DREAM and K-1 Face Financial Trouble

Aaron YoungContributor IIISeptember 1, 2010

For quite some time, it has been speculated that the Fight Entertainment Group (FEG), the promoter of DREAM and K-1, has been experiencing financial woes.

Despite the widespread rumors, however, all FEG officials vehemently denied any setbacks and disputed the speculation.

On Tuesday, Aug. 31, though, a FEG representative acknowledged the promotion's shortage of cash.

Mike Kogan, the promotion's representative in the United States, explained the difficult situation FEG is going through, relating to the financial viability of their struggling mixed martial arts company, DREAM, and the world's largest kickboxing entity, K-1.

In July, the Fight Entertainment Group announced a partnership with PUJI Capital, an investment bank in Shanghai. The reported deal was worth about 2 billion yen ($230 million).

With the announcement of the partnership, K-1 President Sadaharu Tanikawa boldly said, "This is a declaration of war against the WWE and UFC. From Asia, we will take the world."

FEG executives were excited about the deal and expected to secure major television deals in Japan with the new available money.

The deal was not automatically finalized, however, and FEG is now anxiously awaiting the outcome of PUJI's audit of the promotion firm.

As time goes by, the financial support that the promoters expected to receive, around $230 million, is dwindling. The money was planned to be used over a span of five years to continue hold DREAM and K-1 cards in the future.

In addition to the promotion of MMA and kickboxing events in 2011 and further on, it has been widely rumored FEG needs the extra cash to pay off debts to fighters competing for DREAM who never received their full payment since DREAM's inception in 2008.

Other than the failure to pay the complete purses of their cards, another red flag was FEG's cancellation of DREAM.17, an event planned to take place on October 25 in South Korea.

Kogan denied that notion, however, claiming the cancellation of the event was due to a lack of talent rather than a lack of funds.

In addition to the scrapping of DREAM.17, a meager schedule of events for the remainder of 2010 is another sign of weakness.

In the final final four months of the year, FEG has announced the following events: DREAM.16, headlined by Kazushi Sakuraba and Jason Miller; the 2010 K-1 Grand Prix Final 16, an annual event taking place in Seoul, Korea; the K-1 World Grand Prix 2010 Final, the world's biggest annual kickboxing event; and Dynamite!! 2010, the long-running New Year's Eve production.

Past that, Kogan can't confidently assure FEG's existence past Dynamite!! if the deal with PUJI falls through.

"It's very difficult. Obviously we're short on revenues, and we need to, besides restructuring, we need to be able to find new sources of revenue. You need money to make money, so to speak," Kogan explained, "We need investment money. That's the bottom line."

He also said that multiple companies had been interested in investing in FEG in the past, but he wasn't completely sure what came of the deals.

Regardless of all the rumor mills and speculation, the Japanese combat industry is in a weakened state compared to its prominence in the 1990's with K-1 and early to mid-2000's with the PRIDE Fighting Championship.

At the announcement of the PUJI Capital alliance, Tanikawa recognized the decline of MMA and kickboxing in the "Land of the Rising Sun" saying, "When K-1 and PRIDE were competing against each other, 80 percent of the mixed martial arts market was in Japan. It is now the opposite and Japan is only 20%."

In the end, drastic changes are required in order for Japan to return to relevancy in mixed martial arts.

With the UFC stronger than ever, talent will be hard to come by unless FEG can come up with large enough funds to lure fighters across the Pacific.

Similar to PRIDE's development in the last decade, a roster of immigrating American stars, such as PRIDE had with Mark Kerr and Mark Coleman, will have to be bolstered by homegrown stars, such as PRIDE had with Fedor Emelianenko and Mirko Cro Cop.

DREAM will also have to embrace the originality PRIDE maintained throughout its existence.

During those years from 1997 to 2007, MMA in Japan was promoted as a dramatic and unique spectator sport, rather than the underground atmosphere the UFC incorporates.

For the sake of MMA and kickboxing fans, not only in Asia but around the world, hopefully PUJI's investment deal can be completed.

With competition from DREAM, the UFC would thrive along with the young Japanese promotion, and they could both capitalize on the growing mixed martial arts industry.