More Details Emerge on UFC Acquisition of Strikeforce

via mmaknockouts.net

UFC President Dana White announced earlier today to Ariel Helwani that Zuffa, the UFC's parent company, had acquired Strikeforce, the UFC's biggest rival. White pledged that things would remain "business as usual" and that Zuffa would honor all of Strikeforce's contracts with fighters and Showtime.

Since the announcement we've learned a little bit more about the deal. MMA Junkie reports that the UFC wasn't the only potential buyer in the mix:

ProElite Inc., the once-mighty fight-promotion company purchased for pennies on the dollar in February 2010 by Stratus Media Group Inc., had been in active negotiations with the recently acquired Strikeforce and had met face to face with CEO Scott Coker, sources close to the negotiations today told MMAjunkie.com.
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ProElite Inc. first inquired about purchasing Strikeforce mere months after it was taken over by Stratus Media Group in early 2010, and talks had intensified within the past month, one source said.

The revamped company's proposal to acquire the California-based promotion may have included cash and stock paid to Silicon Valley Sports & Entertainment, a sports-franchise company that owns Strikeforce along with Coker, another source said.

Josh Gross has more:

Negotiations between representatives for Zuffa and Silicon Valley Sports & Entertainment, which also runs the NHL's San Jose Sharks, have been in the making for months, various parties familiar with the deal said.

Three years ago Silicon Valley agreed to a partnership with Strikeforce's parent company, West Coast Entertainment, a San Jose-based promotion created by Scott Coker in 1985. A kickboxing-based organization, Coker did not move to promote MMA under the Strikeforce banner until 2006. Coker and Silicon Valley shared an even split of the company.
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On March 1, Coker described rumors of a pending sale to the UFC as "crazy." He said Strikeforce was searching for "strategic partners" and that there were at least two options, but that "the UFC is not one of them."

Among those potential investors was ProElite, Inc., which was told it could buy out Coker's Silicon Valley partners for $20 million and another $20 million investment in capital, a source involved in the negotiations said. ProElite is a publicly traded company that promoted MMA on Showtime under the EliteXC banner until it sold its assets to Strikeforce and its partner Silicon Valley in February 2009. That 2009 sale created the opportunity for Strikeforce to strike a deal with Showtime.

Sources confirmed Coker, the current Strikeforce CEO, attempted to wrest control of the brand, but in the end was unsuccessful. Instead, an agreement to sell Strikeforce's licensing rights, fighter contracts and video library closed with the UFC on Thursday or Friday.

Michael David Smith talks about the implications:

The TV deals: Strikeforce's television model is fundamentally different from the UFC's, with the UFC focusing on pay-per-view and basic cable while Strikeforce goes for premium cable on Showtime and, occasionally, network television on CBS. The UFC has tried hard to get a premium cable deal (a deal with HBO fell apart at the 11th hour), and getting the UFC on network television has long been viewed as a necessary step toward mainstream acceptance. Taking over Strikeforce means taking over the TV contracts, and it's a step toward a world where the UFC is able to gain more exposure on TV without cannibalizing its bread-and-butter pay-per-view business.

The calendar: White has said in the past that he envisions a future time when there's never a week when the UFC isn't running shows somewhere in the world -- and maybe even running multiple shows on the same weekend. As the UFC is currently constructed, that's not possible. But with the addition of more fighters and more staff, you can easily see how 52 shows a year -- or more -- is a real possibility. In 2010, the UFC did 24 events, the WEC did eight events and Strikeforce did 15 events. Combining the three promotions makes it entirely possible that Zuffa could put out a schedule in which it never takes a week off. Not in 2011 or 2012, but some day in the not-too-distant future.

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Dave Meltzer talks about the pros and cons:

The up side from a business standpoint is with Sengoku and Dream going down, Zuffa pretty much controls the major league aspect of the sport and fighters have far less negotiating leverage when it comes to deals. They can control fighter contracts efficiently as well as control the direction of the sport adding Showtime, and perhaps, CBS, to deals under their umbrella. It gives them more events to showcase more fighters, which has both good and bad aspects to it.

A negative is that Zuffa will now be promoting Strikeforce, meaning the fighters in that organization should get more visibility. That sounds good, and it is, but it also means instead of seven world champions, we now have 14, and that also is two different champions in five different classes. There will be an inevitable public demand for fights, and they would eventually happen when contracts expire if the public wants them bad enough, but the one thing UFC has been great about is not diluting the value of its championships. Boxing has killed the value of its titles, as has wrestling. With 14 world champions, time will tell if this becomes a negative.

Zach Arnold chimes in:

It's consolidation, for sure. A lot of people in the end will lose their jobs. Showtime will be a big loser initially, but a person who I think could end up a winner here is Gary Shaw. Once UFC takes what they want from Strikeforce, there will be leftovers (think: female fighters). UFC does not have an appetite to promote women's MMA. It is entirely conceivable that Showtime will go to Shaw and make a deal to try to cause some problems for UFC down the road. I'm almost certain that will happen. Unless, of course, part of the deal is a non-compete for Showtime in the MMA 'space'...

As for UFC picking the best fighters from Strikeforce and letting the rest go, the company already has a major problem with a bloated roster. Sure, Showtime will be able to finance contracts for some UFC fighters, but in the long run I don't see many fighters benefitting at all from such a deal. Bellator is not in any position whatsoever to pick up refugees from Strikeforce.

Scott Coker cashed out. How would you like to be a fighter for Strikeforce now? Fedor doesn't want any part of Zuffa. Alistair Overeem wants to be able to kickbox as well as fight and that goes against Zuffa code. Josh Barnett doesn't want to deal with the UFC politics. What does it say about Coker and his belief in his Heavyweight GP that he would cash out before even completing one round of said tournament? If he really believed in his company and believed in the trajectory it was going in, he wouldn't have sold the company. Remember all those glowing reports from a couple of weeks ago about how the company was doing so well? Will the ‘tournament' even progress further?

Outside of roster issues, UFC accomplishes a lot here with the purchase of Strikeforce. They eliminate their main rival and ensure complete and total control of the industry. They also have enough VTR (video) to run a media channel. Other than Shaw and Showtime, there is no one left to give Zuffa a headache. And, if you're DREAM or K-1 or Sakakibara, you just saw the one willing business partner in the States sell his company out to an organization (UFC) that had a bitter taste left in its mouth in the asset sale deal for PRIDE.

Personally, I am not convinced that Showtime and the UFC won't be able to work out a deal. The UFC has long needed a premium cable TV partner to air its international events. Their original plan was to air those events on HBO but that deal fell through in 2007 when then-HBO CEO Chris Albrecht resigned in disgrace

However as former BE staffer Michael Rome pointed out in the comments:

I think everyone should take public statements with a grain of salt. There's a lot of posturing going on right now, and I think it's a mistake to take anything Dana says as a concrete truth that will not change. I mean, what if Showtime balks and decides to terminate the contract and focus all of their energy on boxing? I think that is unlikely, but if they do all this talk about running separate promotions goes out the window. Really, we don't know what this will look like in 6 months.

Zuffa has hardly even successfully integrated the WEC fighters yet, they are in no hurry to merge in Strikeforce fighters. Frankly, they do not have the capacity right now to service a roster of 450 fighters. This means a LOT of firings if a merger happens.

Also people underestimate the power of hatred. The Showtime people hate Dana and they are not going to like being his unwitting partner.
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Ultimately, these contracts are now owned by Zuffa. The idea that they need to wait until Strikeforce contracts are up to sign people to the UFC is a legal fiction that they are keeping up for the reasons you say (to prove they didnt just buy it to gut it).

Let's take a hypothetical scenario:

Nick Diaz beats Paul Daley. He goes to Scott Coker, and says he is not happy in Strikeforce and would prefer to get a release and fight elsewhere. Scott calls Dana, who thinks it is a good idea to release him. Nick Diaz then signs with the UFC.

The entire running separately thing is a nice idea because it creates a high quality feeder league and gives Zuffa dominance over the entire landscape, but it is a fiction that will end sooner rather than later.

 Neil Springer of the Toronto Sun has the final word:

Though White maintains Strikeforce will continue to operate independently, there's no way he plans to keep it alive any longer than he needs to.

Once all of Strikeforce's contractual obligations are taken care of, it's likely the company will be killed off and all the best parts will be moved to the UFC.

After all, White is not so much in the MMA business as he is in the UFC business.


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