SBJ/Oct. 14-20, 2013/In DepthPrint All
On the eve of the most lucrative fight in history, with receipts from $20 million in tickets counted and projections of pay-per-view sales edging toward $150 million, the promoter behind the record-setting event tackled yet another calculation.
Floyd Mayweather’s record-smashing victory against Mexican sensation Saul “Canelo” Alvarez last month came at an MGM Grand Garden Arena that, for all its ability to generate electricity for a big event, is woefully lacking in the amenities expected from a modern-day venue.
Floyd Mayweather fights Saul “Canelo” Alvarez at MGM Garden Arena, a no-thrills venue that lacks suites, club seats and other amenities.
Photo by:Getty Images
And yet, on one extraordinary night in September, a prize fight that was by no means the reincarnation of the Thrilla in Manila generated about nine times as much in ticket revenue as the Los Angeles Lakers do at the sold-out Staples Center.
Every ticket in the arena’s lower bowl, from the row of chairs aligned at ringside to the top row of each section, sold for $2,000. There were 4,718 of those tickets, together accounting for $9.4 million, or nearly half of the $20 million gate.
Another 1,498 tickets sold for $1,750 each. There were 1,627 seats at $1,500 and 2,429 at $1,000. At $600, 4,081 seats were available. There were 1,793 seats that sold at the lowest price point, $350.
Not counted in the gate was another $2.6 million from 26,163 tickets sold for closed-circuit viewing at seven properties along the Las Vegas strip.
Late in the afternoon a day before the fight, Golden Boy Promotions CEO Richard Schaefer contemplated how much more money they could have generated if the Grand Garden were more like some of the other buildings at which he puts on fights: the Staples Center in Los Angeles or the Barclays Center in Brooklyn.
For the first time, the question was based on an expectation rather than distant hope.
In June, MGM Resorts International announced a partnership with arena developer and operator AEG to build a 20,000-seat arena on property between the two casino resorts across from the MGM Grand — New York-New York and the Monte Carlo — with work scheduled to begin next year and an opening set for the spring of 2016.
While Vegas has seen enough fits and starts on this front to react with a degree of skepticism, Schaefer has reviewed plans by architect Populous and says he has no question it is happening.
UFC co-owner Lorenzo Fertitta, himself a Las Vegas casino operator, believes the project will be built. “Jim Murren [CEO of MGM Resorts] says it’s going to open, and everything he has ever said was going to happen has happened,” Fertitta said.
Todd DuBoef, president of Las Vegas-based promoter Top Rank, also sees the arena becoming a reality.
Not only has MGM announced the project and discussed it during earnings calls, but representatives from MGM and AEG held a board meeting of the joint venture the day before the fight.
Still, the two sides refused multiple requests to discuss anything about the project — or even how the partnership came about — for the purposes of this story. So there are dots left to connect.
What is certain is that the building they’re talking about, replete with suites and clubs, on a glitzy scale for which Vegas is renowned, will take the financial potential for a big fight to unprecedented levels.
Schaefer answered the revenue question quickly and simply, without much calculation. The new building would have about 25 percent more capacity, so he expects the September fight would have made at least $5 million more from tickets if it were in the new building.
It could be even more, he said, because a state-of-the-art venue would be better equipped for television and in-arena production. The promoters took out large swaths of seating to accommodate in-arena sets for crews from Showtime and ESPN, and to put in large video screens to bring the experience more in line with what fans expect.
The 199 seats they took out in the lower bowl cost about $400,000 in revenue. The 374 they killed upstairs amounted to another $212,000.
When it was suggested that more supply might require him to come off the $2,000 price for part of the lower bowl, Schaefer shook his head.
“If I would go to the MGM today and say, ‘By the way, I just found another 2,000 seats at $2,000 a ticket,’ they would say — ‘We want them. We want them all,’” Schaefer said. “My son showed me this morning on StubHub, prices for the $2,000 tickets are $10,000 and higher. So if there would be more $2,000 seats, they’d go like that,” he said, raising a hand and snapping his fingers.
“It’s Las Vegas,” he said, leaning on the three words that those who do business in the world’s fight capital frequently intone.
“It’s Las Vegas.”
Shifting revenue streams
There was a time when the insiders’ take on why neither of the two large arenas on the Las Vegas strip had been retrofitted to include suites or a club was that fight fans were worth more to casinos at the blackjack tables than they were in the arena.
A big fight is a great way to attract gamblers for a weekend. But once casinos got them to Vegas through the lure of a fight, they wanted them pushing chips out onto the tables, not lounging in an arena club for two hours leading up to the main event.
Sean Combs was among the celebrities on hand for Mayweather-Alvarez, showing that a big fight still pulls in the VIPs, despite an old-school arena setting.
Photo by:Getty Images
“When you look at the mix of revenues in Las Vegas, the growth part of that is entertainment, dining and night clubs,” said Fertitta, who was president of his family’s casino business before leaving to oversee the UFC full time five years ago. “Gaming has been fairly flat. But when you look at whether I’m buying bottle service for $2,000 or putting down $2,000 on the table games, the bottle service is actually more profitable than the casino. So now the thinking is just generate revenue wherever you can.”
Since 1989, the year that the opening of the Mirage reinvigorated Vegas tourism, gaming revenue has gone from delivering 59 percent of revenue at Las Vegas strip properties to making up only 38 percent of it, according to figures compiled by the UNLV Center for Gaming Research.
In that same span, rooms have gone from providing 16 percent of revenue to 25 percent, food has gone from 11 percent to almost 16 percent, and entertainment and retail have gone from 6 percent to 15 percent.
“Fifteen years ago the revenue you generated at a pool was selling some burgers, chips, cocktails and maybe some sunscreen,” Fertitta said. “Now they build these palaces. You want to stay in that cabana, which is where the rich guy is? That’s 20 grand. And on top of that I’m going to charge you for bottle service and this and that. They’ve taken an entity that was generating $15,000 on a good Sunday to $1.2 million on a good Sunday. That’s what new facilities can do here.
“This is the entertainment capital of the world. There should be a party on four different levels of suites at our events. In Las Vegas, we’re No. 1 in night clubs. Restaurants. Retail. The one thing we don’t have is an arena where we can cater to people. There’s a lot more revenue to be had there.”
Yet even as the model has shifted, the two larger arenas on the Strip have remained locked in the past. MGM, which paid for its own facilities, publicly opposed any arena project that required municipal funding. The logical assumption is that the company didn’t put much money into updates for the Grand Garden or its sibling, the slightly smaller Mandalay Bay Events Center, because it owned both of them.
“They’ve got both buildings,” observed UFC President Dana White, who typically books five or six events a year at either the MGM Grand Garden or Mandalay Bay Events Center. “Where else are you gonna go?”
That changed in 2007, when AEG struck a deal with MGM competitor Harrah’s to build a 20,000-seat arena behind two of its properties. That project stumbled over funding hurdles, the most recent of which came when a proposed 1 percent sales tax failed to come to a vote last November.
In June, AEG announced it would instead develop the building with MGM.
The connection to one casino operator worries some who do business in Vegas. MGM typically buys many of the better seats to events at its arenas itself, using them to compete for travelers. Other properties must turn to brokers to acquire good seats. With suites and other premium amenities in play, MGM may continue to hold tightly to the best the building has to offer.
“To have anything new with updated amenities that modernizes our city is absolutely fantastic,” said DuBoef, whose company typically booked at least two big fights a year at the Grand Garden or Mandalay, but in the last year has worked instead with the Thomas & Mack Center and casino operator Wynn Resorts. “But if it’s not managed on an agnostic basis that welcomes all the properties, it gets mismanaged. It doesn’t work.”
In the meantime, making do
A couple of hours before Mayweather and Alvarez entered the ring, guests of Showtime, Golden Boy and MGM stood elbow to elbow in a room that earlier in the week served as the fight promoter’s office.
Thanks to the right lighting, a heavy hand on the thermostat and a glitzy guest list, the event went off surprisingly well.
CBS Chief Executive Les Moonves chatted with producer Jerry Bruckheimer. Showtime head Matt Blank held court at a nearby table. Behind a velvet rope set up at the entrance, photographers snapped photos of a parade of familiar faces from sports and entertainment.
“We work hard at it and so maybe we pull it off and people are entertained,” Schaefer said. “But when you consider that everything else about the event is first-class, and you think about what people expect when they come to Las Vegas — really, you want to do more.”
By the time the main event started, Jack Nicholson was in his seat at ringside. Denzel Washington was nearby. So were Magic Johnson, Wayne Gretzky and Michael Phelps. It was electric the way that Vegas so often is for Mayweather, leaving one to wonder what it might be if the venue were as polished as the property’s most bankable fighting star.
“I spent $2,000 a seat, and you’ve got to walk up the stairs and through this crazy atmosphere to go to the bathroom,” said UFC Chief Operating Officer Lawrence Epstein, who in recent years has made a habit of traveling to major sporting events to see how his company’s arena experience compares. “That’s not what happens when you go to a Miami Heat game.”
On the first Sunday of the NFL season, four days after “The Ultimate Fighter” launched to the lowest debut-night rating of its history, Fox Sports used the most valuable promotional real estate in its portfolio to do what Fox Sports does best:
Yell a little louder.
Fox plugged “The Ultimate Fighter” during its NFL pregame show. It plugged it during its regionally televised games. And then, during a San Francisco 49ers-Green Bay Packers showdown that drew an average of 28.5 million viewers, the largest audience ever for a season-opener on Fox, it plugged the show some more.
Fox has made UFC programming such as “The Ultimate Fighter” an anchor on Fox Sports 1.
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The result of all that promotion was something well short of a viewer stampede to Fox Sports 1. Week 2 of “The Ultimate Fighter 18” was up only slightly over the debut, rising from 762,000 to 870,000. The next two episodes pulled audiences of 639,000 and 778,000, respectively.
You could point to a number of reasons that the show hasn’t caught fire this season. But it’s clearly not because Fox hasn’t let mainstream sports fans know it’s on.
“We launch ‘The Ultimate Fighter,’ it comes in with a couple of hundred thousand viewers, and what do they do?” UFC President Dana White asked rhetorically during a conversation at the UFC’s Las Vegas headquarters. “You watched Fox NFL on Sunday, and every promotion was geared toward ‘The Ultimate Fighter.’ That’s what [the UFC-Fox marriage] has been like.
“People have heard me say it a million times. Being in business with these guys is incredible.”
Taking some hits early
Had you seen White in the bowels of Philips Arena in Atlanta hours before Jon “Bones” Jones successfully defended his light heavyweight title there 18 months ago, you would have expected him to be less than complimentary about the company’s move from Spike TV to Fox in early 2012.
White had arrived at the arena that afternoon, rather than days earlier, as had been his custom for years. To get “The
White had to be in Las Vegas for “The Ultimate Fighter” each Friday night during the show’s 13-week run, so he couldn’t spend the week in Atlanta. Worse yet, he arrived there in the midst of a globe-crossing trek that would take him from Vegas to Stockholm, to Abu Dhabi, back to Vegas for “The Ultimate Fighter,” then on to Atlanta, then Miami, then Rio de Janeiro, then Los Angeles and back to Vegas again for another taping of “The Ultimate Fighter.”
Though the Friday night slot was accomplishing what FX wanted, breathing life into one of its weaker nights, “The Ultimate Fighter” was getting a smaller audience than it did when it aired midweek on Spike. UFC executives worried all along that they would struggle to get their core audience of 18-34s to stay home on a Friday night. That appeared to be what was happening. The schedule also was making it difficult for White to play the role he’d always played promoting the pay-per-view events, which remain the UFC’s core business.
“Friday night isn’t really working for us,” White confided before heading out to watch Jones fight 18 months ago. “We’re trying but, yeah, it’s created a lot of problems.”
Rather than bemoaning the move, or blaming Fox executives and their scheduling wheel for the property’s struggles, White insisted he was optimistic that they would work it out. “The guys at Fox get it,” he said. “We’re working on it and we’re going to figure it out. You watch. We’ll figure it out.”
White knew FX was open to a change of nights, and that executives at Fox Sports would push for it on the UFC’s behalf if they thought that it was eroding the sport’s core audience. With fights on Fox, Fox Sports Net and the since-dismantled Fuel TV, the network had too much tied up in the sport to let it stumble out of the gate.
But White also knew something that no one was saying publicly at the time.
In one of the first rights negotiation meetings that he and UFC owners Lorenzo and Frank Fertitta had with Fox Sports co-presidents Eric Shanks and Randy Freer, midway through 2011, White told the network heads that he envisioned FX as the ideal home for “The Ultimate Fighter.” Shanks countered that he could see that, but that if it didn’t go there, Fox would place it on another well-positioned cable channel with similar distribution.
“What would that be?” Lorenzo Fertitta asked. “You don’t have any other channel like that.”
Not yet, Shanks said. But one was in the pipeline. He laid out the network’s plan to take two of its niche sports channels — Speed and Fuel — and remake them into Fox Sports 1 and 2, a pair of broader sports channels that would compete with ESPN.
FS1 would not start out with the audience reach or profile of FX, but it would put the UFC on a sports channel, alongside other Fox properties, most notably the NFL, Major League Baseball and NASCAR.
“That was a big selling point for us,” Fertitta said, recalling the meeting that tilted the UFC away from Comcast, which had been its early favorite, and toward Fox. “We always knew that, in order to reach our full potential, we had to be on a real sports platform. Not to take anything away from Spike. They were the right place at the right time. But we felt like we outgrew that and we wanted to be on a sports network.
“When they told us we were going to be one of the four pillars, with football, Major League Baseball and NASCAR, that’s when it started to become appealing for us. To be in that group is really what sold us. It was kind of like, ‘OK, we’ve arrived.’”
Arrived at the overarching Fox family? For sure. But arrived at a single destination? Not at the outset.
As Fox executives worked to move the pieces into place to launch FS1, the UFC dealt with a checkerboard programming schedule that may have exposed it to more viewers, but also confused the fans it already had.
“The Ultimate Fighter,” which is the UFC’s signature property, resided at FX. Live fights aired on FX and Fuel. Studio shows, magazine shows and archived fights landed mostly on Fuel and also on the Fox regional sports networks.
The UFC drove growth for the networks. FX’s numbers in key demos were up massively on Friday nights thanks to the UFC. Boosted by more than 2,000 hours of UFC programming, Fuel more than doubled its viewership, making it the fastest-growing network on cable last year. At the same time, the UFC’s audience for its most important programming outside of its pay-per-views declined.
Pay-per-view preliminary fights, which averaged 1.4 million viewers for 12 shows in the final year on Spike, fell to a 1.26 million average for 21 shows on FX. “The Ultimate Fighter” went from 1.5 million viewers in its Spike swan song to 1 million in its first season on Friday night on FX and then 910,000 in its second season.
After that first season, FX dumped the live fights that were complicating White’s travel schedule, but it kept “The Ultimate Fighter” on Friday night. When the show’s audience plummeted to 910,000, Fox had seen enough. It moved the show from Friday night to Tuesday night last spring. There, it posted an average audience of 1.32 million.
At season’s end, Fox announced that “The Ultimate Fighter” and the rest of its UFC programming would move to FS1, where the property could be an anchor tenant.
“God bless anybody who for the past three years has followed ‘The Ultimate Fighter’ to a new network, two different nights, and now another new network,” said Fox’s Shanks, a vocal MMA supporter who got to know White well in his previous job heading sports at DirecTV. “It’s here to stay on this night, on this network, hopefully we think for the next 20 years. It’s gone through a lot. I think that it has been resilient. And we’ve put the promotional muscle behind it to make sure people do know it’s now on Fox Sports 1 on Wednesday nights.”
Just as the migration from Spike to the Fox channels brought its difficulties, the move to FS1 has come with its own set.
The first fights on FS1 when the network launched Aug. 17 garnered an audience of 1.71 million, still the most-watched show to air on the new network. But the decline since then has been precipitous, to 809,000 viewers and then 539,000.
Still, the fact that Fox chose the UFC as the property to highlight on FS1’s launch day says much about the heft the network is willing to put behind the sport.
Not only is all UFC programming now available on a pair of sports channels, the growth of which is a priority for News Corp., but FS1 has carved out a single night to highlight as an appointment destination for fans. Wednesday night is not only home to “The Ultimate Fighter,” but also to the “UFC Tonight” studio show, and the live cards that previously aired on FX and Fuel.
Selling fights on Wednesday nights rather than Fridays and Saturdays almost certainly will cost the UFC ticket revenue. It expects to fill fewer seats and charge lower prices, especially when it takes its events to the West Coast. Still, UFC management figures the television upside is worth the trade.
“What we give up on the ticket sales is peanuts compared to what we think we’re going to get in terms of consistency and appointment television and the luster it’s going to add to our brand,” Epstein said. “That, to me, is the biggest structural pillar we’ve put in place. Wednesday night, we’re going to own it. It’s going to be all about us. It’s going to take a few years to reap all the benefits from that, but it’s a big, big change.”
On a recent trip through the Fox offices, White bumped into Freer in a hallway. Rather than striking up a conversation about ratings or on-air promotion, Freer asked him how ticket sales were going since the move to Wednesday night.
“It’s a challenge,” White told him. “But we’ve had bigger challenges.”
Freer reminded White that he could turn to Fox’s RSNs and affiliates to push ticket sales in any city in which the UFC promotes a show. And he told him that if down the road, the losses on ticket sales were outstripping the television gains, they could reconsider the Wednesday night placement.
“Who does that in the television business?” White said. “In the television business, it’s: You’re going on Wednesday nights. Sink or swim. If it doesn’t work, we’ll bring in somebody else who can swim.
“It’s never been that way with these guys. That’s one of the reasons we know it’s going to work.”
World Wrestling Entertainment says its sponsorship revenue has nearly tripled since the company decided in 2008 to exit the raunchier Attitude Era and replace it with more family-friendly, PG-rated television programming.
Companies such as Mattel (action figures), Nestlé (Hot Pockets), General Mills (Totino’s), Frito-Lay (Doritos) and Kraft (John Cena’s face will appear on 72 million cartons of the Capri Sun drink) are among the approximately 20
WWE reports that sponsorship revenue was $7.4 million in 2008 and now is more than $20 million annually. WWE would not disclose the cost of the sponsorships it has sold.
“When you look at the roots of WWE, it has always been a multigenerational property,” said Michelle Wilson, WWE’s chief marketing officer, who joined the company in February 2009. “I still hear it today when I go on sales calls: ‘I went with my dad. I went with my granddad.’
“Think back to early 2002, the Attitude Era: Shock TV was the norm and it became more TV-14 content. At that time, that’s what sold and did well.
“As we evolved, we realized it was important to get back to our roots and get back to the multigenerational aspect of the brand. And to make sure we can bring on corporate partners, and charities, we knew PG would really help those conversations to happen. … We wanted to attract blue-chip partners.”
When Dwayne “The Rock” Johnson told Cena, “You look like a big fat bowl of Fruity Pebbles” during an on-air
The animated image of wrestler John Cena has appeared on 8 million cereal boxes.
“He knocked Fred Flintstone off the box,” said Sharon Pupel, marketing director for Post Foods, maker of Fruity Pebbles. “Obviously we’re very happy with the relationship. We’ve had great success in reaching our target with the great properties WWE has.”
Said Wilson, “I think WWE is perfectly positioned to grow. We’re very turnkey; we control the intellectual property, the athletes, the production of TV, and the social media and digital media assets. So when sponsors come to us, it’s one-stop shopping.”
Bruce Goldberg writes for the Denver Business Journal, an affiliated publication.
This month’s airing of the HBO Films presentation “Muhammad Ali’s Greatest Fight,” a docudrama that explores Ali’s appeal to the U.S. Supreme Court after he was convicted of draft dodging, began a run of several shows that HBO Sports hopes will work hand in glove with a busy run of upcoming fights.
Spike Lee and Mike Tyson discuss their HBO Films project.
Photo by:Getty Images
“We’re known as the leading platform for live boxing, and these shows are very compelling adjuncts to that live boxing,” said Ken Hershman, president of HBO Sports. “They feed each other. So a live fight might help feed an audience for a documentary and we’re fully expecting the Mike Tyson show to provide a great lead-in to a night of live boxing following it, as well as a ‘24/7.’”
Boxing also gets documentary treatment this week on ESPN, where the 30-for-30 film “No Mas” premieres on Tuesday night. “No Mas” follows the classic rivalry between Sugar Ray Leonard and Roberto Duran. Directed by Eric Drath, “No Mas” debuted on ESPN Deportes Saturday night.
The record-breaking numbers behind the Mayweather-Alvarez fight will be the story of the year in combat sports. The $150 million-plus in pay-per-view sales. The $20 million at the box office. Only the second fight ever to do more than 2 million buys.
But some of the lesser-known numbers tell an interesting story of the frenzy that followed the fight.
On the same day as the most watched college football game to air on CBS in 23 years, Alabama’s victory against Texas A&M, the chatter on Twitter belonged not to that game, but to Mayweather-Alvarez, based on data compiled for Showtime by Social Guide, the Nielsen social media measuring service.
The 825,000 people tweeting about the fight that Saturday pushed out 2.7 million tweets, more than doubling the Twitter activity related to the ’Bama game, which was easily the second-most-tweeted TV-related topic of the day.
The fight’s most commonly used hashtag, #TheOne, was used about 250,000 times on fight day, making it the most used tag of the day. Boxing hashtags made up seven of the top nine, with #TeamCanelo, #Mayweather and #MoneyTeam each used more than 100,000 times.
The @SHOsports Twitter account was the most mentioned sports account for the day, with more than 14,000 mentions.
“It just shows you the way that we caught fire as the fight approached,” said Showtime Sports head Stephen Espinoza. “The fight became top of mind. It’s what people were talking about. And I think that showed in the [pay-per-view] results.”
Fans also visited Showtime Sports’ website as they never had before on the day of the event, clicking there not only to order the pay-per-view, but also to watch episodes of Showtime’s “All Access” series and view other videos.
The site recorded 947,000 visitors and 1.84 million page views on fight day, up dramatically from the 78,000 visitors and 204,000 page views for Mayweather’s last Showtime pay-per-view and the 131,000 who went there on the day of Alvarez’s last fight. All that data is courtesy of Canvas, the host and administrator of Showtime Sports’ site.
“It shows you what happens when you open up access to your content and get it out in front of people,” Espinoza said. “Everything we did was about opening up access. We want people to buy the fight. But everything else was out there, delivered as broadly as we possibly could. And I think you saw the results.”
The Eye and the Peacock
The return of boxing to Saturday afternoon on CBS and NBC in December provided a watershed moment for the
The bout between Leo Santa Cruz and Alberto Guevara in December attracted 1.8 million viewers to CBS.
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NBC, which placed a second fight in the top 10 in April, plans to air at least two fights a year on the flagship channel as part of its well-received “Fight Night” series, with the next scheduled to feature Main Events-promoted heavyweight Tomasz Adamek on Nov. 16.
Showtime Sports head Stephen Espinoza said he is in discussions with CBS Sports executives about more dates on the network. The focus, he said, is on finding a lead-in that will be similarly effective to the one they had in December, when they retained 90 percent of the audience from the Indiana-Butler basketball game.
“That showed there’s definitely a general market interest in boxing,” Espinoza said. “It’s critical that we have a compatible and strong lead-in in order to give the programming a boost. Since we haven’t seen boxing on network television regularly in a while, it’s going to take a while to retrain the audience. We can’t expect to pull an audience out of thin air with no sports as a lead-in.”
Fox, UFC talk production
The UFC may produce additional programming for Fox.
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Now, with Fox in the market for programming to fill two new sports channels, the UFC is studying the expansion of its production arm to help feed that still emerging beast. Last month, UFC President Dana White and Craig Borsari, senior vice president of production and operations, began work on increasing its capacity to create non-UFC sports programming to pitch to Fox Sports.
Though White would not discuss specifics, he said the programs likely would be similar to the documentary style “Countdown” shows the UFC produces to promote its pay-per-views. The UFC would expand its production staff in Las Vegas and build a new group in Los Angeles to handle the increased output.
Top Rank eyes subscription model
Promoter Top Rank says it hopes to roll out a subscription model that would take some of its digital video content behind a pay wall by the end of the year, but has not yet determined what to put there and what to keep free.
Top Rank has been working with MLB Advanced Media on a revamp of its digital holdings for more than a year.
“There are a lot of tricky conversations [with television rights holders],” said Top Rank President Todd DuBoef.
“But there also are things that are not necessarily captured in the traditional broadcast — locker room access, preparation before the fight, things that happen in the corners — a lot of things like that could give people different insight.
“It’s a balance between giving things away to create awareness and what is a monetized product that consumers will pay for.”