Industry Spotlight: Round 5 MMA

November 12, 2008

MMA is much more than a sport – it’s a lifestyle.

The MMA we know and love exists well beyond the action that we see in a cage or ring. The term MMA has also become synonymous with a type of clothing, a genre of music, an attitude, and a specific way that people choose to live their lives.

So, when people talk about the rapid ascension and growth that MMA has experienced they mean well-more than the sport. Thus, the purpose of MMApayout.com’s Industry Spotlight is to shine some light on MMA companies experiencing success and reward them for some of the unique things they’re doing to help grow MMA.

Today, I’ll be taking a look at Round 5 MMA – an organization experiencing a little rapid growth and prosperity of its own. Fortunately, I was able to sit down with the co-founder of Round 5, Damon Lau, and former UFC Lightweight Champion, Sean Sherk, to discuss the company.

The Organization

Round 5 MMA, based in Toronto, Ontario, is the company responsible for the design and manufacture of the first-ever line of collectible MMA action figures that you can currently find in stores like Toys ‘R’ Us, K.B. Toys, FYE, and Champs, among others.

Despite, at the time, having only operated for a year, Round 5 was quick to break into the mainstream market in April 2008 with their Series 1 collectible line that included Randy Couture, Tito Ortiz, Matt Hughes, and Quinton Jackson figurines.

Now, seven months later, the company is set to release its Series 2 collectible line featuring Sean Sherk, Anderson Silva, Rich Franklin, and Wanderlei Silva.

“Our distribution has been going fantastic – we’re looking to double our distribution by next year” said Lau. “Progress has been going so great that…I’ve already scheduled for a series 3, 4, 5, and 6 to be released quarterly next year.”

Although Lau is hesitant to commit to any product line expansions – including any foray into the extremely popular and ultra-competitive MMA clothing market.

“We’ve really carved a separate niche for ourselves” claimed Lau. “We’ve been one of the few companies that have had the opportunity to really hit mainstream distribution…and we’re really going to be focusing on the collectible elements and more fan-type of material.”

A Unique Relationship

Aside from the fact that Round 5 is a thriving MMA business – reaping the rewards of hard work and sound management – I was also interested in the company’s rather unique relationship with its fighters.

“We create licensing programs directly with the fighters” Lau said, and “the licensing programs they receive usually pay royalties 4-5 times the average standard within toy licensing.”

It’s important to note the precedence that is being set by Round 5 in paying out 4-5 times the average standard for toy licensing within the entire toy industry. Additionally, fighters are also given complete creative control over their figurine right down to their sponsors on their shorts (providing them with even greater income opportunities).

“A lot of fighters can make as much money fighting in the ring as they do with sponsors on their shorts.” Lau noted. “We sort of translated that same program where our fighters have the right to work with their sponsors to solicit any funds in regards to seeing a larger marketing [opportunity] by being able to present the logos on the shorts of the figurines.”

Fighter’s Trying to Diversify

It’s no secret that fighter pay is an issue within the industry right now. Yet, no matter where you stand, it’s tough to argue the importance of what Round 5 offers fighters like Sean Sherk.

“It’s good to diversify yourself in a lot of different areas and not just in the fighting industry” Sherk said. “I’m pretty much a partner with Round 5 and I mean that because I’ve worked extensively with them on the production of the action figure and in the percentages I get.”

“They [Round 5] want this thing to be beneficial for everybody, not just themselves” he noted. “It is my face and name that’s going to sell the action figure; [Round 5] realize that and give us a higher percentage because of it.”

Obviously, income diversification is a goal for Sherk – as it should be for any fighter in the business – which is why it should come as no surprise that his partnership with Round 5 is not the only venture that he’s involved with away from the Octagon. He’s got a tennis shoe on the way in addition to a “couple of other things on the table.”

Conclusion

The business model that Round 5 has created is very conducive to the growth of MMA and support of its fighters. It also underscores a key point in the future development of the MMA industry: diversification is tremendously important.

Consider that nearly 75% of the UFC’s revenues are event-driven; or, that nearly all of the income a fighter generates can be related to fighting at an event.

The fact of the matter is the foundation of MMA – its fighters and their promotions – are significantly exposed to a downturn in event-related revenues.

With an impending recession on the horizon, there’s no time like the present to begin hedging.

I invite you to click on the links and listen to the full interviews with Damon Lau and Sean Sherk.

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