06-25-2008, 08:23 AM
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| | AFL: VooDoo Economics?
MMAPayout.com: The Business of MMA: AFL: VooDoo Economics?
Knowing the financial straits that most MMA start-ups are hindered by, it was a bit surprising to see the big numbers being thrown around recently by the American Fight League. Especially eye opening were the figures that were reported for the signing of female fighter Tara Larosa. Sherdog reported the terms recently: |
With those numbers being thrown around, a little research was in order to figure out where the revenues were going to come from for these kinds of salaries. Judging from this piece on the AFL, meeting that kind of payroll should be no problem.
The deal - which will reportedly pay Larosa a minimum of $500,000 and could reach $750,000 over the course of its 18-month term -
They forecast revenues between $15 million and $20 million for 2008 and plan to double that by 2009. PPV will be their main driver of revenues with sources indicating they are expecting 150k PPV buys once they start PPV this Fall. Merchandising should be no problem, either, with planned revenue of $350,000 the first year and over $1 million by the second year.
With promoting MMA being so easy a caveman could do it and a public that embraces non-UFC MMA companies, they should be rolling around in money in no time, with plenty left over for Tara's $500,000 to $750,000 contract.
Referenced article: A Fighting Chance:
here's a revolution taking place in the way America views combat sports — and it started in Lexington. |
"We are purposefully, in a positive way, trying to disrupt the industry," said William "BJ" Santiago, CEO of the Lexington-based American Fight League (AFL). "We are really becoming America's league."
That is a significant accomplishment for the upstart company incorporated in Kentucky in October 2007. But Santiago and his business partner Jon Hatton have done so by making dramatic changes in the way they approach the business of Mixed Martial Arts (MMA) promotional fights.
"We knew what other groups were doing, and they do a good job," Santiago said. "But we never wanted to compete with them. We wanted to be different."
The difference in this case has equaled success. In its first year, the group forecasts revenues between $15 million and $20 million. By 2009, the AFL plans to double those revenues. The group will have events in 12 to 15 states this year. Within two years, there will be an AFL event taking place every week somewhere in the country.
Both Santiago and Hatton attribute this success to the organization's pursuit of two unique agendas: a minor league or grassroots style professional circuit and a positive public image campaign.
Promoters in the past have used a similar business model to promote fights, such as those by the better-known UFC (Ultimate Fighting Championship), Hatton said. The AFL has deviated from this by creating a fight ranking system. Hatton compares it to players in the minor leagues who gain the opportunity to move into the majors.
Veteran, credentialed fighters will tour throughout the country in any of the 33 states where fighting is legalized. Rankings, as well as matches, are determined based on earned points, with fighters also competing for a predetermined purse. In the last few months, the AFL has signed a number of well-known MMA fighters to its roster.
Amateurs and pro-rookies are given an opportunity to prove their worth in the grass roots system. This local or "farm" system allows fighters to gain experience and reputation based on a point system. Such a platform allows fighters to move up in the sport, Hatton said. The AFL recruits two or more promoters per state who will be sanctioned to hold AFL events. Amateur matches consist of three rounds of three minutes; pro-rookie matches last for three rounds for five minutes, and professional title fights consist of five rounds for five minutes.
In Mixed Martial Arts (MMA) fights, combatants use a series of martial arts including Judo, Tae Kwon Do, Krav Maga and traditional boxing, Hatton said. Athletes are usually expert in two to four of these arts and switch back and forth from one to another during a fight, he said.
This point-based circuit system is effectively changing the way the public perceives the sport, Hatton said. "It is now being seen not as simply a fight, but as a competition between athletes," he said. "That's a change from the past."
The AFL launches its "Revolution Tour" of events on March 7 at Rupp Arena in Lexington. A projected best crowd estimate is between 7,500 and 9,000 attendees, Hatton said.
Changing the image of MMA is the second unique mission of the AFL. "Our goal is corporate citizenship programs," said Santiago. "Jon and I want our legacy to be to do good for society in conjunction with sport."
Corporate America has often been hesitant to support fights due to a negative image, Santiago said. Fighters have often been depicted as thugs or buffoons, rather than athletes. The AFL's goal is to change that, creating a family-friendly image similar to that of NASCAR or the NFL.
To that end, all AFL fighters are required by contract to perform charity work, make hospital visits, or demonstrate other forms of citizenship prior to an event. The AFL donates a portion of proceeds to a variety of charitable causes, ranging from children's charities to cancer.
In particular, the AFL is committed to supporting U.S. troops, Hatton and Santiago said. Portions of their proceeds go to organizations for fallen and wounded soldiers, including Fisher House and Wounded Warrior. Santiago is a U.S. Army Airborne Infantry officer and veteran of Desert Storm.
In November, Santiago and Hatton plan to take the AFL directly to the troops by staging an event in Iraq. Proceeds will go to charities, particularly those that support the military, Santiago said. Discussions are currently underway for this event to be televised. Due to security reasons in Iraq, details will not be announced until later.
Santiago and Hatton started their business partnership after meeting at the same gym. Hatton is a six-year Krav Maga (an Israeli special forces fighting technique) and Santiago is a world-level Tae Kwon Do competitor. Hatton was a successful residential community developer who had branched out into promoting fights. Santiago was a director at Lexmark.
Both agreed from the beginning that strong business strategies would be key to AFL's success. To that end, they enlisted nationally and internationally prominent advisors and investors to sit on their corporate board. Byron Holley, CEO of Lexington Capital, helped the AFL raise initial monies.
They added Sean McClure, also from Lexington, as director of marketing and athlete liaison. McClure also looks to the merchandising side of the business, which he says will yield about $350,000 the first year, "as we develop the line," and over $1 million by the second year. Merchandising will be different from the usual hats and t-shirts, including a corporate line of dress shirts and pants, as well as a possible line of jeans. Instructional and workout videos are also in the planning stages.
This change in merchandising is being created due to the expanding demographic the AFL is creating, McClure said. He describes current audiences as 18- to 40-year-old males and 18- to 34-year-old females. McClure terms the audience "mainstream and very smart." He said that as the AFL is enabling MMA to gain legitimacy as a competitive sport and not as fighting, support has grown exponentially.
A next step in that growth is broadcast of AFL events. There have already been discussions with Mark Cuban's HD Network, as well as others, regarding television broadcast and pay-for-view. Hatton points to UFC's events as a model. "It costs UFC approximately $2 million dollars to produce a show, including the fighters' purse," he said. "A single event can gross between $25 million to $30 million dollars. That's due to the pay-per-view."
Still, Hatton said, many fight promoters fail. "They do not have a great management structure, and they don't run their operation like a corporation," he said. "We do. Plus we have a goal to be different — and to do things right. And, as BJ constantly says, 'to make this a better place to be.'"
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