Exec: Mismanagement Caused Elite Collapse
Tuesday, October 21, 2008
by Loretta Hunt (lhunt@sherdog.com)
Though it had a platform that rivaled all others in mixed martial arts, EliteXC and its parent company, Pro Elite, couldn’t stop themselves from falling off the ledge.
Launched in December 2006, Pro Elite entered a booming market and quickly established a place behind perennial leader, the UFC, with the sheer magnitude of its size and scope. However, it was a combination of mismanagement, runaway personalities and frivolous spending that led to its demise, said one of its consulting executives, T. Jay Thompson.
“Mismanagement, it was mismanaged by people that didn’t know MMA, that didn’t have the proper years of experience,” said Thompson of the company’s cease of operations Monday after only 22 months in business. “It’s not an exact science. There’s not a book that you can write to learn how to promote shows.”
Thompson, who promoted 55 events under the Icon Sport and Superbrawl brands over 13 years, was one of the more experienced individuals brought into the Pro Elite fold, but he said he was under-utilized from the start.
Pro Elite paid Thompson $350,000 in cash, hundreds of thousands of shares in stock and signed him to a five-year consultant’s position in return for his Icon Sport promotion and all its assets, which included a 50-plus event tape library.
Thompson’s Icon Sport was not the only bold purchase made in that first year of operation.
Pro Elite also paid $3.75 million for longtime promoter Terry Trebilock’s regional juggernaut, King of the Cage, $5 million for the UK’s Cage Rage outlet and invested $1 million cash in South Korea’s SpiritMC –- all hefty price tags to ensure the fledgling promotion gained unfettered access into each respective region and had a healthy stable of farmed talent from which to pull.
Instead, SEC reports listed losses from all four acquired companies totaling over $20 million.
“They didn’t use it,” said Thompson of Pro Elite’s ill-fated farm system. “They bought too much too fast. To be in second place in five years, we needed to [still] be here in five years. First and foremost, we needed to find a way to make money.”
But instead of raking in the dollars, Thompson saw them fly out the doors of the company’s overpriced Wilshire Blvd. rental offices in Los Angeles.
“It had to be $100,000 in rent [a month],” said Thompson. “It’s a beautiful place to bring someone up and hold a meeting and try and impress someone, but who we trying to impress? It’s MMA.”
Thompson said the warning signs were apparent from his initial negotiations with Pro Elite in late 2007. A deal that was supposed to be signed a month before EliteXC’s inaugural event in Hawaii turned into a verbal tug-of-war between himself and former EliteXC Live Events President Gary Shaw a day before the announcement of Icon’s purchase was made. Once onboard, Thompson found he didn’t mesh with the outspoken Shaw, an import from the boxing world.
“I think Gary Shaw has a lot of positive traits as a promoter,” said Thompson. “I didn’t necessarily see him as someone morally or ethically that I wanted to learn from though.”
A frustrated Thompson found himself on the outside looking in, absent from the initial meetings with CBS that Shaw spearheaded and the company’s day-to-day decision making led by the Los Angeles office.
With the company showing signs of internal dissention, Shaw was downgraded to a consultant’s position in late July. Thompson does not believe Shaw’s pay was reduced in the demotion.
Shaw’s son, Jared, stayed on with the company as a vice president, though his role with the organization was never clear.
“It was my understanding that to get Gary out, they had to keep Jared in,” said Thompson.
Like his father, the novice Shaw seemed to have issues fitting in with Pro Elite and the sport in general.
“I think Jared Shaw is a passionate kid,” said Thompson. “I don’t think he knows MMA. I don’t think he should be making decisions in an organization of that size. I believe Jared Shaw’s heart was in the right place. I think Jared Shaw wanted badly to succeed and for what reasons I don’t know, whether to be in the front, to be the star himself. I think he tried his hardest and just did a rotten job.”
Nowhere was Shaw’s struggle more apparent than Oct. 4, when EliteXC made its second trip to Florida to promote its third card for CBS. Shaw, who didn’t hide his affinity for the promotion’s biggest star, Kevin "Kimbo Slice" Ferguson, caused more commotion outside the cage then Seth Petruzelli’s 14-second decimation of Slice inside it.
“When you have a high-level representative of our company in Jared Shaw on national television jumping up and screaming, it’s extremely embarrassing,” said Thompson. “To have people like that calling the shots, I’m not all that surprised that the company’s where it’s at right now, and I’m not surprised that CBS doesn’t necessarily want to put their eggs in that basket.”
Just who called the shots Oct. 4 -- which unknowingly became EliteXC’s swan song -- will remain a hot topic as the promotion’s death is dissected from every angle. The loss of Ken Shamrock just a couple of hours before his main event bout with Slice was a brutal blow, and the decisions that came afterward proved crucial to the company’s survival.
“It was a scarily run show from what I saw,” said Thompson, who said his attempts to assist the company in its most desperate hour were disregarded. “It’s really easy to be a promoter when your star’s winning fights, when everything’s going well. Crisis management is really what makes a good promoter.”
Thompson said he flew down to Florida on his own dime and was sitting cageside when he got word that Shamrock had sliced the skin above his eye and would not be cleared to fight. Unable to get clearance to head backstage, Thompson said he tried to relay suggestions to upper management through assistants and unanswered phone calls.
“Number one, they picked the wrong opponent,” said Thompson, who confirmed that light heavyweights Aaron Rosa and Petruzelli were considered for the opening. “Do I want my star getting his ass kicked by the unknown guy that’s a dropout from the UFC, or do I want his ass kicked by a guy that I can call Tito Ortiz’s number one student protégé and the next big thing in MMA?”
The second mistake proved poisonous, said Thompson, and pertained to alleged talks between Petruzelli and the promotion for the fighter to stay on his feet and in Slice’s comfort zone.
“I have no proof [but] I’d be amazed if he wasn’t paid to stand up,” said Thompson, who was absent from the last-minute negotiations but claims co-employees intimated to him their confidence in an arrangement that had been made prior to the bout. “I sent [Pro Elite CEO] Chuck Champion an e-mail basically telling him my concerns the day after, and after talking to him, he made it clear to me that isn’t what happened, and I had to go with his word.”
Once keen on purchasing and bailing out the EliteXC brand, Showtime, a subsidiary of CBS, terminated the nearly negotiated agreement with Pro Elite last week. Thompson doesn’t blame them.
“Watching the company from the inside out for this long, I don’t want them running my show if I’m CBS,” he said. “I don’t want that group running my show.”
Thompson believes the Icon Sport brand will be returned to him, but fears it, and many of the fighter’s contracts, could be held up in bankruptcy court for an extended period of time.
And as Affliction Entertainment and possibly others swoop in on the still-warm spot once held by the first promotion to score a live broadcast TV deal, Thompson hopes someone will succeed where his company has failed.
“I think CBS is deciding whether or not they want to be in the MMA game at all, and I think they’re leaning away from it to be honest with you,” he said. “If they do it, they’re going to go into business for themselves and bring a couple of key people on. I would love to be involved with that.”
