UFC, Lebron James, Lawrence Epstein discussed on Freakonomics
One obvious difference between the cost of labor in sports versus just about any other industry, except maybe the entertainment industry is that the employees ease are the product which makes them much more visible than employee's typical industry and potentially much more valuable consider a superstar like LeBron James this year is earning thirty five point six million dollars, which sounds absurd until you try to calculate just how valuable he is to the sport. I mean, it's LeBron James was getting what he deserves. He'd make two hundred million bucks a year three hundred million dollars a year that again is Lawrence. Epstein of the UFC. His biggest star Conor McGregor earned a reported one hundred million dollars for that pay per view fight against Floyd Mayweather junior. Oh, man. I mean, I mean, we if Connor made one hundred million dollars last year, which is probably you know, I mean twenty percent of our revenues. You know, LeBron James is got to be worth ten. Ten percent of the revenues of the NBA. He's gotta be right. So what does that it's four hundred million or something it's a giant number? Maybe not Connor which is twenty percent of our revenues, but he's easily ten. He's easily ten for the record. The NBA produced about seven and a half billion dollars in revenues last season. Ten percent of which would be roughly seven hundred and fifty million dollars too bad for LeBron James that Lawrence Epstein isn't setting a salary, and what about you f c salaries before interviewing Epstein, I'd ask the economist Victor Matheson to compare athlete salaries in different sports. You know, if you're trying to decide what what sport to go into you probably want to go into baseball and football for at least, you're going to be earning a pretty big chunk of those television revenues and man stay away from UFC because they're making a lot of of revenues, but not much of that is going into the athletes, you know, the amount going to the athletes there's about ten or fifteen. Percent of revenues so again, much less. Why do you have these athletes earn so much less? Keep in mind. What Lawrence Epstein told us earlier that the UFC unlike other leagues pays its own production costs still you might think that compared to the big team sports. You have see athletes would do pretty well since team sports requires so much more labor to produce. We do know that you have see fighters are not unionized, which means they don't have collective bargaining power like NFL and other team athletes do in any case, I asked the UFC's Lawrence. Epstein about this disparity. Well, you know, I think for small the fifteen percent number. I don't I don't think that's accurate. I mean, there certainly is some fluctuation in the percentage of revenues that goes athletes, but the reason for that, you know, primarily is that we have a variable revenue stream model in our company. So you mentioned the NFL let soom they're giving fifty percent of the revenues to the athletes. Well, those revenues are contracted revenues with. The largest media companies in the earth, ESPN, CBS NBC FOX, and and others the significant part of our profitability still comes from pay per view events, which of course, are completely variable in revenue in so because we just don't have those contracted revenues like so many of the other sports leagues. Do you know we're taking a lot of risk every time we put one of these major events on. I mean, you can't just agree to pay certain people a certain amount of money if you don't know whether or not that money is going to come in. And of course, the NFL and major league baseball, and the NBA multibillion dollar contracts with, you know, great credit on the other side of of those deals bright. I've read that the median UFC salary is roughly forty two thousand dollars a year, we interviewed a fighter Lauren Murphy, who's the number five ranked female fighter in her weight class. And she told us she gets about twelve grand per fight guaranteed. Another twelve grand if she wins in a fifty thousand bonus if she's the. The fight of the night. So she said she said years where she's made just twenty thousand and one year wish made around ninety thousand again for fighter whose whose number five in the world. In her ranking. I understand there's an ongoing antitrust lawsuit against the of C which claims that the UFC used an anticompetitive scheme of long-term exclusive fighter contracts coercion and acquisitions of rival MMA promoters to establish a maintain dominance..