Did Strikeforce's Deal With Fedor Emelianenko Force the UFC Sale?
by Nate Wilcox on Mar 15, 2011 9:30 AM EDT
in Strikeforce Analysis
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UFC President Dana White shocked the MMA world Saturday morning when he announced the purchase of Strikeforce in an informal online video. Since then fans have been chewing over every nugget of information trying to figure out what this means for the future of the sport. We still don't know much, but after yesterday's official press conference with White, UFC co-owner Lorenzo Fertitta and Strikeforce CEO Scott Coker we know much more than before.
Now that we've had a couple of days we can also begin to piece together a picture of what forced the sale.
- Scott Coker didn't want to sell, but his partners, Silicon Valley Sports & Entertainment, did.
Per MMA Junkie:The fight promotion had been looking to raise capital in recent months, sources said, though it's unclear whether the search was motivated by imminent financial troubles.
Josh Gross reported that Coker went to some lengths to stop the sale:
According to the "San Jose Business Journal," Strikeforce generated $30 million in revenue for the 2010-2011 fiscal year.
"Silicon Valley was relatively happy with the returns but didn't want to take it to the next level," one source said.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.
- Strikeforce had been an extremely profitable regional promotion, but its deal with Showtime forced it to compete with the UFC for expensive, top-tier talent, in particular Fedor Emelianenko.
It's one thing to put on big live events in San Jose with local stars like Frank Shamrock and Cung Le, it's a whole 'nother thing to put together cards that will draw good ratings on CBS or sell pay per views. Once Strikeforce took the Showtime/CBS deal, they had to take big risks. Unfortunately nothing went right. - The failure to put together a Pay Per View in 2010 meant Strikeforce couldn't afford the Fedor deal.
Dave Meltzer has asserted that it was the Fedor contract that forced Strikeforce to seek outside financing on his radio show.
Fedor's original three fight deal included a third fight on Pay Per View, but his loss to Fabricio Werdum last year killed that prospect. The original plan was for Fedor to fight twice on CBS and then fight his final fight on PPV. For whatever reason after doing quite well on CBS against Brett Rogers, Fedor held out and skipped Strikeforce's April 2010 CBS show. I've seen speculation that Fedor was injured and his management at M-1 Global chose to extort Strikeforce for more contractual concessions rather than just sitting out until Fedor recovered. Fedor's absence from the April CBS show not only doomed that event to terrible ratings, but his subsequent loss to Fabricio Werdum on a June 2010 Showtime card meant that a Fedor vs Alistair Overeem heavyweight championship bout on PPV would not happen.
Fedor's subsequent loss to Antonio Silva in the opening round of Strikeforce's heavyweight tournament in February would seem to have been the last straw, pushing Strikeforce's entry into PPV back even further.
It's not an air-tight case, but there is no doubt that Emelianenko was by far the biggest expense on the Strikeforce books and it's also clear that there is no way the promotion could have made a profit on that deal from the fees it gained from CBS and Showtime alone. The plan was to feature Fedor on CBS twice then go straight to PPV. Instead they did CBS, and then Showtime twice.
It was a noble attempt, but it failed and now the UFC has once again stepped in to pick up the pieces.
HT Fightlinker for putting together the clues.
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Fedor’s contract is with Showtime.
Don’t expect to see Fedor fight for Strikeforce now that it is owned by Zuffa.
There’s no way Showtime will have him fight for Strikeforce when they can have him fight for their new promotion M-1.
M-1 will probably be around on Showtime after Strikforce is gone so why not start promoting him on the M-1 shows and make him the face of the M-1 shows on Showtime.
Andre's Posse
wrong. He is tied to showtime sure. But he has to fight in strikeforce. Dont expect Fedor to fight in the UFC unless a new deal is done but he sure as hell has obligations to SF.
by mmalogic on Mar 15, 2011 9:52 AM EDT up reply actions 1 recs
I don’t know the exact details of M-1’s contract with Showtime, but the way I’ve always read about it around here is that the contract is with showtime more than with Strikeforce.
Andre's Posse
I’m not positive, but I think M-1 the company has a deal with Showtime. Fedor the fighter has a contract with Strikeforce. Not positive on that though.
If you can't wow them with brilliance, then baffle them with bullshit.
"Fedor’s contract is with Showtime Networks Inc. and we’re excited to be working with such a premium North American outlet," Kogan said.
M-1 Global, which also promotes events, recently signed a new TV deal with Showtime as well. They debut on the network on March 25.
Kogan pointed out that the new deal between Zuffa and Strikeforce effects nothing in their own deal with Showtime.
Andre's Posse
Well I’ve been proven wrong yet again. That’s just so crazy that a fighter would sign with a television company. It’d be like BJ Penn signing with Spike tv.
If you can't wow them with brilliance, then baffle them with bullshit.
Coker always knew he couldn’t afford Fedor or Hendo on the money SHO was paying him. But SHO wanted a couple of big stars to give SHO fights more oomph. So Coker told them if they wanted them they would have to pay the bulk of the fee for them. In the second deal M1 wanted TV time which SF couldn’t offer.
Coker was part of the negotiations because M1 is “co-promoting” the M1 fights. If Fedor fights on SHO then Zuffa is going to be co-promoting on SHO. My guess is if SHO asked Zuffa would agree to wave any requirement for Fedor to fight in SF unless they want to put him with Cain so Dana can go “see”.
cause that was before he re-did the deal to what it is currently
by alexmullen4180 on Mar 15, 2011 10:51 AM EDT up reply actions
CBS owns a big chunk of Showtime
Follow me on Twitter @KidNate
by Nate Wilcox on Mar 15, 2011 11:53 AM EDT up reply actions
just a chunk?
i thought they owned the whole thing?
by Victor Rodriguez on Mar 15, 2011 4:43 PM EDT up reply actions
just to be clear
he is obligated to Strikeforce via Showtime.
but you’re totally right.
by Victor Rodriguez on Mar 15, 2011 4:42 PM EDT up reply actions
My impression was that Fedor’s contract is with Showtime and Strikeforce. It’s not a separate contract with Showtime it’s a complicated three way contract where Showtime puts in money for Fedor’s Strikeforce fights and Fedor’s Strikeforce fights air on Showtime(and lets not forget the co-promotion part of this which is with Strikeforce). M-1’s deal with Showtime for four broadcast shows is a separate deal from Fedor’s contract it’s just that they apparently used Fedor’s contract for leverage to get Showtime to give them these shows.
Fedor fights for Strikeforce. Fedor fights on Showtime. I can’t get into the specifics
-Scott Coker
its hard to believe the fedor deal was anything less than a complete failure for them
they didnt pay all they did and give away all they did for him to go 1-2
"I have smoked weed with alot of UFC champions" - Joe Rogan
"Você ta fudido. Se vai levar muita porrada, ta ligado?" - Anderson Silva
I wouldn't agree with that...
They might not have expected him to go 1-2, but still… People sure as heck paid good money to WATCH him go 1-2.
"I like a man who grins when he fights - Winston Churchill"
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by jw1487 on Mar 15, 2011 1:51 PM EDT up reply actions 1 recs
Damn
If Fedor were on the fence about retiring before, this would make his decision that much easier. I don’t think any other MMA organization out there can afford his paycheck, and I doubt M-1 would want anything to do with Dana and Zuffa.
"But I was like "I don't know how they do things where you guys are from, but I dont think monogamy is legal in this country."
@anonymousbungi
FEDOR losses caused "depreciation" and risky business.with strikeforce.
If Fedor had been winning instead of losing, there would have been zero outside trouble, or interference from the UFC.
-but just like when kimbo lost, so did elite xc, strikeforce is almost the same, only they are trying to hide that fact.
—imo “depreciation” caused Silicon Valley to bail.
by Cage Stoker Csi on Mar 15, 2011 9:43 AM EDT reply actions
Fedor’s loss to Werdum didn’t cause a lot less fans if any less to tune in to his match against Bigfoot during the heavyweight tournament.
I don’t think Fedor losing had a huge impact on Silicon Valley wanting out.
Andre's Posse
yeah but it definitely did prevent a PPV bout
between Overeem and Fedor last fall that could have saved Coker’s company.
Follow me on Twitter @KidNate
True, but we don’t really know if the PPV would have ever happened even if he did beat Werdum. We have no idea if Coker could have gotten more money out of Silicon Valley to fund a PPV. He just presented it as more of a goal for the time.
Andre's Posse
there would've been a PPV
doing numbers comparable to Affliction would have been quite profitable even with Fedor’s salary. Affliction paid the whole card waaaaay too much but Strikeforce limited it to Fedor pretty much.
Follow me on Twitter @KidNate
by Nate Wilcox on Mar 15, 2011 10:26 AM EDT up reply actions
the whole article is pure speculation
that’s what I do.
Nice to meet you, I’m Kid Nate. I’m a blogger.
Follow me on Twitter @KidNate
by Nate Wilcox on Mar 15, 2011 11:54 AM EDT up reply actions 6 recs
A blogger who uses half-truths and distortion on the front-page of what’s supposed to be a credible website to push slanted views upon its readers.
MMA needs credible reporters and credible outlets for those reporters.
Andre's Posse
This is what Anr suspects anyway
You know Joe, Brandon Vera is considered to be a Heavyweight George St.Pierre because he just comes, comes, and comes again... -Mike Goldberg, UFC 57
Cheick Kongo looks like a cross between Evander Holyfield and pop singer Seal!
Melvin Guilard looks like a little Kevin Randelman!
-Mike "All black people look alike to me" Goldberg, UFC 62/64
by Jonnycaz2.0 on Mar 15, 2011 12:46 PM EDT up reply actions
It wouldn’t be so bad if they didn’t always try to come up with as controversial writings as they can to generate hits from people debating the controversy.
Andre's Posse
If they did that they would become MMA Junkie
And that would be a very, very unfortunate thing. Despite having no sense of humor (probably due to constant criticism) I like BE’s site and the way they swing it and would much rather read speculative articles full of half truths and “what if’s” than have Junkie spell every detail of ONLY the most “confirmed material.” …That stuffs for kids…..and if you read their message boards you’ll find the bulk of their readership is just that
You know Joe, Brandon Vera is considered to be a Heavyweight George St.Pierre because he just comes, comes, and comes again... -Mike Goldberg, UFC 57
Cheick Kongo looks like a cross between Evander Holyfield and pop singer Seal!
Melvin Guilard looks like a little Kevin Randelman!
-Mike "All black people look alike to me" Goldberg, UFC 62/64
It’s a blog, the whole point is for people to interact. Heck you can write your own fanpost and discuss a topic any way you wish to frame it on the site. Don’t confuse editorial blogging with news reporting, we are hear to expand our minds and discuss topics not to just get the facts (of which there actually is very little to be had).
“Bloody Elbow – Pound-for-Pound the Best in Mixed Martial Arts (MMA) Commentary, News and Community”
I think it’s clear that BE posts news and blogs about all things related to MMA. One of the reasons I personally like to come here is to read the opinions of the editors, as it’s nice to get news (which they link to/quota) along with some added commentary.
Haters! :(
That's the...
Kicker.
While I don’t agree with a lot that gets posted on BE, they at least create open dialogue. If I wanted just the facts ma’am reporting, I’d go to MMA Fighting (and sometimes I do so well, I do).
But how often can you read the same headline with the same information? I like to read something with some editorializing in it so I can rec’ it or so I can tell them to eff off in a roundabout way that doesn’t get me banned.
by Sergio Hernandez on Mar 15, 2011 12:52 PM EDT up reply actions
no I am honestly expressing my opinion
and the reason we have credibility is because we are honest in our opinions and honest when we have a conflict of interest.
there are plenty of places to go to get “just the facts ma’am” coverage and the official spin.
Follow me on Twitter @KidNate
ppv is a killer. That money comes in over time whereas SHO’s license fee comes in instantly. Cash flow is king and SF was strapped. It still would not have been sustainable.
Silicon Sports owns a plethora of different businesses, they aren’t some newbies. They realized there was no sustainable path… everything lead to a dead end. Mark Cuban – a guy who owns his own arena, and his own channel realized this after putting on just one show. It’s a dead end.
If SHO wasnt subsidizing SF to such an extent they would have been out even sooner. That has to be pretty demoralizing to anyone willing to step up including SHO where a guy like Coker and silicon sports couldn’t even make it work with CBS corp. subsidizing it.
Even Josh Barnett realizes it’s futile.
Honestly, I think SVSE invested in Strikeforce on the assumption that they would remain a profitable regional promoter who helped to fill their arena on dates when the Sharks weren’t in town. When Strikeforce decided to branch out and become a national promotion, they probably felt like they were operating at cross-purposes. SVSE didn’t want to invest in a national MMA powerhouse. They wanted to invest in a profitable way to book a few extra dates in the HP Pavilion.
This. Really they are better off finding another local promotion to work with that will put more dates into their arena.
Reportedly SF was $20M in debt but moving in the right direction. SVS&E would have been responsible for half of that. so $10M but how much had they made off of renting the arena over the years? Consessions? And you need to keep in mind that SF was very profitable as a regional show.
The Sharks have lost money every single year and I bet those losses are way more significant.
Agreed. They were for sure gearing for a PPV. The tourney bracket was designed to get Fedor and Reem together for this me thinks. However another loss/chink in the Russian’s armor killed this and the kids with the big wallets lost interest. The relatively decent revenue the supposedly had did not equate to good (or enough) cash flow for them to assume the risk probably. I would have however guessed a mega deal like this happening after the NFL lockout was resolved though as I think there may be some ground to conquer there in the open sports landscape.
by troutki on Mar 15, 2011 11:28 AM EDT via mobile up reply actions
I'll say it....
…..so Fedor killed another MMA promotion.
by Reciprocity on Mar 15, 2011 9:44 AM EDT reply actions 6 recs
It’s not Fedor’s fault if Strikeforce’s whole business plan relied on ONE person. Blame Coker or the other guys behind Strikeforce for that, not Fedor.
who blamed fedor ?
I say they had all their egg in one basket.
-and fedor dropped the ball..
-and his management still,no doubt, want top dollar for his fights.
-but he is losing fights, and getting beat up badly in the process! by top 20 HW’s
all those factors are not attractive to an outside company.., unless its the ufc..who need coker as a negotiator overseas..and the strikeforce challengers series has more new talent..another farm team..
by Cage Stoker Csi on Mar 15, 2011 9:52 AM EDT up reply actions
Fedor’s job is to fight, not to run a promotion. Sure, you can say Strikeforce’s grand plans were foiled as a result of Fedor losing, but it’s not Fedor’s fault.
Actually
Fedor does own a large part of M1. It is his promotion as much as Finklesteal’s. So it IS his job to run a promotion (into the ground). I doubt he gives a damn that Strikeforce is the next entry on Dana’s tombstone. He is setting up M1 to be his retirement fund and Strikeforce dissolving only furthers that goal.
by BKdroid on Mar 15, 2011 10:25 AM EDT up reply actions 1 recs
meh
i’ll lay this at m-1’s feet instead of just Fedor.
by Victor Rodriguez on Mar 15, 2011 5:32 PM EDT up reply actions
They probably don't want him...
under the circumstances M1 wants in order to let Fedor fight, i. E. co-branding shows.
They probably want Reem more than Fedor at this point
"But I was like "I don't know how they do things where you guys are from, but I dont think monogamy is legal in this country."
@anonymousbungi
Antonio Silva made that irrelevant
"If I had a dollar for every brain you don't have, I'd have one dollar." - Squidward Tentacles
by SSreporters on Mar 15, 2011 11:14 AM EDT up reply actions
I tried to tell people they weren't making some big profit
So where are the comments from Snowden and others who claimed to “know” that Strikeforce’s shows were profitable, and that the company was doing so well?
I’ve been trying to make this point for a year, that an individual show being profitable without burdening of G&A, etc. does not equate to a company having positive cash total cash flow.
It’s frustrating that people who get paid to write on this site and imply they have access to inside information were so wrong, either due to ignorance or intentional misrepresentation of the data….
by flingom on Mar 15, 2011 9:59 AM EDT reply actions 4 recs
Yeah, there were plenty of comments on that BE article regarding the $30 million in revenue SF reportedly made for 2010 and how revenue =/= profit. With the pay cheques of Fedor, Henderson getting 250K, Diaz getting 150K, the number of shows they were doing and the lack of PPV, etc., it seemed clear to many that SF probably wasn’t making a profit. A lot of it was speculation on both sides, but people like myself seriously doubted how SF could be turning a profit. One comment said SF was probably running at a loss, but with exponentially growing revenue, which is an okay place to be in four years for a company, but it’s clear it wasn’t good enough for their partners.
It was pretty one-sided at the time
Go re-read the comments section. I was one of the only people questioning it, SO MANY people insisted they were making money, including Brent Brookhouse and Jon Snowden.
It was frustrating at the time, and it’s frustrating that now no one acts accountable for being wrong. So it will just happen again.
They could have been losing money hand over fist wi but It’s also possible that they were in the red or at least not losing that much but were sold because SVSE was losing money with their other ventures or didn’t want to risk expanding and wanted to cash out. All of those are possibilities but I doubt any reporters will really look into giving us a definitive answer about what happened, and that’s what frustrates me.
I think they were sold because their vision of becoming a national promoter with a broadcast model was contrary to SVSE’s vision of them being a local promoter with an attendance/gate model. SVSE invested because Strikeforce was a lucrative way of filling a few extra dates in the HP Pavilion. I don’t think they ever had any intentions of becoming more than that.
I think they were making money on paper. Their problem was cash flow. Even profitable companies can find themselves in a pinch when their revenues take longer to arrive than their expenses.
Snowden was talking to people inside Strikeforce and Showtime
he was repeating what he heard from his sources. that’s what reporters do.
Sometimes your sources are wrong.
same thing happens to mmalogic when his sources inside Zuffa are wrong or deluded.
Follow me on Twitter @KidNate
by Nate Wilcox on Mar 15, 2011 10:28 AM EDT up reply actions
Hold on a sec!
Wouldn’t Snowden claim that is what lowly “interviewers” like Ariel Helwani do? Surely high power “reporters” like him must do extensive verification and fact checking right?
Don’t mean to be a dick, but he seems to always demean others as “interviewers” and it does bug me.
I don’t think Ariel Helwani is a “lowly” anything. He’s a prominent player in this sport. Nor am I a “reporter.” Far from it. Not sure what you are on about here.
by Jonathan Snowden on Mar 15, 2011 11:56 AM EDT up reply actions
This is ok Jonathan, but to tell you the truth, I am a Finley Fan. And naturally I’d like to see all the interviewees under one interviewer. That’s only fair for the fans and the fighters.
by castleeb on Jan 20, 2011 9:48 AM CST reply actions
J Snow has a tombstone is his office with fallen interviewers engraved on it!
by DayGeaux on Jan 20, 2011 10:55 AM CST up reply actions 2 recs
Made me laugh. I can’t wait to put Helwani’s name on it.
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by Jonathan Snowden on Jan 20, 2011 11:01 AM CST up reply actions
Just saying ;)
If you can't wow them with brilliance, then baffle them with bullshit.
Dont compare me to him… First, Im not a “reporter”… secondly, yes Im not always right… but when on earth has this guy ever been right about anything?
He said affliction’s business model was a success… I said it wasnt.
He said the wec wouldnt merge with the UFC. I said it would.
He said SF was doing very well… I said the operators always do well… it’s the guys bankrolling who never seem to and eventually get out… after explaining it to him he still had no clue.
I even gave him a lead on feb 14th that silicon was heavily shopping Sf around so he could finally once in his lfe break an actual story… what did he do? instead he chose to waste his time trying to explain the nonsense of why Anderson/GSP is bad for the sport…
He should quit and get into the stock forecasting business so everyone could make millions doing the exact opposite..
by mmalogic on Mar 15, 2011 11:02 AM EDT up reply actions 15 recs
This is a bunch of half truths and distortions.
1. I didn’t say Affliction’s business model was a success. I said the mainstream press mitigated their losses. That’s not even close to the same thing.
2. I said that the WEC and the UFC wouldn’t merge until the TV deals allowed them to do so.
3. I said Strikeforce shows were profitable circa 2010-2011. I didn’t make any claims that they were always so, or that they carried no debt. Any and every start up business carries debt. That’s not damning in the slightest.
4. Everyone was aware that SF was looking for investors. That wasn’t a “tip.” You said not one word suggesting Zuffa was the buyer. Because you had no idea.
by Jonathan Snowden on Mar 15, 2011 11:50 AM EDT up reply actions 4 recs
the difference between you and Jon logic
is that he puts his name on what he puts out and backs it up. When you blow it with one of your “inside scoops” you tend to crawl away for long periods of time.
Follow me on Twitter @KidNate
by Nate Wilcox on Mar 15, 2011 12:14 PM EDT up reply actions 1 recs
That's the problem!
Snowden was so inside with Strikeforce (and his ‘exclusive access’), that he acted like a Strikeforce mouthpiece. He presented as fact whatever he was being told. I’ve been asking since 2010 for someone at Bloodyelbow to write a detailed piece on Strikeforce finances and no one did. They just ’ heard from sources’ and presented it as fact.
I just don’t get it. You guys [BE] are so influential in the MMA world, and it’s just completely OK for one of your most-read writers to repeatedly present totally inaccurate things as fact because they ‘heard from a source’. Where’s the accountability?
What company in their right mind is going to open up the books to a journalist for the public and competitors to see?
Exactly
They wouldn’t. And yet Snowden and others took it like Gospel when SF told them they were profitable (without supporting it with their books).
What should have been done was a thorough analysis of costs, debt and revenue, based on all available public information. There were a LOT of usable data points, including details of the showtime deal, fighter salaries, estimates on the M-1 Relationship, debt from XC purchases, arena rental estimates, general costs for running an MMA organization.
It would have required real ‘reporting’, instead of just regurgitating ‘insider’ info. Apparently it was too much to ask.
This is beyond laughable. Do you think anyone reporting this story right now has “looked at the books?” You’re just trading one set of whispers for another.
by Jonathan Snowden on Mar 15, 2011 11:51 AM EDT up reply actions
It doesn't matter
I love hyperbole as much as the next guy, but ‘beyond laughable’? Really??
You totally ignored the point of my post. It doesn’t matter if the people reporting now have looked at the books. What matters is that you did not, but you presented things as fact because your sources/friends/whatever at Strikeforce told you so.
It would have been great for someone here to perform an in-depth analysis using all available information to best determine Strikeforce’s financial situation, and then provide transparency on how that analysis was conducted. You didn’t. Yet you presented to (I’m guessing) tens of thousands of readers like you knew the facts.
no
Jon reported that his sources inside Strikeforce and Showtime were telling him that they were turning a profit on the events in question.
No reporter is going to be immune from getting spun by his sources.
Follow me on Twitter @KidNate
by Nate Wilcox on Mar 15, 2011 12:15 PM EDT up reply actions
See? Lack of Accountability
Let’s look at his comments from the link I already posted. Unedited, unabridged:
“They are making money. I ran down some of their expenses last year. They are profiting with pretty much every event.”
“No one has ever even speculated that they are losing money. Where does that idea come from?”
He doesn’t say – ‘a source from Strikeforce claims they are profitable’. That’s the problem. He absolutely made comments on a VERY well-visited site that impacted the public perception of Strikeforce (positively) without facts to back it up.
BE ACCOUNTABLE.
by flingom on Mar 15, 2011 12:34 PM EDT up reply actions 1 recs
Those events were profitable to my knowledge. I am and will remain accountable for those statements which I believe to be true. Other events in Strikeforce history were not profitable. But the business was turning around for them, or at least they believed that to be true.
by Jonathan Snowden on Mar 15, 2011 12:44 PM EDT up reply actions
Thanks
I appreciate the fact that you’re standing by your statements. I’m guessing (feel free to correct me), that you put a lot of faith in statements made to you by people at the company, and that faith may or may not have been misplaced. To your point, we don’t know because we still haven’t gotten anything other than speculation on their debt position or cash flow. I just don’t like that it was pushed as Gospel when it was from a source that had plenty of motivation to lie about it.
The whole blogger/reporter thing is SO blurry when it comes to MMA, where there was basically zero infrastructure of traditional reporting, so people turn to bloggers for their news and facts. It’s a mess and I wish more bloggers would step up and make a point of differentiating their opinions from verifiable facts.
To your other point, about ‘profitability’ – it’s a lot easier for an event to be profitable, if you aren’t burdening your costs with all the non-event specific expenses of the company. That’s what I think you and others were probably missing…
If it helps, I think your history pieces are a really good addition to BE?
by flingom on Mar 15, 2011 12:52 PM EDT up reply actions 1 recs
Just because you have debt doesn’t mean you aren’t profitable. Is Zuffa profitable? Yet they carry hundreds of million if dollars of debt and had to shake the trees for money to buy little old SF.
Folks need to be a lot more careful with the whole profitability discussion.
Accounting has tons of assumptions built into it which can be manipulated to hide the truth: Timeframes, what gets written off, what counts as revenue, etc. etc. There are a lot of shady tricks w/ which one can “honestly” give misleading spin. Like (hypothetically), oh yeah all our events last year were proffitable, when in fact, this is only true under a very limited set of assumptions and for a very limited timeframe. The company could be losing money overall, but still “profitable” for each discreet event.
Or they could be running in the red because they are funnelling money out to the owners. But from the owners perspective they are very profitable.
Very true.
My point wasn’t that they were/weren’t profittable. It’s that reports in MMA take what seem like v. carefully tailored statements and assume generalities from them. Business reports have a bit more savvy in this regard—though they get taken in often enough as well.
People sell profitable companies all the time
“Silicon Valley was relatively happy with the returns but didn’t want to take it to the next level,” one source said.
There are plenty of perfectly good reasons to cash out of a profitable investment. Maybe Silicon Valley just didn’t want to be in the MMA business as badly as Zuffa does.
Never approach a vast undertaking with a half-vast plan.
by szquirrel on Mar 15, 2011 11:56 AM EDT up reply actions 1 recs
I dont know why you are pointing the finger @ Snowden
I enjoy his articles, its getting irritating how many people just jump with accusations of inaccuracies.
I dont think anyone knew Strikeforce was being bought out, it was a tightly held secret.
Took longer than I expected, but Fedor’s baggage has killed another promotion. It will be a slow lingering death this time.
Keep Firing, Assholes!
Time to put some meat in your pain sandwich.
by Ubernoober on Mar 15, 2011 10:01 AM EDT reply actions 1 recs
"I destroy company with single finger."
Meet me on Monsta Island. Where the girls look good and the MC's be Wildin'.
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by Damon O. on Mar 15, 2011 10:11 AM EDT reply actions 9 recs
The nay-Sayers may end up being right in that Fedor and Henderson’s contracts ended up killing Strikeforce. But when it all finally comes out I suspect that Dany Heatley will be just as much to blame. Coker’s partners had little interest I’m MMA and we’re only looking for something to fill the HP on down days. They had no stomach for the risks involved on trying to be a national promotion. When it’s all said and done and the books come out Strikeforce will have been in the hole for a much smaller amount than many are bandying about and the San Jose Sharks losses will be more to blame.
But I with the state of MMA journalism I won’t hold my breathe to know the truth. Who informed us that Fedor was had surgery on his hand after the Roger’s fight? Or that a huge ppv event was being planned for Fall of 2010?Fans covered those facts more than any reporters..
by John Nash on Mar 15, 2011 10:11 AM EDT via mobile reply actions 4 recs
that's a very good point
about the Sharks.
regardless, Coker had zero margin for error and Fedor’s two losses but the negotiating style of Vadim and co made it impossible.
Follow me on Twitter @KidNate
by Nate Wilcox on Mar 15, 2011 10:36 AM EDT up reply actions 1 recs
If I’m not mistaken I think I’m the person that pointed out to most the member here how, in several incidences, truly Scott. C. Broussardian their tactics really were.
And lets not make mince any words here, it was Zuffa that put them out of business. According to Jose Mendoza at MMPayout, both Stratus Group and a group headed by Shelly Finkel put bids in but Zuffa upped their offer to a point the others couldn’t match. Which seems to indicate that the final sales price would be higher than $40 million.
You do realize that stratus groups offer included stock options which is essentially like trying to buy something with monopoly money.
I think you’ll be surprised once the actual figures come out.
Honestly if Showtime would have initially worked out a deal with M-1 instead of Strikeforce once XC flopped then we’d still have 2 major orgs right now. It’s clear the Silicon Valley guys had no desire to pump money back into SF from the way they ran the fan expo and did nothing to enhance the production, satisfy their fighters.
It was worth more to Zuffa than to anyone else
It’s not like they upped their offer just so Dana and the Fertittas could twirl their Snidely Whiplash mustaches and cackle about another competitor crushed.
If by “Zuffa put them out of business” you mean “Zuffa made an intelligent purchase that strengthened their own business” then okay. Two parties can arrive at different evaluations of a product without either one being a dick about it.
Never approach a vast undertaking with a half-vast plan.
While that is most likely the case here it’s still more fun to point out that every company that Fedor has fought for for the last several years went out of business with him fighting for them. Part of the problem with moving up to the national level is dealing with things like the Fedor situation (which was a cluster from the very start), I can imagine after a while it would get old for backers who weren’t MMA fanatics to start with.
He’s still undefeated in that department.
What I would also like to see is someone revisit Coker’s attempt at getting an event in Japan. In light of what happened is it possible that he was hoping to cut a deal with RE to buy out SVSE? What was laughed off as pipe-dream plans might have actually been attempted out of necessity and their failure may have led to this sale.
One great thing about MMASupremacy is that he’s actively trying to report what happened.
There is no denying that Fedor is one of the four horseman of the MMA appocalypse, if he shows up in your organization then your days are numbered. From the Inoki Bom-Ba-Ye yakuza scandal that was part of what led to Pride’s downfall to BodogFight PPV in St. Petersburg that financially neutered them to Affliction’s untimely demise (If Fedor is death, which horseman would Barnett be? steroids?) to now rumors that the weight of Fedor’s contract was one of the reasons Silicon Valley cashed out it’s hard to say that signing Fedor has been a good thing for anyone (except M-1 Global of course).
The first thing I wondered when all this went down and the talk of Coker trying to wrest control of the company was the talk of Paul Heyman coming on board last August. It was Coker who said that he had been talking to Heyman, I just wonder if that was his move to try and take control of the company? Was Coker trying to get Heyman and his money friends to buy out Silicon Valley then?
Well, I can’t imagine it being famine.
"I see him beating Anderson Silva. I see him picking him apart. Him at a 131 years old...(trails off)." - Tito Ortiz on Vitor Belfort at Affliction:DOR
by Rundownloser on Mar 15, 2011 2:55 PM EDT up reply actions
That is an interesting twist.Heyman did make a run at buying SF once before. But his prtners wanted the whole thing not half. I would love to see Coker and Heyman join up and start a new promotion.
Like notthe face I have also been wondering if Coker was trying to make some thing happen with RE or at least Ishii.
I would love to see Coker and Heyman join up and start a new promotion.
I suspect Zuffa will hold on to Coker as long as they can, much like they have done with Reed Harris.
You can never have enough talented people in your organization.
Coker has been running his own promotions for ever. Reed was a car sales man or some thing before he got into the WEC. Reed is a lapdog, Coker ain’t.
Zuffa doesn’t always need lapdogs but they do need talented men, Coker may not be mean enough to be a big time fight promoter but he definately has quite a bit of talent for working in the industry. I can see them wanting to keep Coker around to help them grow long term. I can also see Coker wanting to go back out on his own in the future too.
I'd wager that those partners
Turned a very healthy profit from founding Strikeforce in 2006 to a 2011 sale.
" Tell me something Steve, How does a guy from Puerto Rico loose a ball in the Sun? "
I would imagine that Scott Coker recently became quite a bit more wealthy too being as he was a “partner” in all of this.
The reports I've read state the purchase was
40 million plus repayment of outstanding debts. No way Zuffa spends that figure if Strikeforce wasn’t a profitable player.
" Tell me something Steve, How does a guy from Puerto Rico loose a ball in the Sun? "
yeah just like when they paid $70 million for Pride
who didn’t even have a TV deal at the time and had already been publicly linked with using the Yakuza to threaten competitors.
These guys invest long term and sometimes they get taken to the cleaners.
The WFA and WEC weren’t big cash cows when they bought them but Zuffa came out ahead of the deal because they got fighter contracts (Rampage, Machida) from the WFA and managed to keep rivals off of Versus for years with the WEC. It’s still unclear if that was worth the money, time and effort.
Follow me on Twitter @KidNate
by Nate Wilcox on Mar 15, 2011 12:18 PM EDT up reply actions
At least the WEC didn’t cost a lot to run with very low fighter salaries and only 7-8 shows per year.
very true
but it might have damaged their relationship with Spike TV which is deeply co-dependent.
Follow me on Twitter @KidNate
by Nate Wilcox on Mar 15, 2011 12:23 PM EDT up reply actions
I’ve read $40M, including repayment of debts. Besides, it’s all rumors. And since both Zuffa and SF are private companies, we’ll never know the real numbers. No point in arguing, really.
I personally think that if SF was making huge money, SVSE wouldn’t have sold SF for such a low amount as the rumored $40M, especially considering the UFC had to pay something like $70M for Pride…
considerign that the UFC claims to be worth $1billion
if Strikeforce were really a fast-growing and already profitable rival then it would’ve cost much more than $40 million to buy an asset that would have been worth at least 10 times that in just a year or so.
Seriously if Strikeforce could’ve held on until they got to PPV they could’ve made some money.
Follow me on Twitter @KidNate
by Nate Wilcox on Mar 15, 2011 12:22 PM EDT up reply actions
If Scott Coker just put $15 to $20 million into his own personal pocket as his share of the Strikeforce buyout then I doubt he is too upset about all of this. He’s not only still involved in the sport he’s now got some walking around money too.
You know who says stuff like that?
People who don’t have any money.
Believe me, when push comes to shove, Coker likes money just like everyone else.
Every one likes money. But lots of people come to realize that it isn’t the end all and be all of their existence. Personally I have turned down numerous higher paying jobs because I knew I would be miserable doing them. A job eats up 1/3 to a 1/2 of your life. Sleeping 1/3. That means you work time has a huge impact on your over all happiness which is why it always baffles me when people say the fighter should just kiss Dana’s ass and get paid no matter how miserable he makes them. No one has ever worked for some one they couldn’t stand?
You know when you can get away saying that it's about more than just the money?
When you have $20 million dollars in the bank. It might not be exactly what he wished for but I would imagine that Scott Coker isn’t unhappy with his current wealth.
As much as I respect Fedor's legacy...
His time has passed, and we will sadly not see any type of comeback, if we’re realistic.
He’s done. The changing of the guard is already in motion.
Relax and enjoy!
Where are all the people who kept saying Showtime was happy with SF’s ratings of 300k viewers? If showtime was so happy and if showtime was such a believer they would have have paid off silicon valley and moved ahead with coker… but they didnt.
These same people now think Showtime is just gonna start all over again. Why would they spend 10’s of millions again and start from scratch when they could of just bought out Silicon’s stake?
Zuffa has SHO by the balls. SHO is backed into a corner where they will either move ahead with the UFC or transition out of the MMA business. If HBO wants to twist the stick even harder up their ass they’ll cut a deal with the UFC and slowly transition everything SHO has invested onto their own network.
Lorenzo and Zuffa with every public statement is speaking to SHO not the fans. “we’re gonna bring in UFC guys”, “in our deal with viacom we currently have the capability to air UFC on subscription and network TV”, “business as usual”, “We’re gonna run things seperately”.
He’s basically saying to SHO/CBS corp. if you cooperate we can make a win-win deal where you get UFC programming and Zuffa gets good distribution partners, if you dont we’re going to come in and strip everything away on your dime.
spike/sho/CBS vs USA network/nbc sports/NBC. Let the battle begin.
by mmalogic on Mar 15, 2011 10:27 AM EDT reply actions 5 recs
Why would showtime pay off Silicon Valley? They aren’t a promotion company, period. When XC folded they OWED Showtime $4 Million in debt, imagine how much Strikeforce’s parent company owes Showtime after these huge events they’ve been trying to put on. That now means ZUFFA owes Showtime/CBS that money.
And Strikeforce had a sorry CEO that was constantly bent over by M-1. Thats why Showtime gave M-1 a 5 fight contract and didn’t give those fights to Strikeforce. If Strikeforce goes they’ll continue putting on shows through M-1.
That was mostly because XC was forced to pay for production because of their shitty deal. With the new Strikeforce deal, SHO was paying for production.
Still even if Showtime were making a profit or breaking even with Strikeforce there is absolutely no way they would of bought controlling interest. They aren’t fight promoters. In all their years in the boxing business and rivalry with HBO they’ve never created their own fight promotion. They stick to production/broadcasting end of it.
Why would showtime pay off Silicon Valley? They aren’t a promotion company, period. When XC folded they OWED Showtime $4 Million in debt,
Showtime was looking into buying EliteXC when they folded(they already owned 20% of the company), it goes to reason that if they would of been interested in XC they would of been interested in the much better set up Strikeforce. Showtime seemed to of wanted to own their own promotion for a while and they have sunk millions into this but now things seemed to of changed and they didn’t move to buy Silicon Valley out.
Showtime Networks filed public notice with the U.S. Securities and Exchange Commission Thursday announcing its intention to enter preliminary negotiations for the purchase of Pro Elite Inc.
Showtime, a subsidiary of the parent conglomerate CBS Corporation, already enjoys broadcasting deals with the Los Angeles-based company on both its premium cable channel and CBS. Showtime also has a 20% ownership stake in Pro Elite.
http://www.sherdog.com/news/news/Showtime-Enters-Talks-to-Purchase-Pro-Elite-14454
That now means ZUFFA owes Showtime/CBS that money.
This was an assets purchase they didn’t buy the company entirely they just bought it’s name and assets. I would image that just like they have done with all their other purchases they set up an entirely new LLC for Strikeforce. If there was any money owed to Showtime then it would of come out of what Zuffa paid to Silicon Valley and Scott Coker, Zuffa wouldn’t owe Showtime any money at all.
Thats why Showtime gave M-1 a 5 fight contract and didn’t give those fights to Strikeforce.
The four M-1 global shows on Showtime is a joke(Challenger level shows at best) and Fedor is contractually tied to fight for Strikeforce. It wasn’t just a deal between M-1 and Showtime for Fedor it was a deal that included Strikeforce (Fedor events are still co-promoted events, Fedor is tied to Strikeforce still).
The four M-1 global shows on Showtime is a joke(Challenger level shows at best) and Fedor is contractually tied to fight for Strikeforce. It wasn’t just a deal between M-1 and Showtime for Fedor it was a deal that included Strikeforce (Fedor events are still co-promoted events, Fedor is tied to Strikeforce still).
And so is M-1. Which means through Strikeforce, ZUFFA will be helping promote Fedor’s promotion, a main sticking point over their negotiations a few months ago was M-1’s brand and recognition getting equal exposure.
You’d have to be crazy to think Showtime had any delusions of M-1 pulling Strikeforce type numbers anytime soon when they made the deal but it also isn’t a coincidence that the deal between M-1 showtime was made around the same time Strikeforce was being shopped. Maybe they considered it at one point but they’ve never been promoters especially if ZUFFA was going to be bidding against them.
And so is M-1. Which means through Strikeforce, ZUFFA will be helping promote Fedor’s promotion, a main sticking point over their negotiations a few months ago was M-1’s brand and recognition getting equal exposure.
To quote Dana White, It’s business as usual. For the last several months Dana’s business with M-1 has been making their lives as miserable as he could, I would imagine that those crazy Russians aren’t going to get what they think they are going to get out of Zuffa. One thing is for sure Fedor is going to be fighting who Strikeforce wants him to fight now or he’s going to be sitting on his ass, M-1’s negotiating leverage there has been shot all to hell.
You’d have to be crazy to think Showtime had any delusions of M-1 pulling Strikeforce type numbers anytime soon when they made the deal but it also isn’t a coincidence that the deal between M-1 showtime was made around the same time Strikeforce was being shopped
Who knows what Showtime knew, heck if anyone but Zuffa would of bought Silicon Valley out then for Showtime it would of actually been business as usual. For that matter who says that Strikeforce being shopped around is a recent thing, Paul Heyman has said he almost bought the company in 2008.
Maybe they considered it at one point but they’ve never been promoters especially if ZUFFA was going to be bidding against them.
They have been involved with combat sports for decades (which makes me wonder why their production of Strikeforce is so poor). They didn’t “consider” it they purchased 20% of EliteXC and filed papers with the SEC stating they were negotiating to buy the rest. CBS corperation is a huge company, they aren’t scared of Zuffa. Chances are the reason they have backed off of owning their own MMA promotion now is because the entire economy has tanked and they don’t want to spend money on something that is so questionable.
by who me on Mar 15, 2011 12:30 PM EDT up reply actions 3 recs
They didn’t "consider" it they purchased 20% of EliteXC
That’s not entirely true.
They didn’t purchase that 20% so much as they bankrolled the company in exchange for stock. It was the only way to keep the company afloat.
I am shocked – SHOCKED – that the Fedor signing ended up dooming Strikeforce.
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
Editor, HeadKickLegend.com
Contributor for CagesideSeats.com and Bloody Elbow Radio
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by Derek Suboticki on Mar 15, 2011 10:27 AM EDT reply actions 5 recs
It's a completely illogical narrative
" Tell me something Steve, How does a guy from Puerto Rico loose a ball in the Sun? "
Fedor would have much more fans if M-1 never existed
"I am very confident this fight can go either way"
I don't buy it at all
If Strikeforce was really losing money, why would Coker try and prevent the sale? If it wasn’t a profitable venture than why would Coker be trying to wrestle control away at the 11th hour?
More likely is that Strikeforce WAS turning a profit. Zuffa realized that it wasn’t going away. And extended a very LARGE offer that the shareholders at Sillicon Valley decided to take.
Guaranteed the investors made out like bandits on this purchase!!!!
" Tell me something Steve, How does a guy from Puerto Rico loose a ball in the Sun? "
Because Coker wasn’t the one investing a ton of money to keep Strikeforce afloat, the Sharks guys did, and they didn’t want to put even more money into it to grow it even further. They saw an opportunity to cash out, Coker couldn’t find investors to keep control of Strikeforce, and the UFC bought it all. End of story.
Still doesn't add up
If Strikeforce was losing money then why would Coker want to take on something that would personally bankrupt him? It makes no sense at all?
What likely happened is what happens in business all the time.
Guy opens a business. Nurses it along and carves out a decent living running it. Bigger company comes along. Guy sells to bigger company for an huge one time payment.
If Strikeforce was going under, why would Zuffa bother with a purchase?
" Tell me something Steve, How does a guy from Puerto Rico loose a ball in the Sun? "
Coker wasn’t the one putting his own money on the line… the Sharks guys did. And I’m sure Coker believed wholeheartedly in Strikeforce, which is why he wanted to to find new investors and keep trying to make a run at being the #1 promotion.
And to the last question, Zuffa couldn’t care less about Strikeforce itself… they wanted two things, its fighters and its video library. I doubt they wanted to eliminate the competition as Strikeforce was still a very distant #2. The UFC might have been afraid of where Pro Elite could’ve taken Strikeforce though, who knows. In the end, they figured they get rid of potential future headaches, while grabbing most of the top fighters outside of the UFC, and grabbing more video footage they can use for various shows like Best of Strikeforce, or whatever.
I agree that Strikeforce was a distant #2
However they were gaining some measure of traction. It was still a viable place for fighters to go and earn a good wage. It was obviously not folding up. So obviously it was profitable and financially solvent. Zuffa purchased it because
1. It will help suppress salaries in the industry
2. It eliminates the closest legitimate competition
3. They are heartless bastards
" Tell me something Steve, How does a guy from Puerto Rico loose a ball in the Sun? "
keep in mind that the Fertittas spent $40 million and five years
to make the UFC profitable. Coker probably could have gotten Strikeforce into the black given enough time and money but he ran out of both and now he’s an employee rather than an owner.
If Strikeforce were hugely profitable Coker would’ve gotten an ownership stake in Zuffa.
Follow me on Twitter @KidNate
by Nate Wilcox on Mar 15, 2011 11:52 AM EDT up reply actions
Not saying they were hughely profittable
I’m saying they were turning a profit. The lights were going to stay on. They were a legitimate #2 promotion.
Hence, why Zuffa spent a chunk of money to close them down.
" Tell me something Steve, How does a guy from Puerto Rico loose a ball in the Sun? "
I firmly believe Zuffa bought Strikeforce mainly because they didn’t want a motivated and hungry MMA company taking them over (Pro Elite) as that would eventually pose a serious threat to the UFC… but Zuffa certainly would’ve been fine with Strikeforce continuing as they were.
40 Million bucks is substantial
They obviously had SOME worries to dig that deep to buy SF out. Though they might make that figure back just from fighter salary suppression over the next 12-24 months?
" Tell me something Steve, How does a guy from Puerto Rico loose a ball in the Sun? "
40 million is pissing away money for a company backed by Sheikh Mansoor Bin Zayed Al Nahyan. Hell he may of just wrote a personal check for it.
40 Million is a TON
Especially to a group of investors who only invested a small amount of start-up capital, and 5 years of time.
Make no mistake about it. Strikeforce was a huge success to the people who owned it. They made a huge financial gain relative to the cost invested.
" Tell me something Steve, How does a guy from Puerto Rico loose a ball in the Sun? "
why would Coker try and prevent the sale
Who says Coker was trying to prevent Silicon Valley from cashing out? He wanted to take over the company, which means he was probably one of the bidders for their assets too. Apparently Strikeforce had been shopped around for a while (heck Paul Heyman has said he almost bought the company in 2008 and their were rumors of him and Coker being up to something last August too), that doesn’t mean that Scott Coker wanted to sell his part of it though.
This is what really happened
Joe: Dana, we used footage of Jake Shields in Strikeforce for the Prefight show, we are going to get sued!
Dana: No problem.
Zuffa Buys Strikeforce
We need better reporting when it comes to the business aspects of this sport. Some article said that Strikeforce was “running a debt,” what does that mean? Does it mean running a deficit? does it mean they have debts (like 99% of corporations in the universe)? Shady reporting means we didn’t get a clear picture of what SF’s finances were in the real world, and the fact that zuffa now owns the books means we will never know, and now we are just left to endlessly speculate over the old battle lines that shouldn’t exist anymore because the stupid fight is over.
well with privately held companies
we’re almost never going to know the exact state of the books.
Follow me on Twitter @KidNate
by Nate Wilcox on Mar 15, 2011 11:53 AM EDT up reply actions
I know, but it would be nice if people would at least say things that make sense, or explain them, running a debt means nothing. running a deficit means something, having debt means something, saying running a debt just adds unnecessary confusion to the situation.
I love BE and it does so many things so well, but I agree, the business side of things is a weakness on this blog. Maybe that should be BE’s next acquisition in terms of talent.
Anybody else read Meltzer’s site? That’s the job qualification.
by Jonathan Snowden on Mar 15, 2011 3:43 PM EDT up reply actions
I'm
I’m not saying BE, I’m saying all mma media. There was one throw away line somewhere on the internet this weekend that they were “running a debt” and a bunch of other very minuscule pieces of information that don’t tell anything resembling the whole story and people are running with them as if they know everything.
Meltzer has made assertions before that were proven wrong.
Paying premier fighters UFC purses can make a debt in your pocketbook, especially if you’re just starting out. Remember how long it took the UFC to turn a profit and get out of debt. Strikeforce hasn’t been in the “big leagues” for that long, and were still experiencing growing pains. Their problem is they had to sign big names to maintain interest from the audience, and stay on tv. All of this will come at a cost and scare investors. Strikeforce was just starting to turn things around (baby steps). The UFC saw this growth and increased popularity and decided to make an offer; in turn the investors decided it was time to sell while they could get something of value for their product.
And here we are today…
Fedor and his contract wasn’t the reason behind everything.
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