MMA  > General MMA  > UFC's buying Strikeforce was a mistake?
March 18, 2011, 10:12 AM
Like I noted before, I had my doubts.
And I tend to agree with SI's own Tim Marchman's assessment
here's the URL.

http://tinyurl.com/5vsope d

And here's what he wrote:

Zuffa's purchase of Strikeforce, late subject of much consternation and confusion, was a surprise only in its timing. Given long term trends in the fight game, a buyout was always inevitable. Whether it will turn in the end to be a good thing, I have no more idea than anyone else does.

There are clear reasons to think it will be. Most obviously, it offers the potential for some great fights that we might not otherwise have seen, such as Gilbert Melendez vs. Frankie Edgar, or Phil Davis vs. Muhammad Lawal, or Mark Hunt vs. Chad Griggs. Somewhat less obviously, it offers the promise of help and fresh perspectives for UFC's overworked matchmakers, Joe Silva and Sean Shelby.

Mainly, it marks the point where UFC stops competing with fight promotions and starts competing with the real players in sports. Mixed-martial-arts fans tend to have comically low expectations, thinking that their sport has gone mainstream when Georges St-Pierre scores an underwear ad, or when Anthony Pettis makes an ESPN highlight reel. They forget, or don't know, that the Chicago Cubs' fifth starter makes more money and is more famous than GSP, and junior high school girl's volleyball players make ESPN highlight reels, too.

I have high expectations. I don't think fighting will ever be as popular as the NBA, but I see no real reason why there shouldn't be fighters as famous as LeBron James and Kobe Bryant at some point. Clear of serious rivals, UFC can now focus on making that happen.

Throat clearing aside, I rolled my eyes when I heard the news Saturday, in a way I hadn't since I saw the arrow shaved into Brian Ebersole's chest hair at UFC 127. This isn't an obviously bad move, but it's a dubious one, with implications even broader than it seems. The following, in no particular order, are reasons why.
March 18, 2011  10:13 AM ET

1) UFC needs competition. I don't mean this abstractly, in the sense that Dana White needs an enemy to do his best work. I mean it concretely. UFC doesn't have enough work for all the good fighters in whom they're interested. Until they can offer it, they need a place where promising fighters can learn, and where veterans in ruts can rehabilitate themselves, before being brought back and being put in a position to make money for the promotion. An independent Strikeforce served that role, served as a place where someone like Nick Diaz who hadn't done well in the latter stages of a UFC run, could fix his reputation as a major league fighter. One under Zuffa control that is used that way is just a minor league; as we learned with WEC, success in a Triple-A affiliate means nothing to UFC fans.

2) Zuffa is now in business with Showtime. It isn't a closely held secret that some of Strikeforce's more puzzling decisions over the past few years have been influenced by television executives who seem to know as much about the sport as your Aunt Bertha. That surrender of control is part of the price of working with a network or pay channel, and not being willing to pay it is some of why UFC isn't on one. However operations actually work, Zuffa is now in business with these people, presenting a product over which they may not have quite the control to which they're accustomed.

3) The entourage. Whether or not anyone wanted to talk about it openly, one problem UFC always had in its negotiations was Fedor Emelianenko was, putting this as neutrally as possible, that there was some concern about perception -- a worry that Emelianenko might have associates with whom a casino owner would not want to be seen as involved. They're involved now.

4) Overstretch. Zuffa doesn't seem, now, to have enough people working for them on the back end -- in public relations, in merchandising and so on -- to operate UFC at its full potential. They've now taken on a promotion that certainly isn't staffed up enough, and which will have to be run as its own entity for some period of time. There will be ways to integrate operations, but adding one undermanned shop to another seems a way to run into serious problems.

March 18, 2011  10:14 AM ET

5) Opportunity cost. This is related to the point above: Is putting work into running a second major promotion really the best possible use of Zuffa's time? When pay-per-views featuring the quite brilliant lightweight champion Edgar aren't selling, when WEC has yet to be digested, when fighters like St-Pierre and Anderson Silva have yet to reach a fraction of their potential as crossover stars, when MMA is still not yet legal in New York, when major decision-makers in journalism and advertising still don't know what the sport is or who watches it and so on, this is an open question.

6) Timing. Reportedly, Zuffa's main competition for Strikeforce was Pro Elite, the group that brought you EliteXC and Kimbo Slice's marvelous fight against Seth Petruzelli. Given their past forays into MMA promotion, one might surmise that the clever move might well have been to let them have it and then pick up whatever assets were left six months from now after they'd run the thing into the side of a mountain.

7) Saturation. Apparently one reason for the purchase is that UFC wants to expand fairly aggressively, especially running far more shows overseas. They know their business better than I do, but there's not much reason to think the market is right now ready to bear a lot more MMA shows. Television ratings are down and fans seem to be getting slightly pickier about which shows they'll pay to see.

8) Dilution. Relatedly, if the plan is to leverage Strikeforce's assets into a serious increase in the number of shows, it's not clear that this makes sense. Strikeforce has a lot of very good fighters and some great ones, but it doesn't have many stars who can be expected to headline a show. It also doesn't add an immense amount of depth to Zuffa's portfolio -- some, surely, but not in a way that changes the game. Since UFC has only fairly recently begun to consistently promote shows that run deep with five fights really worth watching, expansion, even with Emelianenko, Diaz, Dan Henderson and co. on board, is likely to lead to some dodgy mains and perhaps, depending on what is scheduled, some sketchy undercards.

March 18, 2011  10:15 AM ET

9) Enemy fighters. You can make too big a deal out of this, but there are reasons why people like Josh Barnett and Paul Daley weren't under contract to Zuffa. No one is going to make a fine distinction between UFC and Strikeforce when they do something embarrassing.

10) The structure of the sport. This is a big deal. Before now, any UFC main eventer who had an issue with Zuffa knew that he had an out -- maybe not a perfect one, but a credible one. That's gone now. It also means that any serious star who has an issue over which he feels strongly enough to leave -- and there have been many over the years, even if the departures of the likes of BJ Penn, Tito Ortiz and Randy Couture have proved temporary -- would have only one option if he wanted to get paid, that being to promote his own fights. That's the last thing Zuffa would want to see, because it will only take one star of the magnitude of GSP or Brock Lesnar mounting his own pay-per-view card, and reaping the attendant profits, for top fighters to realize that at this point there are stars big enough to survive without the UFC brand.

11) Nature's abhorrence of a vacuum. There is an empty space in MMA right now, and someone is going to fill it. Strikeforce was, in a sense, the best competition UFC could have: It was just credible enough to keep other would-be rivals out of the sport, and just small enough not to pose a serious threat. They were a safety valve, one that's now gone. It's easy to forget this, but UFC is, by sports standards, a mom-and-pop shop. All it would take is one rich lunatic like Roman Abramovich or James Dolan deciding that he likes cage fighting and wouldn't mind throwing some pocket change to hire a guy like Lesnar to give UFC a kind of competition it has never faced.

Of course a lot of this is speculative, and if I were laying a lot of money on it I'd say this will in the end turn out swimmingly for everyone save the fighters, who if they aren't going to unionize or employ their leverage honestly deserve what they get. But there are sound reasons to be skeptical.

March 18, 2011  08:04 PM ET

Tim throws out a dozen and a half paragraphs laying out everything wrong with this transaction, and finishes up with........

...."if I were laying a lot of money on it I'd say this will in the end turn out swimmingly .."

Comment #5 has been removed
March 18, 2011  09:27 PM ET
QUOTE(#4):

Tim throws out a dozen and a half paragraphs laying out everything wrong with this transaction, and finishes up with............"if I were laying a lot of money on it I'd say this will in the end turn out swimmingly .."

..."for everyone save the fighters"

Apparently you read only first half of his sentences...

And I do agree with him also.
This might end very bad for the fighters (and consequently for MMA as a sport)
They will have no viable second option and worse of all, nowhere to go.

March 18, 2011  09:35 PM ET

Anything the UFC does is a mistake according to Roni. ;-)

I don't buy Marchman's assessment whatsoever. Lots of guess work and almost no research. I don't think he really gets MMA.
He is commenting about the value of a purchase and he doesn't even address the financials whatsoever. Ridiculous. He's just making pessimistic assumptions, some of the quite silly if you understand even the basics of mergers and acquistitions.

SF hadn't turned a profit yet and had a considerable debt load. Silicon Valley Sports, who owned 50% of the company wanted out. Coker (50% owner) and his partners couldn't raise additional financing to buy out SVS so they had to sell. There were 3 serious bidders.
The sale price to Zuffa was $40 million bringing the value of Zuffa from 2.15 billion to 2.19 billion - A miniscule fraction.
The other two offers SF (Coker and SVS) received were less that $25 million. The other buyers didn't feel they had the same leverage to turn SF into a profitable business as Zuffa does. . Zuffa can make the money back with just a few big PPVs.

March 18, 2011  09:38 PM ET
QUOTE(#4):

Tim throws out a dozen and a half paragraphs laying out everything wrong with this transaction, and finishes up with............"if I were laying a lot of money on it I'd say this will in the end turn out swimmingly .."

Yup. It's a sloppy article. He should have stuck to the 3 or 4 areas of concern rather than ramble on and expose himself as a poser. SF was valued at less than 1/50th of Zuffa - and they are going to let the contracts play out over the next 18 months like with WEC. Tim's all wound up over nothing.

 
March 18, 2011  10:11 PM ET

and anything that UFC does can't be wrong according to you, Yoda.

The problem is, you don't want to hear. Simple as that.

he voiced the areas of concern. And I tend to agree with him.

Are there optimistic ways to see the merger? Obviously! But then it's odd to comment, isn't it?

My main concern is with the sports factor. I don't want a sport to be owned by a private company. If they own the sport, this is not a sport anymore.I would love, for instance, if the fighters get an union. THEN I think most of my fears would diminish.

But I do agree with him on most of his topics.

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