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Volume 21 No. 1


As the stream of pay-per-view boxing events slowed to a steady drip in the last five years, the executive who has worked on that business since HBO Sports launched it 23 years ago noticed an unanticipated result.

HBO was bringing in nearly as much money airing four or five pay-per-view fights a year as it did when it put on eight or 10.

Canelo Alvarez (left), who was the B-side in a fight with Floyd Mayweather Jr. in September that sold 2.2 million pay-per-views, is slated to make his debut as a PPV headliner in March.
Photo by: AP IMAGES
“The history of this business is cyclical, in terms of who the pay-per-view stars are and how many of them there are,” said Mark Taffet, the senior vice president who oversees HBO Pay Per View. “But what has been consistent has been number of buys and the revenue that occurs each year. There is a remarkable consistency there.”

In six of the last eight years, HBO’s pay-per-view revenue has ranged from $180 million to $240 million, even though its output in those years ranged from four fights to 10. Buys in those years were 3.2 million to 4 million. Last year, when HBO and Showtime each did two PPVs, the four fights combined for about 3,975,000 buys and $252 million. In 2012, when HBO did four PPVs, they generated a nearly identical 4,015,000 buys and $238 million.

The lesson: Though less isn’t always more, it’s about as much.

It will be interesting to see how that history applies to this year, which is shaping up to deliver the busiest pay-per-view calendar in boxing since 2008, and perhaps the highest-grossing ever, since it could be the first time lead dogs Floyd Mayweather and Manny Pacquiao each headline two PPVs in the same year.

Rising star Canelo Alvarez, fresh off a date with Mayweather in the most lucrative fight in history, at $150 million from 2.2 million buys, is slated to make his debut as a pay-per-view headliner on March 8. Pacquiao is expected to follow in April, with Mayweather going in May, and Miguel Cotto and Sergio Martinez negotiating to fight in June. Assuming one more PPV each for Mayweather and Pacquiao, plus two more penciled in for Alvarez in July and November, puts the count at eight dates in 10 months.

That would be as many as aired in 2012 and 2013 combined, and the most in a single calendar year since 2008, when HBO put on nine events and scheduled 10, one for each month except April and August.

That nine-fight year generated $192 million from 3.8 million buys. The following year, HBO cut back to three PPV fights and still did 3.2 million buys and $167 million. Six fewer fights led to only 600,000 fewer buys and $25 million less in revenue.

“The dynamic changed,” Taffet said, “and less became more.”

This year, it has changed again, driven by the return of Showtime to the pay-per-view landscape, as well as the impending emergence of the next wave of pay-per-view hopefuls — most notably Alvarez — even as the current class of Mayweather, Pacquiao and Cotto fight on.

The lessons of the last eight years would seem to indicate that it’s best to reserve pay-per-view for only the top-shelf fights; that the realities of a finite market will make winners of four or five of the fights and losers of the rest.

And yet nobody involved — not the leading promoters, the networks or the major cable pay-per-view provider — is bemoaning what lies ahead.

“We believe the smart strategy is putting [only] marquee events on pay-per-view,” said Mark Boccardi, senior vice president of programming at pay-per-view provider In Demand, a joint venture between cable operators Time Warner, Comcast and Cox. “Still, overall, we’re pleased with having more fights in the mix. Sure, something is going to give. You’re not going to have the Mayweather-Canelo-type buy levels on a regular basis. … But what we have seen over the years is that there is a substantial hard-core boxing fan base and those fans continually buy pay-per-view events.”

The concern stemming from more events isn’t limited to how much consumers are willing or able to spend in a year. There’s also the matter of how much marketing support the promoters can expect from cable and satellite providers.

Networks and television distributors combined to deliver more than $80 million worth of promotional spots plugging Mayweather-Alvarez in September. It’s unclear how those providers will respond to twice as many pay-per-view events, but many assume that it means some fights will get less support than they might like.

“The assumption has to be that a crowded calendar will definitely impact the amount of promotional support — the cross-channel spots we get from distributors as well as the co-op [advertising] dollars that are available,” said Stephen Espinoza, executive vice president of Showtime Sports. “We are competing for a finite number of spots and dollars. … That is without a doubt a consideration as we move through the year and finalize each bout.”

Boccardi and Taffet said they aren’t so sure there will be a big impact. The networks and distributors set their marketing budgets based on projections, so if a fight projects to sell well it still should get solid backing, they said.
“You can’t just think of it as a bucket of money to spend on pay-per-view for the year and it is what it is,” Boccardi said. “All the operators realize how valuable these pay-per-view programs are to the bottom line. They’ll justify getting even more dollars to go against the right pay-per-view programs.”

Much as the networks would prefer that promoters reserve pay-per-view only for the blockbusters, the economics of the fight game can complicate those decisions.

Alvarez has been pining to headline a pay-per-view for more than a year. Promoter Golden Boy planned to give him his first shot late in 2012, but rival promoter Top Rank bumped him with a bigger fight on the same date. Alvarez fought on Showtime, then did so again in April at a sold-out Alamodome, setting him up for a breakthrough fight as the B-side against Mayweather.

Now, Alvarez’s camp wants to see what sort of numbers he’ll do as a headliner. Golden Boy and Showtime have agreed to take the shot, in part because there is not a reasonable alternative. Golden Boy CEO Richard Schaefer penciled the decision out this way:

The bottom of the projection for an Alvarez pay-per-view is about 200,000 buys. At 200,000 buys, after deducting the 50 percent cut taken by cable and satellite operators and the 7.5 percent paid to providers HBO or Showtime, the promotion would be left with about $5 million. Undercard fights typically cost about $1 million. Rights fees from the delayed broadcast and foreign and closed-circuit sales typically cover the cost of marketing the pay-per-view. The promoters make their money from ticket sales and sponsorships. That means 200,000 buys can provide about $4 million as an upside for the fighters.

“And I don’t know any network which today is paying $4 million for a live fight,” Schaefer said, pegging the current ceiling at HBO and Showtime at about $3 million. “So is 200,000 homes a success? Define success. Are we talking about a financial success, or a success for the sport?

“I believe at 200,000 homes you’re a little better off financially than if you would go live. And with 200,000 homes, and an average of five people, that’s 1 million viewers. What kind of viewership do HBO and Showtime do for boxing? About the same as that. So at 200,000 buys a pay-per-view is not a flop. It sounds like a flop because you have Mayweather doing 1.5 million and now 2 million. But 200,000 or 300,000 buys can be a success.”

While not ready to buy into the idea that all three of Alvarez’s fights this year land on pay-per-view, the head of Showtime Sports points to his last outing as evidence he may be ready to carry his own event.

“Generally, [Mayweather] is between 1 million and 1.5 million, but he has broken out with two opponents,” Espinoza said. “One was Oscar De La Hoya and the other was Canelo Alvarez. That’s a pretty good indicator that Canelo may be ready to go out on his own. And it’s about expectations.

“We need to maintain a little perspective and realize not everyone comes out of the box as Floyd Mayweather. It’s a slow process. At some point you just have to take the plunge and begin that process.”

When boxing last did 5 million buys in a year, in 2007, it was driven by De La Hoya and Mayweather. But Pacquiao and Cotto each fought twice on pay-per-view that year, as did Marco Antonio Barrera. Juan Manuel Marquez and Ricky Hatton were on as opponents. Eric Morales, Bernard Hopkins and Fernando Vargas each headlined once.

“If the product is compelling, I think a slate of eight or nine will be fine,” said Todd DuBoef, president of Top Rank. “Of late, pay-per-view has been almost exclusively about Pacquiao and Mayweather events. When people talk about this next tranche of guys, maybe there’s more depth on the periphery than there once looked to be. In our business, we don’t know until we see it play out.”

Fox Sports 1 has signed a three-year deal with The Jockey Club that will include broadcasting nine major horse races, including the richest race in the world, the Dubai World Cup.

The series of 90-minute programs will begin Feb. 9 with the Donn Handicap at Gulfstream Park in South Florida, and end with the Ricoh Woodbine Mile Stakes at Woodbine Racetrack in Toronto on Sept. 14.

Neither Jockey Club officials nor Mike Mulvihill, Fox Sports 1 senior vice president of programming and research, would disclose financial details of the deal.

While the network will air nine races this year, the deal does allow it to televise up to 10 races a year.

Jason Wilson, vice president of business development of The Jockey Club, a 120-year-old horse racing industry organization, said Fox Sports approached The Jockey Club last year about broadcasting horse racing.

Mulvihill noted the deal came out of discussions between consultant Ed Desser, who represents The Jockey Club, and David Hill, Fox senior executive vice president and a longtime horse racing fan and handicapper.

Mulvihill is bullish on the racing series. “We don’t do anything just to fill hours,” he said. “I believe that horse racing is a sleeping giant in American sports.”

He pointed to the fact that about $11 billion is wagered on horse races in North America annually, as well as the sport’s affluent fan base. He added that most of the Grade 1 horse races, which feature the best horses in the country, are being televised nationally only by networks dedicated to horse racing.

“That’s not to say that horse racing doesn’t face challenges,” he said, “but when you’ve got a sport that’s generating $11 billion in handle a year and for the most part the highest level of competition isn’t even being televised nationally, I have to believe there’s an audience there that is being underserved.”

The Jockey Club partnered with NBC Sports, which broadcast a four-program series on NBC, NBC Sports Network and CNBC called “The Road to the Kentucky Derby” in 2012 and 2013. However, that racing series will not be broadcast by NBC this year. “We did have discussions about ‘The Road to the Kentucky Derby’ series, but we couldn’t make it work for 2014,” Wilson said.

NBC declined to comment on its talks.

When “The Road to the Kentucky Derby” aired on NBC, it averaged 926,000 viewers in 2012 and 935,000 viewers in 2013. It averaged 243,000 viewers when it was aired once on CNBC in 2012, and between 52,000 and 166,000 viewers for its shows on the NBC Sports Network in 2012 and 2013.

“These shows will do as well as the shows we had on NBC Sports Network,” Wilson said when asked about ratings projections for Fox Sports 1. “Of course, we do expect a drop relative to the NBC show in 2012 and 2013.”

The series planned for Fox Sports 1 marks the first time Fox has broadcast horse racing since the late 1990s.

Leagues and TV networks are questioning the legality of a new feature on Yahoo Sports’ mobile app that curates game highlights in near real-time.

The feature, “Loops,” was launched at the beginning of the year and allows users to create in-game GIFs (graphics interchange format files) from NFL, NBA, NHL, MLB and NCAA game telecasts. The app records the game broadcasts and then lets users create their own video highlight reels, complete with graphics, text and video filters.

“Loops” allows users to create their own video highlight reels.
Essentially, Yahoo Sports is creating virtual highlight packages that its users can post online.

The service hits on a long-standing fear among TV executives: that a service like “Loops” will do to video what a service like Napster did to audio. Sports executives worry that the “Loops” service has the potential to decrease the value of leagues’ highlight rights and, potentially, their live game rights.

All major sports license their online game highlights under various rights structures. Neither the leagues nor networks have licensing deals with Yahoo Sports for “Loops.”

League and network lawyers are paying close attention to the service. They don’t know if the “Loops” service is illegal, but several executives said it appears to infringe on league and network rights.

ESPN released a statement saying, “We are looking into this matter and reviewing our legal options.”

MLB Advanced Media, which holds a contractual relationship with Yahoo Sports for an online highlights show, similarly said the matter requires review. “I’m not going to rush to judgment, but our belief is that duration of content doesn’t matter with regard to rights. It doesn’t matter whether we are talking about six seconds or six hours,” said Bob Bowman, MLB Advanced Media president and chief executive. “We are in lockstep with our rights partners with regard to the use of actual game footage.”

The matter is so delicate that most networks and leagues declined to comment on the subject. CBS Sports, Fox Sports, NBC Sports Group and Turner Sports would not comment; the NFL and NBA also withheld comment.

Yahoo Sports declined to comment as well.

But sources said that Yahoo Sports believes it can navigate the rights issues because the graphics, text and video filters used on the highlight “transforms” it enough so that it’s not covered by any rights deal.

The minimal delay — timed in seconds, rather than minutes — from when video becomes available in “Loops” essentially allows users to watch a game from the Yahoo Sports app rather than one of the TV networks, at a delay of less than a minute. Helping fuel “Loops” is technology from IntoNow, a social TV outfit Yahoo bought in 2011.

“Putting aside any question on rights, it’s a fascinating product,” said Jason Kint, former senior vice president and general manager of “This feels like version 1.0 of this feature. I can only imagine how they can continue to slice up these highlights and clips in more interesting ways.”

“Loops” currently is available only for Apple’s iOS mobile platform, but an expansion to the Android platform is scheduled to happen soon.

Mandalay Sports Media bought New York-based production house Roadside Entertainment in a move that positions Mandalay on both coasts.

“We have aspirations to be a broad-based media company, and this extends our reach,” said the company’s founder and co-chairman Mike Tollin, who would not disclose terms of the acquisition. “It’s very helpful for us to have a presence on the East Coast with a partner we trust that can jump in and take care of things.”

Mike Tollin
Tollin, the well-known Hollywood producer and director, launched Mandalay Sports Media with Golden State Warriors co-owner Peter Guber nearly two years ago to invest in and develop programming for TV, broadband and mobile platforms.

Mandalay Sports Media and Roadside have worked on several projects together, most notably on “Ink” for AOL. “Ink” is a series of vignettes on athletes and their tattoos.

As part of the deal, which will be announced this week, Roadside partners Ron Yassen and John Hirsch will become executive vice presidents of production for Mandalay Sports Media.

Within sports media, Roadside is best known for producing the ESPYs for ESPN and several documentaries for NFL Network. Mandalay Sports Media was particularly interested in the company’s online work. Roadside launched a sports-centric YouTube channel called NOC (“Network of Champions”) with Baron Davis and Cash Warren.

Both Yassen and Hirsch have long résumés in sports media. Yassen helped launch Classic Sports Network, which became ESPN Classic, and has produced documentaries for ESPN series including “SportsCentury” and “Outside the Lines.” A former ABC Sports producer, Hirsch helped launch the XFL.

CAA is a founding partner in Mandalay Sports Media.

When the UFC launched its new Fight Pass digital service in the early morning hours of the first Saturday in January, company President Dana White was watching at a resort in Jackson Hole, Wyo., and chief content officer Marshall Zelaznik was on a laptop in his Los Angeles home.

White tweeted a photo of the crystal clear video routed to his TV screen, along with the question: “How is it working for all of u?”

Then he braced for whatever missiles the most persnickety of his 2.75 million followers might launch.

“I can’t believe how positive my Twitter is,” White told Zelaznik when they spoke by phone a bit later. “This is amazing.”

Launched with a free trial that rolls over to $9.99 a month beginning Feb. 28, Fight Pass gives the UFC a home to air at least a dozen fight cards from outside North America this year, along with “Ultimate Fighter” shows produced in India, China, Brazil and Mexico and other shoulder programming. It also has a deep library of fights from the UFC and its MMA predecessors, including the popular Japan-based Pride circuit. The UFC had about half its library up in time for the launch on Jan. 4 and will continue to build it, Zelaznik said.

UFC executives would not reveal specifics on how many have signed up for the free trial, which also has included early prelims from U.S. events. But Zelaznik did say they “blew through” the best number they did for prelim fights streamed on Facebook, which White previously said was about 140,000. He said that by the end of the month the site will have doubled expectations, which were based on previous Facebook audiences, as well as transactions for live and archived content on the UFC website.

“We hit the ball out of the park,” Zelaznik said. “We’re more buoyant than ever about what this service can be.”

The UFC’s service differs substantially from the digital channel announced by the WWE earlier this month, which will include all of the pro wrestling company’s pay-per-views in the $9.99-a-month package with a commitment to a six-month subscription. That “over-the-top” offering has ruffled feathers among cable and satellite distributors, largely because of the bargain basement price.

“For us, this is a complementary offering to everything else we’re doing,” Zelaznik said of Fight Pass. “This was about complementing Fox. About complementing pay-per-view. We never considered putting pay-per-view in there. That’s not what this is.”