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ProElite and Showtime need to stop the insanity before it’s too late

We’re just 20 days from a scheduled public auction on Nov. 20 in Los Angeles in which a bunch of scavengers will convene and try to pick over the remains of the rotting carcass known as ProElite.

Sadly, it appears that two companies with trusted names in the industry, CBS and Showtime, are ready, willing, and able to douse themselves in ProElite’s foul stench.

On Nov. 20, the sport of MMA is currently scheduled to be reduced to nothing more than a bad episode of the Homeboy Shopping Network when suitors are slated to submit bids on various ProElite assets such as domain names, trademarks, video footage, and most notably, the contract of some 50-plus professional mixed martial artists.

It’s the fighter contracts in question that are currently perceived by many to be the asset of most value. However, the reality is that those contracts are most likely worthless. Those that do not learn from history are doomed to repeat it and MMA History 101 has taught us one thing, it’s that fighter contracts are next to impossible to transfer from one promotion to another.

It’s not even certain the contracts would have remained valid even if Showtime had completed an acquistion of ProElite and decided to continue to operate EliteXC under a new ownership and management structure. But the waters are much muddier than that with long-time MMA manager and promoter Monte Cox claiming the fighters have signed personal service contracts, which in turn raises a serious legal question about whether ownership can be transferred.

“Cox, who has managed over 60 fighters over the last 11 years, said the 15-year-old sport has entered new territory with Showtime’s intentions to auction off his client’s contracts,” writes Sherdog.com’s Loretta Hunt in a rather illuminating article. “Cox and others have their doubts that the sale of a personal services contract will be upheld in a court of law.”

Have we forgotten about Zuffa’s acquisition of the PRIDE Fighting Championships and that the reason why fighters such as Dan Henderson, Wanderlei Silva, and Mauricio Rua are in the UFC? It’s not because the UFC inherited their PRIDE personal service contracts, it’s because the three signed completely new contracts with the UFC.

But the question of transferability of personal service contracts isn’t the only issue at hand, as ProElite also issued a filing with the SEC on Thursday that states they plan to legally challenge Showtime’s attempt to auction off its assets.

“The Company plans to take all appropriate measures to prevent the sale from occurring,” ProElite’s filing states. “Such measures may include raising additional financing, filing a lawsuit enjoining the sale, filing a bankruptcy petition or negotiating a settlement with Showtime.”

Those are fighting words in my extremely suburban neighborhood. In my ‘hood, that’s code for “somebody is about to get their asses taken to court” or “you can take pennies on the dollar as payment or I’ll just file for bankruptcy and then I won’t have to pay you anything.”

That little dose of legalise would have me headed for the hills if I was a potential bidder considering that Showtime’s online ad for the auction offered this little nugget of caveat emptor: “The Collateral will be sold on an ‘as-is, where-is’ basis, without recourse, warranty or guarantee of any kind, express or implied, including as to title, possession, enforceability, validity, merchantability or fitness for a particular purpose.”

That’s some heavy duty fine print. Again, I’m not an attorney, but I think that translates to: NO REFUNDS.

With so many issues now being called into question, what reputable business person with half-a-brain would even attempt to acquire the contracts? What if Showtime holds an auction and no one shows out of fear that what they might be bidding on isn’t their’s to own? I can go to downtown Philly and buy a nice gold chain for $20 but I don’t because I know that the person selling it doesn’t really own it.

Although it hasn’t been from a lack of trying, I still do not understand exactly what is going on. But I do get a sense that decisions are currently being made out of emotion as opposed to what’s best for business. I really do not have faith that people have sat down and thought things out rationally because this situation of impending doom that could be averted just doesn’t make sense.

I don’t know if there’s ever been more apt definition of a lose-lose situation in the history of MMA. By holding fighters hostage, nothing good will come to ProElite, CBS, Showtime, and most certainly not to the fighters. By holding onto the contracts and not washing their hands of ProElite completely, Showtime is walking into a quagmire (and no, I’m not referring to Glenn from Family Guy) as hundreds of thousands of dollars in attorney’s fees are going to be exhausted for no apparent reason.

But legal costs could be just the tip of the iceberg for CBS and Showtime. If the fighters get smart and work together, they could go after ProElite, CBS, and Showtime for millions of dollars in damages if their rights are being violated. For the third time, I’m not an attorney (let’s say tat together, people!), but do we not have a right to earn a living in America?

And what about the intangible damage that could come to CBS and Showtime from a public relations standpoint? Has no one at either CBS or Showtime contemplated how bad this situation could make them look? I omitted ProElite from the equation because I don’t think their reputation at this point can get any worse than it already is. On one hand, ProElite may look like a company on its last legs that poses no threat. However, the reality is that the company has little to lose at this point and potentially could cause more problems for CBS and Showtime than CBS and Showtime can cause for ProElite.

CBS and Showtime still have their reputations to consider. Have they forgotten that a major reason why they ended negotiations to buy ProElite in the first place was the companies didn’t enjoy having their good names dragged through the mud? Yet here we are, on the heels of another spectacle with no thought apparently given to how it’s going to look if stories come out about how fighters are losing their houses because CBS and Showtime are involved in litigation that is preventing them from earning a living.

From a moral standpoint, what ProElite and Showtime are doing is wrong. The fighters are not commodities; they are real people with real financial responsibilities. But I’ve learned the hard way that morals mean very little in the business world, so let’s look at this from a pure dollars and cents perspective. And from a business standpoint, it appears what both companies are doing is wrong for all of the the reasons highlighted above.

Cooler heads need to prevail and CBS and Showtime need to cut their losses before they lose even more. Just stop the insanity and set the fighters free and then argue in private about who is really entitled to all of those high-definition televisions.

10 COMMENTS
  • obamasaidknockyouout says:

    Sounds like people buying the contracts will get a nice lawsuit to go along with it.

  • Jay K. says:

    Sam,

    I read on elsewhere that attempts to reach Chuck Champion have all gone unanswered.

    My question is, do you think he’s washed his hands of the Shaws and MMA altogether or do you think he’s still involved in some capacity?

    Jay K.

  • Joseph says:

    Great write up Sam.

  • Rich B says:

    Sam,

    How does this situation (along with the Pride acquisition) differ from that of the UFC buying out the WFA in order to getg Rampage (and Machida)?

  • Guinness says:

    20 days away from Novermber 20th and posted on Novermber 7th? Subtract the 3, divide by 6, add the integral of the square of pi.. yeah I get it.

  • matthew says:

    Good read Sam. Job well done.

    I enjoy your site and the majority of your posts. 😛

    Matthew.

  • jj says:

    If you were out 8 million wouldn’t you try to get something back?

    I can see where CBS is coming from. However, ProElite is just dragging out the inevitable. Who in their right mind would give more funding to EliteXC/ProElite when they’ve burned through the millions consistently with little attention to a profitable business model, especially now with the loss of their broadcasting partner(s).

    CBS surely has lawyers just sitting around waiting for this kind of stuff.

  • tallsforeverybody says:

    I’ll start the bidding for $KALA’s buiness acumen at $1.00…

  • dasouthernicon says:

    this is truly a debacle… MMA in America is in trouble b/c of some really irresponsible jokers… Everybody could be making $$$, but since these numbskulls wanna do like they been doing, now lotsa fighters aren’t gonna make a living fighting in the US, if any other place…. This is pathetic.

  • mike wolfe says:

    If ShoTime’s lawyers were even minimally competent, a bankruptcy filing would only delay the inevitable. Most lenders take security interests in the collateral used to guarantee payment of loans. A secured creditor–one whose security interest is properly documented and recorded–is entitled to obtain the security in the event of default and regardless of a bankruptcy. The fact that assets are sold “as is” is also common. ShoTime doesn’t want anybody to later claim that it somehow made warranties about the collateral. Again, very common in this type of situation. Bidders will simply adjust (decrease) their offers to account for any risks.

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