Extreme fighting may face more fees
By Peter Boylan
Advertiser Staff Writer
By Peter Boylan
A bill seeking to regulate the extreme-combat industry includes a revenue collection formula unheard of by state tax officials, and promoters say higher fees would cripple their ability to stage fights in Hawai'i.
HB3223, passed out of the state House Tourism and Culture Committee yesterday, calls for promoters to pay a license fee of 3 percent of the first $50,000 in ticket sales and an additional 5 percent of all sales over $50,000. Additionally, the measure asks for 5 percent of all television and Internet revenue and 5 percent of all pay-per-view and DVD sales.
The bill will next be heard by the House Judiciary Committee.
Patrick Freitas, who along with T. Jay Thompson runs Icon Sport, said the proposed revenue collection would prevent all but a few international companies from putting on fights.
"It's nuts. It's gonna kill us," he said yesterday. "We initially came out and supported (the bill), but we're changing our stance. We're looking at $12,000 to $20,000 in fees going back to the state per fight. That's way too much money. Let's give the current system more power."
Most sporting events are subject to the state general excise tax of 4 percent from ticket sales and other event-generated revenue.
The proposed licensing fees and revenue collection are "unusual," said Frank Ruff, a tax specialist with the state Department of Taxation.
"As far as different levels of income coming in and being taxed at different rates is new to me," he said. "Nothing like that is on the tax books."
The bill also establishes a five-member, independent body called the Mixed-Martial-Arts Commission of Hawai'i, to be appointed by the governor.
"When you look at an event like this, there are millions of dollars being made and the state needs to capitalize on that," said Rep. Jerry Chang, D-2nd (Hilo), the bill's author. "By creating a commission, the commission will regulate it and make sure everyone is getting paid and the public is getting its money's worth. We're crafting the framework and the commission will create the rules."
Chang's measure is aimed at regulating extreme combat bouts like "Rumble on the Rock," "K1" and "Ultimate Fighting Championships."
States across the country have been rushing to create regulatory bodies for the sport over the past four years in order to collect revenue and rein in unlicensed, backroom cage brawls.
In December, the California State Athletic Commission officially sanctioned mixed-martial-arts by setting up a regulatory body, paving the way for the state to tap into a multi-million dollar revenue stream. It is one of 20 states now regulating mixed-martial arts.
The Mixed-Martial-Arts Commission of Hawai'i would be responsible for enforcing an expansive list of laws that govern everything from the number of paramedics and licensed physicians at fights to the amount of liability a promoter faces if he doesn't provide adequate punch for consumers' dollars.
Commission members, one of which must be a former fighter, will carry badges and attend events.
The popularity of mixed martial arts started to take off in the 1990s and has become an international industry worth hundreds of millions of dollars, selling out 10,000-seat arenas in Las Vegas and Tokyo in addition to racking up pay-per-view sales. The Ultimate Fighting Championship, a company run by Lorenzo and Frank Fertitta, two brothers who own Station Casinos in Las Vegas, is the largest U.S. extreme combat company operating.
UFC's reality series, "The Ultimate Fighter," drew more than 2 million TV viewers during November's season finale, according to Nielsen Media Research.
Tickets to fights in Hawai'i range from $30 to $350, and some events have drawn more than 7,000 people.
Icon Sport, a subsidiary of international fight promoter Future Fight Productions, earned more than $4 million in gross revenue in fiscal 2005 and has held more than 500 bouts in the state since 1996.
Under the current law, the state receives a $500 fee and an unspecified amount of revenue generated from facilities rentals for each fight.
Before an exemption became law last year, mixed-martial-arts contests and other forms of extreme combat were technically illegal, but promoters squeezed bouts through loopholes in the law for more than a decade. Under the law the governor signed in May, promoters can get an exemption if they:
Extreme-combat bouts are currently monitored by investigators with the Regulated Industries Complaints Office, and any violation of the exemptions in the law subjects the promoter to the possibility of a $10,000 fine per offense.
Rep. Tommy Waters, D-51st (Waimanalo, Lanikai), had introduced a bill that would have banned the sport in Hawai'i after parents in Waimanalo complained their children were re-creating the bouts and getting injured. That bill died.
Waters also takes issue with children emulating mixed-martial artists, especially those recently in the news for high-profile arrests.
Last year Rumble World Entertainment's B.J. Penn was charged with assaulting a police officer, and Icon Sport's Jason "Mayhem" Miller was charged with burglary.
Penn will stand trial this summer for punching a uniformed Honolulu police officer at a post-fight party and Miller will go to trial after he was arrested for breaking into his ex-girlfriend's apartment in December.
"I would certainly be concerned if children were looking up to these guys as role models," Waters said. "Rather than aspiring to become a professional mixed martial artist I would hope that young people would aspire to bigger and better things and that's aside from the fact that some of these guys are getting into trouble (with the law).
"Sure, you got your bad eggs in the NFL, but for the most part these people went to college and are good role models. I think (HB 3223) is better than nothing and at least it puts some parameters in place. I'm a little disappointed, but I believe in the process. Nobody came out and testified in favor of my bill and it died."
Reach Peter Boylan at email@example.com.