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UFC's Refusal to Co-Promote Events Isn't Just About Their Dominance

15478-200856538280One of the most easily analyzed quotes from Dana White and Zuffa has long been the statement that the UFC will never be involved in a co-promotion. Most fans believe this is due to the fact that the UFC is the biggest and most profitable MMA promotion in the world, and those fans would be right. The UFC has nothing to gain from a co-promotion with another promotion, and the co-promoting organization would have everything to gain from the UFC's name.

During today's media conference call , Dana White said that a co-promotion was "impossible". One of the quotes actually stated that the Fertittas have a gaming license, and it implied that this was one of the reason as to why the UFC would ultimately never co-promote along with the obvious fact that they are making loads of money without the help of any other promotion.

What did Dana White mean by this? After thinking about this for awhile, it really stems from something that happened quite awhile ago involving the PRIDE buyout and the following lawsuit between Pride FC Worldwide Holdings LLC, a Lorenzo and Frank Fertitta-owned venture, and Dream Stage Entertainment, Nobuyuki Sakakibara, Ubon, and Dream Stage Holdings along with some other unknown defendants.

The most notable part of the lawsuit did, in fact, involve the Fertitta's gaming licenses:

The complaint states that because of the Fertittas' involvement in the Nevada gaming industry, specifically their possession of privileged gaming licenses as owners and operators of Station Casinos, it was "essential" for the selling parties "to undertake certain post-closing actions."

Section 5.3 of the asset purchase agreement expressly required that the defendants, particularly Sakakibara, "submit to and pass any reasonable background checks." However, according to the complaint, the selling parties "have repeatedly and consistently failed to submit basic information to and have materially obstructed the Investigator in the conduct of its background checks and due diligence investigation of, among others, Sakakibara and Ubon."

Pride Worldwide alleges that "the Selling Parties never intended to comply with this material term, thereby defrauding the Purchasing Parties into entering into the AP Agreement, the Consulting Agreement, the Non-Compete Agreement and the other related transactional documents and into paying the Selling Parties millions upon millions of dollars."

Notice of breach was first provided on Aug. 22, 2007.

How did these gaming licenses have anything to do with this entire buyout? Any dealings that Fertittas are involved in are subject to due diligence of the company that is being acquired or bought. The Fertittas cannot be involved in anything that has any type of organized crime connection or corruption connection because of their involvement in the Nevada Gaming industry.

If a co-promotion had actually been set-up between the UFC and M-1 Global, M-1 Global would most likely have to undergo some sort of due diligence process in the same manner due to having a contract involvement with Zuffa. Since Zuffa's CEO is Lorenzo Fertitta, this could become a problem. More importantly, it could become a huge problem for the Fertittas if by some chance M-1 Global is involved in some sort of illegal activity. The last thing Lorenzo Fertitta would want is a lengthy investigation by the Nevada Gaming Commission.

There are definitely a number of reasons why Zuffa wouldn't want to enter a co-promotion agreement with another organization. Not only does it not help their own organization, but it could end up causing a huge hassle down the road much like the Dream Stage Entertainment deal to acquire PRIDE.

The FanPosts are solely the subjective opinions of Bloody Elbow readers and do not necessarily reflect the views of Bloody Elbow editors or staff.

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The Fertittas cannot be involved in anything that has any type of organized crime connection or corruption connection because of their involvement in the Nevada Gaming industry.

I made this exact point several days ago when someone suggested Zuffa was being unnecessarily stubborn for not writing the checks directly to M-1, which was reported to be the sticking point of this whole “co-promotional” front.

"The reason a rabbit outruns a fox is because the rabbit is running for his life and the fox is running for his dinner."

by Blackout612 on Jul 31, 2009 4:29 PM EDT reply actions   1 recs

Yeah, well… it was brought up in the conference call. Even though I knew about this stipulation, I never once thought of it until I started hearing what M-1’s ultimate intention was in a co-promotional effort. Now, it’s pretty clear.

Follow me on Twitter @lelandroling
"Two things are infinite: the universe and human stupidity; and I’m not sure about the universe." - Albert Einstein

by Leland Roling on Jul 31, 2009 4:33 PM EDT up reply actions  

Not saying I beat you to it. Saying I feel the same way. I don’t know that they really care about brand awareness as much they care about piping Fedor’s paycheck through their greazy hands.

"The reason a rabbit outruns a fox is because the rabbit is running for his life and the fox is running for his dinner."

by Blackout612 on Jul 31, 2009 4:49 PM EDT up reply actions  

Oh, I know...

I was just saying.

Follow me on Twitter @lelandroling
"Two things are infinite: the universe and human stupidity; and I’m not sure about the universe." - Albert Einstein

by Leland Roling on Jul 31, 2009 4:56 PM EDT up reply actions  

i’d love to hear vadim’s opinion on this matter. not so much because of the insinuation of a mob link, but because their one sticking point appears to be a legal impossibility for zuffa.

great piece leland. you’ve been killin’ it throughout this whole process. much more indepth analysis than any other site i read.

by woooburn on Jul 31, 2009 4:41 PM EDT reply actions  

I don’t know if it’s an impossibility, but it brings up heavy possibilities of scrutiny from the Gaming Commission in Vegas. Any deal like this would, and it being an international deal probably brings some scrutiny. Zuffa probably doesn’t want to have another PRIDE matter in which the due diligence done was obviously not enough. They risked basically telling a judge that they did a shitty job of due diligence in the matter in order to get money out of DSE.

Follow me on Twitter @lelandroling
"Two things are infinite: the universe and human stupidity; and I’m not sure about the universe." - Albert Einstein

by Leland Roling on Jul 31, 2009 4:45 PM EDT up reply actions  

I wonder if M-1 would welcome that kind of scrutiny.

I

by MMA_Messiah on Jul 31, 2009 4:49 PM EDT up reply actions  

Yeah, it was actually the first thing that popped into my head. I could be way off base, but its sad to think about being true.

by sadface on Jul 31, 2009 7:21 PM EDT up reply actions  

It would be a real pain in the ass to run a background check on them from Vegas to Russia if M-1 later chose not to follow through. That could turn out similar to the DSE situation where Sakakibara just didn’t do the background check after the deal was done and he got his money.

by who me on Aug 1, 2009 10:19 AM EDT up reply actions  

And it ultimately looks very bad for Zuffa because the due diligence process wasn’t very meticulous. This was the entire worry behind the lawsuit.

Follow me on Twitter @lelandroling
"Two things are infinite: the universe and human stupidity; and I’m not sure about the universe." - Albert Einstein

by Leland Roling on Aug 1, 2009 11:40 AM EDT up reply actions  

Any time you expect something to be done post-deal instead of pre-deal you are just asking for trouble (particularly internationally). Pretty much everything about the Pride deal makes me scratch my head and I can’t imagine that Zuffa wants to go through that again.

by who me on Aug 1, 2009 12:01 PM EDT up reply actions  

yeah, i guess “impossibility” was the wrong word to choose. perhaps “can of worms”? :)

by woooburn on Jul 31, 2009 4:55 PM EDT up reply actions  

Agreed.

You have delivered some excellent articles. I am glad to see you on board here at Bloody Elbow.

by Lynchman on Jul 31, 2009 7:11 PM EDT up reply actions  

So not only did M-1 insist on co-promotion

They insisted on co-promotion in an environment where they had not undergone the proper procedures in order to make co-promotion a possibility.

Anyone that holds this against Dana should be forcibly sterilized.

When a true genius appears in the world, you may know him by this sign, that the dunces are in a confederacy against him. - Jonathan Swift

by Derek Suboticki on Jul 31, 2009 4:51 PM EDT reply actions  

just not fedor

i wanna be retired, and watch his kids beat the hell of out everyone.

by woooburn on Jul 31, 2009 4:53 PM EDT up reply actions  

Well, it wasn’t that. It’s just that if a co-promotion were to happen, the possibility of all of these things happening could potentially happen. Obviously, the UFC is very, very hesitant to enter into any dealings that would involve another organization being under contract in a co-promotional effort because then due diligence would have to be involved in that deal. The NGC could probably take some interest if they believe some wrongdoing is going on, or the OTHER organization involved in the deal is corrupt. Hence why due diligence is done to find out if that’s a possibility. The problem is… as exposed by the PRIDE lawsuit, it’s tough to do due diligence.

Follow me on Twitter @lelandroling
"Two things are infinite: the universe and human stupidity; and I’m not sure about the universe." - Albert Einstein

by Leland Roling on Jul 31, 2009 4:58 PM EDT up reply actions  

When you look at it that way, even offering M-1 a cut of the PPV buys looks pretty irresponsible.

I think Dana wanted to get this done in a way that had 0% to do with business or the UFC. Other than co-promotion – which I’m guessing he couldn’t agree to by himself sans the Fertittas even if he wanted to – he caved on everything. I think that, once the sting of shattered expectations wears off, I’ll be glad Fedor didn’t sign this deal.

When a true genius appears in the world, you may know him by this sign, that the dunces are in a confederacy against him. - Jonathan Swift

by Derek Suboticki on Jul 31, 2009 5:01 PM EDT up reply actions  

They wouldn’t offer that. The thing is… they wouldn’t offer M-1 any cut. They’d offer Fedor Emelianenko a cut, but not cutting it to another promotion. That would look bad, and probably set off some sort of scrutiny.

They’d have to do it with a deal with Fedor, and M-1 would only be involved much like the rumors said… as a sponsor sort of deal with banners and logos.

Follow me on Twitter @lelandroling
"Two things are infinite: the universe and human stupidity; and I’m not sure about the universe." - Albert Einstein

by Leland Roling on Jul 31, 2009 5:07 PM EDT up reply actions  

Fedor needs to drop M-1 like a bad habit.

When a true genius appears in the world, you may know him by this sign, that the dunces are in a confederacy against him. - Jonathan Swift

by Derek Suboticki on Jul 31, 2009 5:08 PM EDT up reply actions  

50/50 is the reason they don't co-promote
There are definitely a number of reasons why Zuffa wouldn’t want to enter a co-promotion agreement with another organization. Not only does it not help their own organization, but it could end up causing a huge hassle down the road much like the Dream Stage Entertainment deal to acquire PRIDE.

Forget the marketing and exposure for a moment and just focus on money alone:
If a PPV does 1000k buys, it’s worth about 25 million (25 dollars out of every 45). 50/50 means they have to give M-1 12.5 million. It’s mind boggling that M-1 would demand this when they are not a position of power.

Crazy Russians indeed.

by cyph on Jul 31, 2009 5:19 PM EDT reply actions  

Another way of looking at it of course, is that while Brock-headlined PPVs might average 1 million buys, Brock-Fedor hits 1.5. Those 500K incremental buys, at $25 a buy, is worth $12.5 million to the company. If M-1 is kicking in $2 or 3 million to cover the cost of staging the PPV, the UFC gains (if they generate $37.5 million off of a $2 or $3 million investment) a $15.75-16.75 million profit, rather than $25 million off a $5 or 6 million investment., or a $19-20 million profit.

To me, even if UFC were planning to co-promote, they’d want to do just as well, if not better than they’d do for any other Brock Lesnar fight. 60-40, or 65-35, might adjust their profit margins to something more amenable.

But alas, this is the kind of analysis that I hope the good people at Strikeforce and Showtime will be engaging in going forward.

by madiq on Jul 31, 2009 5:53 PM EDT up reply actions  

How do you figure this?

while Brock-headlined PPVs might average 1 million buys, Brock-Fedor hits 1.5.

To my recollection the biggest “Fedor PPV” was under 100,000 buys. One could rightly assume that a vast majority of those 100,000 buyers already purchase UFC PPVs, being MMA fans. With that taken into consideration i just don’t understand you come to a 50% increase in total buys due solely to a largely unknown fighter.

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by ronniebonnie on Jul 31, 2009 6:02 PM EDT up reply actions  

It wouldn’t be about “Fedor” per se; it’d be about “The UFC Champion vs. the #1 Heavyweight to crown the Undisputed Heavyweight Champion of MMA.” Zuffa and the rest of the media would hype it as a big deal, because it would be a big deal, and that would make the PPV “can’t miss” with UFC fans, in much the same way that UFC 100 was viewed.

by madiq on Aug 1, 2009 1:43 PM EDT up reply actions  

Zuffa doesn’t need for M1 to kick in the 2 or 3 million needed to put on the PPV. Just going by your numbers. How does it make sense for Zuffa to save 2 or 3 million up front and then throw away 15.75-16.75 million. It would be one thing if Zuffa didn’t have the money required to put up the money in the beginning, or if there was any sort of risk involved, it would maybe be a feasible discussion, but Zuffa has the money, and there is no risk involved, it’s a guaranteed money maker.

The second thing, is that even if M1 floated all of the money needed to properly stage and promote the event, all the the profits and revenues would be coming from the Zuffa machine and what they have built up in the past. The only thing M1 brings to the table is Fedor. They don’t bring any sort of promotional skills, they don’t bring any TV deals, they don’t bring any exposure, they don’t bring anything. The only thing a Fedor fight does for the UFC is please a very small group of fans that have already made up their mind whether they are going to buy or pirate the PPV, regardless of Fedor’s involvement.

Any co-promotion involves Zuffa giving money to M1 that M1 has no way of making on their own and that Zuffa can make without Fedor, it makes no sense.

by Phildo on Jul 31, 2009 6:44 PM EDT up reply actions  

Lesnar-Mir hit 1.5 million

When a true genius appears in the world, you may know him by this sign, that the dunces are in a confederacy against him. - Jonathan Swift

by Derek Suboticki on Jul 31, 2009 8:15 PM EDT up reply actions  

No, “UFC 100” hit 1.5 million. That fight was already trending to over a million buys before the main event for UFC 98 was switched over. The fact that it got to be headlined by the Lesnar fight was a bit of fortunate luck.

by madiq on Aug 1, 2009 1:46 PM EDT up reply actions  

With Chuck done and Tito on the sidelines for so long Lesnar is probably the biggest draw in the UFC currently. By comparion Fedor’s drawing power is negligible. Of course that could change very quickly with the right advertising push and enough money spend on getting his name out there (then again who knows, even with all that Anderson Silva doesn’t draw for squat).

by who me on Aug 1, 2009 3:27 PM EDT up reply actions  

The biggest draw of the UFC is the brand itself.

A man should never waste an opportunity to keep his mouth shut.

by iiowyn on Aug 1, 2009 3:29 PM EDT up reply actions  

Agreed but that doesn’t mean that every UFC PPV sells exactly the same numbers, headling fight is very important to the rate.

by who me on Aug 1, 2009 3:31 PM EDT up reply actions  

True, and the value of the brand is tied in with whoever headlines. People are trying to break this down into simple addition of buys.

A man should never waste an opportunity to keep his mouth shut.

by iiowyn on Aug 1, 2009 4:37 PM EDT up reply actions  

M-1 wouldn’t throw in any money on this they would probably inject Jerry Millen into the middle of the show to wander around looking busy. The big thing they would be after would be their name at the top of all the ads to give the imrpression they were actually responsible for the show. UFC and M-1 Global presents even if M-1 doesn’t actually do any of the “presenting” at all.

by who me on Aug 1, 2009 10:35 AM EDT up reply actions  

Also swoop in and collect half the profits.

A man should never waste an opportunity to keep his mouth shut.

by iiowyn on Aug 1, 2009 3:24 PM EDT up reply actions  

I’m sure they would agree to less, you know maybe 40% and top billing in exchange for all their hard work :D

by who me on Aug 1, 2009 3:30 PM EDT up reply actions  

Obviously, but this is another point to be made.

Follow me on Twitter @lelandroling
"Two things are infinite: the universe and human stupidity; and I’m not sure about the universe." - Albert Einstein

by Leland Roling on Jul 31, 2009 5:57 PM EDT up reply actions  

My God. It's perfect.

When a true genius appears in the world, you may know him by this sign, that the dunces are in a confederacy against him. - Jonathan Swift

by Derek Suboticki on Jul 31, 2009 8:15 PM EDT up reply actions  

This is why I love Bloody Elbow

Seriously. Who else is reporting MMA like this? You guys must be some Aspergers m’fers.

by judonerd on Jul 31, 2009 6:06 PM EDT reply actions  

I am, but I don’t work here =(

A man should never waste an opportunity to keep his mouth shut.

by iiowyn on Jul 31, 2009 6:12 PM EDT up reply actions  

AS Pride!!!

Sign me up!

Shameless self-promotion! http://twitter.com/scb0212
Ever tried. Ever failed. No matter. Try Again. Fail again. Fail better. -Samuel Beckett

by Scott C. Broussard on Jul 31, 2009 7:18 PM EDT up reply actions  

Me three. My alphabetized comics colllection: let me show you it.

My autistic son seems to have come by it honest. :-)

Don't believe a word I say, I don't train BJJ. -- I blog at TangleBones - you should follow me on Twitter here.

by jemaleddin on Aug 1, 2009 8:53 AM EDT up reply actions  

UFC "oh i heard of them" M-1 ..."who"

Dana White said it best Zuffa has spent the past 10 years working to establish the UFC as the premier brand in the US

and the only thing holding Fedor back from signing with them is the fact they will not co-promote

bottom line why should M-1 get to get to cut in line and piggy back off the UFC success?

A UFC contract is fine for Tito, Chuck, Randy, Lesnar , GSP, Penn, etc.

what makes Fedor any different? (best HW of all time, hall of fame regardless if he ever fights again in the US)

I hear all those points but sometimes you have to meet in the middle

https://twitter.com/ultmma

Follow me on Twitter http://twitter.com/ultmma

by ultmma on Jul 31, 2009 8:12 PM EDT reply actions  

And what would you consider the middle?

by Lynchman on Jul 31, 2009 10:46 PM EDT up reply actions  

Fedor & UFC

UFC gets= Fedor #1 ranked HW and top P4P fighter, get Fedor to sign a 2 year contract with a minimum of 4 fights or 3 yr 6 fight deal, M-1 not billed as co-promoter

Maybe,Maybe could M-1 be the lead sponsor for UFC 108 brought to you by M-1 Global (super Bowl weekend card) . doubt Zuffa would do this though

Fedor= equal pay to Brock the current UFC champ, cut of the PPV, ability to wear M-1 shorts, t-shirts, have logo inside the Octagon, No champions clause (his contract is not automatically renewed after winning title, contract is locked in at X number fights or X number of years), ability to fight in combat sambo between fights

Seems reasonable. no?

Not sure which side the scales tip to on this one

Follow me on Twitter http://twitter.com/ultmma

by ultmma on Aug 1, 2009 3:04 PM EDT up reply actions  

So basically the contract the UFC offered that he just turned down?

by who me on Aug 1, 2009 3:22 PM EDT up reply actions  

The UFC should agree to co-promote...

…except that they should do it the other way around: “ok, you pay Brock and Fedor and the arena and all production costs, and we get half the money by not doing anything”.

by koroshiya on Jul 31, 2009 9:24 PM EDT reply actions  

Problem with that, is that the UFC already does 90% of the work by just attaching their brand.

A man should never waste an opportunity to keep his mouth shut.

by iiowyn on Aug 1, 2009 8:38 AM EDT up reply actions  

Leland Roling

Greatest MMA journalist/blogger…whatever the title… top notch

"Moral of the story: mmalogic is wrong. Thanks" Leland Rolling, my new favorite writer on BE.

by Gunslinger20 on Aug 1, 2009 1:07 AM EDT reply actions  

Another Zuffa Hypocrisy

so thus that mean until Zuffa cant Monopolize the sport, we wont see the best fighters fighting in one ORG? If that’s their policy of not co promoting because of the husstle of being scrutinized by the so called Nevada gaming commision then UFC has no business in MMA cause every Orgs are co promoting and we all know co promotions is the only way we can see the best fighters in the world fighting each other

by Over77 on Aug 1, 2009 8:50 AM EDT reply actions  

How many “best fighters in the world” have we seen fight each other in the UFC?

How many “best fighters in the world” have we seen via co-promotion?

by Phildo on Aug 1, 2009 9:02 AM EDT up reply actions  

What? Honestly who is co-promoting? Strikeforce only co-promoted with EliteXC because of a court settlement (because of Frank Shamrock’s contract) and the thing they did with Affliction was just them allowing Affliction to pay AA to fight on a Strikeforce card against a Strikeforce fighter, that wasn’t a co-promotion that was basically buying advertising in the middle of the Strikeforce card(same with AA on the CBS card). When you get down to it Strikeforce is willing to move fighters around but they aren’t actually co-promoting either. Bellator isn’t co-promoting? When had WVR co-promoted? The only time I can think of K-1 doing an actual co-promotion was Dynamite!! USA in 2007(pre-Dream) and they haven’t been back since. Bodog co-promoted one PPV with M-1 and it pretty much killed them off as a company. The only people who have been doing this co-promotion on a regular basis is Affliction and M-1 and we can see how that ended up. The big hypocrisy here is fans who pretend that this is something that actually commonplace and successful in the sport instead of looking at how things actually are.

As far as getting to see the best fighters against each other, we don’t need co-promotion because we get that darn near every month out of the UFC, they hold close to 70% of the best fighters in the world and the only true world champion they are missing is Fedor.

by who me on Aug 1, 2009 10:59 AM EDT up reply actions  

Except the UFC is close to obtaining almost all the best fighters.

Follow me on Twitter @lelandroling
"Two things are infinite: the universe and human stupidity; and I’m not sure about the universe." - Albert Einstein

by Leland Roling on Aug 1, 2009 11:41 AM EDT up reply actions  

Very, very close.

When a true genius appears in the world, you may know him by this sign, that the dunces are in a confederacy against him. - Jonathan Swift

by Derek Suboticki on Aug 1, 2009 2:59 PM EDT up reply actions  

All anyone has to do is look at the rankings and see how many of them are in the UFC, they have 70% of the top 10 ranked fighter.

by who me on Aug 1, 2009 3:36 PM EDT up reply actions  

The recalcitrant few that continue to defend fighters that a) think they are bigger than the sport, b) duck top competition, c) compete primarily in a drug test free environment and d) avoid signing with the UFC look sillier and sillier by the day.

When a true genius appears in the world, you may know him by this sign, that the dunces are in a confederacy against him. - Jonathan Swift

by Derek Suboticki on Aug 1, 2009 5:23 PM EDT up reply actions  

The recalcitrant few that continue to defend fighters that a) think they are bigger than the sport, b) duck top competition, c) compete primarily in a drug test free environment and d) avoid signing with the UFC look sillier and sillier by the day.

Let’s keep it real here. If Fedor signs with Strikeforce (in the US, where there are regulations and Unified Rules), and fights Top 15-ranked guys, then goes overseas to fight what was formerly a Top 5 guy, regardless of drug testing, he is doing his best, under the circumstances. The only thing that would sweeten the pot for you is signing to join the UFC, which he could still do AFTER he fought all of those fights.

But negotiating for the best deal you can get doesn’t mean you think you’re bigger than the sport, it just means that you’re trying to get the best deal you can, based on your leverage.

It’s pretty clear that you think that the UFC is synonymous with the sport, but I say “Not Quite Yet.” Don’t worry, if and when it happens, you’ll get dap from me, but there’s still MMA outside of the UFC that matters.

by madiq on Aug 1, 2009 7:27 PM EDT up reply actions  

Props Leland. Sometimes I feel like I’m pulling teeth trying to get this kind of info, at least in a light that my simple mind can understand. Thanx man.

by bubbafat on Aug 1, 2009 1:46 PM EDT reply actions  

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