Haymon will own boxing… and it’s a good thing
Special to UCNLive.com from John Chavez
It’s about time.
It has been quite a while since a power player in boxing makes a real power play. There hasn’t been any industry changing strategy of this magnitude since HBO decided to start showcasing top-level pugilism in the 1980s.
Since then, boxing has seen dwindling fluctuations in its popularity, accessibility and earning power.
The major difference between Al Haymon and the rest of today’s boxing promoters has more to do with perspective than anything. Promoters generally think, “Product, product, product.” In terms of product, we are referring to the fighters themselves. The traditional lifeblood of a boxing promoter is their matchmaking, also known as “product development capabilities. This would equate to spotting talented fighters and maneuvering them into shiny, winning records, eventually leading to a title shot, hopefully on premium cable. This is how a promoter makes his money back from the long, treacherous road of “product development.”
That is the mindset of a promoter: “If I have the product, the networks will pay.”
Haymon, on the other hand, has gone above this mindset of operation.
He has obviously done his homework in regard to the financial mechanics behind the driving force of network licensing fees. Boxing has long been controlled in the U.S. by premium networks HBO and Showtime, which, in essence, has alienated the sport from the booming windfall that has been experienced by other major sports on the OTA (“over the air”) and regular cable channels. At one point in time (the late-1990s), HBO surpassed an annual budget of $90 million dedicated solely to boxing. The current number in 2015 hovers around the $30 million mark, which obviously points to deflationary economics in play. The reason for this contraction of budget is due to the lucrative nature of premium, original series such as “The Sopranos” and “Sex in the City” as well as the inability to contain the major boxing stars within the total budget rather than “losing them” to pay-per-view. This transition of HBO’s focus has been well in play for the past 15 years and is only progressing further at this point.
There is no underlying reason for HBO or Showtime to significantly increase their boxing budgets other than increasing competition with each other. There simply is no upward pricing pressure from any outside source. The ratings for both channels generally do not provide enough viewership to warrant a quantifiable reason for increased investment in the sport.
The market has, in essence, become increasingly stagnant with no end in sight.
Enter Al Haymon in 2015.
The driving financial force behind OTA and regular cable television are three things: audience, advertisers and demographics.
If a television program provides a sizable audience with the desired demographics, premium advertisers will flock to pay to market their product to that audience.
If one were of a simple mindset, one could look at Haymon’s “time buy” play on NBC as a way to simply build an audience with the hopes of eventually attracting enough advertisers to provide a financial upside to the venture. However, it’s quite evident that Haymon tries to avoid uncertainty as much as possible. This is why he has brought CVC Capital Partners into the fold as they have proven their capabilities to maximize revenue for the most lucrative racing circuit in the world: Formula One. Their portfolio of global, blue-chip sponsors/advertisers is second to none.
Haymon isn’t just looking to build an audience on NBC, he is bringing the financial driving force as well: the brands/advertisers. This would make it a complete no-brainer for any network that had second thoughts about getting involved in boxing programming. A difficulty the non-premium networks has seen in the past in terms of boxing programming is selling advertising spots on short notice for a sport that has been marginalized at best. Advertising doesn’t work all that effectively in this format and is usually relegated for remnant inventory rather than premium.
Haymon is taking this particular issue out of the equation.
One of the greatest underpublicized assets for Haymon in this venture comes from an unrelated and unlikely source known as the UFC.
In 2011, the UFC announced a seven-year deal with FOX for a reported (average) $100 million license fee per year. This would include four regular FOX (OTA) dates per year and 18 dates on FOX Sports (then FX) 1 and 2, as well as the reality-based “The Ultimate Fighter” series.
The ratings for the “UFC on FOX’s” properties have been rather marginal…nothing significant on FOX and sub-million audiences on FS1 and FS2.
If Haymon can show that his events (11 on NBC, nine on NBC Sports Network) can garner comparable ratings to the UFC in addition to bringing premium advertisers to the network, one could theoretically make the case that his product warrants a similar $100 million annual license fee – or more – down the road.
This is what would change the entire boxing landscape especially in the US.
This is why Al Haymon is an another level of mindset compared to that of boxing promoters.
He’s thinking above the level of the “product” and is looking to actually grow the market in totality rather than simply playing in the current sandbox. Analyzing the past ratings on HBO, Showtime and recent NBC events, the data points to Haymon undoubtedly succeeding in this venture. The UFC numbers generated on FOX’s outlets can be matched and likely surpassed.
It will be great for American boxing as it has been heavily undervalued for quite some time.
It wouldn’t be surprising to see HBO or Showtime exit the boxing landscape when this transition occurs as they lack the financial model as it pertains to boxing to compete with regular cable channels and the driving force of Haymon. HBO or Showtime can theoretically double their annual budget to $60 million but without any quantifiable incentive to do so, it would be money better allocated to developing far more monetizable content such as an original series. Just for perspective: Blockbuster original series have the potential financial upside of not only driving premium cable subscriptions but also domestic first-run syndication, second-run syndication, international syndication, DVD sales, merchandising, digital rights, hotel, airlines and video-on-demand. Boxing programming generally drives strictly viewership/subscription rates by comparison.
It will be quite interesting to see what FOX will look to pay for UFC programming at the close of their deal. If it is a significant increase from their $100 million-per-year deal, Haymon will be looking to match or surpass that amount.
It also doesn’t hurt whatsoever that Haymon has an influential relationship with NBC’s Director of Programming Acquisitions, Lou Ferrer.
It sure will make Ferrer’s ability to coerce the power suits to shell out the dollars for boxing much easier when he will be handed the fighters, the audience and the advertisers all from the same source.
Remember that whole “avoiding uncertainty” thing?
There is still a glaring hole in the sport I see that needs adjustment but the top end of boxing will be propelled with Haymon driving the ship. The only way this venture fails is if the events fail to drive a significant viewership over the long haul, causing brands to lose interest. Compelling match-ups will help in this aspect but marketing will supersede it all. The demographics will be key in the long run while the overall ratings will be key in the short term.
The annual boxing budgets for HBO, Showtime, FOX Sports, ESPN, NBC Sports Network, UniMas, Telemundo and beIN Sports combined are less than $75 million. Haymon is looking to go big with this project and if he develops the king budget in the game, he will attract the kings of each division to join the stable.
It’s really that simple.
This is why Haymon can thank the UFC in 2017 to 2018 for setting such an attainable bar when he signs a multi-year deal with NBC for $125 to 150 million per year. It’s already in motion.
It’s about damn time.