Kid Nate has a very good article available at BloodyElbow.com where he analyzes recent reports that Zuffa's credit rating was lowered based in large part because of disappointing performances during the second and third fiscal quarters.

The UFC is by no means in any sort of long-term trouble. And, whether they are in short-term trouble is very relative as they remain a highly profitable company.

However, there is a risk that their 2007 fiscal campaign might not be as profitable as 2006. It shouldn't be a surprise if it turns out that 2007 wasn't as financially rewarding as 2006 because Zuffa undertook several measures to build towards their financial future. These measures, such as the acquisition of PRIDE, expansion into Europe, and the developing the WEC were not cheap. 

So while Zuffa deserves some slack because they made moves this year to invest in their future, Kid Nate raised a valid question as to whether those moves are smart after all.

At the top of Nate's list is the PRIDE acquisition:

The disastrous PRIDE acquisition

I think this is the fiasco most of the others follow from. Ironically, as much as Dana disses internet fan boys, he's one himself. Only a fanboy would pay what Zuffa shelled out for a mortally wounded promotion whose scandals had already cost them their TV deal. Only a fanboy would be so threatened at the prospect of PRIDE mounting a financially disastrous Las Vegas show that they panic and start offering money. Clearly due diligence wasn't performed or Zuffa would have figured out BEFORE the sale that PRIDE's contracts with its fighters weren't transferrable. Basically, Dana and his crew got played. And while they were busy getting screwed they took their eyes off a lot of other important matters.

On a whole, Nate did a great job with his piece and I highly recommend you check it out in its entirety. However, I'm not really sure anyone should be saying the acquisition of PRIDE was a failure or a success.

First, the numbers reported by the Associated Press in regard to the purchase price ($65-70 million) may not be entirely accurate. We'll probably never know the actual number because Zuffa is a private company and Dana White is not talking. I asked him during a CBSSports.com interview several months back about the number that was reported and White was quick to state that the number didn't come from the UFC. I have my doubts about that because if it didn't come from the UFC then it means the only other place it could have came from was PRIDE.

The actual agreed upon figured that was reported by the AP has been rumored to be a lot less. In fact, because the completion process dragged on so long (the deal was not finalized when it was announced on March 27) it's possible that the final sale price was even lower.

My basic contention is that you shouldn't believe everything you might have read in regard to the final purchase price and after talking to multiple sources, I don't believe that Zuffa took as big of a financial risk as some people think.

It's also important to understand why Zuffa bought PRIDE.

Lorenzo Fertitta was a long-time admirer of PRIDE and had a lot of respect for the promotion as a fight company. I believe that he was sincere in wanting to maintain the PRIDE brand. However, he's also a smart businessman and had to have known that being able to save PRIDE was hardly a slam dunk and that there were risks involved.

Based on conversations that have taken place with multiple sources over the course of the past year, I believe that the Fertittas were willing to roll the dice and take a chance. If nothing else they'd be able to walk away with PRIDE's video library and they'd be able to keep the promotion out of the hands of their competitors.

Prior to their acquisition of PRIDE, the UFC made two significant acquisitions of other promotions. One was acquiring select assets from the WFA last December and the other was purchasing the WEC. The primary motivation behind the acquisitions was to strategically limit the business opportunities of their competition.

The WEC became an attractive option because so many networks were interested in televising MMA. The UFC was already committed to Spike, and while Zuffa had freedom to solicit other TV deals for the UFC, there were some limitations. It was believed that rather than let a competing promotion get valuable television exposure that it would be wise to establish a second brand that could accept one of the available television deals.

In regard to the WFA, the main selling point for Zuffa in acquiring select assets from the promotion was to acquire the contract of Quinton "Rampage" Jackson.

EliteXC, which entered into a television contract with Showtime after Zuffa pulled the UFC off the table so that they could pursue a deal with HBO, was looking to secure Jackson as its franchise attraction.

Zuffa, which tried to sell Showtime on doing a deal with the WEC after they pulled the UFC off the table, didn't want EliteXC to have Jackson as a key player on Showtime.

A similar train of thought likely was involved in regard to the decision to step up in the PRIDE sweepstakes. Dream Stage Entertainment, the parent company of PRIDE, was talking to multiple players in the MMA industry right up until the point of coming to an agreement in principle with the UFC.

Two of those players were competitors to the UFC.

ProElite, Inc., the parent company of EliteXC, at least entertained the idea of acquiring PRIDE. How serious they were is uncertain.

However, negotiations between the IFL and PRIDE evolved to the point where the IFL had a formal offer on the table that it was analyzing. The IFL ultimately decided the deal didn't make sense and declined.

The sale price the IFL was considering was approximately only a third of what Zuffa was quoted as buying PRIDE for. As such, I believe the final sale price that the AP reported Zuffa as paying was not the accurate number and that it was likely deliberately inflated to make the deal sound more glamorous than it really was.

Based on all the information I've been able to obtain the past several months, I really don't believe the decision to buy PRIDE was a bad one even though the promotion is now essentially dead. 

Some pundits have blamed Zuffa for a lack of due-diligence in regard to the acquisition but they weren't operating in a traditional American business climate. PRIDE wasn't going to give any potential suitor open access to its financials until an agreement in principle had been reached. Zuffa was left with the decision to either move on the deal or risk a competing promotion gaining access to some of the biggest stars in the sport.

They took a chance and it didn't work out but I'd hardly call the acquisition of PRIDE "a disaster." 

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Sam Caplan

Lead Writer/Editor - ProElite.com

SamCaplan.ProElite.com