NETWORKS: IT'S A QUESTION OF TRUST - OR SHOULD WE SAY ANTI-TRUST?

BY Charles Jay ON July 27, 2003
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The 76th Round

Whether they want to admit it or not, networks have always had more than just a passing interest in controlling the product that winds up on their air. Evidence of this can be traced all the way back to 1947, when CBS formed a wholly-owned subsidiary named Tournament of Champions, which was fully involved in the promotion of prizefights, emanating from the Polo Grounds in New York and other locations - televised, of course, over the CBS network.

Eventually, as a way of consolidating its power and eliminating competition that would perhaps prove harmful, the International Boxing Club executed an expensive but worthwhile buyout of Tournament of Champions. The IBC, as many historians are aware, used that transaction and the acquisition of Mike Jacobs' Twentieth Century Sporting Club, along with its control of leases on many viable fight venues, to establish a full-blown monopoly over all aspects of boxing - including televised fight cards - that was eventually challenged by the Justice Department - an investigation and subsequent prosecution which resulted in plenty of criminal indictments and civil actions, not to mention, of course, the complete dissolution of the IBC.

The issue then was the violation of anti-trust laws.

And I'm not sure that the issue, in part, isn't the same now.

Certainly one can make a very strong argument that, given their position of strength in being a potential influence over the balance of power, concerns about anti-trust violations, restraint of trade, and market manipulation would almost necessitate the oversight of networks, vis-a-vis the boxing industry.

There are really two entities that "fuel" boxing promotions, and the promoters who stage them. One are the casinos, who provide the "found money" for promoters at the venue itself. But that is small potatoes compared with the more important entity - television. As we alluded to previously, it is becoming increasingly difficult to make any kind of profit promoting boxing in this day and age without the support of television revenues. And because of this, the number of fight shows is clearly not what it was many years ago.

As a result, the promoters who are able to secure television for their boxing shows prove to be those who are able to develop the power base necessary to operate. If a television executive were to grab any promoter, and I mean that - ANY PROMOTER - and tell him he was going to have twenty TV dates, guaranteed, for the upcoming year, along the rights fees that accompany it, it's fair to say that while it would not be a steadfast guarantee of profit, it would still provide the promoter with the inside track on a couple of things - 1) the chance to sign fighters to promotional contracts, since he knows he will, with little doubt at all, have the money and the activity necessary to fulfill an obligation to the fighter, and 2) the opportunity to pitch a casino with the guarantee of getting nationwide TV exposure for a pre-determined number of fights over a set period of time, which gives him a decided competitive advantage over any promoter who is NOT bringing TV
to the table.

And since the guaranteed revenue means better fighters and more available money involved, the possibility of being able to promote title fights increases. Remember, the more money available, the higher the sanctioning fee.

You see, just as long as some TV executive says "yes", virtually anyone can have all the elements in place to become a successful promoter. But without the TV connections, none of the aforementioned components would be likely to come to pass.

Now, imagine if that network connection also "encouraged" the promoter's competitors to place their fights on that promoter's shows, or present stipulations that would almost require them to share their fighters with that promoter, as a pre-requisite to getting the television exposure. As you can probably guess, that kind of activity might have the effect of intentionally stunting competition.

It also means that the people who run television boxing are in a position to make or break promoters. Period. They can decide who makes money in the professional boxing business, and can in turn decide who will NOT be able to compete. Obviously, professional boxing constitutes interstate commerce. But there's nothing the FCC does that directly addresses network practices in the boxing business.

Now, when the network executive is actually on the payroll of, or has as mutually beneficial financial relationship with a promoter, which goes beyond that of the vendor-customer dynamic, it undoubtedly magnifies the problem.

For an instructive example of this, we present the case of USA Network, whose "Tuesday Night Fights" series was one of the most popular on cable television. Brad Jacobs (no relation to Mike), now an advisor/valet for Roy Jones, was in charge of programming boxing events for the network, which meant he was the person who awarded the lucrative boxing dates to promoters. In September of 1992 Jacobs, who had recently lost his home as a result of Hurricane Andrew, became involved in a precarious situation where he was actually hired as a "consultant" by Arthur Pelullo's Banner Promotions. It should be made clear that Jacobs took this position with Banner while at the same time engaged in the business of acting on behalf of USA Network in its boxing series.

Jacobs received as much as $3000 per show from Pelullo for a series of six events which were shown on closed circuit television from the Riviera Hotel in Las Vegas, in a deal that ran through February of 1993. Jacobs performed no essential function on those shows - he did not make or approve main event matches; he did not secure the casino deal; he did not procure the TV production, or supervise that production. Indeed, sometimes he did not even appear at the shows. Prior to this arrangement with Jacobs, Pelullo's organization had never promoted a USA Network show before, nor had it done any business with Jacobs.

But after the series of six shows had run its course, Pelullo's fights began to appear conspicuously often on the USA Network package. Despite having only one fighter (welterweight fringe contender Donald Stokes) under contract at the outset, Pelullo went from having no dates at all on USA to garnering close to 25% of all the network's shows over the course of the next four years - all in the midst of a highly competitive atmosphere where dozens of promoters bid for USA dates.

Whatever additional business went on between the two men is just speculation. But promoters were indeed directed to place some of their main events and semi-final matches on Pelullo cards, lest risk not being aired at all. And Pelullo got paid for individual bouts placed on other shows which involved fighters he did not have under contract - namely heavyweight Jeremy Williams. Pelullo even went so far as to approach casinos with the idea of purchasing packages of dates for USA Network boxing events, this despite the fact that output deals with one promoter appeared to be contrary to USA's "Tuesday Night Fights" policy.

During this period, Jacobs worked on behalf of Pelullo in other ways as well. In the summer of 1993, Jacobs made attempts to sell site fee deals for some of Pelullo's boxing events to casinos in Mississippi, and indeed, in the discovery materials of a lawsuit to which Jacobs was a co-defendant, filed by promoter Jimmie Wheeler in 1994 (materials I was privy to, since I was also part of the lawsuit), a letter surfaced in which Pelullo and his company had designated Jacobs as its "agent" to seek boxing opportunities for Banner Promotions on the Mississippi Gulf Coast (I had also seen the letter previous to the suit). Ultimately, Jacobs was able to steer Pelullo into a number of shows at Casino Magic in Bay St. Louis, Miss., most of which were sold to Jacobs by Pelullo for USA broadcast.

Jacobs also engaged in similar relationships with other promoters, including Mat Tinley (most recently of America Presents), who at the time was head of Prime International Television, thus filling the "Brad Jacobs" role for Prime Network, but who also promoted shows in which boxers under his management competed. Tinley had put Jacobs on the payroll as a "consultant" for Prime Network, after which time Jacobs not only awarded a number of USA Network dates to Tinley and his "beard", brother-in-law Joe Kutilek, but also granted all foreign sales rights for USA's "Tuesday Night Fights" series to Tinley's Prime International, reportedly for less money than another company, Miami's Spin Television, was already bringing to the table. After Jacobs became Tinley's consultant, and in a revelation that frankly had me taken aback, Pelullo confided to me that he, along with Kutilek, had control of all the Prime Network boxing dates.

Jacobs made no secret of the fact that he was the person promoters had to "pitch" to get USA Network dates. And despite his subsequent claims to being an "independent contractor", he signed his business correspondence (all on USA
Network stationery) as "Director of Boxing Programming". At the time he was originally approached by reporters regarding an FBI investigation into his activities, Jacobs retained legal counsel in the person of Norman Kaplan, a Los Angeles attorney also engaged in the management of fighters, among them Alex Garcia, a heavyweight who had made numerous appearances on USA (in the opinion of most experts, TOO many), some of which were on shows promoted by Pelullo.

According to a Boston Globe

report by Ron Borges, Jacobs retained Kaplan to "try and get to the bottom of this and find out who has made these kind of false accusations. The whole thing is unthinkable and outrageous. My attorney (Kaplan) is trying to find out where it's all coming from." The ironic thing about this is that while Kaplan was supposedly investigating the accusations of conflict of interest against Jacobs, Lonnie Bradley, the former WBO middleweight champion, FOR WHOM KAPLAN PROVIDED
LEGAL REPRESENTATION, was in the midst of making a number of main event appearances on USA Network, making Kaplan's representation of Jacobs, IN AND OF ITSELF, a conflict of interest for Jacobs! No information is available as to whether Jacobs actually ever paid Kaplan for his services.

One must remember at this point that in terms of the general "boxing economy", so to speak, the industry is very much a "zero sum gain" business. When one promoter is given a TV date, that means another promoter does NOT get one. And therefore, when one promoter GAINS, others LOSE. Under these parameters, it is easy to understand the scope of influence the television executive can wield, and how dangerous it can be when such power is abused.

Given these circumstances, the lesson to be learned here is that Jacobs, who was in a position to make some promoters successful and, just as importantly, prevent others from being successful, had also positioned himself where he was actually benefitting financially, in more than one way, from some of the "vendors" who commonly petitioned him for television dates - a clear conflict of interest, which gave the people like Pelullo, Tinley, et al, an unnatural advantage over their competitors.

Inasmuch as USA Network and Prime Network were the only real English-language outlets for a promoter to go to at the time, it created an atmosphere that was almost monopolistic, as least where it was relative to mid-level promoters, who depended so much on cable dollars to keep their operations viable.

When an actual or POTENTIAL monopolist engages in activities which are themselves illegal or which are otherwise inherently destructive of competition, it may constitute a violation of Section Two of the Sherman Anti-Trust Act. Even if there is no specific intent to monopolize, an entity which engages in business practices which have the effect of excluding or limiting competition, or which are even indirectly engaged in practices in which an entity is accorded an unnatural advantage which is not simply the result of some superior product or skill, can be subject to Section Two as well.

It would certainly be difficult to maintain, with a straight face, that all qualified boxing promoters were given the opportunity to compete on a level playing field, or anything close to it, given the aforementioned state of affairs.

Jacobs' relationship with Pelullo became the subject of a federal grand jury investigation into corruption in boxing; a probe which was conducted out of the Newark, N.J. offices of U.S. Attorney Joe Sierra. The investigation itself was somewhat short-lived, because it wasn't long before Sierra's office shifted its focus to a more glamorous case - that which targeted Bob Lee and the International Boxing Federation. In retrospect, I don't think there's any question they dropped the ball in the USA Network matter - something which may have borne more fruit.

Why do I bring this up? Because what I sense has been happening at ESPN over the last few years gives me the eerie feeling I'm looking at USA Network all over again.

And then some.

We referred to some of it in the previous chapter - promotional organizations created out of thin air. Promoters seeing proposals for fights turned down, only to see those fights wind up on another promoter's TV date. Fighters being "steered" to promoters who are getting multiple dates. Shows that seem to be "taken", far in advance, even though no one seems to know which concrete matchups are filling those shows. "Strategic partnerships" with promoters who are allowed competitive advantages over others. An executive/consultant (Russell Peltz) who was allowed to run rampant, free to make side deals under the guise of being an "independent promoter", stealing fighters, and permitted to, at will, leverage his involvement with the network for his own personal gain.

And then there's this strange manipulation of a "moral soapbox", with the network taking a scathing position on sanctioning bodies that seems to fit with its curious endorsement of a ratings source (Ring Magazine) that outwardly accepts money from the boxing establishment, while at the same time serving as an "enabler" for the very hypocrisy they seem to castigate, by subsidizing the existence of completely illegitimate "sanctioning bodies" like the IBU and IBA.

Add to that the utilization of Teddy Atlas as a "standard-bearer" (well, you'll hear enough about him a few chapters down the line), and it's all pretty unsavory.

No state boxing commission realistically has authority over any of the activities Jacobs, Peltz, or ESPN engaged in, or may have engaged in. However, were boxing to be regulated on a national level, with an agency created to oversee the sport, or if existing law could be amended so as to provide for some level of television oversight, the questions about this kind of conduct could be dealt with.

Since television is an implied "public trust" of sorts, many activities of broadcasters can fall under the authority of the Federal Communications Commission (FCC). Because of the presence of pay-per-view television, the activities that go on between network and promoter, and the frequent travel of fighters from state to state, boxing also falls into the category of interstate commerce, and thus territorial or anti-competitive arrangements should be subject to anti-trust law. So should the activities of anybody, whether they be in the television end, or the boxing end, when it comes to the conflicts of interests the sport is so rife with.

Because many of the problems plaguing boxing fall not into the area of state or local jurisdiction, but federal jurisdiction, not only can a very convincing argument be made for some form of federal regulation, from a logistical perspective it's almost mandatory.

Unfortunately, I don't see it on horizon. Why? Simple. There's a man named McCain stands squarely in the way.

Stay tuned for that chapter. It's coming soon.

fightpage@totalaction.com

Copyright 2003 Total Action Inc.

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