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.

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.

Fight Biz Quote: Dana White

October 14, 2008

White proceeded to say Petruzelli’s comments, which were later amended to say he was only referring to a knockout bonus he earned, deserve a criminal investigation, and a formal inquiry in all states where Elite XC has staged fights. White said if Florida requires a formal complaint to amplify its current probe, he will “look into” making one himself.

“If this happened in Nevada, or if it happened with me, the FBI would be investigating it. If this thing does not get investigated properly, it’s the biggest slap in the face to sports.”

Dana White, speaking to the LA Times. All of a sudden the EliteXC card in Reno gets a bit interesting. With White willing to enter the process based on his comments above and EliteXC doing their next card from Nevada, NSAC head Keith Kizer may be getting a call and making a few of his own.

EliteXC And Demos

October 13, 2008

Setting aside the PR nightmare that is EliteXc at this point, Dave Meltzer raised some interesting statistics in his recent items at Yahoo and in his Wrestling Observer Newsletter. Meltzer’s stuff on Yahoo is always intelligent and a good read, the one saving grace for Yahoo’s coverage of MMA.

Meltzer noted several trends coming out of the EliteXC show:

-EliteXC actually did some of its best numbers with men 50-54

-Continued Strength in southern Markets: Birmingham , Knoxville , Greenville/Spartanburg , Charlotte, Memphis , Louisville , and Nashville.

-Carano pulling in strong numbers for females

All three of these elements represent a growing of the pie beyond what is the traditional MMA audience. While EliteXC surely hopes to attract some of the same demographics (young males) as the UFC, their network exposure has helped to bring in other groups who are outside of the MMA norm. Affliction seemed to be trying to hit some of these same demos with their NASCAR sponsorship, which has widespread appeal but that also skews a bit older and has a strong southern presence. Whether it be with EliteXC or not, CBS’ continued coverage of MMA is key if there is to be continued growth and exposure of the sport to these non-traditional groups.

CBS Bankrolls Heat Card

October 10, 2008

While EliteXC has basically been living hand to mouth since the beginning of the year, subsisting for the large part on the various buy-ins from Showtime and CBS up to this point, according to the latest SEC filings, they look to have completely given up the ghost, as CBS completely underwrote the 10/4 event and received all revenues. The pertinent information:

Previously, CBS ordered an additional event under the Agreement from the Company scheduled to be presented on October 4, 2008, at The BankAtlantic Center in Sunrise, Florida (the “Sunrise Event”). The Company advised CBS that it was unable to deliver the Sunrise Event ordered by CBS for October 2008 under the current terms of the Agreement.

Accordingly, the Company and CBS agreed to amend the Agreement whereby CBS would assume all expenses for the event and receive all revenue from the event. CBS advanced the estimated event costs according to an agreed upon budget in order for the Company to pay expenses related to the event. Additionally, the Company and CBS waived mutual exclusivity under the Agreement for the Sunrise Event.

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