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.

UFC Signs Mobile Entertainment Deal

September 24, 2008

NEW YORK – September 23, 2008 – Thumbplay® ( www.thumbplay.com ), the #1 mobile entertainment content service in the U.S.*, and the Ultimate Fighting Championship® ( UFC® ), the world’s premiere mixed martial arts sports organization, today announced the launch of a wide array of mobile content through the Thumbplay service. Effective immediately, UFC fans can hear from their favorite UFC fighters, replay videos of the most intense matchups and view the stunning Octagon Girls™ through the convenience of Thumbplay’s online and mobile content retrieval service.

Thumbplay, available on more than 2,000 mobile devices across all major U.S. carriers, will now showcase some of the most exciting throw-downs in fight history and other riveting content, including:
• Fighters: Download videos and wall papers from various UFC fighters
• Octagon Girls: Arianny Celeste, Edith Labelle and Rachelle Leah heat up your background
• Events: Video Clips and stills from the biggest battles in UFC history
• Sound Effects: All the sounds of the Octagon in one convenient spot

“UFC has exploded on the sports scene and enjoys an enormous fan following that is as dedicated and passionate as the athletes themselves,” commented Are Traasdahl, Thumbplay’s CEO and founder. “Now, the fans will have an even deeper connection to their favorite athletes and all of the compelling content the UFC has assembled. And naturally, it is all delivered with the great service and easy access Thumbplay is known for.”

UFC, the world’s largest pay-per-view content provider with more than 12 events per year, is a mixed martial arts competition between highly skilled professional fighters who use such disciplines as jiu-jitsu, judo, karate, boxing, kickboxing and wrestling. UFC fighters are among the best-trained and conditioned athletes in the world hailing from such diverse countries as the U.S., Canada, Brazil, Japan, Russia, Holland and the United Kingdom.

“We are always pushing technology and looking for new ways to deliver the UFC experience to our fans,” stated Dana White, UFC President. “With Thumbplay, we can offer the UFC fighters, sounds and action from UFC events as downloads. This partnership makes new UFC content available to fans and can literally make the UFC come to life right on your mobile device.”

About Thumbplay

Headquartered in New York City, Thumbplay was founded in September 2004 by Are Traasdahl and Evan Schwartz. It is backed by Bain Capital Ventures, SoftBank Capital, i-Hatch Ventures, Redwood Partners, New Enterprise Associates, Meritech, Brookside Capital Partners and Cross Creek Capital. More information can be found at www.thumbplay.com or at m.thumbplay.com from a mobile phone.

More From LA Times On Apparel: SoCal Brands

September 8, 2008

The LA Times had another story on MMA apparel and the focus was on brands headquartered in the SoCal area. The main thrust of the article was the vast new product offerings we will be seeing in the next six months or so. Some Highlights from the article:



TapouT bedding, pillows


TapouT looks to be going full steam ahead with their licensing efforts, with their name being attached to an ever expanding line of items:

By November, fight fans will be able to buy three styles of footwear slathered in Tapout’s batwing-style logo, as well as chain-link-emblazoned bedding, beds, backpacks and baby clothes. Fans and competitors alike shouldn’t take their eyes off this Quiksilver of fight club culture. Tapout holds roughly 75% percent of the MMA-apparel market share

The Article gives a nice breakdown of the product mix over at Affliction, and details their varying revenue streams from their product lines. I’ll admit I didn’t realize they were so diversified in their offerings:

Tom Atencio, a former MMA fighter and vice president of Affliction Clothing, bristles at pigeon-holing it as a fight brand, stressing that only 20% to 25% of sales at the Seal Beach company come from MMA-related merchandise, with the rest from men’s and women’s denim, eyewear, shirts, footwear and accessories sold at stores such as Metropark, the Buckle and Nordstrom.

One More Round looks to be going down market, with the introduction of a lower-priced shirt. It remains to be seen if this will affect their brand identity. A brand like Affliction is identified with more high-end pricing, so such low end fare would tend to hurt their brand. It should be interesting to see if One More Round can successfully play both ends of the market without hurting the cash cow high end brands:

Now, after success selling hazy, charcoal gray, $66 screen-printed Ts and black, brass-button $119 wovens with copper foiling and appliques at Nordstrom’s Brass Rail and other places, One More Round is taking the fight in the other direction — to Tapout territory — with the launch of a lower-priced line called OMR by One More Round, with Ts starting at $20. “We’ve established ourselves at the boutique level, and now we’re trying to reach that core MMA customer that can’t necessarily afford a $39 T-shirt,” Baltutis says. The line hits stores in mid-November.

Tito Otiz’s Punishment is another brand that is looking to diversify their product line:

Punishment Athletics—Tito Ortiz, who held the Ultimate Fighting Championship light-heavyweight title, is founder, chief executive and de facto drill sergeant of Punishment….

Last week his Huntington Beach company unveiled its first foray into button-front woven shirts, and Ortiz says future seasons will build toward an entire Punishment wardrobe, including neckwear and denim.

The Zuffa End Around

September 3, 2008

It is often said that business ethics is an oxymoron, but that is the case only if you conduct yourself in such a manner. Rob Maysey details the increasingly questionable nature of the UFC’s push for merchandising agreements with it’s fighters:

Multiple sources have indicated that UFC officials are now sending letters to fighters who have not yet signed the Merchandising Rights Agreement. The letter warns fighters that if they do not return the executed Merchandising Rights Agreement by the end of the week, the offer will be rescinded, and the fighter will not be included in the UFC’s licensing program.

Even more outrageous, UFC officials are directly contacting fighters, instead of the fighters’ selected agents. Fighters are told that they are hearing only one side of the story from their selected representatives, and that the UFC’s Merchandising Rights program really is a great deal. By not signing the Merchandising Rights Agreement, fighters are told they are leaving money on the table.

The old saw “he signed the contract, he should honor it” line of thinking is a bit of a dodge and hard to defend if the signature is attained by subverting the fighter-agent relationship and without the advise and consent of legal representation, in effect, duping the fighter. Moves of this nature are more at home in the moral morass that is the boxing scene, and not something that MMA promoters should be mimicking.

JAKKS Inks Deal with WEC, Pride

September 2, 2008

Collectible figure maker Jakks Pacific announced today the addition of the WEC and Pride Fighting Championships to their offerings, this is in addition to their deal with the UFC. The Press Release:

– JAKKS Pacific, Inc. (Nasdaq:JAKK) today announced the signing of two exclusive, four year, worldwide Master Toy license agreements with MMA organizations World Extreme Cage Fighting(R) (WEC(TM)) and PRIDE(R). JAKKS is expected to launch the line of collectible action figures, play sets and accessories based on WEC and PRIDE in Spring 2010.

WEC focuses on lighter weight classes includingthe bantamweight and featherweight divisions. WEC was founded in 2001 and purchased by the owners of the Ultimate Fighting Championship(R) brand in 2006. PRIDE, one of the most popular MMA organizations in Asia, was founded in 1997 in Japan and purchased last year by the owners of UFC.

“We are thrilled to extend our relationship with UFC by adding WEC and PRIDE to our action figure roster,” said Stephen Berman, President and COO, JAKKS Pacific. “As the world leader in fighting action figure toys, we plan on dominating the Mixed Martial Arts collector action figure arena. The addition of WEC and PRIDE gives JAKKS a substantial base of fighters with which to work and develop into a broad and exciting line of collectable products for fans.”

“This agreement with JAKKS gives fight fans a premier line of authentic collector action figures,” said Dana White, UFC President. “This is a great partnership that benefits the sport, our athletes and our fans.”

The Pride inclusion should be interesting. The purchase of Pride was a nightmare contract-wise with most of the contracts not carrying over from one organization to the other. It would be hard to believe that image and name rights would have carried over in cases where the contracts didn’t. One possible reason for the inclusion of Pride may be to offer alternative versions for UFC fighters under contract thatt also fought in Pride. Jakks could do UFC versions of folks like Big Nog, Wanderlei, Shogun, Rampage, Mark Coleman, Anderson Silva, etc. and also issue versions of those fighters with Pride-specific characteristics (ie Wanderlei in his speedo’s instead of his UFC board shorts.)

MMA Expo Looks to Expand, License

August 28, 2008

Huntington Beach, CA – IMMAE announced today that it will be launching an ambitious licensing program designed to project Mixed Martial Arts Expos across the globe and propel the IMMAE brand to household name status. IMMAE plans to produce these community level events across North America in an effort to help further penetrate Mixed Martial Arts into mainstream America.

IMMAE will look to produce state level and regional shows. These shows will be larger in production and attendance than community level shows and will be designed to promote the sport of MMA on a much larger scale. The largest show will remain the annual event currently held in Southern California. This event will remain annual avoid to void market saturation and will be engineered to draw in exhibitors and fans from around the world.

IMMAE is announcing its first state level exposition through its licensee network. June 26th, 27th, and 28th 2009 marks the first state level exposition to be held in Honolulu, Hawaii. The event is being held at the Blaisdale Exposition Center in downtown Honolulu and is being produced in conjunction with Evolution Sports. The purpose of the event is to promote awareness for MMA at a state level as well as to promote networking and synergy between Hawaii based MMA businesses. The event also promises to be a bridge between the mainland MMA community and its Hawaii based counterpart. The event will feature up to 120 booth spaces, a grappling tournament, and amateur MMA events.

IMMAE is also announcing its first community level exposition through its licensee network. October 11th and 12th 2008 will mark the first community level exposition, to be held in Chandler, Arizona. The event is being held at the Rawhide Rodeo & Fairgrounds and is designed to promote awareness of Mixed Martial Arts in the Chandler Community. The event is being produced in conjunction with Apocolypse Productions based out of Chandler, and was formerly called SWMMAE. There will be professional seminars hosted by top MMA fighters across the two day event.

For more information on IMMAE or upcoming IMMAE events in your area, visit www.immae.tv

Comparing Merch Deals: UFC vs WWE

July 28, 2008

While the discussion over the UFC’s merchandising and ancillary rights contracts has died down somewhat, the contract continues to cause concern for athletes and agents in MMA circles. Dave Meltzer compared the UFC’s merchandising pacts with those of the WWE, a promotional and business model that the UFC seems to be modeled after, in the print version of his Wrestling Observer Newsletter.

There’s a lot of controversy in the MMA world regarding UFC trying to get fighters to sign merchandising agreements, which, among other things, would give UFC the right to market the wrestlers in perpetuity. The agreements are similar to those in this company (the WWE), which UFC is following the lead in when it comes to merchandising fighters. However, the situation is very different. The top fighters are balking at things like percentages offered and life-long marketing, which would include after they leave the company. In WWE, the contracts you sign to wrestle and merchandise deals are mandatory while UFC is trying to now get people under contract to sign new deals from scratch with merchandising. Plus, almost all fighters of any note have representation, while in WWE, a large percentage, perhaps as high as half, don’t employ representation. UFC fighters up to this point didn’t get bonused for things like DVD sales of shows they are on. WWE wrestlers get a percentage, sometimes tiny but a percentage nonetheless of anything they appear in. If you appear in a match on somebody else’s DVD, you get a piece. All wrestlers and former wrestlers get itemized quarterly merchandise reporters and breakdowns. Wrestlers don’t get anything from matches that are replayed on television. UFC fighters don’t get anything from all the repeats of their fights on television either.

The WWE deals are mandatory while the UFC is trying to get fighters to sign new deals, but that is clearly the end game for the UFC. The WWE model for marketing rights has proved to be a bonanza and one that Zuffa would be keen to replicate. A closed system with all merch rights being controlled by the UFC is the most economically attractive for Zuffa. Such a model would be similar to those done by the other major sports leagues, who tightly control what brands are associated with their teams and players. In-House Zuffa product or those designated as official providers, like TapouT, will become the major players for things like Apparel.

They aren’t able to retroactively apply the new marketing paradigm to those under contract but those just coming in to the company are a whole other matter, and should serve as the means to implementing this closed system strategy . The merch deal will likely become a pay-to-play issue for those looking to fight in the UFC, a mandatory step for entry into the biggest MMA company in the world. There will be a mix of merch-contracted fighters vs non-contracted fighters for the foreseeable future, but over time that will increasingly tilt towards an all merch-contracted labor force for the UFC. The time frame for such a conversion is probably over a 5 to 7 year time period.

TapouT Locks Down Footlocker

July 9, 2008

John O’Regan of Fighter’s Only breaks the news of TapouT’s impending entry into a Footlocker near you:

“Tapout is a new program that we first introduced in Champs (a subsidiary of Footlocker) late last year and continues to be very encouraging and will be rolled out to Foot Locker this fall,” said Serra.

Explaining the decision to begin stocking the famous mixed martial arts label, he said that Tapout will provide “some excitement and some new and innovative merchandise”.

This is another massive get for the guys at TapouT. Between Champs and Footlocker, you have a massive distribution channel at brick and mortar stores, one that is within reach by a short drive to probably 95% of the country. While online sales are an important key in the sales mix, the big sales are going to come when you are hitting the wide variety of brick and mortar shops such as JC Penney (UFC), Nordstrom/Buckle (Affliction), and Hot Topic/Footlocker (TapouT). It is these new avenues for sales that are driving the projected explosion in sales for TapouT in 2008 and 2009.

Fight Biz Quote: Tapout's Punkass

July 7, 2008

“But we’ve turned down a lot of things,” he said of licensing offers that have come the company’s way as its profile has risen. “We won’t attach our name to something that our audience wouldn’t use or wear.”

–Tapout’s Punkass, speaking with The Press-Enterprise about the company’s philosophy on licensing opportunities for the company. There will soon be TapouT bottled water and energy drinks, among other products.

The article has some good info on the size of the martial arts apparel business but tends to understate the possible size.

According to the Sporting Goods Manufacturers Association, a Washington-based trade group, there were 6.9 million U.S. participants in all kinds of martial arts in 2007, compared with 6.2 million in 2000. While the overall U.S. wholesale value of sports equipment and apparel rose 3 percent in 2007 from the prior year, the martial arts category was up 12 percent — from $280 million in 2006 sales to $314 million last year.

These numbers only account for those that are participants in martial arts, while brands like Tapout also draw significant numbers from those that don’t train. Regardless, the martial arts market is a growth sector, with 4 times the growth tate of the overall sports apparel business.

Ring Kings Hitting Stores July 16th

July 7, 2008


The Orlando Sentinel is reporting the first widely distributed set of mixed martial arts trading cards will hit hobby shops on July 16. Card-maker Donruss is issuing a set that includes 30 Ring Kings in its Americana II set of trading cards. The company recently did a promotional tie-in with Fight! Magazine, including a sample card with the magazine for subscribers. Here’s a complete checklist:

1 Randy Couture
2 Andrei Arlovski
3 Forrest Griffin
4 Urijah Faber
5 Cung Le
6 Rashad Evans
7 Dan Henderson
8 Rich Franklin
9 Georges St. Pierre
10 Gina Carano
11 Jason Miller
12 Matt Serra
13 Sean Sherk
14 John McCarthy
15 Matt Lindland
16 Keith Jardine
17 Houston Alexander
18 Karo Parisyan
19 Frank Trigg
20 Thierry Sokoudjou
21 Stephan Bonnar
22 Kendall Grove
23 Jay Hieron
24 Mike Pyle
25 Martin Kampmann
26 Tyson Griffin
27 Gray Maynard
28 Bruce Buffer
29 Frank Edgar
30 Bas Rutten

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