of the revenue generated by the UFC is at a historic low. UFC fighters have taken home roughly 20% of the revenue over the past several years. The drop that we’re now seeing is directly in line with the UFC’s stated plans to keep fighter pay under 20% of revenue. This gets more dismal when you compare it to other sports like the NBA where players and owners both take nearly 50%.

Finding information about fighter pay has been made to be tedious. The UFC is not required to disclose pay in many states that they operate in, like Nevada where they are headquartered and do the majority of their business.

Recently the UFC traveled to Charlotte, North Carolina, and was required to disclose pay. The entire fight card’s combined pay was less than $2 million spread across 22 people, and five people took home less than $30,000. For comparison again, NBA’s rookie minimum salary is right around $1 million per year.

It’s common sense that the NBA generates more revenue than the UFC. That should, and does, entail higher salaries across the board. Moreover, businesses need to make money to survive, scale, and pay off debts; and the UFC is no different. What does not make sense and borders on indefensible is arguing in favor of an organization shrinking the percent of pay that their contractors are afforded, while actively enforcing policies that limit those contractors’ ability to generate additional revenue.

In any other industry a company that is making it harder for their employees to afford their living expenses will have a challenging time attracting premier talent to work for them so they can continue making high quality products. Mixed martial arts is different.

It would be disingenuous to say that the UFC pays worse than other mixed martial arts organizations outright. The minimum pay for athletes in rival organizations like the PFL and Bellator is lower than in the UFC. MMA fighters are stuck between a rock and a hard place. However, for the past few years the PFL has been able to attract interesting talent because they pay $1 million to every fighter that wins their tournaments. This objective pay structure combined with the news of Francis’s contract are painting PFL as a mixed martial arts organization with unique opportunities for athletes.

Incentives & Long Term Investing

Let’s go back to the past in the Bay Area and listen to a speaker tell his side of the story so we can partially understand why fighter pay is where it is today. The video is timestamped to the appropriate section.

For those unfamiliar, let’s briefly discuss the UFC’s pay structure in more detail.

Fighters are essentially mercenaries. They get paid half of their money to show up, and the other half of their money to win at the expense of whoever is in front of them. Fighters lack benefits that full time employees receive and trendy compensation packages with things like equity grants, mental health stipends, and other ancillary bonuses are out of the question. Fighter pay is a brutal reality that adds an extra layer to the idea of “hungry fighters”.

For what it’s worth, every fight card also gives out bonuses for fighters that have “performance of the night”. Typically this is reserved for the best fights and exceptional finishes. This has been touted as incentivizing fighters to be more exciting. That argument could not be more flawed.

Let’s cut the bullshit. Fighters don’t show up to lose. Splitting pay between show money and win money does nothing but cut costs. Performance bonuses are doled out by White, making them completely arbitrary and essentially outside of the fighters’ control.

Let’s briefly pretend fighters are incentivized to win by the win bonus. If we layer this on top of the very human incentive to avoid pain and punishment that White discussed in the video above, we can reasonably say that fighters are actually incentivized to win as safely as possible so they can fight again sooner and ultimately collect another paycheck. A better solution to the problem of needing to incentivize action would be to give a bonus to every single fighter that gets a finish.

Getting back to Ngannou’s contract and how it relates to the video, White’s rudimentary point is correct, financial incentives motivate action. Unfortunately for White, the UFC’s solution has proven to be overly myopic.

Contracted pay is only one way to incentivize labor and it does nothing to incentivize action outside of that labor. What White failed to see is that other MMA organizations would be willing to provide unique incentives to motivate action from their fighters in and out of the cage, and that’s exactly what the PFL is doing.

There are two important details from Ngannou’s contract that deserve greater attention. Not only does Ngannou get a split of the revenue generated from the fights he participates in, but he is also an equity partner in PFL Africa. That’s a fancy way of saying Ngannou will make additional money over the course of his lifetime as he generates additional profit for the PFL subsidiary, PFL Africa. The PFL have incentivized Ngannou to grow the business more than the UFC ever did. With this industry defining contract, the PFL has also created an incentive for you, the consumer, to watch their fights.

Conscious Capitalism & Ethical Enjoyment

This article is not written to bash the UFC. As a Brazilian jiu-jitsu coach, I feel indebted to White and the UFC for popularizing mixed martial arts so more people want to pay me to teach them a facet of the sport. I also genuinely enjoy the product they built. You can think that while also wanting fighters to have more ways to monetize their name and likeness, the option to pursue more lucrative contracts, and a higher percent of the profits derived from the product they create.

In preparing for this article I reached out to my friend that runs the brilliant Youtube channel MMAi. He had the following to say:

The point of this article is not to argue for or against the UFC profiting, or capitalism in general. When I’m not training, watching, and writing about MMA I work for a financial technology company. I understand the values of capitalism and I’d like to think I understand the shortfalls as well. The competition inherent in capitalism is valuable simply because it makes people and organizations try harder to capture more revenue. That’s exactly why Francis Ngannou’s contract is so important.

I lived through the UFC competing and winning against Pride, Elite XC, Strikeforce, and countless other promotions across the world. The UFC used to regularly try new and interesting experiments to stay top of mind with MMA fans all over the world. I remember Dana White sending Chuck Liddell to Japan to represent the UFC in Pride, bringing Royce Gracie back to fight Matt Hughes, and signing Brock Lesnar to shake up the UFC. Those activities didn’t all yield the results the UFC intended, but, they all promoted the UFC’s brand to a wider audience, thereby capturing more customers and revenue. Contrast that to the recent string of completely forgettable UFC cards we’ve been getting and it’s starting to look like the UFC is a content creation company more than a promotion machine these days.

The UFC can pay fighters what it does because there are no external pressures forcing them to change. That is, the government has not cracked down on the UFC, nor has any other promotion been able to capture enough revenue to force the UFC to adapt. Which of those can you impact?

Voting with your dollar is practically the last objective democratic process we have left. You have the opportunity to stand up and vote for better fighter contracts, or at least UFC alternatives, by watching PFL content and purchasing their pay-per-views cards.

Ethically, I feel incentivized to write this piece. More people need to know that we can support fighters directly by participating in the Ngannou experiment. I also know that the UFC is where it is today because it is led by freakishly competitive people with access to an incredible amount of resources. The only thing that has changed is they’ve accumulated more resources as their competition has dropped off. If new competitors come on the board I have to imagine the UFC will start competing for our attention again. The recent fight announcements make it seem like they’re at least trying to capture our eyes.

Buying Ngnannou’s pay per views and ignoring the UFC’s should lead to the UFC working to create more favorable fighter contracts so they can continue to entice better talent to sign with them, make interesting fights, and capture our attention and money.

The history of combat sports is impossible without poor, marginalized people fighting for their livelihood and rights. They represent the communities they come from and push their rights forward by putting their struggles into the limelight. The Ngannou story is no different.

While Ngannou is quite literally bringing the sport and economic activity to the entire continent of Africa he also represents another community, workers and fighters alike that are toiling away trying to break through their own barriers of economic oppression.

Ngannou is a main character in the latest chapter of fighting for the freedom to secure a better life. I hope you’re not too blind to read it.