According to Strikeforce founder Scott Coker, that sale involved some threats from Dana White.
UFC lawsuit details Strikeforce negotiations, business model
A lot of interesting information has come out from the recently unsealed documents pertaining to the antitrust lawsuit against the UFC. Apart from being able to figure out several of the top UFC stars’ full payouts, Bloody Elbow has also obtained documents and depositions that detailed Strikeforce’s business model and negotiations with Dana White and the UFC.
It also showed the good cop, bad cop routine that Lorenzo Fertitta and Dana White used to run for negotiations.
“In or around October 2010, Dana White called the Strikeforce owners to inform them that Lorenzo Fertitta wanted to acquire Strikeforce and, in November 2010, the Strikeforce owners met with representatives of the UFC concerning the potential acquisition of Strikeforce at the offices of WME,” lawsuit documents stated, as obtained by Bloody Elbow’s business expert John Nash.
“At that meeting, Lorenzo Fertitta reportedly stated that he thought ‘Strikeforce is building a great brand, but [Zuffa felt] there should only be one brand, so [Zuffa] would like to buy [Strikeforce].’
“For its part, Zuffa’s internal correspondence in 2012 indicates that the UFC sought, by its Strikeforce acquisition, to eliminate it as a competitor. In a conference call, UFC CEO Lorenzo Fertitta stated that: ‘Lawrence and Pete Dropick, who run Strikeforce for us, went back to New York, had negotiated a separation agreement with Showtime to essentially shut Strikeforce down. We would then pull all of those Fighters into the UFC which is essentially what we want to do anyway.’ According to Zuffa, acquiring Strikeforce’s Fighter contracts was definitely the most important’ aspect of the deal.”
Scott Coker didn’t want to sell Strikeforce to “Darth Vader”
In Scott Coker’s deposition, he noted how he didn’t want to sell his company at the time, as it would be the end of “the MMA industry” and would lead to worse purses for fighters. He also compared the Dana White-led UFC to the evil empire in Star Wars.
“I believe that the phone started ringing from [Dana White] because we had signed [prominent heavyweight] Fedor (Emelianenko) and we announced the heavyweight tournament. It was clear that although we were a very small company, much smaller than the UFC, but we were in the same business, that we had a better heavyweight division than they did, and I think that was one of the considerations on their part.”
“Strikeforce got on [the UFC’s] radar and I think they [Zuffa] wanted to control the market share,” Coker’s deposition stated.
“Affliction took the easy way out. Now it’s UFC and Strikeforce. If you can’t battle these guys it’s over for the MMA industry. UFC will be the only one left. We’re the last chance. Otherwise, fighters’ purses will go down if UFC is the only one – is the only one period. We’re Luke Skywalker and UFC is Darth Vader and the Death Star.”
Dana White threatened to make life hard for Strikeforce
Lorenzo Fertitta complimented Strikeforce and had a polite and measured approach, but according to the lawsuit documents, when the carrot didn’t work, Dana White stepped in with the stick.
“According to Scott Coker, Strikeforce’s founder, Lorenzo Fertitta stated that his plan was to close [Strikeforce) down, and we would take all of the Fighters and bring them to the UFC.’
“Coker testified that, after negotiations stalled, Dana White threatened that he would “come after [Strikeforce’s] fighters, and he would make our life hard, and, you know, give us a bad time.”
Faced with Dana White’s threat and limited options, Coker eventually decided to sell Strikeforce, where many of their fighters went on to headline big PPVs and win titles in the UFC.
Strikeforce made a profit while paying fighters 59-66% of revenue
Financially, while they were only a fraction of the UFC’s money, lawsuit documents showed that Strikeforce still managed to make a profit while giving fighters a much higher share of the revenue.
“Strikeforce’s financial documents confirm that Strikeforce achieved profitability on many events while paying a high percentage of Event Revenue to its Fighters. In two events held in November and December of 2009, Strikeforce earned Event Revenue of $2.97 million, and paid its Fighters $1.74 million, equal to 59 percent of its Event Revenue. Over this time period, Strikeforce earned positive profits on its events (as measured by its event EBITDA), of $0.39 million, or 13.1 percent of its Event Revenue.
“From January through July of 2011, on a total of six events, Strikeforce earned Event Revenue of $13.8 million, and paid its Fighters $9.1 million, equal to 66 percent of this amount, while earning an event EBITDA of $0.49 million, or 3.6 percent of Event Revenue. That Strikeforce earned incremental net income on these events is proof that its payments to Fighters were not the cause of its global losses.”
Paper: Strikeforce one of antitrust failures of Obama Govt
Interestingly enough, Strikeforce’s purchase was part of a recent paper that reviewed many of the Obama administration’s “failures” in enforcing antitrust law. John Nash quoted a segment of the paper that cited the US government’s “failure to stop anticompetitive mergers that harm labor.”
“A good example of the problem of labor suppression and antitrust is the wave of mergers engineered by Zuffa, the owner of the Ultimate Fighting Championship, to suppress the compensation of its fighters. In 2011, the FTC allowed Zuffa to buy Strikeforce, its largest mixed martial arts platform rival, thus making it impossible for fighters to negotiate higher compensation by playing the two companies off one another. Fighters, who had received 45 to 63 percent of Strikeforce revenue prior to the merger, now reportedly receive roughly 20 percent.”
Could Strikeforce have been a true UFC rival?
Perhaps Dana White would’ve disagreed, but Coker claimed in his testimony that he believed Strikeforce could’ve “become a stronger competitor to the UFC” if he didn’t have to sell the company.
Financially, Strikeforce had projections at the time had them expecting to make generate $51.6 million revenue for 23 events, while paying fighters 54% of the revenue and still earning $11.5 million. From a talent standpoint, Strikeforce certainly did make an impact.
Documents showed former UFC matchmaker Joe Silva perusing Bloody Elbow’s old MMA consensus rankings from 2011, just before the Strikeforce acquisition:
“UFC matchmaker Joe Silva sent an email setting forth the January 27, 2011 consensus rankings of MMA Fighters in major weight classes, noting that the UFC “Own[ed] MMA.” Those consensus rankings, however, showed that Strikeforce had 3 of the top 10 (and 6 of the top 25) heavyweight Fighters; 5 of the top 25 (and a top 10) light heavyweight Fighter; 2 of the top 10 (and 4 of the top 25) middleweight Fighters; 2 of the top 10 welterweight Fighters; and 3 of the top 25 (including 1 top 3) lightweight Fighters. No promotion other than the UFC had as many highly ranked Fighters in late January 2011, just two months prior to Zuffa’s acquisition of Strikeforce.”
At one point, former Strikeforce fighters held the UFC titles from welterweight up to heavyweight at the same time. Several Strikeforce vets like Ronda Rousey, Daniel Cormier, Luke Rockhold, Tyron Woodley, Robbie Lawler, Fabricio Werdum, Cris Cyborg and Miesha Tate all won UFC titles.
Other notable stars from the promotion include Fedor Emelianenko, Nick Diaz, Alistair Overeem, Jacare Souza, Fabricio Werdum, Gegard Mousasi, Roger Gracie, Gilbert Melendez and many more.
It was also Rousey’s success in Strikeforce that convinced Dana White to go back on his stance that women would never fight in the UFC.
It’d be hard to say if Strikeforce could’ve consistently met those projections and grown to be a true competitor to the multi-billion dollar behemoth in UFC — especially with Zuffa’s controversial practices. Either way, Strikeforce being added to Dana White’s infamous tombstone only meant that fighters ended up with less options, and MMA lost one of the very few promotions that actually made money.
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