Time to box clever, not throw in the towel
Boxing has ended its COVID19-enforced hiatus and returned to UK screens. However, this is far from the return to normal that may have been hoped for. One of the only fights of significance, Whyte vs. Povetkin, failed to meet expectations – taking 220k pay-per-view (PPV) buys against a prediction of 300k by its promoter, Eddie Hearn (another significant fight, Usyk vs. Chisora took place on Halloween but PPV buys are yet to be reported). This underperformance has been reflected across the pond – in the US, boxing audiences in August and September were down 36-51% against the same months last year across Fox and ESPN.
To some extent, this is unsurprising. PPV is especially exposed to the economic cycle - consumers can treat PPV as a hyper-flexible subscription where they pay for exactly the fights they want, meaning that any squeeze on consumers’ wallets is felt instantly by broadcasters and rights holders. This has meant that reduced incomes caused by the current COVID19 crisis, and the resultant careful consideration of home entertainment budgets, have impacted boxing harder and more quickly than any other sport.
A stuttering economic recovery is unlikely to save the day either. The nature of PPV viewing leads groups of individuals to gather in each other’s homes to watch a fight – sharing the £20 PPV cost. COVID19 restrictions on gatherings limit this sort of arrangement for the foreseeable future, in effect forcing individuals to consider multiple separate £20 PPV payments – or instead, choose to simply go without. Demand for pub PPV licences is also in doubt – this Autumn’s 10pm closing time, for example, was set at exactly the time headline fights usually start and the proposed closing time of 11pm for this Winter is still likely to be too early for fights to finish.
This problem is compounded by a lack of centralised organisation, with fights organised in an opportunistic manner, and both fighters (and their promoters) needing to agree the details. The incentive to organise any bout is set by the revenue that that fight can generate. Lower PPV sales and ticket sales at zero due to COVID19 restrictions mean that the size of prize on offer is much smaller. This has reduced the incentive for boxers to fight to the extent that marquee fights are only just beginning to return (making it one of the last sports to do so). So, while central league organisation has kept sports like football running, the number of boxing fights happening remains much lower than pre-pandemic.
This begs the question of how to navigate the current situation. A pure PPV model is too exposed to the economic cycle and COVID19 gathering restrictions, which are likely to continue until the recently developed vaccines are available and widely distributed. Meanwhile, boxing’s one-time possible saviour, multisport OTT DAZN, is experiencing troubles of its own, having been sued by one of its key boxing stars – Saul ‘Canelo’ Alvarez – in a dispute over his $35m per fight deal (a deal which he has now exited, although he will continue to fight on the platform on an ad hoc basis). Indeed, DAZN’s hope to aggregate boxing in its key market – the US – seems to have come to an end as COVID19 has hit its subscriptions hard and it is left with fewer key fights to bring them back. DAZN has laid off its New York staff and rolled its US service into the recently launched global DAZN service, priced at only $2 per month.
So, if a PPV-only model is too risky and a standalone boxing OTT (which is what DAZN essentially was in the US) has been proven to be a tough sell to consumers, it seems that the distribution strategies currently pursued in boxing are not yet optimised. However, moving to a pure media rights model, typical of most sports, isn’t appropriate to solve these problems given the low frequency of boxing bouts.
The best solution (at least, in Europe) may be a hybrid strategy. Deals could be done with the traditional pay TV platforms to offer all boxing content on a top-up channel via a subscription model, with a fee set on top of subscribers’ usual monthly contract. This would still monetise boxing fans’ additional willingness to pay – previously captured via PPV – but would stabilise revenues and reduce exposure to the economic cycle. To maximise revenues for marquee fights (or even for all fights), non-subscribers would be offered access via PPV as before. A hybrid model de-risks the strategy by providing a consistent, subscription-based revenue stream and offers multiple price and entry points not only for the hardcore boxing fan but also the general sports fan who counts boxing as one of their favourite sports.
This model would not be dissimilar from the one adopted by WWE, where all live PPVs are available at no extra cost to subscribers of its OTT service, WWE Network, and non-subscribers access PPVs via TV in the usual way. A new channel like this could require extra content – and any gaps in the schedule could be addressed by ending exclusivity agreements between broadcasters and promoters. Bringing in multiple promotion companies would maximise the stables of fighters on show and offer greater structure and a consistent schedule of bouts.
This new channel could also be executed via a joint venture between a promoter (or promoters) and the broadcaster. Such an arrangement would mitigate the risk for the broadcaster whilst still providing a baseline income level for fighters due to the more predictable revenue streams despite economic uncertainty. Ultimately, it could also introduce a degree of central organisation to a sport that has suffered (both reputationally and financially) without it.
Although unasked-for, COVID19 presents boxing with the opportunity to move away from the short-termism of the PPV model and towards a more structured approach which could benefit all stakeholders.
The media landscape has become more complex over the past decade. There is also now a much more challenging economic environment due to COVID19 – a backdrop that is likely to extend into the coming years. This means that all sports will have to actively search for approaches to optimise revenue – and hybrid platform and D2C strategies with multiple price and access points represents one of these approaches. O&O’s in-depth, bottom-up research on consumer preferences and sophisticated consumer segmentation techniques, and its unique insight into platform strategies and valuations has already helped sports and investors in sport - ranging from rugby union, football, basketball and motorsports to volleyball, WWE and winter sports – to start to navigate this more complex and challenging environment successfully.
Ed Noble, Oliver & Ohlbaum Associates