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30/11/10 - DREAM/K-1 woes continue, investment fails to materialise
Japanese mega-promoter Fighting Entertainment Group, parent company of K-1 and DREAM, has suffered a new setback, according to a long-established Japanese agent. The agent says that the much-trumpeted deal with investment bank PUJI has come to naught and that the investment bank has said that it can do nothing for FEG.
Earlier this year FEG made headlines when it announced a partnership with PUJI and said the investment bank would be procuring $200 million of cash capital to finance ongoing operations.
According to our agent source, PUJI has discovered that the Japanese fight-sport market is worth less than initially estimated (or than it was initially told) and $200 million has proved to be a hopelessly unrealistic figure.
PUJI also found that investors who expressed an interest in FEG were nevertheless not willing to part with cash unless some management restructuring was put in place. When this met with resistance at FEG, the parties in question lost interest.
FEG has found itself in trouble because of waning interest in the kickboxing and MMA scene in Japan. Interest peaked some years ago - Japan is a notoriously faddish culture - and fighters were making big money at the height of the sport’s popularity.
Since then television, advertising, gate and sponsorship revenues have all declined - but fighter purses have not. Major names that were getting several hundred thousand dollars for fights at the height of K-1’s popularity, for example, are getting those same purses (or similar) despite the decline in revenues.
FEG has adopted a ‘business as usual’ approach to the situation and any announcements of financial difficulties or impending doom are unlikely to be forthcoming. But there are multiple fighters awaiting payments for more than one fight (mainly K-1 fighters).
Unable to obtain loans or capital from investors FEG has, according to our souce, gone to the ‘black market’ for loans with which to pay its fighters. This of course raises the spectre of the Yakuza links which killed PRIDE FC, but FEG has always been fastidious about avoiding such links (or at least, having any such links made public). Seeking capital from ‘unofficial’ sources is a very risky move.
Despite the difficulty FEG and PUJI have had in raising investment, there are several interested parties hovering in the wings if the company is put up for sale.
Initial talks have already happened with some of these parties but even then, they are said to have been put off by opaque financial accounts and an absence of, or unwillingness to, go through the due diligence process which is standard practice with the sale of any business.
The company hopes for, and badly needs, big ratings for its Dynamite! show on New Year’s Eve, mainly because it needs good numbers to show to potential investors and it also needs to keep the TV deal it has. The hunt for cash continues but our source, who has operated in the Japanese market for some years, is pessimistic about FEG’s ability to sustain itself and predicts a buy-out or the company’s demise towards the end of 2011.
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