The cancellation of Titan FC 36 last month, while not a big surprise, was a bonafide disappointment to the fighters and fans who were supposed to come first. Fighters were counting on a paycheck to get by and enjoy the holidays while fans were looking forward to some regulated violence. The promotion claimed the cancellation was "due to health complications related to an unexpected surgical procedure CEO Jeff Aronson underwent recently," which set off alarm bells inside some observers' heads.
Would the UFC or Bellator, or even WSOF or RFA cancel shows if their leading men were in the hospital? If Titan claims to be stepping up its game from a regional promotion, shouldn't it have a support staff around Aronson who can handle running a show without him?
Count Sam Caplan, co-host of The MMA Insiders podcast, among those who didn't buy Titan's explanation. "My B.S. meter was going at an all-time high...From my experience as someone who's been involved in the fight game for a long time, the number one reason why shows get cancelled: Financial issues." (See the 46:10 mark)
Aronson tried to clear the air yesterday telling MMA Junkie radio that he tore internal stitches following lower abdominal surgery. This led to the decision to cancel the event since he's the one that funds the operation and makes sure everything's in the right place logistically. He also noted he'll be dipping into his own pocket to send affected fighters some amount of compensation on Jan. 15.
But this explanation didn't answer questions as much as create new ones. Is Titan FC not adequately funded prior to a show? Are we to believe that Jeff Aronson is the only one in the entire company with check-writing privileges or a corporate credit card? Since the show was cancelled nine days from the event date, wouldn't major expenses such as the promoter bond, advertising costs, and the venue deposit have already been paid? Can the remaining Titan team not handle logistics for one event in a bind? And why would the CEO have to dip into his own pocket to compensate fighters if the company is sufficiently funded?
What's really going on over at Titan? Bloody Elbow has obtained lawsuit filings, contracts, settlements, and bankruptcy documents to give a better peek at the behind-the-scenes business world of Titan Fighting Championships.
Aronson buys Titan
Titan Fighting Championships' original founder, Joe Kelly, sold the promotion to Resurrection Fighting Alliance in 2012 only to buy it back a few months later. Kelly ran two shows in 2013 before selling Titan's assets to Jeff Aronson.
Aronson, the former CEO of Cash4Gold, had received a one-time distribution of $19.2 million as part of a November 2008 private placement of securities according to a lawsuit by the investment bank firm, Needham & Company.
Cash4Gold would file for bankruptcy just four years later following complaints of bad and deceptive business practices. Along the way, Aronson cut his MMA teeth with Alchemist Management, representing such name fighters as Rory MacDonald, Brendan Schaub, Gegard Mousasi, and Stefan Struve.
In February 2014, Aronson explained his transition into the promoter space to Bloody Elbow's Iain Kidd stating, "...the problem I started running into as I started signing more and more top young prospects, was I couldn't get them any fights. No one would fight these guys... I decided about a year ago that I had had enough. I was looking around at different promotions and seeing what was going on in the business of MMA. I got myself familiar with some of the promoters out there, and then I started a new company called Titan FC and I brought over a bunch of guys that had run the shows for the old Titan, because there's so much that goes into putting on a good show."
Titan's Asset Purchase
Aronson filed Articles of Organization for Titan FC, LLC on Oct. 4, 2013. Three days later, his new company agreed to purchase the assets of Joe Kelly's Titan Entertainment, LLC. As Aronson explained it a few months later, "Other than the name, which I kept because I really liked it, this has nothing to do with the old Titan."
According to the Asset Purchase Agreement, Aronson's Titan FC would purchase Titan Entertainment's AXS TV contract, the Titan Fighting Championship Media Library, and all of their intellectual property including trademarks and websites. In exchange, Kelly would receive $128,000 and be kept on to "operate the day-to-day affairs of [Titan FC]," receiving $7,500 for each event he promoted.
Kelly would be a 20% owner of the new Titan FC, with Aronson controlling the remaining 80%. If there were any net profits, half would be reinvested into the company with the rest divvied up quarterly based on Aronson and Kelly's respective ownership percentages. At all times, a minimum of $100,000 was to remain in Titan FC's bank account, "reserved for operating expenses."
Like many things in the MMA industry, the transaction doesn't seem to have gone as planned.
Titan FC is currently suing Titan Entertainment and Joe Kelly in a Florida court for fraudulent inducement and breach of contract. According to the complaint, "Titan Entertainment fraudulently induced Titan FC into an Asset Purchase Agreement...Titan FC has paid Titan Entertainment the necessary funds but Titan Entertainment has failed to deliver the promised assets. At the time it entered into the Agreement with Titan FC, Titan Entertainment had no intention of ever delivering certain assets to Titan FC, and has refused to deliver such assets. Instead, upon information and belief, Titan Entertainment continues to use such assets for its own personal financial benefit."
The key asset in dispute is the Titan Fighting Championship Media Library which Titan FC claims was never delivered. According to the complaint, this led to problems early in 2014 when "Titan FC, Jeffrey Aronson (its owner), Titan Entertainment, and Kelly became embroiled in a dispute over each other's performance of the terms of the Asset Purchase Agreement."
In an effort to resolve the dispute, Aronson and Kelly allegedly agreed to a confidential settlement on May 1, 2014 whereby Aronson would place $25,000 into a trust account to be held until Kelly delivered the fighting cage and all necessary equipment for what they called the "C-3 Event" (which appears to be Titan FC 28) to be held in Oklahoma on May 16. Kelly was to resign his 20% membership interest in Titan FC, LLC, and at the show's conclusion would be "paid an additional sum of $10,000 directly from Doc. Tripp."
The CEO of the Oklahoma-based MMA promoter, C3 Fights, is Dr. Ron Tripp. Due to the Oklahoma location, similarity in names, and the reference to "C-3," it stands to reason, but is unconfirmed, that he is the "Doc. Tripp" mentioned above. As of this writing, it is unclear why a third-party to the settlement agreement was to make the final payment.
There was one other key term to the settlement:
6. Upon the law firm's receipt of the Initial Payment, Kelly will also deliver to Titan FC, LLC all other assets per the Asset Purchase Agreement including, but not limited to, contacts and sponsor information as attached hereto
While not explicitly mentioned above, Titan FC claims in its complaint that "one of the ‘assets' Kelly promised to deliver to Titan FC under the terms of the Settlement Agreement was the Media Library, which had previously never been delivered. To date, while Titan FC made the $25,000 payment, and despite repeated demands, neither Titan Entertainment nor Kelly has caused to be delivered to Titan FC in Florida the Media Library."
The media library is especially important as the UFC announced last Jun. 15 an exclusive agreement to live stream all of Titan FC's events, which had previously aired on CBS Sports Network. The press release also stated that Titan's archive of 33 events would be uploaded to Fight Pass "in the coming months."
Jason Floyd and other MMA media members have noticed that we are now six months past the announcement and the only Titan fights available in the UFC Fight Pass fight library are from events held after the deal was signed (Titan FC 34 and 35).
The archive of prior Titan events has yet to be added and we now have a big clue as to why: Titan FC is embroiled in a legal battle with Joe Kelly over ownership of a substantial chunk of its media library, possibly up through Titan FC 28.
It is certainly possible that legal issues with the Titan media library have led to problems with the UFC deal. One only needs to recall how the UFC's Chief Content Officer, Marshall Zelaznik, reacted a few months ago upon learning of a legal dispute during negotiations to put World Series of Fighting (WSOF) content on Fight Pass.
Could the UFC have concerns about Titan FC? Might it have considered terminating their Fight Pass deal or reducing contractual payments while the complete library is unavailable? The media library must have some value for Titan to spend time and money suing over it, and the possibility certainly exists that the ongoing dispute somehow created problems at Titan.
Another potential trouble spot is sponsorship. In his excellent series on the UFC's finances, Bloody Elbow's own John Nash calculated that sponsorships accounted for 9% of the UFC's 2006 revenue. It's not difficult to imagine that this percentage is significantly larger and more critical for a smaller promotion without pay-per-view and closed circuit revenues.
There's at least one sponsorship problem we know of because Titan FC is currently suing a sponsor in the same Florida courthouse as the Titan Entertainment case.
Per the complaint, on Aug. 25, 2014, Titan and DigiPro Media executed a sponsorship agreement where DigiPro allegedly agreed to pay a total of $207,500 to be the exclusive festival sponsor of Titan at the Mobile Aerofest on Mar. 20, 2015, an event which ended up as Titan FC 33.
According to Titan, as of the October 2015 filing of the lawsuit, DigiPro had only made good on $74,500 of the total amount due, including a check in February for $7,500 which allegedly bounced due to insufficient funds. Titan is currently suing DigiPro for the remaining $133,000 balance.
Promoting Ain't Easy
For those who follow the business side of mixed martial arts, the evidence consistently indicates that trying to grow a young MMA promotion into a profitable or cash flow positive enterprise is extremely difficult. Dana White and Lorenzo Fertitta are famous for saying that at one point the UFC was $40 million in debt before things turned around with the success of the first season of The Ultimate Fighter.
We know that over a span of two-and-a-half years, the World Series of Fighting went from $2.4 million in owners' capital contributions to $7.2 million while also accumulating over $7 million in outstanding loans. They were allegedly one day away from having to cancel WSOF 15 in Tampa, Florida due to lack of funds, allegedly one day away from being locked out of their corporate offices for not meeting rental obligations, and are currently being sued by a different landlord for allegedly being delinquent on rent payments.
Without having access to Titan FC's books or inside sources willing to talk on the record, we can't yet say definitively what's going on, but there can be signals. In addition to media library and sponsorship signals, the purchase price could be another as could former owner Joe Kelly's ongoing bankruptcy case.
Take WSOF as an admittedly imperfect comparison promotion. Many indications are that WSOF is losing substantial amounts of money and yet Shawn Lampman's mother sold her 26% stake last May for $2.2 million. Jeff Aronson, on the other hand, essentially purchased 80% of Titan FC in late 2013 for just $128,000. In the world of sports properties, $128,000 is a pittance.
The purchase price certainly doesn't suggest that Aronson was buying a strong expectation of equity generation, and Joe Kelly's bankruptcy filing doesn't brighten up the picture. The former owner of Titan Entertainment filed for Chapter 7 bankruptcy protection in Missouri this past July.
Kelly ran Titan Fighting Championships under the umbrella of Titan Entertainment for roughly eight years. He allegedly received a payout of $128,000 plus $25,000 plus $10,000 more, and is now claiming in court filings assets of roughly $25,000 and liabilities from Titan Entertainment which appear to total just over $168,000, mostly from personally guaranteed Titan credit cards and business loans.
Kelly lists his income from Titan Entertainment in 2013 and 2014 as $0.00, "operated at a loss." These were admittedly transitional years, but still, after eight years they aren't the signals one would hope for.
So what's more likely, that Titan FC 36 was solely cancelled due to one man's health problems or that legal and/or financial difficulties also reared their ugly head?
True fight fans certainly don't want to see Titan FC go away. We want as many options as possible for young fighters to develop their skills and older fighters to possibly re-ignite careers. But when you move past the public façade and peak behind-the-scenes of promotions like Titan FC and WSOF, the signals haven't been looking so great lately.
Good luck, Titan.
Bloody Elbow reached out to Titan FC and the UFC for comment, and received the following statement from Titan's COO Lex McMahon, "As a matter of policy, Titan FC does not comment on any ongoing legal disputes."
Paul is Bloody Elbow's analytics and business writer. Follow him @MMAanalytics.