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Strikeforce’s high-risk, high-reward Japan strategy

By Zach Arnold | January 27, 2011

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When Josh Gross broke the news of Strikeforce running their second HW GP event on April 9th (with Japan being a target), the obvious reaction online was about avoiding licensing issues and drug testing. The names of Alistair Overeem and Josh Barnett are both popping up for this event. I don’t think it’s fair at all to lump the two fighters together on the issue of doping. Each is an individual case and, as you might recall last May, I argued endlessly about this in relation to Alistair.

I had guessed around the time that Strikeforce picked up Mr. Barnett that they would run his fights in Japan. It made a lot of sense. There’s too many landmines in the States. Plus, with what happened in California (Strikeforce’s home base) and the Affliction show collapse, Japan really was the one place that made sense for Josh. After all, it’s where he wrestles and where he wants to fight. You can also say the same thing about Alistair Overeem, who did sign with talent agency Yoshimoto (the same casting agency that enlists Razor Ramon Hard Gay and his pelvic thrusting.) Overeem’s goal is become the big cheese in Japan and K-1 is his primary focus. America is a nice side attraction for him, but Japan is the goal. What better way to placate him but by having his fights in Japan?

It’s a fascinating move by Scott Coker to really consider a deep involvement in Japan given the current climate of the industry there and yet, it’s a calculated move. The risk is high — lack of money, shaky television situation, long-term uncertainty with K-1. However, what makes the prospects of Strikeforce working with K-1 in Japan realistic is that SF can turn the tables on K-1 and use the K-1 financial model to benefit. With Showtime paying Strikeforce a certain amount of money per show, the promotion can afford to work with someone like K-1 if K-1/DREAM is willing to run the show and cover the costs. Sounds familiar? It was Kazuyoshi Ishii’s strategy when PRIDE collapsed and now, unfortunately for K-1, it’s a failing business model for the Japanese. Which means that the idea of Strikeforce using that same model against the grandmaster who built his empire on it is extremely thick in irony.

For K-1, it would be an interesting image booster in Japan. They could conceivably tell the fans that they are bringing some of the best, if not the best, foreign MMA fighters in the world to Japan to fight in a ring and not a cage. All of this is big for the psyche of the Japanese fans.

(The idea that the big names want to come to Japan because Japan is where the world revolves around.)

Whether it draws or not is another question, but right now K-1 is in survival mode and working with Strikeforce to bring in Fedor, Alistair, Barnett, etc. is good for the image. Plus, all those fighters want to fight in Japan anyways, so it keeps the talent base happy. A co-promotional relationship also would critically help Strikeforce fill some major voids in terms of depth (at least on paper) in the Lightweight and Welterweight classes. The door also opens up to use fighters at Bantamweight and Featherweight.

For Strikeforce, the ability to make money while running big fights in the big non-American MMA market will be a win that UFC will not be able to obtain. It’s a move where both SF & K-1 can combine forces to try to diminish the prospects of UFC making a big dent in the country. Each party (SF & K-1) has something at stake and right now the stakes are pretty high for both parties. Desperate times call for desperate measures. If K-1 can use Alistair, Fedor, and others to try to get leverage for television security, then it’s worth it to play ball in the end.

Now, what I wrote up above is the ‘perfect’ scenario for both parties. Whether or not it turns out that way in the end is anyone’s guess, however. Money talks and bullshit walks.

Topics: DREAM, Japan, Media, MMA, StrikeForce, Zach Arnold | 32 Comments » | Permalink | Trackback |

32 Responses to “Strikeforce’s high-risk, high-reward Japan strategy”

  1. Jon Luther says:

    Good piece, Zach. These are precisely the kinds of risks Strikeforce needs to take if they’re going to make big gains. I feel like they’ve been hiding behind the comfort of Showtime and their licensing fees for too long. It’s time to take risks, using their gig with Showtime as a home base should things get tough.

  2. […] The MMA blogosphere’s resident Japanese MMA industry expert Zach Arnold answers my question why Strikeforce would want to bring the GP to Japan. It’s a fascinating move by Scott Coker to really consider a deep involvement in Japan given the […]

  3. Dave says:

    Well, it still isn’t for sure that they’ll work with K-1 or FEG at all. Coker is meeting with Real Entertainment, the guys formerly DSE (Dream Stage Entertainment, think PRIDE, people) to work on the HW GP and a LW tournament as well. No one is really sure what will happen with FEG and exactly who will take over K-1’s reigns.

  4. 45 Huddle says:

    So let me get this straight….

    1) They are avoiding AC’s because one of their fighters has cheated so much he can’t even likely compete in the United States now….

    2) They plan on running a show in a market that is not only on the decline but in complete and utter disarray. Even WVR and FEG are losing their shirts in that market…. And they are Japanese.

    3) Not only are the logistics of an international show more complex (perhaps take a test run in Canada first?)…. But they are doing it in a country that has everybody with their hand in the cookie jar. The promoter…. The yakuza…. Perhaps Pay for play TV over there. Not to mention the fighters, Strikeforce, and showtime also have their hands in the cookie jar.

    So which part of this equals “High Reward”? And before people bash me as just being a UFC guy…. Even within the last week on this website I said I don’t even think the UFC could penetrate this market properly. Even partnering up with a Japanese promoter will mean trouble. Anybody remember the guy from Vegas who worked with Pride coming to the states? I forget his name. But he should be a cautionary tale for any American thinking of working with a Japanese Promotion. They cannot be trusted and things…. No matter how good they look on paper are bound to fall apart….

    • Chuck says:

      That is Ed Fishman you are talking about. I do agree with you, but I do think Strikeforce probably has a better shot (not “good”, but “better”) than UFC because of guys like Fedor, Barnett, etc. And Coker’s contacts in Japan could help too, along with getting guys like Sakurai and Aoki to fight on the cards. But the Strikeforce brand isn’t exactly a hot commodity in Japan. Actually, it isn’t a commodity at all.

      It is going to have to be a “wait and see” sort of thing.

  5. The Gaijin says:

    I “get” the notion that they want to run the card in Japan based on Overeem and Barnett’s status there, but that seems pretty flimsy to me. Optically it looks bad (vis testing issues), but let’s be honest, only the hardcore fans care and really of those hardcores it’s the subset that loves to shit on Coker for everything and Barnett and Overeem for the obvious reasons (and ignore that there’s more actual evidence against Carwin and Lesnar juicing than AO)…so we’re talking a small pool of loud (on the webz) people that will feign disgust and indignation.

    I’m not sure how partnering up with people that everyone publicly says are losing their shirts is supposed to be good for them…but I’m not really big on the intricacies of the Japanese fight business. The other thing that’s not making sense if they are planning to go nuclear with a PPV for the semis/finals – why are you running a show that will be “live” at 4 a.m. in North America? Isn’t that the audience they need to be cultivating for this tourney to make the big $$$.

    • 45 Huddle says:

      Overeem shows visual signs of being unnatural. Lesnar does not. Not to mention that Lesnar is a natural wide body who has fat on him. Overeem’s body doesn’t even look like it’s from the same gene pool as his Pride body.

      And Barnett has been caught 3 times. Carwin is a likely user…. But he is also being tested basically every time out now. Something we can’t say for Overeem or Barnett. Which is why there is a problem.

      • notthface says:

        Did Tim Sylvia show obvious visual signs? Stephan Bonnar? Royce Gracie? How about Kirill Sidelnikov,Ruben Villareal, Bigfoot Silva, Chris Leben, or Chael Sonnen?

        • 45 Huddle says:

          Some guys don’t show signs. But that has nothing to do with the ones who do.

          Sonnen had more back acne. Leben was more cut. So was Sylvia. Their bodies did change. And not even 10th as much as Overeem’s has….

        • edub says:

          Tim Sylvia’s body composition is very different from before he was caught roiding. He was almost “cut” before the failed test. Chris Leben’s body was completely different during the Michael Bisping fight. Chael Sonnen has had roids all over his back since he’s been competing in the UFC.

          Some guys show signs. Some don’t. It depends on the person, and the type of PEDs used.

        • Zack says:

          Warpath and Royce were two of the most brutally obvious examples of roiding if you see the before and after shots.

      • Ligerbomb27 says:

        You don’t need roids to get/look big. It’s genetics + diet + hitting the weights. That’s it.

        I know some MASSIVE dudes who look as jacked as Overeem, and they’re natural. Some guys on the same diet/routine are chubby (but still strong – just not impressive looking).

        Don’t assume, Mr. 45.

        • 45 Huddle says:

          Who is the one assuming?

          When I talk about Overeem…. His jaw has gotten bigger in the last few years. That’s a sign of growth hormones.

          The muscles are just icing on the cake….

        • edub says:

          A lot of people are on steroids that don’t admit to it. Remember that too.

      • The Gaijin says:

        Sorry should have clarified – Lesnar was a historic example. He may or may not be on something now, but he DEFINITELY was a steriod/PED user in the past, especially in his tenure with WWF. Hell he was arrested with what was initially suspected as steroids, but turned out to be “prescribed” growth hormone. It’s was basically a known fact in mma circles during Carwin’s regional days that he was (allegedly) juicing – he was 300+ lbs and absolutely shredded…it got to the point that they couldn’t find guys to fight him because it was so (allegedly) obvious. Not to mention the fact that he very recently appeared on “the list” of customers of PEDs.

        • 45 Huddle says:

          I would be shocked if Lesnar wasn’t on something in the WWE. But his athletic body today looks like it did when he was in the NCAA’s…. So I doubt he’s on anything.

      • Choop says:

        Overeem was always a ripped cut beast even at 205. Considering he cut a very large amount we can assume he was around 228, give or take a few pounds.

        He didn’t do any weight training back then at all, or he wouldn’t be able to make weight. He was basically a natural heavyweight who had to work extremely hard to keep himself light.

        Once he started working out he put on a total of 30-35lbs. Overeem may be cheating, but his weight gain is hardly incredible if you consider the circumstances. Once he made a decision to move up he could focus on putting on as much mass as possible, as opposed to keeping as slim as possible.

  6. Chis says:

    Good article Zach. And a smart business move by Strikeforce, if they can pull it off.

  7. notthface says:

    Everyone obsessing over the fact that they want to do a show in Japan to protect Barnett and Overeem must have missed the fact that they will be testing fighters throughout the tournament:
    http://sports.espn.go.com/extra/mma/news/story?id=6046811

    In fact, the Grand Prix events will probably be the most tested events in MMA this year, but I doubt we’ll hear any praise for Strikeforce.

    As for why Strikeforce would want to do a show in Japan, the answer is obvious: it’s smart. It’s something they wanted to do last year and were sidetracked by the Fedor/Nashville fiasco and FEG’s problems. The local promotions in Japan are struggling to make enough on their cards and what the market pays can’t afford to bring in the gajin stars that draw. That doesn’t mean there isn’t a market, just not a viable one for high end mma. Enter Strikeforce, who can be paid by Real Entertainment for the same or less as a Dream card, but provide a higher caliber of talent than they could, and is not dependent on the Japanese market. That’s just gravy for Strikeforce. In addition, they will be using fighters that can still fight under a Japanese promotions’s banner so they won’t be helping out a competitor but building up their own future rosters. It’s called a win-win.

    Dave Walsh did a pretty good summary of this on Liverkick.com.

    Something else I don’t think I’ve seen people discussing: the San Jose Small Business Journal did a story on Strikeforce and reported they had earnings of $30 million last year, better than most people suspected.
    http://www.bizjournals.com/sanjose/print-edition/2011/01/28/strikeforce-makes-millions-on-MMA.html
    They seem to be on more stable ground than many suspect, although a lot will still be riding on adding Showtime subscribers, ppv, and a Japanese expansion.

    • But, but…they are failing! mmalogic told me so!

      • notthface says:

        If you can’t trust an anonymous poster who uses unconfirmed sources and has an undisclosed but obvious relationship with Zuffa, who can you trust?

        • 45 Huddle says:

          When I first started off as an underwriter… There was this company I had to look at. My boss pretty much set me up to make it a learning experience.

          We didn’t have the financials on the company yet but we did have information from their local paper claiming how much they made. I started to do the numbers based on those numbers.

          A week later, the company finally sent us the financials and the article was flat out wrong. They were actually big time in the hole and leveraged to the nines. Technically their reported revenues were accurate, but it had to do with some fancy accounting and “sale” of bs assets.

          My boss then had a meeting with me to explain how local papers and news sources are the most unreliable placed to get good information on companies. That a lot of time they almost act like their publicists with no real fact checking.

          Anyways…. To make a long story short…. Local news reporting on the “success” of local business is almost always a sham.

        • 45 Huddle says:

          And revenues aren’t NET INCOME. That’s accounting 101.

          You give me a companies revenues and I will ask you for their expenses…. All is relative until you have all those numbers….

        • The Gaijin says:

          “When I first started off as an underwriter…”

          How many jobs have you had there teach?

        • 45 Huddle says:

          Underwriting was a real career job I had. Subbing was just an in-between sort of thing. Not many jobs besides that.

          One thing I have seen a lot of is companies financials. From reading through public releases to private companies. Public companies are pretty standard and they typically don’t do too many weird things because they have investors they have to talk to every quarter.

          Private financials are a completely different ball of wax. From the way they report numbers based on werid accounting standards….. And the way their specific business allocates money into different catagories…. To the weird bank agreements they typically have….. You can never know how strong a company really is until you look at their financials. But a lot of times if you look at how they are organized and how their run their core business…. You can get a good idea about how they also handle their money.

  8. 45 Huddle says:

    I was waiting for somebody to ask but nobody has…. And it seems like annobvious question?

    Cage or Ring?

    The cage doesn’t sell well in Japan. And it’s unfair if half the tournament is in a ring versus a cage.

    That’s one of the many reasons I always thought the UFC would fail in Japan. The cage does not translate….

    • Tradition Rules says:

      Actually, I was thinking the exact same thing,….along with elbows not being thrown while standing or in the clinch.

    • Dave says:

      That is a really good question, but I think the cage using Unified Rules.

      SRC already uses Unified Rules (Strikeforce rules are just no ground elbows), DREAM had a few cage shows and GCM runs regular “cage” shows, as did DEEP.

  9. Paradoxx says:

    Perception is everything and SF has already ruined this by even mentioning Japan.

    US fans don’t care about fights in Japan. US fans barely care about major UFCs PPV in other countries (anyone remember the 215k buyrate for a fairly stacked UFC 110 that still aired in prime time). And US fans are where the money is right now.

    • 45 Huddle says:

      Not to mention the time difference. They going to show it on tape delay?

      Most of their fans are online MMA fans. They will all know the results ahead of time…..

  10. Dave says:

    annnnnd Barnett withdrew his appeal from CSAC, he has given up on getting licensed there.

  11. […] other words, who you are seen with and who you deal with is of the utmost importance in Japan. I wrote about Strikeforce’s high-risk, high-reward plan to try to do business in Japan. A healthy part of that risk is being judicious in how you handle […]

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