Are the Lowest-Paid UFC Fighters Really Overpaid? A Comment on Gift (2019)

Abstract

In a recent article in this Journal, Gift (2019) attempts to measure the marginal revenue product (MRP) of individual Ultimate Fighting Championship (UFC) fighters. According to Gift’s estimates, top-tier UFC Fighters are frequently and substantially underpaid relative to their MRP while “a sizable percentage of UFC fighters generated little to no MRP,” and are consequently “overpaid by traditional measures.” In this Comment, we examine possible explanations for this finding, including various limitations of Gift’s data and methods. We also examine the underlying economics of the sport, in which quasi-fixed broadcast revenue streams, ignored in Gift's MRP estimates, play a large and increasingly dominant role. As Berri et al. (2015 ) have emphasized, comparisons of athlete compensation and standard MRP metrics (even if estimated correctly) are “meaningless” in the presence of substantial quasi-fixed revenues. Critically, Gift assumes zero MRP for all fighters in all bouts in all non-Pay-Per-View (PPV) events. As a result, Gift's method assumes fighters are “overpaid” for the vast majority (75 percent) of fighter-bouts. Even setting this aside, we argue that Gift's use of Google Trends data—at best an extremely crude proxy for a fighter's contribution to PPV revenue—suffers from measurement error, producing attenuation bias. As a consequence, Gift's data and methods are likely to substantially underestimate UFC fighters’ economic value.