With the recent signing of Fedor Emelianenko to a six-fight, two year deal that gives him $2 million dollars per fight along with a $1.5 million dollar signing bonus, M-1 Global has made a huge stake in the mixed martial arts world right out of the gate. The reaction to the news from the Press Conference that happened on Monday is fairly mixed. Will this new organization have a bigger impact on the MMA scene or will it fade much like some of its predecessors? Let's take a look at each side of the argument and back it up with some hard-nosed data.
The Optimistic View
Were you one of those fans who got a warm fuzzy feeling inside when they announced their intentions of the organization, the signing of Fedor, the possibility of PRIDE rules returning, etc.? You may be one of the fans out there who is optimistically hopeful of this new organization. And why shouldn't you be? With the recent news of Randy Couture leaving the UFC, the issues being disclosed that lies have been said to fighters regarding pay, the treatment of fighters by the UFC, the UFC's main sponsor not paying fighters, and the abrasive words that Dana White spits out during interviews and appearances that gives the UFC that "tough guy" feel, maybe this is something we should be excited about. Mitchell Maxwell stated that the organization would be without "women, greed, or arrogance". I'm sure women will be around, but without greed and arrogance sounds great, doesn't it? Optimists would say that this organization will challenge the UFC right out of the gate, and in reality, anything is possible.
When I watched the press conference from the feed at Ecko Enterprises, Fedor stated that M-1 Global wanted to make the "New PRIDE". For all the fans of PRIDE who watched some of the great battles in the organization, the mix of international talent, and the eventual demise of the promotion, they may take this comment as a breath of fresh air, a new light in the MMA world. When you listen to the conference, it sounds great! We would get to see the old PRIDE rules with the ring, the production, the fighters hopefully, and the spectacle. From the optimist's standpoint, you could be excited about this organization's prospects.
There are a few downsides that many casual fans may not know about. Mitchell Maxwell is not an MMA expert. He actually stated that he didn't know what MMA was or who Fedor Emelianenko was. Many media outlets simply ignore that fact and report that he has 34 years of experience in the entertainment industry. He's produced a few theatrical shows on Broadway and off-Broadway. What's the advantage is that? Well, in a sense, Maxwell is only the chairman. He has a great team around him in Monte Cox, Fedor's management team, and the managing team of Sibling Entertainment. Most notably, Cox will be the driving force from the start. He manages a plethora of talented fighters in the MMA business and will probably be looking at fighters in the UFC that are getting near the end of their contracts.
The most optimistic view is probably from the standpoint of the organization itself. They believe that with the signing of the #1 Heavyweight in the world that fighters will literally pack up shop and come to their organization. That may be true for the heavyweights that want a shot at Fedor, but what about the other divisions? Who will M-1 Global obtain that is a big enough name to headline other weight classes? This all remains to be seen as it was stated that we would hear who has been signed within the next week to 10 days. Is having such a great fighter enough for other fighters to want to join M-1 Global? If you are an optimist, you should be hoping so. The success of M-1 Global depends on it.
The Pessimist View
As much as I want to be an optimist and happy that another organization has staked a claim in the international MMA scene, I can't bring myself to being sold on the idea of M-1 Global. First on the list of evidence is Mitchell Maxwell's activities with Sibling. Mitchell seemed to have trouble in the film industry in the late 90's and early 2000's. Here's a direct quote from the Market Watch file:
B. Corporate History SEGI was organized under the laws of the State of New York in September 1995. In 1997, the Company acquired Maxwell Entertainment, Inc. ("MEI") from Mitchell Maxwell ("MM") and Victoria Maxwell ("VM") and originally engaged in the development and production of entertainment properties including plays, musicals for the live stage, independent feature films and other entertainment projects.
In February 1999, SEGI formed the AM Films division coincident with acquiring the broadband distribution rights to a motion picture library from Dream, LLC ("Dream") and began to reduce our interest in and pursuit of the development and production of plays, musicals and films. Later, we solely focused on the pursuit and distribution of motion pictures primarily over the Internet. This decision and refocus of our operational plans away from production of live stage properties and independent feature films led to MM's and VM's resignation as officers and directors.
After several years in attempting to establish secure sufficient distributors and successfully deliver our film library through direct online methods, and failing to secure necessary financing to sustain and market this emerging market, we sought to refocus its business direction to other areas of the entertainment industry not burdened by increasing technological and legal barriers. This realization supported our move away from the Internet video-on-demand business.
They changed their interest from producing theatre shows such as plays and musicals to producing motion pictures that were solely for distribution over the Internet. Interestingly enough, Mitchell and his sister Victoria both left the corporation due to this move. Once SEGI (Sibling Entertainment Group, Inc) failed at this venture, this happened:
This change ultimately led to a change in our management and control in October 2003 and a return to our original core operational plan to pursue the finance and production of live-stage theatrical, independent feature films and theatrical real estate and related synergetic businesses. The change of control included the return of our executive officers and directors, Mitchell Maxwell, President ("MM") and Victoria Maxwell, Vice President ("VM") along with James Cardwell, CFO ("JC"). MM, VM and JC were and continue to be officers and directors of Sibling Entertainment, Inc. ("SEI"), a private company engaged in similar business activities. This close association resulted in the Company's relocation of corporate offices and the sharing of office overhead costs including the costs and compensation of its officers and staff with SEI (see Related Party Activities).
Mitchell and Victoria came back when the company moved back to live theatrical films and shows. A couple of years later, they acquired some small film companies that produced some Reel Love films that were romantic comedies set in New York City. Odd enough, this was all under the Sibling Pictures banner that is subsequently under SEGI. All the shares from Reel Love LLC and another company organized under Reel Love were all transferred into Sibling Pictures. This is pretty much how they do business. They seem to work "relationships" between Sibling Entertainment Group Holdings, Inc. and all the subsidiaries that they also own. This may be common practice. It doesn't add to my argument that a lot of this data is causing a pessimistic view, but it gives an idea of how this company seems to work.
Almost every single acquisition or relationship involves theatrical film, shows, or independent film according to the previously linked article. They also have a management gig with the Denver Civic Theatre. They seem to also have a music producing company under their umbrella as well. Basically, they encompass the entire entertainment industry. Film, music, theatre, live-stage shows, and management of venues for said events. Have they ever been successful? If you call very small profits successful, sure. They haven't made a killing on any of these endeavours. Overall, they just aren't a powerhouse company that has done much in any realm of the film or theatre industry. Money management and the string of unsuccessful ventures leads me to a pessimistic outlook on the promotion.
Here is a bit of data to back up my claims that the business side of Sibling is doing poorly, from the Sibling's quarterly report:
The Company has not generated revenues since inception and due to the nature of our search for a suitable business opportunity, cannot determine whether we will ever generate revenue from operations and may continue at a loss.
For the period from inception to June 30, 2007, the Company recorded a net loss of $3,524,079. The Company's net loss is primarily attributable to general and administrative expenses and the write down of promissory notes. The general and administrative expenses include incorporation costs, offering costs, accounting costs, and costs associated with the preparation of disclosure documentation in connection with registration pursuant to the Exchange Act of 1934.
We expect to continue to operate at a loss through fiscal 2007 and cannot determine whether we will ever generate revenues from operations.
They expect to operate at a loss through 2007, but now with the acquisition of M-1 Global, can they turn it around? It's possible, but I wouldn't count on it just yet.
Promotion woes
Will M-1 Global be able to sell Fedor to the American public? He's a non-English speaking Russian fighter. Is that possible? With the right television deal, it could be. The options that have been rattling off the walls in the rumor mill have been HBO, Showtime, and HDNet. Showtime currently broadcasts EliteXC and ShoXC shows.They may be looking to expand Showtime into a MMA powerhouse as far as broadcasting events goes. My thought is that they are probably not going to be the network that will carry M-1.
HBO recently cut the negotiations with the UFC and now may have an option in M-1 Global. They may also be more lenient on the types of things that HBO production can do for the promotion as opposed to having full control of the production like the UFC supposedly wanted. HDNet is obviously another suitor for a contract with M-1 Global. My question is... can they market this guy?
I don't think so. Fedor is by far one of the best fighters in MMA, but how can you market a guy without the PRIDE library? Zuffa and the UFC own the tape. I think as far as international MMA events go, he could be very marketable. But in the U.S., casual fans probably recognize Randy Couture as the champion and the best in the world. I think Mitch Maxwell and the rest of his crew overestimate the amont of buys they can get for him in the States.
Eggs all in one basket
This statement makes me nervous for M-1:
"Anything you do in business involves risk," said Maxwell. "A lot of people would say you have to be crazy to back something like this, but we have the best fighter in the world and everybody wants to be aligned with the best."
Everybody wants to be aligned with the best. I agree, but the fact is, you only have one fighter who is considered the best. Fedor himself said that he didn't believe he was pound-for-pound the best fighter in the world. He hasn't fought any of the UFC's elite. The UFC also has the best heavyweight division in the world, what makes those fighters want to leave such a rich talent pool of heavyweights? The first answer would be treatment of each fighter in the UFC. I believe with Cox at the reigns, they may have a solid base to bring fighters that he manages over to M-1. Money could very well be another reason.
Why am I so skeptical about this statement? Because I don't think fighters leave organizations because ONE fighter is with another organization. Sure, being treated fairly and well by an organization has pull, but the biggest factor as to why fighters go to different promotions is money. And as we've looked at before, money is something that the management team at Sibling isn't exactly great at obtaining or keeping for that matter.
Hypothetical scenarios
What could M-1 being doing? I've had various discussions with people who have unbelievably crazy theories as to what is going on. It's fairly fun to talk about, but could any of it be actually true? One theory that intrigued me was the possibility that M-1 is created a lot of buzz to worry the UFC into buying them out. It seems odd, but Sibling is traded as a small cap stock on the market. Could Zuffa simple takeover Sibling if they wanted to? Yes, they could. Fedor's contract would most likely still have to be honored though. So, then he would be with the biggest MMA promotion in the world and in the UFC on his own terms and able to fight anywhere in the world. Very interesting idea.
All the mystery surrounding the company has led many people to comment that the Russian mob is behind the backing of the company. It's the most far-fetched theory out there regarding the promotion. Is it so far-fetched? Who knows, and I don't really care unless I see Fedor take a massive dive in the face of insurmountable betting odds that give his opponent a +1000 or something. Maybe then I would be inclined to think we just saw Jake La Motta-esque antics or betting scandals, but doubtful that it is going on here.
Historical lessons
Over at Fightlinker.com, a commenter (Xavier) stated that the company's whole look and feel reminded him of the Phantom Game Console. Phantom put a few Microsoft people out in front to promote the concept of Phantom. There is a great article here regarding the history of the game console. In short, he was getting up front investment money on promises and had creditable people he had convinced that the console was the next big thing. These creditable people went out and did the promoting for him which got him even more investors. He had a nest egg of money and in the end, never did anything with it. They produced some fake prototypes from the looks of it and convinced people that a big release was coming. All of this was a complete scam.
Sure, this probably isn't the case, but historically, companies that have a income sheet with barely any funding on it usually don't fair well when funding small time events. This is a huge undertaking, and all the numbers point toward failure. It almost makes this thing seem like a complete scam.
What if the mob is trying to get into a legitimate business? Don't start another PRIDE scandal. Hopefully this is all legitimate and these ridiculous theories will all be debunked.
You be the judge!
Putting aside the outrageous theories, M-1 Global still has a bleak outlook from my standpoint. Sibling has historically been bad with money and haven't had any unbelievably successful ventures. They have a management team that knows the entertainment industry and small venue management business, but what about LARGE scale production and management of a MMA organization? Sure, they hired SFX Media & Events to run the production, great move on their part, but management of such a large international organization could be too much to handle.
The promotion side of the business is questionable as well. Can they actually promote Fedor to an average North American MMA fan? I don't think so. Using a media outlet like HBO, Showtime, or HDNet isn't exactly a mainstream presence either. I believe they are also underestimating the pull Fedor has with his presence in the organization. I imagine we will hear about the M-1 Global organization signing almost all of the Red Devil fighters, but I don't think we will be seeing a lot of UFC fighters making a mass exodus. It's a possibility to see Rothwell, Whitehead, Barnett, Arona, and a few others in that promotion. That's a solid list of great fighters, and you could see an exodus of a guy like Nogueira since he wants to be Fedor. It's all a possibility, but I doubt they can pull that many fighters based purely on a name. Money will be the biggest factor.
With that said, who is actually backing this venture? You can read all the articles on here and see all the backing they currently disclose. Their financial reports currently say they have barely any money, so obviously they gained a lot of outside investors. Mark Cuban? Ed Fishman? We'll see. That's the most intriguing aspect of all of this and it could sway whether this will legitimately be successful or not. For now, I remain a pessimist, how do you feel?