SBJ/October 10 - 16, 2005/SBJ In Depth
Fighting for its future
Published October 10, 2005
The man who once ran boxing at HBO is bent forward in a chair in a Las Vegas meeting room on the eve of the summer’s biggest fight, ready to rumble and thunder and spew, sure as the massive, man-made volcano that goes off every half-hour of every night down the Strip.
Boxing is “an awful business.” The sport is “self-destructive.” The industry is “chock-full of desperadoes looking to make their next payroll.” The promoters in the positions of greatest influence are “the most destructive in the industry” and “people who ate from the carcass and showed not one iota of regard for the future.”
This is the fight world, according to Lou, a Brooklyn-born, Harvard-educated lawyer who still speaks with a mouthful of the old neighborhood when he’s wound tight, as he was before that summer blockbuster, Bernard Hopkins vs. Jermain Taylor.
“Desperation breeds desperate behavior,” DiBella shouts, attracting barely a glance in a room that has grown used to him the way construction workers get used to jackhammers. “That’s where we are now. Everyone is looking for the next score. Nobody is looking to the future. And I’m not taking myself out of that equation. You have to pay your bills.
“There is not a game plan in this industry to rebuild this sport, to build young stars, to establish that the best fights are generally offered to the public free. Everybody is looking to pay their bills. That’s normal behavior when you have an industry suffering. But, make no mistake, it’s an industry suffering.”
There are issues of health and safety, particularly in states that sanction boxing infrequently. Concerns remain that boxers lacking representation get raw deals. There are too many sanctioning bodies, leading to watered-down championships and ratings that are farcical at best and corrupt at worst. But, mostly, the demons that dog boxing are financial. There is money in the sport, particularly for the biggest fights, but it is moving and clustering in ways that put surviving today at odds with flourishing tomorrow.
Even those who profess to be bullish on boxing, such as the sport’s television engine, HBO, would like to see promoters, fighters, sanctioning bodies and, yes, even networks take a longer economic view.
“I call (boxing) the lowest common denominator of free enterprise in American business,” said Ross Greenburg, president of HBO Sports, which, with an annual boxing budget of about $50 million, doubles as the fight game’s primary banker. “It’s always been a difficult sport to navigate.”
Eroding an audience
At the core of the discussion is pay-per-view, a television tool that is at once a boon and bane for boxing. Thanks to the expansion of pay-per-view options on cable and satellite systems, the dozen biggest fights of the year will combine to generate more than $100 million in sales this year. But, entering the weekend, only one had eclipsed 500,000 buys — and this in a year of intriguing fighters taking competitive fights.
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Greenburg points to a recent stalemate with Floyd Mayweather Jr., who fought on HBO regularly before getting his first pay-per-view slot for a fight with Arturo Gatti in June. Mayweather dismantled Gatti in a fight bought by 340,000. He made at least $4 million. Now, he’s shopping for another big payday, likely bigger than what HBO would be willing to pay to keep him on premium cable.
It’s simple economics.
That Hopkins-Taylor fight reached 370,000 homes. On commercial television, that’s an ocean liner headed for an iceberg. It’s less than half of what the WNBA pulls on ABC. But, at $49.95 a pop, 370,000 homes is an economic bonanza: $18.5 million in gross revenue, half of which goes to cable operators and satellite providers. After paying an industry standard of 7.5 to 10 percent to a distributor such as HBO or Showtime, the promoter splits the rest with one or both fighters.
Promoter Golden Boy Promotions came away with about $8 million in pay-per-view revenue, said Richard Schaefer, CEO of the company, owned by showcase boxer Oscar De La Hoya. According to contracts filed with Nevada regulators, $1.4 million went to Taylor. Hopkins received a guarantee of $1.5 million as a gross purse, plus a large, undisclosed cut of the pay-per-view. Golden Boy paid undercard fighters about $400,000.
The promoters, fighters and networks all typically will clear more money from pay-per-view than they can from subscriber- or advertiser-supported television. But the sport is seen by an audience that is a fraction of those that watch other mainstream sports; about one-tenth, for example, of that for Saturday afternoon baseball on Fox.
“The most seismic change has been the migration of boxing from free broadcast television to the various levels of pay television: basic, premium and now pay-per-view,” said Jay Larkin, senior vice president of sports at Showtime, who has handled boxing at the network since 1986. “Everything after that is almost secondary. That was a fundamental change to the sport.”
Ask the nation’s premier boxing promoters about pay-per-view and its long-term economic ramifications and they quickly deliver a unanimous verdict. In separate interviews, six who are at the top of the game — Bob Arum, Don King, Oscar De La Hoya, Kathy Duva, Gary Shaw and DiBella — all described a double-edged sword that is cutting deeply into the sport’s future.
“We are chasing our fans away and all we have left is this hard-core cadre of nuts who will buy whatever we put on — and they’re not a lot of people” said DiBella, who promotes Taylor, the likable middleweight champ who looks like the sport’s next star. “The idea of moving the high-quality fights to pay-per-view all the time and showing the dreck on premium cable or basic cable, that’s counterintuitive if you’re trying to rebuild your sport.”
The summer’s most hyped fight, Jermain Taylor (left) vs. Bernard Hopkins, generated 370,000 pay-per-view buys, grossing about $18.5 million.
The promoter who has come closest to finding paydays outside pay TV of late is Duva, CEO of Main Events, the outfit that regularly furnished cards to NBC until the network dumped boxing in 1992. Duva got NBC to take another swing at it three summers ago in a creative deal that also included NBC-owned Telemundo. When the networks walked away again after ratings stagnated at about 1.0 last year, Duva hooked up with ESPN, which was looking for a promoter that would help it venture into — you guessed it — pay-per-view.
Main Events up-and-comers would fight on ESPN, build awareness, and then graduate to pay-per-views produced and distributed by ESPN. It’s a model that gets Main Events fighters broader exposure than they’d get elsewhere, but at pay rates higher than the $15,000 that the cable network paid last year for fight cards provided by other promoters.
It’s also a model that ESPN signed on to for only one year. The executive who oversees boxing at the network, Jim Noel, says ESPN likely will continue to work with Main Events, but that the relationship “will evolve, as all relationships do.” Last month, ESPN was sorting through how the addition of “The Contender” to its Original Entertainment division would affect its boxing strategy.
No matter what direction ESPN goes with her company, Duva says she is convinced that it and other mainstream networks are critical for a sport that has been marginalized by the shift to niche coverage.
“Ultimately, the forces of the market are going to force us off of pay-per-view and onto something else,” Duva said. “When it started out, pay-per-view was out there for something special, and that something special could garner an audience of over 1 million. It wasn’t long ago that we’d be disappointed in 700,000. Now, people celebrate 300,000. Our audience is dying off, and we’re not replacing it.”
Even Don King, who made bundles on pay-per-views featuring Mike Tyson and is known for negotiating fiercely for every dollar from a fight, says the migration of big bouts away from live slots on HBO and Showtime weakens the product.
“You can’t choose one or the other,” King said. “They’re tied together like the Corsican twins.”
When consumers knew the fighters, as they did Tyson and Evander Holyfield, they clicked their remotes or dialed their phones in numbers that dwarf today’s top sellers. Twelve of the top 16 pay-per-view fights of all time involved Tyson or Holyfield. Ten of them generated more than 1 million buys.
But, King points out, that sort of awareness isn’t built from buys of 300,000. Television executives estimate four to five viewers per household for pay-per-view fights, meaning audiences of less than 1.5 million viewers for most cards.
“You can get money from pay-per-view that pays much better than the rights fees you’ll get from (HBO and Showtime),” King said. “But, by the same token, only 300,000 homes see it. So you’re not getting the awareness. You want both.”
As the ring announcers say, we have a unanimous decision. The proliferation of pay-for-view fights is eroding an audience that eventually will wear so thin that it won’t be able to support its own weight.
So, who’s ready to walk away from the money?
“How do you tell these kids that have limited careers to fight off pay-per-view on a regular basis when they can make so much more money fighting on pay-per-view?” asked Arum, who takes a mea culpa on cashing in yesterday rather than investing for tomorrow. “Sure, you worry about where the sport is headed. But the guy who is taking advantage of the pay-per-view and getting purses commensurate with what he draws from that, he will have made his money and probably pissed it away on cars and jewelry by the time the (audience) dries up. He’ll be gone by then.”
Smaller money, bigger name
The message that HBO says it now sends fighters and promoters: Don’t take every fight that will do 250,000 buys to pay-per-view in order to make $3 million instead of the $1.5 million that you’ll get for fighting live on HBO.
Showtime placed last weekend’s Diego Corrales-Jose Luis Castillo (left) rematch on PPV following their action-packed first fight.
“The mentality in boxing has always been to grab as much money as fast as you can in the short term,” HBO’s Greenburg said. “I understand that temptation. But I also know that the best promoters always had long-term plans for their star fighters.”
Those long-term plans included pay-per-view, but they weren’t limited to it. HBO likes its stars to fight the tune-ups between big bouts on its air, creating what often amount to infomercials promoting the pay-per-view that will come later.
HBO’s contracts with fighters include varied terms. But industry insiders say most bind a fighter to fight on HBO a set number of times over the life of the deal: for example, nine times in three years. Mostalso specify whether boxers will fight on pay-per-view and whether those fights will count toward the agreement.
The idea is to keep the most marketable fighters on HBO and get the network into position to buy rights to the most desirable fights.
“We’re trying to build stars in the sport,” said Kerry Davis, senior vice president of programming for HBO Sports. “We want to market Jermain Taylor with an image campaign and help increase his stardom. But we don’t want to do that and have him show up on another network.”
That other network — Showtime — got into boxing in 1986, with the delayed broadcast of Marvin Hagler’s fight against John “The Beast” Mugabi. Four years later, it wrestled Tyson away from HBO, signing boxing’s biggest attraction to a $120 million pay-per-view deal.
Today, the two channels differ on approaches.
Showtime continued to slug it out with HBO for the sport’s top fighters and biggest fights until late in 2003, when it realized that scuffling with a larger network with a budget twice the size of its own wasn’t going to pay off.
It started unraveling exclusive deals with fighters such as Kostya Tszyu and Zab Judah, instead opting to spend its money on the best matchups that promoters would provide. It also stopped playing checkers with HBO over dates.
Starting last year, Showtime launched a programming schedule that brought rare predictability to boxing, airing the sport on the first week of every month, with a weeknight series called “ShoBox” featuring lesser-known fighters coupled with Saturday night premium shows. It hoped that offering fight fans a consistent schedule would fend off the counterprogramming of HBO, which frequently waited for Showtime to schedule its cards and then answered with its stars on the same nights.
“We were being pushed all over the playground,” said Ken Hershman, senior vice president and general manager of sports for Showtime. “We decided to put major boxing events on the first Saturday of every month, HBO be damned.”
The strategy appears to be paying off. Showtime is seen in only about 14 million homes, which is half as many as HBO. And the ratings show HBO winning in a walkover, with averages of 1.85 million households for its “World Championship Boxing” shows and 1.6 million for “Boxing After Dark.” Showtime averaged 465,000 households for “Championship Boxing” and 200,000 for “ShoBox.”
But, Hershman said he is buoyed by significant percentage gains: up 35 percent for the Saturday night cards and 71 percent for “ShoBox,” which benefited from a move from Thursday night to Friday night. HBO was flat compared with last year.
Executives at both networks point to the same dynamic when addressing the future of boxing. They say that if the best fight the best, they will buy those fights, air them and the viewers will come. They say there is a place on their air for exciting matchups, even when the fighters aren’t household names. They preach that fighters must realize that a loss need not truncate their careers, so long as it comes against a fighter that viewers respect.
“In 2005, we’ve seen more fights exceed expectations on pay-per-view and in ratings on HBO, and more fights not just be successful in typical large casino arenas, but be successful in cities that haven’t supported boxing over the last decade,” said Mark Taffet, a Wharton MBA who is the pay-per-view guru at HBO. “All of that, in my mind, is supporting a resurgence of the sport.
“It’s happening because the best are fighting the best, and they’re not being penalized if they lose. If that trend continues, the sport will continue its resurgence. The economics are there to support it.”
For all the King-bashing that goes on in boxing, he was the promoter at the center of a three-fight string at Madison Square Garden that brought attention to the middleweight division in 2001. King promoted Felix Trinidad, a Puerto Rican icon thought to be the toughest fighter in a division that has jumped up to capture attention on occasion. He wanted to line up Trinidad against the other middleweights, unify the titles, then bulk him up to fight superstar Roy Jones Jr. on the way, Taffet says, “to economic heaven.”
Hopkins beat Trinidad, derailing that story line. But it made for a year of intriguing matchups for HBO and about 750,000 buys for HBO pay-per-view, all thanks to an idea driven by King.
“Nobody does anything because it’s good for the industry,” Taffet said. “It’s just a confluence of mutual self-interests. We didn’t bring out the bible and say, ‘This is good for the industry.’ I work for HBO. I don’t work for an industry. Don King doesn’t work for an industry. But when we find common ground that still addresses our mutual self-interests, it always works.”
Three years later, HBO and King have been unable to find that common ground when it comes to the jumbled heavyweight division, which includes four champions, each of whom is anonymous enough to fool the panel on “What’s My Line?” Taffet says HBO suggested a series of fights that would sift through the muddle, producing one acknowledged champion. All would air live on HBO, clear of pay-per-view, backed by broad marketing support.
Taffet said it all fell apart when “somebody” — he wouldn’t say who, but King has ties to three of the four heavyweight champs — couldn’t get guarantees that he would emerge as the promoter of the winner.
“Somebody decided that their self-interest wasn’t mutual with anyone else’s,” Taffet said, “so nothing happened.”
In August, rival promoter Arum outflanked King. With King controlling so many contenders and negotiations deadlocked, the WBC mandated a purse bid for the right to promote Vitali Klitschko’s title defense against the mandatory opponent that it selected, former champ Hasim Rahman, who is promoted by King. Arum, who doesn’t promote either fighter, won with a bid of $12 million, outbidding King by $1 million.
“That was good Arum brain power,” said Shaw, a promoter who stayed clear of the bidding. “I give credit to Bob for that. He outsmarted everybody else. It was good business, and it’s good for boxing.”
While it may sound exorbitant for a heavyweight division devoid of stars, most in boxing agree that Arum will make money on the card, based in large part to his savvy understanding of revenue streams. He projects about $5 million in site fees, thanks to the backing of Las Vegas hotels. He expects to make at least $3 million from foreign rights in Germany and the Ukraine, where Klitschko is popular, and about $1.5 million for TV rights elsewhere in the world.
Top Rank is spending about $100,000 marketing a strong Latino undercard on Spanish-speaking TV, print and radio, expecting to sell about 150,000 pay-per-views that way, on top of the 400,000 to 600,000 that it can sell behind Klitschko, the closest thing the division has to a name. Arum says he’ll have to be tragically wrong for it to cost him money, figuring all he needs to break even is to sell about 170,000 pay-per-views.
“And if I can’t do that I shouldn’t be in the business,” Arum said. “All I can figure is that nobody else bothered to do the arithmetic.”
Should Klitschko win, Arum also stands a chance of getting a piece of the heavyweight picture as promoter of future title fights.
“If I have a window and an opportunity to promote the winner of this fight against serious opposition, the heavyweight division will be back,” Arum said. “People want to see a heavyweight fight, but not garbage. And they’ve been getting garbage.”
Finding the fans
The network that has done the most to keep boxing in front of mainstream sports fans in the last decade is ESPN, which has built its “Friday Night Fights” franchise into destination television for boxing hard-cores. Its studio show is where viewers go to keep up with a rapidly changing, far-flung sport.
But now promoters complain that ESPN’s business practices are doing more to harm the sport than promote it. The dustup started a year ago, when the network returned from a brief hiatus with its deal with Main Events. That deal got ESPN a pay-per-view card that the network says produced 150,000 buys, a good night for ESPN and Main Events.
Pay-per-view powerhouses Evander Holyfield (left) and Mike Tyson account for 12 of the 16 biggest PPV audiences in history.
All the major players have balked at that offer, leaving the network with an array of club fights, cards put on by small local promoters who make their money from ticket sales rather than TV rights.
“The mistake ESPN made was limiting it to one promoter,” said Shaw, who promotes cards on both Showtime and HBO and is putting together an impressive promotional stable that includes middleweight contender Winky Wright. “When they had the budget, if they would have opened it up to all of us, there would have been car accidents with promoters racing to get up there to Bristol.”
For its money, the network has gotten a show that consistently ranks as the highest-rated series on ESPN2. “Friday Night Fights” delivered a 0.6 rating this year, and Tuesday night cards during the summer registered a 0.5, meaning the shows were watched in about 600,000 homes. Both numbers were flat against last year. Noel, who is vice president of business affairs for ESPN, said ad revenue was up, but he wouldn’t reveal specific figures.
From the way it spends its money, it’s clear that ESPN’s strategy has been to build the show around its studio desk, rather than at ringside, bringing in the sport’s bigger names for interviews that attract an audience.
“We looked at boxing a couple of years ago with some concern over … how much we were spending versus how much our ratings were being monetized on the advertising side,” Noel said. “We thought we could do things a different way. We decided to do that, it worked, and it has been a very good story for us.”
While ESPN has been reworking its strategy, its chief competitor, Fox Sports Net, has waded into the sport with monthly cards on its male-dominated flagship, “Best Damn Sports Show Period.”
The connection was born last year, when promoter Dan Goosen was unable to find a slot on premium cable for heavyweight James Toney, who was coming off an injury. Goosen, who started doing shows on FSN predecessor Prime Network in 1996, pitched a Toney fight to Fox Sports Net executive George Greenberg. Greenberg suggested “Best Damn,” the show on which he was executive producer.
“Brilliant, I love it,” Goosen said. “I think it’s given boxing a fresh, new look and one of importance. It gives it that special feel.”
The BDSSP cards don’t pay as well as most premium cable slots, which start at $50,000 for “ShoBox” and range into the low millions at HBO, but they’re eminently more doable than ESPN’s $15,000.
Though Goosen would not reveal financials, contracts filed with California regulators showed that the promoter paid $6,250 in TV taxes for an Aug. 18 card that aired on “Best Damn,” meaning he received a $125,000 rights fee from the network. That enabled him to pay purses of $20,000 each to British Olympian Audley Harrison and U.S. Olympian Andre Ward, the two headliners on the card. He paid $77,500 in purses for the full card.
“What Fox has done shows you that you can make the numbers work for boxing at that level,” Goosen said. “With ESPN, you might as well say, ‘Hey, I’m giving you my business for free.’ You can’t do business like that. It’s unrealistic and unfair. Anyone that does it only hurts our industry. To me, it’s a shame, because in my eyes ESPN has tried to be the leader.”
Curing boxing’s ills
Many of the ills, such as the protection of boxers’ bodies and finances, could be handled with the enforcement of federal laws already on the books and the recognition of the Association of Boxing Commissions as the body that governs the sport in the United States. Rehabbing boxing’s business model will require more work done from the inside.
The third fight between Roy Jones Jr. (left) and Antonio Tarver drew 20,895 on Oct. 1 in Tampa.
Run similarly to the other sports leagues, such an organization could deliver a schedule that would put boxing where more people could see it, on consistent days and times. It could crown champions who mattered. It could negotiate a television package that included pay-per-view, premium cable, basic cable and network components.
The two subscription TV kingpins that stand the most to gain from a boxing resurgence are part of larger media empires. Time Warner owns HBO. Viacom owns Showtime. ABC/ESPN has proved that splitting sports across multiple channels can work.
Schaefer, the CEO of De La Hoya’s Golden Boy organization, says he is stunned that an outsider hasn’t entered the sport, bought up the major promotion companies and consolidated them into a powerhouse that would remake the model. Or that the existing powers have not banded together to do it.
“When Time Warner merged with AOL, you had two kings,” Schaefer said. “Hewlett Packard and Compaq, two kings. In the business world, roll-ups are our daily business. And it works. Egos can work it out. So I just don’t understand why that is not possible in the sport of boxing. Other sports were able to organize themselves and create a league and a structure. Why is it not possible in the sport of boxing? Why give up before you try?”
Across the table from him, the owner of Golden Boy nods.
“The position I’m in, I realize that I can change it, and I’m not moving back from this,” said De La Hoya, who has made more than $200 million in the ring since 1993. “I’m going full steam ahead to make sure this sport stays alive.”
It is the same promise DiBella made five years ago. Now, he is amending it. DiBella says he will keep his word to his current crop of fighters, doing all that he can to keep them safe in the ring, guiding them through a treacherous business with their wits and wallets intact. The recent death of one of his fighters in the ring has only strengthened that aspect of his resolve. But, beyond that, he is keeping his options open.
Earlier this year, he led an investment group that bought a Class AA baseball team. He serves as the managing partner.
“I’m not willing to commit my life to this industry anymore,” DiBella said on the eve of a fight that would land his top fighter, Taylor, one of boxing’s few meaningful, consolidated championships. “I don’t want to be a big fish in a cesspool pool. And right now, that’s what we are. Fish, swimming around in a cesspool pool.
“And the life in that cesspool pool is dying.”