The Boxing Market Equilibrium
By Earl E: The rumors in the boxing wire indicate Top Rank lost $100K when WBO welterweight Champion Terence Crawford (29-0, 20 Kos) won a unanimous decision over WBC Champion Viktor Postol (28-1, 12 Kos) on HBO pay-per-view (PPV) at the MGM Grand in Las Vegas, Nevada. This was an example of economics in play. Merriam-Webster defines economics as “Relating to the process or system by which goods and services are produced, sold, and bought.”
One law in economics is called the law of supply and demand, which Merriam-Webster defines as “The amount of good and services are available for people to buy compared to the amount of goods and services that people want to buy.” PPV is valuable when the market is in equilibrium, that is when the forces of supply and demand are balance. This is the meeting point in which sellers are willing to sell at a certain price and which buyers agree to that price. The problem is this modern boxing era is not in market equilibrium.
In this present market, boxing stakeholders, specifically promoters and managers forget the important law of supply and demand. How many times do promoters and managers attempt to feed boxing fans with bouts fans simply don’t want to buy? They have this misunderstood thinking that if they schedule it, fans will come. Fans understand their strategy, they are not outsmarting them, but fans still come. Let’s examine some fights and how market forces and the law of supply and demand was applied.
Fans demand to see good fights. The Crawford vs Postol fight show two undefeated fighters. Both have reached the level above prospect. However, both fighters are unknown to casual boxing fans. Was the fight in demand? No. Yet, Top Rank supplies it as PPV. Not many people bought and thus a loss of profit. Although, the Crawford vs Postol match was definitely fight-worthy, it definitely wasn’t PPV worthy. Top Rank argues that the loss was in good cause to showcase Crawford to a wide audience, but that argument fails. It fails because (1) PPV never reaches a wide audience, but a narrow one. Have you ever heard of the Super Bowl or World Cup being on PPV? (2) At the rumor 50K PPV purchases, and let’s generously assume each purchased had at least a household of four watching the fight, then it reached 200K people. That certainly is not a high number to introduce such as talent, which Crawford is. The loss of money, rumored to be $100K loss was a gut check, but it wasn’t a left hook to the body (or for you unique southpaw types-a right hook to the body) as I’m sure Top Rank can afford a $100K loss.
Let’s look at a match with market equilibrium. Here, I don’t cite a PPV, but a free one provided by Premier Boxing Champions (PBC) via CBS, and that was Thurman vs Porter. This match had all the elements of success. You have two really good fighters on a free televised network. It was a fight in demand and so 2.4 million viewers tuned-in, and fans got value. A win-win case for every stakeholder involved.
Let’s look at another match that was a success, Spence vs Bundu. More than 6 million people watched this fight. Why? Because of the obvious, it was on a free platform and televised perfectly, right after the Olympics basketball gold medal game. Now, more than 6 million people have at least heard of Spence. On the business side, PBC and NBC were able to sell commercial time between rounds. Another win-win situation. Even Spence’s opponent Bundu got his name out there, and he is nowhere at the level of Crawford’s opponent, Postol.
This is where the market is shifting thanks to PBC and manager Al Haymon. Haymon understands the law of supply and demand. Oh before I forget to mention it, he studied economics in Harvard. He has found promoters who agree with his strategy, which has so far produced a fan friendly medium unlike other managers and promoters who resist this effort by applying the supply side without regard of what the consumer demands.
The reasons supply side providers are getting away with relying on the supply side is because boxing matches unlike baseball, basketball, football, or even UFC is not provided in quantity. Since there is a limited number of matches, boxing fans are merely happy to watch a boxing match. Hence, the supply side providers enjoy revenue through ticket sales and PPV knowing there are enough boxing fans to watch any fight. Boxing fans did not demand Canelo against Smith, but it is shoved down the fan’s throat. The supply side provider understands there are enough boxing fans to steer them in like cattle into the AT&T Stadium. Not to just watch the match, but mainly for the entertainment value in going out, eating out, and then to an entertaining stadium.
When you rely on supply side and disregard the demand side, eventually your supply will not be purchased. The demand side will be fed up with what the supply side is providing that they stop buying it, such is the case as retailer Gap, which provided clothes out of style, no longer in demand. In our case, in regards to PPV, if there is no value then people will not purchase, and the supply side provider obviously loses money and boxing fans are once again waiting for a dynamic fight.
Demand side must let their voices be heard. One way, is for the demand side to stop paying for PPV that has no value. In fact, if the fight presents no value at all (unfortunately there are many of those), then supply it on free network television. The demand side must make the supply side providers make them a partner by packaging fan-friendly PPV. The demand side has no problem with the supply side providers financially succeeding. Financial success is one basis; capitalistic countries are based on. Making money is healthy for the sport, but that success has to be because the providers are packaging valuable fights that the demand side can agree upon. I’m interested to see the financial results of future PPV to determine which side the market equilibrium is shifting towards to.