Loma-Rigo 2nd highest rated boxing telecast on cable this year

December 10, 2017

Last night’s Vasiliy Lomachenko-Guillermo Rigondeaux fight was the second highest-rated boxing telecast on cable in 2017 according to Nielsen overnight ratings via ESPN.  The fight which was won by Lomachenko, was second only to the Manny Pacquiao-Jeff Horn fight this past July.

Although no viewership ratings are yet available, Nielsen indicates that it drew a 1.3 metered market rating.  Pacquiao-Horn drew 2.4 rating.  Third and fourth on the list of highest-rated shows were the two undercards on Saturday night.  Shakur Stevenson vs. Oscar Mendoza and Michael Conlan-Luis Molina drew 1.1 metered market ratings on ESPN.

Payout Perspective:

The Heisman Trophy Presentation which preceded the big night of boxing likely helped the event.  The lead-in is one of the reasons why Top Rank decided to move to ESPN.  Lomachenko-Rigondeaux was a marquee matchup from the time it was announced and it received major hype from boxing community and many casuals were interested.  Without knowing the UFC or Bellator numbers, its clear this event was the main viewership for combat sporting events on Saturday night.

Court allows discovery to continue in part in Mark Hunt lawsuit

December 6, 2017

The Court in the Mark Hunt lawsuit has ordered that discover to continue with respect to all claims except for his RICO claims in his First Amended Complaint until the determination of the Motion to Dismiss filed by Zuffa/Dana White and Brock Lesnar.

The 3-page ruling indicated that discovery (requests for documents and answering of questions) related to Hunt’s RICO claims against the UFC and White.  However, the other claims including breach of contract and battery (for Brock Lesnar) may proceed forward.

Order on Motion to Stay Discovery in part in Hunt case by JASONCRUZ206 on Scribd

The Court notes the changes made from the original Complaint from the First Amended Complaint including changes in the breach of contract claim and the battery claim.  According to the case law cited by the Court, it may stay discovery from a “preliminary peek,” initially a cursory scan of the Motion to Dismiss to determine whether it might win on the merits and dismiss the need for discovery.

The Court was not convinced from its “preliminary peek” at the motion to dismiss that it will certainly be granted for all claims.

Payout Perspective:

If you think the peek is awkward because it provides foresight into a potential outcome of the actual motion, you are not alone.  However, this is the legal authority that is followed.  A minor win for Hunt as this might precipitate a settlement between the parties so that the UFC will not have to spend money on discovery.  Yet, the Court may decide the Motion to Dismiss at any point.  One might suspect that since the Order was issued for the stay in December for a motion to stay that took place in July, it may take more time for the Court to decide the Motion to Dismiss.

EVOLVE files Motion to Dismiss FloSports lawsuit

November 28, 2017

WWN, Inc., the owner of the EVOLVE wrestling promotion, has filed a motion to dismiss for lack of personal jurisdiction and/or motion to dismiss for failure to state a claim against Flosports, Inc.  The lawsuit, which originally filed in state court in Texas, was sent to federal court in the state earlier this month.  FloSports claims that WWN misrepresented its live streaming data to entice the company to invest in its live stream and internet PPVs.

FloSports has a niche in the online industry by streaming a broad spectrum of smaller sporting events to a direct-to-consumer subscriber base.  The business model has grown significantly since its inception and even drew an investment from the WWE.  The company offers streaming of professional wrestling events of which it had a deal with EVOLVE

The crux of the Complaint filed on September 15, 2017 [now Amended Complaint filed on 11/27/17] is that FloSports claims it was induced into a 5-year Exclusive Media Agreement due to a misrepresentation of the number of wrestling fans purchasing viewership access to WWN’s events.  Prior to FloSports, it appears that EVOLVE ran its own iPPVs and Video-on-Demand.  FloSports claims it invested “hundreds of thousands of dollars” in reliance on this information.  But, the numbers were false.  WWN claims that the numbers were based on previous ownership.

Motion to Dismiss for Lack of Jx by JASONCRUZ206 on Scribd

The parties disagreed on which entity contacted the other first.  WWN claims FloSports contacted it about potentially streaming on its web site while WWN claims in its Motion to Dismiss that it was FloSports that attempted to recruit the Florida-based company.

FloSports’ original complaint had scant facts about the background behind the filing of the complaint and causes of action.  WWN removed the case to federal court in Texas and then filed a Motion to Dismiss on the grounds that there is a lack of jurisdiction and for a failure to state a claim upon which relief can be given.  The Amended Complaint provides a deeper factual picture including a timeline of events.  This was filed with its response to the Motion to Dismiss which may address perceived holes in the plaintiffs’ original lawsuit.

Amended Complaint FloSports by JASONCRUZ206 on Scribd

In it’s Motion to Dismiss, WWN argues that even if the court finds jurisdiction over the Florida company, it must dismiss FloSports’ cause of action for negligent misrepresentation since it is essentially a tort claim.  Under what is known as the “Economic Loss” rule, a party suffering only economic harm may recover damages for that based upon a contract theory and not on a theory for negligence or strict liability.  In its Amended Complaint, FloSports does away with the negligent misrepresentation claim and inserts a claim for fraudulent inducement and fraud.  Similar to its original cause of action for negligent misrepresentation, FloSports claims that it was given false data by WWN to invest in the EVOLVE franchise.

The 5-year Exclusive Media Agreement is included in the FloSports opposition brief and is embedded below.

Exclusive Media Event Agreement by JASONCRUZ206 on Scribd

The Agreement allows an out for FloSports starting in January 2018.  However, they must give a 12 month notice which appears to mean that they would have to pay the rights fee for the year.  According to the Agreement, FloSports paid $75,000 in 2016; $500,000 in 2017; $550,000 in 2018; $605,000 in 2019; $670,000; $740,000 in 2021.  There are also incentives in the contract if EVOLVE exceeded certain benchmarks.  Obviously, the glaring step-up is from 2016 to 2017 where the rights fee shoots up from $75,000 to $500,000.

Payout Perspective:

The legal part of the matter involves a basic civil procedure question one might find itself answering on a first-year law school exam.  Does FloSports have the right to sue WWN in Texas when the Florida-based company claims it has no ties to Texas and has only minimal contacts with the state?  If not, then the court would dismiss the action in Texas although FloSports would be able to refile in Florida.  This first question would determine whether it is necessary to answer the second question which is whether FloSports’ claim for negligent misrepresentation is viable.  According to WWN, it cannot stand since it argues that the “economic loss” rule prevails here which precludes a party from repackaging a breach of contract claim into a tort claim.  This is a moot point if we are to accept the Amended Complaint.  Still, I would assume that WWN argues that the Fraud claim not stand as it is the same/similar to the original claim.  From an anecdotal standpoint, fraud claims are hard to prove and while the Court may allow it past the initial pleading stage, the real issue here is the breach of contract.

The story here is that FloSports is not receiving its anticipated return on investment from the EVOLVE shows and believes that they were duped into believing that this was a popular promotion that had followers that purchased its iPPVs.  Notably, EVOLVE does not address the veracity of the data it provided FloSports but the focus is on the jurisdictional issue because if the Court has no jurisdiction it cannot rule on the underlying facts.  EVOLVE may have a explanation for the data but I assume it is strategically withholding that until a ruling on the procedural issue.

Report: Fox offer in $200M range for UFC media rights

November 27, 2017

John Ourand of the Sports Business Journal reports that Fox has made an initial offer to the UFC in the $200 million range.  This is far less than the predicted $450 million forecasted by the previous UFC regime.

The offer was also confirmed by Darren Rovell.

In its pitch to potential buyers, the UFC stated that its media rights revenue would be $450 million with its next deal.

The current deal ends next year.  It yields an average of $115 million per year over the course of the 7-year pact.  Per the Sports Business Journal, it is seeking a 10-year deal which would place its ask at $4.5 billion overall.

The UFC and Fox had an exclusive negotiating period of 3 months prior to the promotion going on the open market to solicit other buyers.  Although the two could not come to an agreement within that window, it seemed almost expected as the new owners of the UFC would like to see what market it might have for it.

WME-IMG paid $4 billion for the UFC promotion in July 2016.

Payout Perspective:

The $200 million is a modest boost from its $115 million rights fee.  It’s not clear whether this includes any digital rights and/or any changes in its broadcast terms.  One might expect this to be an opening and see what WME-IMG might be able to do about getting other bidders for its rights.  The $450 million figure seems like an aspiration and we are not sure if the new owners believed this to be a reality.  WME-IMG are savvy negotiators and even though the initial bid is low, one might expect once other entities get in on the bidding, the price to increase.

Retro Payout: The UFC goes to China

November 23, 2017

As the UFC makes its debut this weekend in mainland China, MMA Payout goes in the wayback machine to a post the site did a little over 7 years about the hurdles of entering the Chinese market.

The post was written by Kelsey Philpott and was part of his travels while a graduate student at the University of Oregon.

The full article is below with a current Payout Perspective:

I recently traveled to China with my fellow MBA students at the Warsaw Sports Marketing Center in order to consult with several sports leagues and firms doing business in the country. Not only was the trip very successful for the Warsaw Center, but I’ve personally returned home with a better understanding of the Chinese consumer and the key challenges facing the UFC as it looks towards expansion.

Traits of the Chinese Consumer

  • Exceptionally nationalistic
  • Historically very conservative, especially where violence in concerned
  • The average salary in urban areas is 4,000 RMB/month (~$600)
  • A great majority of their entertainment is consumed through free, state-owned television programming
  • Increasingly influenced by consumer trends in Japan and the US
  • Possess global aspirations in all walks of life; money, cars, clothes, etc.

While in China, I very much got the sense that the country is in the midst of a culture shift; much in the same way that the country has experienced somewhat of a paradigm shift regarding its political and economic ideologies. The rapid development of China’s economy and underlying infrastructure (in most areas) has generated tremendous wealth, but it’s also provided the Chinese with a sort of global aspiration: they want – and can now afford – what everyone else has (i.e., fast cars, fancy clothes, and good entertainment).

The traditional Chinese values pertaining to face, family, and country are still very much in place. However, the added element now is a young Gen Y group with the confidence, ambition, and wherewithal to adapt those core values to the Western world.

Key Challenges

1. Chinese conservatism

Despite China’s storied martial arts history and emerging cultural thaw, MMA will not be an easy sell in the country. The Chinese are still by and large a conservative and risk-averse group of consumers led by an extremely protective and controlling government. MMA is a very aggressive and violent sport that’s easily misunderstood.

The biggest challenge for the UFC in China will be obtaining buy-in at the governmental level. If it cannot cultivate key relationships within the government it can forget about television coverage, live event permits, and any sort of merchandising initiative. The Chinese still follow the cultural lead of the government in many ways, and if the government decides to throw its weight behind something, not only does that something get done, but people tend to take notice pretty quickly.

2. Revenue generation

The next biggest challenge relates to the UFC’s business model. Nearly 75% of the UFC’s revenue is event-related, but China is neither a PPV market or a significant spectator market.

The Chinese consume a great deal of their sports through free, state-owned television programming and are reluctant to pay for what they’ve always had for free – even despite the increase in the number of set-top boxes in the country. Various different sports properties have tried PPV or subscription models in the last couple years, but each have failed (including a group that bought the rights to the EPL for three years at some $70m and fell into bankruptcy two years into the deal).

The fact that it’s far more easy and cost-effective for the Chinese to stay at home and watch an event for free makes them less inclined to watch live, especially in the densely crowded and difficult to navigate urban areas. The high rate of television consumption contributes to the lackluster live-game experience at most sporting events, which in turn provides even less incentive for fans to attend. It’s a self-perpetuating cycle.

Nearly every sporting event taken to China has struggled at the gate – the Olympics, F-1, ATP, European TOUR, etc. In many cases the government often resorts to hiring groups of people or assigning army units to attend events as paid spectators just to beef up the look of the event for global television audiences. It’s a very difficult ticket sales market.

Perhaps the best way to be successful is to play on Chinese aspirations for the consumption of world class goods and services. If the UFC brings its best and brightest to China and sells it as such, it may gain an audience on the merit of simply providing its best offering to the country. It would be seen as a sign of respect to which reciprocation is almost guaranteed as a matter of courtesy and obligation.

3. Patience

In the late 1980s, the Commissioner of the NBA, David Stern, crossed the Pacific and sat in the lobby of the CCTV HQ with a box of tapes on his lap looking to accomplish one thing: get his product on television. More than 20 years later, basketball and the NBA have finally started to take hold.

There are many reasons for the NBA’s success in China – it wasn’t just Yao Ming – but perhaps the most important is the combination of effort and money over the period of the last 20+ years. If you look at the current foreign sports landscape in China, the most successful organizations are all those that have spent a good chunk of time in the country. I do not think this is coincidence.

This third challenge is one borne of patience. Is the UFC willing to make the necessary investments — concessions on rights fees to get on TV, localized manpower to cultivate government relationships, and enduring rather high opportunity costs to put on live events — in a market that isn’t likely to provide a solid return for at least another five years?

4. Others

The above three considerations are probably the biggest challenges facing the UFC in China, but it will also have to contend with a variety of other issues to establish itself in the country:

  • Navigating the sometimes very different distribution infrastructure within the country
  • Protecting its intellectual property
  • Implementing or supporting a national development program

Payout Perspective in 2017:

There are obvious changes to the cultural and media landscape in 2017 than in 2010.   This article seems to believe that MMA has a future in China due to a deep talent pool.  The UFC now has a television deal and a digital platform, UFC Fight Pass.  This weekend’s event from Shanghai will be on UFC Fight Pass.  The fact that this event will cater to the local market, the event will air live starting in the middle of the night in the U.S.  But, for Fight Pass subscribers, this will be no issue since they can watch it whenever they please.  The globalization of MMA has expanded the popularity of the sport and with ONE FC operating in Asia, the Chinese market for combat sports seems attainable for the UFC.  With a population of 1.4 billion and a financially stable middle class, there’s a reason why the UFC would like to penetrate this market.

Report outlines Top Rank’s path to its ESPN deal

November 22, 2017

Last week’s Sports Business Journal reported on ESPN’s return to boxing.  The article focused on Top Rank’s deal with ESPN this past July and how it transitioned from premium cable to basic cable.

There was interest from Top Rank into obtaining a rights fee deal the likes of the UFC and Fox.  A key point was shoulder programming which would help with promoting the fights.  Top Rank Boxing president Todd DuBoef analyzed the promotion’s ratings on HBO and saw that they were comparable to the shows the UFC put on FS1 and thought there might be interest for shopping his rights with the knowledge that the UFC was doing the same.  DuBoef sought help from CAA about the possibility.

According to the SBJ article, there were three reasons for ESPN’s dive back into boxing:

One is the opportunity to capture all of the promoter’s fighters and fights, without the concern that the stars they develop will then move to premium cable. Another is the soon-to-be launched OTT service, which will rely on deeply engaged fans who will pay for content like Top Rank’s fight library, and also brings the distribution of pay-per-view into play. The third is the data narrative that DuBoef and CAA brought to the initial conversation.

The article notes that Al Haymon’s PBC was an archetype for Top Rank to gage the level of interest boxing may have with a broader audience.  The interesting take is that despite the sport skewing to the older demographic, it grabbed a slice of the 18-49 demo.  PBC’s business model to buy time on the air with the hope to “flip” the model has not worked.  The article notes that deposition testimony from the litigation involving PBC professes that the flipping of the script for PBC to turn the model for networks to pay for PBC rights was to have occurred in 2018.

Ratings reflect that young male demo is watching boxing.  The first Top Rank fight featuring Manny Pacquiao taking on Jeff Horn drew well in the 18-34 demo as 836,000 of them tuned in when Pacquiao stepped in against his Aussie challenger in July.  The next month, a fight featuring Vasyl Lomachenko beat out a UFC Fight Night in the demo 137,000 to 109,000 and 317,000 to 271,000 for males 18-49.  Although the UFC show on FS1 fared better overall, the ratings saw the younger male demo scoring better.  In September a Top Rank card headlining Oscar Valdez drew better than a UFC Fight Night on FXX.  Boxing beat the UFC 706,000 to 502,000 viewers.

Payout Perspective:

It’s an interesting article because of the perceived newfound partnership between each party and its duties with the main goal of attracting a broader audience which includes a younger demographic.  There is an inference that television boxing consumption skews to the older demographic which may be true.  However, there is a sense that the premium channels on which boxing aired, as well as the lack of advertisements on those networks were key factors as to the older demo.  The ESPN deal helps both boxing and the network.  ESPN gets live content while boxing has the chance to be viewed by a broader audience and will be aided by programming that will help its own events on the network.  So far, ratings seem to show that it is successful.  We shall see how it does in the long run.  As of now, it seems that Top Rank has learned from PBC’s falters in what works on the network and what does not.

Early estimates of UFC 217 PPV are at 875,000

November 17, 2017

Dave Meltzer of MMA Fighting is reporting that early estimates of the UFC 217 drew 875,000 PPV buys in North America making it the biggest PPV show for 2017 thus far.

UFC 217 featured Georges St Pierre’s return against middleweight champion Michael Bisping in addition to two other championship fights.

Google trends reflected strong interest in the PPV.  There were over 1 million google searches on the Saturday of the PPV for UFC 217.  The UFC Prelims drew 1.276 million viewers despite starting on FS2.

Payout Perspective:

Very good result but if you are gaging success by the 1 million PPV buy threshold, it may disappoint.  There were 3 title fights and the return of GSP.  There was more interest in Canada for this PPV but it wasn’t enough to hit 1 million in North America.  The good news that it’s likely the PPV buys worldwide exceed 1 million and shows that GSP is still a draw.

Jon Fitch’s Statement before Congressional Subcommittee supports Ali Act Expansion

November 14, 2017

Former UFC Fighter Jon Fitch submitted a Statement at the Congressional Subcommittee Hearing on MMA as well as an op-ed piece in the Washington Examiner on the day of the hearing.  Each supports the proposed legislation expanding the Ali Act.

The Statement submitted and filed for the Congressional Subcommittee Hearing last week was on MMAFA letterhead.

Fitch’s primary argument is that he was passed over for fights despite being the ranked number 1 contender in the UFC.  He stated that he was criticized for “employing a tactical style” emphasizing his wrestling background rather than fighting in a more “exciting” fashion.

He cites being presented with a merchandising agreement by the promotion which required he give the UFC image rights “in perpetuity and for no compensation” for a video game.  He was released by the UFC for a time due to his refusal to sign the agreement.

Unlike Marc Ratner’s description of the MMA business model, Fitch describes it as a “structurally flawed model inconsistent with sport and designed to achieve a monopoly over an entire sport.”  Fitch gave the anecdote of winning the World Series of Fighting title and then being stripped of the title when “new investors” took over WSOF and it was changed into the Professional Fighters’ League.  He “regained” the title at PFL’s first official event in July.

Fitch goes on to advocate for the amendment to the Ali Act arguing that “sport’s natural growth is stunted” due to the coercive “contractual practices” in the sport.  He cites the lack of disclosure of fight purses by promoters which is required under the Ali Act.  He notes the Chris Algieri situation as a prime example.  We wrote about this in April 2016 and presented the problem with the Ali Act for boxers.

He also stressed that the Ali Act “requires rankings to be based on merit, not contractual subservience.”  Here, Fitch emphasizes the need for objective rankings giving the analogy with Major League Baseball changing the World Series simply based on popularity of team.

In conclusion to his statement, Fitch reiterated the stunting of growth in MMA due to anti-competitive restraints and that when the restraints are removed, “deep-pocketed investors will be made in MMA.”  He believes that the elimination of artificial restraints will cause organic growth benefiting all by increasing revenues for all in the sport.

Similarly, Fitch’s Washington Examiner op-ed was briefer than his Statement to Congress but touched on the same points including the rankings system and the fact that the titles do not matter.  The opinion piece called for sanctioning bodies that would provide the fighter with consistency and ensure that the top contender would have a shot at the title.

Jon Fitch Statement by JASONCRUZ206 on Scribd

Payout Perspective:

Fitch provides the fighters’ perspective of the MMA industry and it is vastly different from that of Ratner’s viewpoint of MMA.  Ratner believes that MMA is devoid of the corruption that plagued boxing which led to the Ali Act.  Fitch sees it differently.  He provides a first-hand account of the issues he knows of in MMA including the issue with the UFC related to the forfeiting of his image rights for the EA video game and giving up his WSOF title when new owners took over.  Certainly, you can point to the fact that neither addresses that he is a plaintiff in an antitrust lawsuit against the UFC which may sway the reader’s view when objectively looking at the opinion.

Ratner’s Statement before Congressional Subcommittee outlines Opposition to Ali Act Expansion

November 13, 2017

The UFC’s Marc Ratner submitted a Statement to the Congressional Subcommittee Hearing on MMA.  The statement opposes the expansion of the Ali Act to combat sports citing issues such as state’s rights and

Ratner, the company’s Senior Vice President of Government and Regulatory Affairs, highlighted his long-time work with boxing and assisting in the passage of the original Ali Act.  He testified about 20 years ago in which he expressed concerns about “conflicts, cronyism, and corruption” in boxing.  He stated that the problems he saw in boxing are “absolutely not present in MMA.”

He highlighted the UFC’s “rags to riches” story of a business that worked its way up from the bottom and did most of the lobbying from state to state by itself, without help from any other MMA organization or promotion.

Ratner emphasized that state regulation works and federal oversight were be an overreach by government.

In addition, he addressed the many mixed martial artists, including female fighters, that have worked themselves into positions where “[d]ozens upon dozens” are millionaires because of the opportunities provided by the UFC.  He also expressed the fact that only a “very small minority of fighters” are supporting this legislation.

Ratner also argued that the reason for the Ali Act was to address corruption in “so-called sanctioning organizations.”  He described these as “privately run businesses that rank fighters for a fee.”  Unlike these boxing sham organizations that either pushed or held back boxers, MMA does not rely on sanctioning organizations.  He cited the UFC rankings which are voted on by sports reporters.  He added, “[w]e put on the fights that fans want to see and they want to see competitive fights.”

He concluded that the proposed legislation would impose boxing’s sanctioning organization model onto MMA.  He claimed that MMA is predictable and transparent in its current state.  He also warned that the growing number of sanctioning organizations in boxing has created a lack of uniformity in the sports and its rankings.

Marc Ratner Statement by JASONCRUZ206 on Scribd

Payout Perspective:

Ratner’s argument against the proposed legislation is plausible based on his viewpoint of the reasons behind the enactment of the original Ali Act.  At this point, the proposed legislation mirrors the Ali Act without any specific differences between the original and the proposed expansion of the law.  The argument that there is nothing wrong with MMA is a bright line view and in comparison to boxing at the time that lawmakers sought to enact the Ali Act might be true.  But, it’s hard to say that just a minority of MMA fighters support the act.  Of course, there are some that do not want to publicly support the Ali Act expansion for concern of repercussions.

Ratner also suggests that the UFC rankings are independent because sports reporters provide the rankings.  Who is it that picks these sports reporters?

His point that numerous sanctioning bodies in boxing creates uncertainty in the rankings is a viable argument.  But does that mean that the expansion of the Ali Act would mean multiple fighter rankings?

The old argument of state’s rights versus federal rights is argued by Ratner as he suggests that state athletic commissions are able to oversee MMA rather than having a federal authority.  It is true that the current system is working, but take the Conor McGregor incident at Bellator 187 as an example.  Who has the authority to oversee McGregor’s actions.  The Association of Boxing Commissions?  Bellator?  The UFC?  The regulatory body overseeing the Bellator event in Dublin?  While state athletic commissions and tribal regulators can enforce actions in its jurisdictions what happens with interstate issues like that of McGregor.

While Ratner provides some arguments against the Ali Act expansion, there are indeed issues in MMA that a federal law can address.  The question is whether this proposed version can do it.

Show Money Episode 20 takes a look at the Congressional Hearing on MMA and more

November 12, 2017

Its another episode with Paul Gift and John Nash discussing this past week on the Subcommittee Congressional Hearing on MMA.

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