Envelope Math: Affliction DOR Downside

January 28, 2009

The one good thing to come out of Larry Merchant’s bitter, dishonest attack on Affliction’s Day of Reckoning is that it forced Affliction and Golden Boy to bring some much needed clarity to their relationship and in turn provided the MMA industry with a glimpse at the true economics of the event.

Today in an interview with Sherdog.com’s Loretta Hunt, Golden Boy CEO Richard Schaefer clarified the genisus of Merchant’s claim that Oscar De La Hoya skipped Saturday night’s HBO Boxing event due to a $5 million payoff from Affliction:

“Larry had asked me at the weigh-ins why Oscar was not coming [to the boxing event], and I told him, ‘Look our partners at Affliction made an over $5 million commitment to the event and it wouldn’t be right if Oscar just dumped it.’ I think he took that and put the Merchant twist on it and it came out the way it came out.”

Assuming this is accurate, or at least in the ballpark, we can engage in a little bit of envelope math to put a potential downside on Day of Reckoning.

The event reportedly drew a gate of $1.5 million. According to the Wrestling Observer Newsletter the company’s first event Banned drew 90,000 buys on pay-per-view. Assuming that this event at least equals that total, with a 45% split and a $45 price tag it would generate an additional $1.8 million (minus whatever Showtime’s cut is). That would be $3.3 million in revenue not including any sponsorship or television licensing fees.

If the event cost roughly $5 million to put together as Schaefer indicated, that would put Affliction’s downside at around $1.7 million. Even assuming the event cost more than to put together, which I believe it likely did when including the marketing budget and undisclosed payroll expenses, we’re still probably talking about a maximum downside of somewhere around $3 million, a far cry from the $5-6 million losses many were/are claiming/predicting.

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