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Behind the Scenes of ProElite and EliteXC’s Demise

If you recall, I had predicted in several columns this past summer that ProElite would be out of the MMA business by February of 2009.

Looks like I was off by a few months. It also looks like I was wrong about CBS coming to EliteXC’s rescue and buying the brand from ProElite.

While neither ProElite or television partners CBS or SHOWTIME have confirmed the news, I am fairly confident in the reporting that is out there. was actually notified of the news by a source close to the situation on Friday when we were tipped off to do some “snooping.” I made several phone calls to sources over the weekend and was told that they had not heard anything supporting the information I had been given.

In hindsight, obviously some of the sources contacted had to have known what was going on but due to the nature of the situation, couldn’t speak to what was about to happen. I trusted my initial source but with a story of this magnitude, I was not comfortable reporting a story of such magnitude with a single source speaking on the condition of anonymity. I would be gambling with the credibility of the site. While I was pretty certain the information was solid, I wasn’t 100% sure. If I had gotten the news out Friday, it would have given officials an opportunity to deny it and put me in a position where if the news proved to be true I could say “See, I told you so” but if it didn’t, well, we’d have a lot of egg on our face.

There was the option to report it as a “rumor,” but I felt to take such an approach at this stage of the site’s evolution would be irresponsible. But I’m not trying to lament over not breaking the story, but rather to convey to everyone reading this that, yes, reports of ProElite’s demise are not exaggerated. The company is indeed done, barring a last-second miracle.

While a lot of good people will soon be without jobs in a very bad economy, ProElite has no one but itself to blame for its demise. The company had all the tools it needed to succeed: an ample amount of funding, major television partners in SHOWTIME and CBS, a small core of name fighters (Jake Shields, Robbie Lawler, Nick Diaz, Antonio Silva, Kimbo Slice, Gina Carano, etc.), and a huge staff that at one point was believed to be larger than the UFC’s. By all rights, ProElite should still be in business right now but had been so poorly mis-managed by MMA neo-phytes during its embryonic stages that its failed had been sealed for quite some time.

The mistakes that were made were numerous, but the biggest were spending tens of millions of dollars on regional promotions such as Cage Rage, ICON Sport, Rumble on the Rock, and King of the Cage for reasons to this day still remain a mystery; paying certain high-profile fighters 2-3 times what they could make with the UFC; finalizing fight cards on short notice (limiting the company’s time to market the event and sell tickets); promoting shows with a high budget even though there was no pay-per-view revenue stream (compare how much money Zuffa allots for a UFC Fight Night event in comparison to a PPV); not having a director of communications or an in-house PR department; poor venue selection (destinations such as Reno, Sunrise, Stockton, and Corpus Christi never made much sense… as well as Honolulu and Atlantic City, due to the high costs of promoting shows in both cities); and hiring employees with strong MMA resumes and not coming up with job descriptions or titles for them until after they had been hired (and then not relying on their expertise).

Management began to make moves to right the ship starting this past February but with a startup company, you don’t get years to turn the tide, you sometimes only get months. When the funding dried up, the company began to operate without a safety net.

When the year started, ProElite had plans to raise $40 million. Then those expectations were reduced to $20 million. In recent months, the idea was to just raise $3.5 million. Warning signals began to sound after the company failed to raise significant money following the strong ratings from May’s successful debut on CBS. Those signals rang even more loud after many investors in the company dumped their shares in ProElite the day ratings news was released to the general public. Clearly there were a great deal of people on the inside who were just as skeptical of the company’s long-term prospects as those on the outside.

When the company couldn’t close on $3.5 million that it at one point was fairly certain it was close to securing, it became solely dependent on CBS. A $1 million loan from SHOWTIME (which was not the first time ProElite had borrowed money from one of its TV partners) was not enough to get the company through the year. Public records indicate that ProElite did not have enough money to hold a Oct. 4 card on CBS as had been scheduled and CBS was forced to step in and underwrite the show. A planned Nov. 8 event set for SHOWTIME was expected to be underwritten by SHOWTIME.

But CBS and SHOWTIME were only going to fund shows out of its own pocket on an interim basis. Long-term, ProElite’s only hope at survival was to find a buyer. Thanks to the loans, CBS held the first option to acquire. Public filings signaled SHOWTIME’s intent to acquire ProElite and while in Sunrise, Fla. to cover the Oct. 4 show, we had been told that a deal to complete the acquisition was all but official.

CBS and SHOWTIME’s control of the company was never more apparent than the Oct. 4 show. While speaking off the record with several ProElite employees, we were told that SHOWTIME canceled the flights of multiple ProElite employees that had been scheduled to work the event just days before they were supposed to fly out of Los Angeles in an effort to cut costs. Some of those employees not only decided to fly out to the event at their own expense, but they still worked day into night once arriving in South Florida. Several employees also told us that they were told they had been asked to essentially re-interview for their jobs.

While many employees had a sense that their days with the company were numbered, several members of the fight team were confident that their services would be retained. The belief expressed was that SHOWTIME and CBS could buy the company and do with it what they wanted, but that they’d still need people to run it. After doing some followup investigation, we were told that it was unlikely the entire fight team was going to be retained and that only a small number of employees were likely to survive the expected acquisition.

According to sources, CBS and SHOWTIME had already begun to set plans into motion about how they would operate the company. Under CBS’ ownership, EliteXC would operate under a leaner and meaner business model. Despite a three-year lease on pricey offices on Wilshire Blvd. in the heart of Los Angeles, only a small contingent of employees would work out of LA. A contingent of employees would then also work out of offices in New York, to give the promotion a presence on both coasts. Having an East Coast office would be crucial, as the time differences between Hawaii, LA, and New York were believed to be a reason why fight cards took so long to finalize. The fact that plans for shows took so long to finalize was a major source of tension between ProElite and its broadcast partners.

CBS’ plans were to televise several EliteXC-branded shows in 2009, but to also work with other promotions such as Affliction and possibly even Strikeforce. Sources informed us that CBS initially wanted to hold six shows during the 2008 calendar year but began to realize that EliteXC simply didn’t have enough fighters to meet the demands of both CBS and SHOWTIME. By working with other promotions, it would not only allow CBS to broadcast more shows, but would give them access to marquee attractions other than just Kimbo and Carano.

There was such confidence that a deal with CBS and SHOWTIME had been completed that EliteXC had already begun to make tentative plans for 2009. A lot of shows were being planned with a lot of options discussed for a 2009 debut in February. As of just last week, work was still being done in regard to the Nov. 8 show as officials were trying to secure a deal that would allow Vladimir Matyushenko to fight Rafael Feijao for the promotion’s vacant light heavyweight title. The promotion was still even trying to try and finalize a deal with pro wrestling star Kurt Angle to make his MMA debut under their banner some time in ’09 and had explored the possibility of involved with a tentative April fight between Ken and Frank Shamrock.

Why the acquisition fell through, I am not 100% certain. But I would say that anyone with fair deductive powers can figure out that the tumultuous events of Oct. 4 likely sealed ProElite’s fate. With that in mind, I can say I am 99.9% certain that the higher-ups at CBS began to get cold feet following the slew of bad press stemming from the now-infamous main event between Slice and Seth Petruzelli that saw Petruzelli TKO Slice just 14 seconds into the bout.

Petruzelli’s comments on 104.1 FM in Orlando that he had financial incentive not to take Slice to the ground that led to such a public outcry that officials in Florida launched an investigation into the incident were just the tip of the iceberg, as there also appeared to be more to the story. For instance, separate sources informed Five Ounces of Pain last week that there was also a possibility that a deal had been struck preventing Petruzelli from using “Thai-style kicks on Slice, since he had not prepared for them leading up to the fight.”

We also know that CBS execs were none too pleased with the whole situation that led to Petruzelli being promoted to the main event in the first place. As confirmed in the Oct. 20 print edition of the Wrestling Observer, veteran MMA reporter Dave Meltzer confirms that Ken Shamrock became angry the day before the fight upon learning just how much more Slice was scheduled to be paid than him. Feeling disrespected, it is believed that his representatives began to hold out for more money on Friday. They were denied but renewed their request on Saturday morning. Hours later, they were informed that Shamrock had been cut and was unlikely to be able to compete.

EliteXC Vice President Jared Shaw thus far is the only representative within the company to deny claims on the record that Shamrock asked for more money. Several outlets have outright accused Shaw of lying, which may not be accurate People need to be mindful of who was holding the purse strings at that point. If Shamrock’s camp was going to ask for money, it would make a lot more sense to go to CBS as opposed to ProElite. There’s also the fact that Shaw served as an unofficial liaison between the company and Slice’s camp, and the fact is that he could have been removed from the situation. If Shamrock’s camp made quiet overtures for more money, there’s a good chance Shaw and other ProElite executives might not be fully aware of them.

The timing of everything raised a lot of eyebrows, but the Observer indicates that Shamrock was so angry that he needed to blow off some steam and decided to roll on Saturday morning. Some public speculation after the event centered around the possibility that based on his pro wrestling background, Shamrock may cut himself intentionally. Meltzer all but rules out there possibility, suggesting that Shamrock needed the payoff he was scheduled to make for the fight and as upset as he may have been, was in no position to walk away having earned no money for the fight. The fact is that Shamrock had a large contingent of his family in attendance at the event and that he may have actually lost money on the fight when you factor in the costs of a training camp as well as travel expenses.

However, the question remains as to why Shamrock chose to go to the hospital as opposed to having a cutman apply pressure to stop the bleeding, then apply super-glue to the cut to close the wound, and then apply makeup to give Shamrock a chance to make it through the pre-fight examination at the arena. While the cut would have opened up easily if he took a shot to the area, the bottom line is that Shamrock would have still be guaranteed his scheduled six-figure payday once he had passed the pre-fight medical.

Meltzer reports that Shamrock pleaded with state officials for hours to allow him to fight, but he had to have known that once sutures were applied to the wound, there would be absolutely no way he would be allowed to compete. The Observer also states that executives with both CBS and ProElite were “cold” whenever Shamrock’s name was brought immediately after the event and are still cold whenever his name is brought up. We can confirm that a lot of people are still rather uneasy over the questionable circumstances in which Shamrock was medically disqualified just hours before he was set to fight Slice on primetime network television.

The injury to Shamrock put CBS executives in a dire situation: go with an unknown vs. Slice that Slice had not prepared for or hold the show without Slice competing but kill their audience by opening the show with news that the signature star of the promotion would not be competing as had been advertised. It is believed that CBS executives considered canceling the broadcast since an encore airing of one of their top shows would have likely garnered a much stronger rating than an event sans its most recognizable star.

The Shamrock situation, the promotion’s franchise player losing to an unknown in just 14 seconds, and the controversy caused by Petruzelli’s comments that were fueled by contradictory statements made by ProElite officials in response, simply made a potential acquisition of ProElite a toxic situation that could come back to cost CBS executives their jobs if things got even worse.

Several executives at CBS, such as the network’s Senior Executive Vice President of Programming Operations Kelly Kahl, were extremely bullish on MMA. They felt it was a sport for the future with a demographic that the network needed to improve in. All things considered, the cost of putting on shows was relatively inexpensive and there was the option to acquire the company at an affordable price. However, in a large corporation such as CBS, even bosses have bosses and major companies simply don’t make acquisitions outside of their core business without several layers of approval. My guess is that when the acquisition department at CBS began to do its research, they didn’t like what they saw. It also wouldn’t surprise me if additional higher-ups (such as Les Moonves) didn’t begin to question why CBS would get involved with a brand that had become so tarnished.

The bottom line is that EliteXC had become a tainted brand. The fact that the UFC made no attempt to acquire some of EliteXC’s assets is very telling. Based on terms of recent loans, CBS had the first option of acquiring ProElite. However, once they passed, ProElite retained the option to shop the company around and dump it for a song. But with a severely fractured brand image and no other major national promotion interested in making a play for the company, it made more sense for Zuffa to allow ProElite to fold and simply wait for its fighters to become free agents.

If ProElite files for bankruptcy, Zuffa will still have an opportunity to put in a bid, but that is considered unlikely, which again speaks to how much of a poor image EliteXC’s brand projected for the sport in recent weeks. For Zuffa to not even be interested in trying to acquire the company just so it could have control of its video library tells you all you need to know.

What happens from here is anyone’s guess, but I certainly have a few. I believe that CBS will stay in the MMA business. The bottom line is that the ratings for the May 31 and Oct. 4 shows were just simply too good. I think the biggest beneficiary of ProElite’s folding could be Affliction. Sources told us just prior to the event on Oct. 4 that there was a lot of talk about possibly broadcasting the Affliction show tentatively planned for Jan. 24 on CBS. In the end, the decision was made to move forward on pay-per-view due to FedorEmelianenko’s price tag for the show but we do know a lot of talks have taken place about future Affliction shows airing on CBS.

We also know that CBS also had explored the possibility of televising Strikeforce events in 2009 that would be built around the involvement of both Cung Le and Frank Shamrock. However, NBC also has interest in televising live Strikeforce events in ’09 so it remains to be seen whether they will be involved.

One option that cannot be ruled out is CBS and SHOWTIME using the old boxing model of just having fighters sign contracts with the network (or, a promotional shell company) and just put on fights under both the Saturday Night Fights and SHOWTIME brands. When Tito Ortiz during the Oct. 4 event, the reality was that he was close to signing with CBS. Without enough funding to put on a show of its own, said he was close to signing with EliteXCProElite clearly did not have the money to entertain the idea of signing a high-profile fighter such as Ortiz.

And once ProElite files for bankruptcy, it means a whole host of talented fighters will become free agents. Zuffa will likely move to sign some of them such as Shields, Lawler, Feijao, Silva, Eddie Alvarez, and Wilson Reis (for the WEC brand), a lot of fighters such as Carano, Slice, Diaz, Petruzelli, K.J. Noons, Dave Herman, Brett Rogers, Joey Villasenor, Scott Smith, Benji Radach, Murilo “Ninja” Rua, Bao Quach, and Cris Cyborg will fall through the cracks. SHOWTIME could possibly sign those fighters and promote them on fight cards with relatively low budgets.

Another thing you will see with the fall of ProElite is the rise of regional MMA. With MMA on the downturn in Japan, a lot of talented fighters could be stuck in a state of purgatory. Granted, Strikeforce will be very interested in a lot of the aforementioned names, but the reality is that the WEC, UFC (which will likely have to purge some of its roster if it pursues a significant amount of ex-EliteXC fighters), and Strikeforce can only have so many fighters under contract. A lot of fighters who were fighting and winning on the national level are suddenly going to find that their only options will be to fight for less for U.S.-based regional promotions and improve their market value with the major national promotions that remain, or retire.

Existing regional promotions will look to secure talent that falls through the cracks while several promotions will form out of the void that has been created by the collapse of so many national promotions. A fight such as Rogers vs. Herman, which had been discussed as a strong possibility of taking place for EliteXC in 2009 for the promotion’s heavyweight title, might now be contested on a regional show. And once these regional promotions sign a few significant names, they will become immediate candidates to land a broadcast deal with HDNet.

HDNet could either be a winner or loser from the ProElite fallout. The high-definition premium-tier cable channel is building its core business model around televising MMA. However, it is losing television partners by the month. The IFL is bankrupt; Strikeforce is expected to move onto greener pastures; with DREAM promoting a New Year’s Eve show in conjunction with K-1 it means that the promotion is unlikely to survive into 2009; Adrenaline MMA has no immediate plans to hold a show; and even Lou Neglia’s Ring of Combat no longer appears to be in HDNet’s plans. As far as live MMA is concerned, HDNet’s only live MMA programming will be Matt Lindland’s Sportfight, the Maximum Fighting Championships out of Canada, and the 60-90 minute undercard fights that Affliction will broadcast prior to pay-per-view events. HDNet will either need to resume promoting its own events or might actually have to start compensating some of its television partners.

What I don’t see happening is another promotion launching out of the ashes of ProElite and EliteXC and trying to adopt the UFC-model in a vein attempt to compete with it. Too many companies have tried and failed. With the state of the U.S. economy, few investors are looking at taking risks right now. But even if the economy was good, any investor worth their salt will do their homework and research the industry. And what they will see is that the WFA, IFL, EliteXC, Art of War, BodogFIGHT, Cage Fury Fighting Championships, YAMMA, Hardcore Championship Fighting, and many other MMA promotions tried to operate on a national level and failed. As much as I hate to say it, the demise of ProElite and EliteXC could mean that the MMA bubble has finally burst. However, to be honest, I’m not sure whether that’s a bad thing or a good thing. As with most things in life, only time will tell.