Are Strikeforce’s Days Numbered?

Posted on | September 21, 2011 | No Comments

By: Rich Bergeron

Already three popular ex-Strikeforce vets are now on the UFC roster: Dan Henderson, Alistair Overeem, and Nick Diaz. Strikeforce used to be the company UFC castoffs went to when they were released or when they reached the end of their contracts. Since the UFC’s Parent Company Zuffa, LLC acquired Strikeforce, MMA fans and industry experts seem to be salivating over the prospect of an outright merger. Meanwhile, Zuffa brass tries to keep up appearances as far as their initial promises to operate their new league with a “business as usual” approach.

Exactly when all the smoke will clear is unknown at this point. The main issue is contracts, and not just those between the fighters and the league. More significant to the big picture of a potential merging of these two commonly-owned entities are the contracts tying Showtime to Strikeforce. Since the exact details of the actual sale of Strikeforce aren’t a matter of public record, it’s hard to analyze what might happen when the clock runs out on those Showtime contracts. Does the UFC have a right under the sale agreement to use the expiration of the deal as an excuse to merge Strikeforce with the UFC? Something tells me the fine print would require negotiating a new television deal if conditions aren’t ripe to return to the bargaining table with Showtime. Both sides of the equation obviously learned something from the fall of PRIDE. Scott Coker doesn’t still have a job with Strikeforce because the UFC brass likes him so much. It’s much more likely that whole “business as usual” arrangement is a matter of the legalese written into the sale agreement to prevent Strikeforce going the way of PRIDE and getting dismantled overnight.

Under these conditions, Zuffa’s principals obviously decided to just get creative in trying to gain complete control of both leagues. If they can’t legally shut the whole operation down and fold it in to the UFC, they can bleed it dry and pick off the best fighters one at a time. This could eventually lead to a situation in which Strikeforce simply becomes a liability as a stand alone corporation. Strikeforce still does a few things differently than the typical Zuffa business model allows for. This includes allowing company fighters to participate in other leagues and fighting disciplines. If contracts weren’t in the way, that policy would also be terminated.

Patterns speak volumes when it comes to the majority owners of the UFC and their record of doing business. The Fertitta Brothers (Lorenzo and Frank III) took a business built from the ground up by Frank Fertitta, Jr. and sunk it into debt to the tune of $6 billion. On the other side of a short but contentious bankruptcy and reorganization of the company, Station Casinos is only around $2 billion in debt now. The Fertittas own just 45 percent of the business at this point, giving away the remaining portions of the bankruptcy’s proceeds to their most leveraged creditors. Thanks to good lawyers and a stockpile of a few hundred million, the brothers were able to wheel and deal their way into retaining a controlling interest of all but one of their casino complex properties.

As if escaping the bankruptcy with such a sweet deal wasn’t enough for these silver spoon brothers, the casino chain is now responsible for pressuring gaming regulators in Las Vegas to change the rules in order to oust a minor competitor called “Dotty’s.” The dispute is now spilling into the courtroom as the taverns affected are up in arms and unable to spend the millions of dollars required to change their business model to conform to the retroactive policy revamping. The same group that barred their father from being in charge of the casino chain due to his questionable past now seems to be eating out of the sons’ hands. It is the mark of the kind of juice these two brothers have attained since they became the face of their father’s company and built the UFC into a billion dollar empire.

Station Casinos now appears to be on the mend, and there’s only one way that business seems to clash with their operation of Zuffa. The interference orchestrated by a spurned culinary union connects the dots between the attitude of the casino chain and that of Zuffa when it comes to unionizing employees. In addition to grassroots efforts involving union marches, public displays of civil disobedience, and pamphlet distribution, the union’s brass seems to be intent on disrupting the progress of the UFC’s parent company. Between lobbying New York legislators to refuse to regulate MMA in the state and setting up a Web-site proclaiming the UFC as “Unfit for Children” the union’s aggressive stand against the MMA industry’s top dog seems like it is always escalating. Media outlets, including this boxing site, are beginning to question the motives of the union and whether members really appreciate how their dues are being spent on this campaign. The union makes some solid points in their arguments and in a public letter to the Federal Trade Commission, which is in the process of investigating Zuffa for anti-trust issues.

The only problem with the approach of this anti-Zuffa campaign is that it appears hollow and malicious in some respects. It is obviously being spearheaded by forces that are biased against the Fertitta Brothers and their way of doing business. Their fight is a labor dispute, and it has everything to do with casinos and nothing to do with mixed martial arts. That reality shines through in much of the material put out by officials at the union offices. Their missives are rife with insufficient and insignificant research and a lack of understanding of the real and concrete issues that make Zuffa’s business model corrupt and overbearing. Those issues include the company’s handling of Strikeforce, which they are holding in a submission choke just waiting to be tightened and locked into place.

The truth is the culinary union’s best bet would be to get behind a fighter’s union and sink some real teeth into their attacks. The combat sports industry across the board involves far too many seedy promoters in different circuits and disciplines who take advantage of the typical fighter because there are no fighters’ unions. A culinary union trying to be a fighter’s union comes across as pretentious and disjointed. At least with their Casino issues they took their claims to court and filed an official dispute with the National Labor Relations Board. Station Casinos didn’t even bother to mount any defense to the claims of abuse. As far as Zuffa goes, though, the union has no proverbial dog in the fight. Without getting behind an actual process to inspire fixing the problems that plague the Zuffa business model–problems that make the whole sport of MMA look bad–the culinary union’s efforts fall flat.

The Fertittas were also involved in bankrupting one of the UFC’s most longstanding and loyal sponsors: Xyience. It’s a long story that’s still unfolding in court, but in a perfect world it would not be the civil bankruptcy matter that it is. Instead, the perpetrators of the loan to own scheme that resulted in Fertitta Enterprises acquiring Xyience through surreptitious and deceptive measures should be held criminally liable for their actions. For a crash course lesson in what actually motivated the Fertittas to prop up Xyience and then steal it from hundreds of legitimate shareholders, CLICK HERE. It all goes back to the purchase of PRIDE and hundreds of millions in cash tied to a senior-secured credit facility that allowed Dana White and both Fertitta brothers to pocket huge dividends. Their loan of around $15 million that facilitated the Fertitta Enterprises takeover of Xyience went almost exclusively to Zuffa-owned businesses instead of going toward the purchase of product to keep the business above water.

Since the takeover the Fertittas have used Xyience as a tool to enhance the UFC. Back in the early days of my investigation into the shady activity behind the company’s UFC partnership, a source told me, “Xyience isn’t a sponsor of the UFC, the UFC is a sponsor of Xyience.” Essentially, the partnership with Zuffa put Xyience on the map in the first place, and the two companies came to be co-dependent on each other in many respects. Xyience is still in a position where it would be very tough to operate without the Zuffa connection. Even though it’s a clear conflict of interest for the Fertittas to own a sponsor of another company they own the majority of, they manage to keep flying under the radar with their activities. The mainstream media seems to have no clue or desire to dig in to the background of Xyience when it comes to issues which should shine a spotlight on the unusual developments created by the two companies being so intimately connected. A case in point example is the Dan Hardy debacle in which the Xyience-sponsored fighter still didn’t get released from the UFC despite losing his 4th fight in a row. His face being on hundreds of thousands of cans of fruit punch Xenergy (Xyience’s energy drink) didn’t raise a single eyebrow in the MMA media as to explaining why Hardy would be retained by the UFC despite such a piss poor performance as a fighter.

Zuffa’s privacy with their financial details allows for the company’s principals to pocket more of the profits without making any major waves with their most valuable employees: the fighters. Though Dana White can comfortably shell out $25,000 per hand on poker games, you won’t hear about any of the UFC’s top-tier fighters making as much in a year as “The Baldfather” oficially takes home for his mouthpiece duties. You won’t see Cain Velasquez or Junior Dos Santos burning $100 bills like Floyd Mayweather, Jr. has been known to do to prove he’s got an astronomically high net worth.

If you’re waiting for the fighters themselves to speak up about mistreatment, don’t hold your breath. Even with the imminent doom awaiting Strikeforce whenever it becomes unsustainable to keep it going under the “business as usual” mantra, there is no movement afoot to protest company policy. Fighters seem to know that showing their discontent never leads to securing a solid future with the top dog of MMA leagues. Fortune does not favor the brave under the Zuffa umbrella. A fighter who sticks his neck out is more likely to get his head cut off than have his gripes addressed sufficiently.

Two of the three fighters who left Strikeforce for greener UFC pastures (Overeem and Diaz) only spoke ill of Zuffa’s tactics after their tenure with Strikeforce officially ended. Overeem complained about being threatened while Diaz lamented about his lackluster paychecks. Both fighters used their own threats to take up boxing for leverage to get a favorable UFC deal done. Diaz even came close to signing for a boxing match with Jeff Lacy before the UFC came knocking with a chance (which he later squandered) for him to tangle with Georges St. Pierre. Dana White saw a window to kill two birds with one stone. On one hand he prevented boxing from stealing all the buzz MMA benefited from in recent years thanks to the label of “the fastest growing sport in the world.” On the other hand he paved the way for Strikeforce fighters he’d like to see in the UFC to make the official transition there.

It’s impossible to keep every fighter in check, though. Every now and then someone speaks out about something they don’t like, and their complaints make headlines. Strikeforce’s latest card and the lack of a media presence there inspired one man (“King” Mo Lawal) to speak out and tell it like it is:

“I (had) thought Strikeforce was a cancer patient,” he told MMAjunkie.com Radio (www.mmajunkie.com/radio). “Man, it’s a damn AIDS patient instead – with Dr. Jack Kevorkian in the background ready to pull the plug.”

Don’t expect Lawal to get a shot at fighting in the UFC. His 8-1 record against top talent could make him quite a contender in the octagon, but after his recent tirade he’ll be lucky if Strikeforce retains him once his current contract expires. Zuffa President Dana White might pretend now that he doesn’t even know who “King” Mo is, but when it comes time to sign a new deal his memory will be sharp. The war of words between White and Lawal was at least able to accomplish an outright admission from White that he could care less about Strikeforce and how successful they are:

“We have all kinds of stuff going and I didn’t need this in my life. It is what it is and I never had a thought in my mind of [expletive] with Strikeforce. But I promote the UFC 24/7.”

If and when Strikeforce ceases operation and becomes another Zuffa casualty, guys like Mo Lawal won’t be invited to the after party. Being a UFC-branded fighter means falling in line with the popular opinion spouted by company brass. Even big names like B.J. Penn can’t even get away with complaining about PR people putting words in his mouth. One Strikeforce fighter who never wanted any part of the UFC before the buyout participated in a Fight News Unlimited interview back in February. Off camera he told me he’d like to stay in Strikeforce and avoid going into the UFC because “they like to keep you under their thumb.” Whether it’s forcing fighters to sign over their lifetime likeness rights for a UFC video game or throwing great fighters out while keeping lousy ones, Zuffa’s known for ruling with an iron fist.

Without being able to look over all the legal agreements signed to secure the Strikeforce buyout it’s tough to predict the exact “drop dead date” for the league to close up shop. Still, it seems highly unlikely that the company will survive 2012 once the Showtime contracts dry up and the best fighters wanted by the UFC see their agreements run their course. Whether it’s because they fear riling up the folks at the FTC or because of constraints attached to the sale agreement, the business as usual charade must continue. The show will go on until there’s no other solution for Strikeforce other than shuttering the operation and gutting it to benefit the UFC. The flow of fighters moving between organizations will be a one-way street, and Strikeforce probably isn’t going to get any new additions any time soon. If they do shore up their ranks it might indicate there’s still hope, which they want to eliminate. Nobody is better at pretending to want to enhance companies they acquire only to turn around and destroy them than the crew running Zuffa.

So, yes, Strikeforce’s days are most certainly numbered. Unfortunately nobody but those in the inner circle of both companies actually knows how many days Strikeforce will actually remain viable. When it comes to closure, Zuffa likes to keep their options open and their final decisions close to the vest. The company’s collapse won’t become public knowledge until the powers that be want it to. When that moment finally comes, it won’t be this site that publishes the announcement. That job will likely be left to the same guy who broke the buyout news: PR Hero Ariel Helwani.

The influx of new talent coming out of the latest season of The Ultimate Fighter and the signing of a new UFC network deal with FOX both help make Strikeforce expendable. Chances are White and the rest of Zuffa’s principals will let Scott Coker think all is well and leave him to run Strikeforce into the ground. “Business as usual” will work as long as it needs to, and Coker will captain the ship until he has to go down with it.