Shamrock Inc: Frank Talks Business and Brand Building

November 5, 2008

Despite having only six fights in the past nine years – all of them outside the UFC – Frank Shamrock has kept his name recognition high and built a multi-faceted business with almost 30 full-time employees.   In a recent interview with MMAPayout.com, Shamrock described his keys to success, while offering some advice to anyone hoping to follow in his footsteps.

“I’m no closet genius,” said Shamrock.  “I learned through trial and error.  It took me 7-8 years to build my business and it was a good time for me because the sport was small then.  I was blessed in that way.”
But times have obviously changed.  “The days of gun slinging and hanging out in this business are gone,” he says. “The dollars are bigger and the sport of MMA keeps moving closer to the mainstream.  Everyone’s rushing to the sport because it’s very popular and cool, but your brand needs to be consistent.”

Shamrock business model in recent years includes 70% of revenue from fighting, 15-18% from licensing, and 12% from consulting.  The latter consists of fees Shamrock earns from promotions like Elite XC, and in the past, UFC, offering advice and support.  He takes cash and/or equity as payment, and sometimes will invest his own capital.

He believes in taking risks, but only calculated ones.  “I’ve taken some risks with my brand, but they were only risks where the payoff was way beyond the risk.”  Over time, he’s changed his approach.  “I’ve got a life and longevity plan,” he said.  “I want to be healthy and happy, but I have to be in really good shape and stay at the highest level.  Otherwise my brand will suffer and people will be kicking my ass.”  As a result, Shamrock has been much more deliberate about how he plans and promotes his fights.  “My plan is to fight for 10 more years, until I’m 45, but the risks get higher every year as I get older, so I work to raise the value of each fight each time,” by amping up the promotion and buildup, and commanding higher revenues.

At the same time, he continues to diversify his business outside the ring, landing some national, mainstream projects like “MMA for Dummies” with Wiley Publishing and one of the crown jewels of sports licensing deals, an MMA videogame by EA Sports that hits stores in 2010.

When he talks business, Shamrock peppers the conversation with phrases like “revenue targets” and “performance goals” which are more typical of an MBA than an MMA legend.  He credits “good mentors and partners” like his attorney Henry Holmes and Strikeforce co-CEO Scott Coker.   He has also worked hard to build a strong team.  “We train, develop and manage people from the MMA and business community.  I have good people.  Some are from the MMA community, some from other professions.”

Shamrock also believes personal integrity has been a strong contributor to his success.  “When you’re the type of business person that looks you in the eye, shakes hands and says, ‘You’ve got a deal,’ and you stick to it, you attract hungry, focused people.”

It’s a lack of integrity that he says contributed to the downfall of Elite XC, of which he was a “major shareholder.”  “You should treat people like athletes and artists,” he says, “they didn’t do either.”  The lesson from their failure, Shamrock said, is that experience, not capital, is the most important contributor to success in MMA.  “In a way they [Elite XC] were leaders because they lined up CBS and Showtime and no one had ever done that before.  But they burned through $60 million because no one modeled the business and industry.  It was inevitable.”  He also says the management team lacked any kind of focus, hiring people indiscriminately to work on various projects, none of which contributed to the bottom line.  “I can run out and hire 50 people, but I could also hire one person who knows what they’re doing.”

But can a viable competitor to UFC really emerge?  Shamrock thinks so, but “That person needs to be MMA 3.0.  He needs to understand the business, bring together disillusioned stars, bring them together and get ‘em functioning.”  In all likelihood, however, he believes a “joint venture” approach, ala Affliction and Elite XC, is more likely in the near term.

In the meantime, Shamrock will continue building “Shamrock, Inc.” regardless.  He offers some friendly advice to anyone entering the game.  “These days it doesn’t matter if you’re any good or not.  But you need to pick who you are and run with it.  If your radio call is at 5:30 in the morning, be there, because that’s what the pros do.”

EliteXC Looking to Retain Contractual Rights for Now

November 3, 2008

MMAWeekly is reporting that EliteXC is looking to retain its contractual rights over fighters even though the company looks to be at death’s door with the recent decision by CBS to not purchase the struggling promotion. Notices to this effect were sent out late last week:

MMAWeekly.com on Sunday learned that ProElite, Inc., parent company of Elite XC, has notified several fighter managers the company still intends to promote mixed martial arts events.

“Elite XC and ProElite are currently downsizing its staff in an effort to improve its business moving forward,” the notice states. “As this process is implemented, Elite XC cancelled the event previously scheduled for Nov. 8 in attempt to re-schedule another event in early 2009.”

The announcement is similar in tone to the ones made by the IFL during it’s period of suspended animation. The statement comes off more as lip service meant to buy time than any concrete plan for the future. Regardless, contractual obligations by EliteXC to is fighters will need to be met with in the near term in order for the promotion to claim any tenuous grasp over their fighters. It should be interesting to see if that is possible and where the funding would come from.

EliteXC: A Lesson in Expectations Management

October 28, 2008

There are many golden rules within the business world, but in regards to selling yourself, your company, or your product, none are more important than this: never over-sell, never over-hype, never over-promise. It’s basic expectations theory.

When an organization makes a promise, they set an invisible bar of expectations within the minds of their customers. Then, for better or for worse, they’re stuck with the task of meeting those expectations; because, obviously, if you don’t meet the expectations of your customers, they’re not going to be happy.

While it seems like common sense, there is a host of academic research behind expectations theory. Perhaps that’s why I’m so surprised that a guy like Jared Shaw – someone so quick to pull out his Harvard School of Business case studies against KJ Noons – has managed to commit one of the greater selling sins in recent memory.

Under the management of EliteXC and the Shaws, Kimbo Slice has been promoted as this “street certified,” legend-slaying monster – a veritable MMA God. Unfortunately, they did such a good job of duping the general public that most actually believed the hype.

To the mainstream, Kimbo Slice, was as advertised; and, their expectations followed accordingly.

Sadly, those expectations were brutally exaggerated and MMA’s first, real foray into the mainstream should be considered a failure if for no other reason than the damage that Seth Petruzelli managed to inflict, with one glancing right, to the chin of both Kimbo’s and MMA’s credibility. And that’s even ignoring the controversy surrounding “Standgate.”

As a result, the general public – and perhaps just as important, the mainstream media – is very weary of our sport; all thanks to those brutal expectations that were unwisely, and perhaps even unfairly, thrust upon a fighter that was not ready and a sport that knew as much.

Now, the rest of the MMA community is left with the task of picking up the pieces and learning from the mistakes of the past.

So to all of you would-be promoters out there, know this: you’ve got a fine line to walk, between under and over-selling – tread it carefully. You can’t dupe the consumer and live to operate another day.

Let The Free Agent Feeding Frenzy Begin

October 22, 2008

Dave Meltzer’s report on the imminent demise of the EliteXC in combination with the cancellation of the organization’s November 8th card have set the MMA world abuzz in the last 24 hrs. Despite the numerous warning signs, it’s safe to say that most within the community remain disappointed that yet another organization has perished. God only knows how long we’ll now have to put up with the same, old “sky is falling” routine…

Yet, I can guarantee you this – sky or no sky – there are a couple individuals within the MMA community that have been waiting months for this eventuality; and I can tell you they’re not the least bit surprised or disappointed.

After all, if you were Dana White, Tom Atencio, or Scott Coker, from yesterday to today, you’ve got one less rival to compete with. More importantly, you’re also about to embark on the biggest free agent feeding frenzy since Pride dissolved in early 2007.

As soon as some of EliteXC’s best and brightest become free and clear of their obligations, they’re almost assuredly going to be receiving multiple inquiries. So let’s take a look at the potential targets and strategies that Affliction, Strikeforce, and Zuffa may employ over the coming weeks.

Notable Fighters

With over 70 fighters signed to the EliteXC roster, there are great prospects and contenders at every weight class. However, the most notable fighters might include:

Heavyweight: Antonio Silva, Brett Rogers, Dave Herman, Jon Murphy, and the much-maligned Kimbo Slice
Light Heavyweight: Rafael Feijao
Middleweight: Robbie Lawler, Murilo Rua, Kala Kolohe Hose
Welterweight: Jake Shields, Paul Daley
Lightweight: Eddie Alvarez, Nick Diaz, KJ Noons, Charles “Krazy Horse” Bennett
Featherweight: Wilson Reis

Affliction’s Strategy

Expect that Affliction will leverage their non-exclusive contracts and relatively exoribitant pay structure to lure many of the top free agents to its side.

And, if you’re Affliction and looking at a thin non-heavyweight roster, you’re likely going to be pursuing the lighter weights in order to round things out. What would Eddie Alvarez and/or Nick Diaz do for Affliction’s lightweight division? Both of these fighters are likely to respond well to the freedom that a non-exclusive contract provides – and, hey, the pay isn’t bad either.

This is where we’ll see if Atencio can keep good on his promise to lower fighter pay over the next few events. With a rumoured deal with CBS in the works, the whole MMA world will be watching.

The Zuffa Strategy

This one is a bit funny. On one hand, you’d expect Zuffa to sweep in and take its pick of the litter, but that hasn’t necessarily been the case if you look at the organization’s history in the free agent market. In fact, they’ve been quite cautious when it comes to ponying up the dough – Fedor Emelianenko and Joachim Hansen are just two of many examples.

Furthermore, I’m inclined to believe that the Zuffa doesn’t really consider Affliction as its long-term competitor. It’s quite possible that Zuffa may just decide to bide its time and wait for the collapse of Affliction before pouncing on the free agent spoils of the entire industry.

At any rate, I suspect that the UFC will try to leverage their brand (like they always do), their level of competition, and their organizational stability if and when they approach any free agent fighters. It’s not all about the money, not for everyone, and the UFC undoubtedly has the best all-around competition of any organization. Any fighter considering the UFC as a destination knows he’ll be facing top-notch competition, but he’ll also be paid according to his success.

The downside to the UFC’s roster management style is that there isn’t a lot of job security for those on a losing streak – that can scare fighters away. Then again, Dana White is just as likely to argue he doesn’t want those types of guys in his organization anyway.

In terms of targets, you have to think that Zuffa will be looking very closely at Jake Shields, Wilson Reis for the WEC, Rafael Feijao (someone they’d targeted from the IFL earlier), and the wealth of heavyweight prospects that Elite had like Antonio Silva, Brett Rogers, Dave Herman, etc.

Personally, I hope to hell they can sign Eddie Alvarez. Show of hands, BJ vs. Eddie, anyone?

The Strikeforce Strategy

The forgotten third partner in all of this would seem to be Strikeforce. They’ve shown in the past their willingness to co-promote and thus I suspect that might be a chip on their bargaining table. They’ve also demonstrated the ability to compensate their high-level fighters at a competitive level (re: Cung Le’s base of approximately $250,000).

I cannot envision them competing for a fighter that both Affliction and Zuffa are interested in, but they could become a player for the mid-level guys that are looking for organizational stability, job security, non-exclusivity, and competitive pay.

Any one of Elite’s former heavyweight prospects would be attractive to Strikeforce; additionally, Robbie Lawler as an opponent for Cung Le is a distinct possibility.

ProElite Violates Loan Terms, CBS/Showtime May Seek Remedy

October 22, 2008

ProElite made another filing with the SEC recently, basically stating that CBS/Showtime feels ProElite has violated the terms of its loans (which required certain bank balances be kept). The total amount of loans outstanding from CBS/Showtime to ProElite was $6.3 million. What is interesting is the possible remedies that CBS/Showtime can make under the terms of the loan. CBS/Showtime may, within three business days, exercise rights and remedies that include:

(a) exercising any and all rights as beneficial and legal owner of the Company’s assets;
(b) selling or assigning the Company’s assets in whole or in part;
(c) granting a license or franchise to use the Company’s assets in whole or in part;
(d) suing, demanding, collecting or receiving in Showtime’s name and money property or receivable on account of or in exchange for the Company’s assets; or
(e) exercising all voting powers of ownership pertaining to the Company’s assets as if Showtime were the sole and absolute owner thereof.

Basically, there could be some major movement possible in the short term unless there some legal challenge by ProElite investors.

The Four Horsemen of the EliteXC Apocalypse

October 22, 2008

With apologies to Grantland Rice….

“Outlined against a blue-gray October sky in Sunrise, Miami, the Four Horsemen rode again. In dramatic lore they are known as famine, pestilence, destruction and death. These are only aliases. Their real names are: Petruzelli, Shamrock, Shaw, and Lappen. They formed the crest of the EliteXC team which galloped over the precipice at the Bank Atlantic Center that night as 8,000 spectators peered down upon the bewildering implosion of a promotion”

On Death
The card from Sunrise represented the death of many things: the death of the Kimbo myth, the possible death of Ken Shamrock’s days at the top of the card, and lo and behold two weeks later, the death of the promotion itself. A confluence of events, some of their own doing and some not, gathered a foreboding momentum that ultimately signaled the end of the road for EliteXC.

In the span of a week-end EliteXC would go from Friday night basically having a deal to be purchased by CBS in the bag…to a Monday Morning Radio show appearance by Petruzelli that would bring the whole house of cards collapsing around the organization. In between those two points you had Shamrock looking to get his pay bumped, receiving a mysterious cut on his eye that would knock him out of the fight, Petruzelli moving into the main event, EliteXC executives allegedly loading up on on incentives to Petruzelli to affect the flow of the fight, and capping it off with Petruzelli knocking out Slice in a fight that lasted about as long as the pre-fight instructions from the ref. Having their main draw getting knocked out was a blow in and of itself that could have doomed the CBS deal but Petruzelli’s case of loose lips while live on radio delivered the coup de grace in sinking the EliteXC ship. A rapidly deteriorating situation only worsened with the comments of Jeremy Lappen and Gary Shaw, whose attempts at crisis management seemed woefully inept. When the final news came in Monday the phrase “sad end to a sorry episode” rang true.

On Pestilence
What to think when looking back at the time of EliteXC on the MMA scene? Should they simply be written off as a total plague upon the MMA house, to paraphrase Shakespeare? While many would be quick to do so, EliteXC did bring many things to the landscape that were welcome. The re-emergence of Frank Shamrock on the national scene is one, both for his fighting and overall entertainment abilities. Frank would give lip service to being the best 185’er out there despite that clearly not being the case, but at this stage of his career that isn’t really the point. Under the EliteXC banner (with co-operation from Strikeforce), he was able to put on some entertaining grudge matches with Cung Le and Phil Baroni. Neither fight was of great importance in some mythological rankings, but they provided a lot of the sizzle and just enough of the steak that makes for a well promoted and enjoyable fight. Having a forum for a fighter like Nick Diaz was another benefit. The UFC may have tired of Diaz but I never did and his having a high profile venue for his fights was a good thing in my book.

Another calling card for the time of EliteXC in MMA will be the increased profile of women’s MMA in the US. With here performance on the May and October CBS cards, Gina Carano was able to cement herself as a bankable entity in the MMA game, a role for females that heretofore would have thought to been impossible. While the spotlight has shone brightest on Carano, other female fighters have been able to see increased exposure through the auspices of EliteXC. While the UFC has been adamant about not offering women’s MMA, the EliteXC exposure for the women will ensure that the ladies will have better opportunities available to them, and will live on even after the promotion breathes its’ last gasp.

On Destruction and Famine
Left in the wake of the EliteXC failure are the various remnants of regional promotions that were a portion of EliteXC. The promotional braintrust behind outfits like Rumble on the Rock, Icon, King of the Cage, and Cage Rage will spread back out across the landscape, like so much diaspora. The fighters of EliteXC will do much the same. These folks will do what they do best: promote and fight respectively. There can be little doubt of the destruction and paucity of options at the national level, but the spreading of promoter and fighter talent will hopefully lead to something more encouraging on a regional level.

Fight Biz Quote: TJ Thompson

October 21, 2008

“I don’t have a smoking gun, (but) I’ve been around long enough, I’ve talked to enough people that were there, I won’t name names of executives in the company that I know—Seth was paid to stand up. I’m confident of that. If the commission wants to talk to me, I’ll tell them what I know.”

EliteXC Exec TJ Thompson, speaking with MMAWeekly. The higher ups at EliteXC may have a lot more to worry about than bankruptcy filings and unemployment if what Thompson says is true.

ProElite Finished; CBS-Affliction?

October 20, 2008

After a proposed sale to CBS fell through, ProElite will officially be out of business later this week according to a report by Dave Meltzer on F4WOnline.com. CBS reportedly may continue in MMA, with speculation centering on a possible partnership with Affliction. The report follows rumors since late last week that the presumptive CBS deal was in trouble.

Multiple sources told MMAPayout.com in the week leading up to the 10/4 event that the deal was all but complete with the paper work already drafted. There were even preliminary conversations regarding the return of Gary Shaw to the equation. The deal ultimately collapsed under the weight of Standgate and possibly CBS’s financial condition.

An Economic "Perfect Storm" Affecting MMA

October 20, 2008

The twin forces of a credit crunch and a continually deteriorating economy are coming together and are having an impact on the financial backdrop of the mixed martial arts industry. While it is said that a rising tide lifts all boats, it seems to be that this “Perfect Storm” is battering all the MMA ships that are out to sea, the UFC included.

As reported earlier on MMAPayout.com, the Fertitta’s Station Casinos bond rating recently placed on CreditWatch with negative implications. The company is being monitored due to it’s increasing level of leverage that violates certain covenants of its’ bonds. The leverage covenants aren’t being met due to more recent turmoil in the financial markets and continued weakening of economy, which is bringing down performance in the Las Vegas locals market more than previously thought.

The Station Casinos stake may not be the only portion of the Fertitta empire to be hitting on hard times. MMAPayout.com has learned that the UFC has recently went through a round of layoffs in their operations. The UFC looks to be cutting away the fat to make itself lean and mean and capable of weathering an extended time period of financial stress and lowered performance.

The credit crunch has also affected Viacom/CBS, which may in turn impact ProElite/EliteXC. Sumner Redstone, a controlling shareholder of Viacom Inc and CBS Corp, might be forced to sell either of the companies to help tide over the current financial crunch being faced by his movie theater chain, National Amusements Inc, according to a report by Reuters. Such a sell off would place highly in doubt a possible purchase of EliteXC by the Tiffany Network or it sister network Showtime. A purchase by the network had been thought to be highly probable as the company went into its recent EliteXC: Heat card that was to feature Kimbo Slice and Ken Shamrock. The subsequent loss by Slice to Seth Petruzelli as well as a fight fixing controversy in the aftermath of the fight are now joined by the news that one or more pieces of the Viacom empire may be jettisoned. All of these factors in concert call into question whether such a deal for the fight promotion will be ultimately consummated.

Kizer Speaks on Standgate

October 15, 2008

In a post from yesterday morning we questioned what possible role that Stand-gate might play in EliteXC’s upcoming card in Reno, asking what NSAC Chief Keith Kizer might interject into the situation. Steve Cofield of Yahoo and ESPN Radio 1100 tracked down Kizer and got his thoughts on the subject. The video below is courtesy of Steve Cofield:

Based on what we know of the situation and how Kizer defines fight “fixing”, EliteXC would seem to be free from sanctioning. They still face a crisis of confidence with fans of MMA, however, who feel their KO bonus strategy undermines the basic tenets of the sport, bascially taking the mixed out of mixed martial arts.

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