CEO tries to resuscitate EliteXC
In the corporate world, Chuck Champion is seen as a turnaround artist. After making his start in business-to-consumer marketing for newspapers, he took the reigns of several companies in financial distress. His last turnaround, online gambling website Youbet.com, went from $.45 a share to $6.50 a share in his five-year tenure with the company.
Champion had left Youbet and was "taking a break" when he received a call from a board member of ProElite, Inc. in November of 2007, asking him to take a look at the company's ledger. Their balance sheet was a story he'd read before.
"Like a lot of startups, they'd gone out and their appetites were fairly significant. They'd bought a lot of brands and they did that very quickly," he said. "You could see the problems that created, trying to integrate all that stuff into one company."
The company was also bleeding cash. Champion says Sales, General, and Administrative costs, which account for the overhead of a business, were burning $1.7 million dollars a month in cash reserves. Something needed to be done, fast, or ProElite would soon close its doors.
Now eight months into his new job as the CEO of a struggling fight corporation, Champion is a "newbie" in the game, trying to meld his business expertise with the unpredictable whims of MMA's audience.
The way Champion tells it, he'll take the cage over the boardroom any day.
"There's more rules in MMA than there are in the corporate world," he said. "Here in MMA you can't get hit in the back of the head and you can't get kicked in the face when you're on the ground."
ProElite has certainly taken a beating, though, since its inception in November of 2006. The company has managed to ink several important, even historic, partnerships with media companies like Showtime and its parent company, CBS. But it's paid too much for the alliances, and taken on too many assets that don't produce revenue. Combined with its extremely high overhead, the company has spilled over $55 million in red ink.
In an August SEC filing, ProElite said it needed $3.5 million dollars of additional funding to keep doors open until the end of the year. A month later, another SEC filing said the company had received only $1 million of the required amount, and "continues to evaluate its options on how to respond to its severe liquidity problem."
In a candid conversation with MMAWeekly.com, the CEO said that the $2.5 million dollar shortfall came when two major investors in the company, The Hunter Fund and Absolute Fund, elected not to make a scheduled loan.
"Them not having been able to consummate those, for reasons that are better illuminated by them than me, put us in a situation where we had to rely on our commercial partners, CBS and Showtime, to help us get through that bridge. They were terrific enough to be able to advance us license fees in order to be able to put on the rest of the shows for the remainder of the year, the last one being Nov. 8."
But the company is still $2.5 million short. Champion says he's cut SG&A costs by a million dollars per month since taking the reigns of ProElite, and is looking for other ways to pad the bottom line. "There's still more an opportunity to take out some more to be run more efficiently and effectively," he said. That includes possibly cutting assets that don't produce revenue, like the satellite promotions ProElite gobbled up in its first year of operations.
"King of the Cage is solid, it's doing well," he said. "But you got Cage Rage, Rumble World, and Icon. Icon and Rumble World (are a) very difficult market; very hard hit by this economy. With Cage Rage, we have not been able to turn a profit on some of those major events we've put on there. I'm a big believer if you aren't making money, why are we putting them on?"
Champion says that talks with major stakeholder Showtime for a possible takeover of ProElite are not at an advanced stage. The company has hired a strategic planning organization and an investment banking firm to decide which option is best for its future. Talks on increased investment from outsiders like Showtime are among "a number with our current partners as well as others," Champion said.
As for EliteXC's Oct. 4 card being a "make or break" event for the company, Champion says it is and isn't. While he acknowledges that its success is "very, very important" for the parent company, it will not close shop before Nov. 8, the date of its next Showtime-broadcast show.
"The first one was make or break, the second one was make or break, now we're down to the third make or break," he said. "You look at our balance sheets and our income statements -- we've got to do things, we've got to execute once and a while. So yeah, from that perspective, absolutely. (Oct. 4) will be the best overall card that we've put on. As we put those fights on, we're getting more phone calls from people who are interested in doing business with us."
Undoubtedly, the company's fate will be largely determined by its third CBS event, and will shape the strategic planning firm's advice in days to come. Elite does have several valuable assets -- Kimbo Slice, Gina Carano, and deals with a major network and its premium cable channel. Champion's job is to figure a way to maximize these assets before the ship sinks.
If there's a sunny side to the situation, it's that Champion has been here before. The turnaround artist in him sees 2009 as a new start for Elite.
"A re-shaped, re-formed EliteXC will emerge, and I believe its prospects are good," he said.