Oscar de la Hoya Is Worth the Money

by Michael Rome on Jan 25, 2009 8:47 PM EST in News Comment 57 comments

Lots of people are astonished by the news that Affliction apparently paid Oscar de la Hoya $5 million to come to their show. We don't know this is the actual figure, but there hasn't been any denial yet.

Even if it is the figure, it could end up being the best expenditure ever made by Affliction. Coming out of the second show, Affliction is in serious financial trouble. Their contracts are all based on assumptions that proved faulty, and they simply can't keep financing this thing from the inside. They need capital.

Enter Oscar. He is not going to supply the capital. But by getting him to the show and paying him to associate himself with the product in a visible way, they have increased their chances of getting funding many times over. My experience with capitalization is limited to the technology sector in Silicon Valley, but the principles are the same all over. Next to the raw numbers, the most important thing that investors look for is a team they can be confident in. They want to see people in charge with a history of success, and names that people can believe in. When it comes to the fight world, it's hard to beat Oscar.

In Hollywood, it's often said that when Tom Hanks is in a room with studios, he gets what he wants. In a lot of ways, the same is true for Oscar. Trying to get funding with Oscar behind you is a whole different game than trying to get funding with Todd Beard behind you.

Affliction: Day of Reckoning was a giant commercial for investors. I have no doubt they had numerous organizations there to consider potential investments, and having Oscar going berserk during that main event certainly didn't hurt. Realistically, if I was making the calls, I would not invest in Affliction because I don't believe there is any way they can make money. But most investors don't know the MMA game. They will see the UFC's numbers and assume they can do it too. Sadly, fans are now in a position where they need to hope investors are clueless.

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Desperate times call for desperate measures

I just can’t imagine the people that ODLH has pull with are going to be compelled to give a shit about MMA.

by subo on Jan 25, 2009 9:01 PM EST reply actions 0 recs

I mean, this thing was a money loser before they paid him to show.

by subo on Jan 25, 2009 9:02 PM EST up reply actions 0 recs

I keep seeing people saying that Oscar was paid 5 million jus to be there but the actual quote I saw led me to beleive that money was for Golden Boy’s involvement not just ODLH to sit in the crowd. Paying Golden Boy 5 million for producing the show makes a lot more sense and I am sure they could of included him being there in person as part of the deal.

by who me on Jan 25, 2009 9:01 PM EST reply actions 0 recs

This

Makes sense. Fucking Merchant and his old senile ass. Look at what he started.

*sigh

by xFenixKnightx on Jan 25, 2009 9:50 PM EST up reply actions 0 recs

yeah i just heard the video of merchant talking about it. he said “…is in nearby anaheim where his company got a 5 million dollar fee from a t-shirt maker so that he would be personnaly involved in the promotion of a mixed martial arts show. It would take that much Jim, to get me to go to one of those things….chuckle chuckle chuckle.”

by #5mmafan on Jan 25, 2009 10:07 PM EST up reply actions 0 recs

It’s still a heck of a lot of money but it makes more sense than paying 5 million for a personal appearance. Of course that is what I got from reading Merchant’s quote so I figured that was what he meant too, he just said it in an insulting manner.

by who me on Jan 25, 2009 10:39 PM EST up reply actions 0 recs

So...

are they hoping that Oscar will pull investors or boxing fans? Ideally, both, but I just don’t understand the numbers. If I were to pay him $5m to come to a fight he would be doing a lot more than sitting around.

by brandonh on Jan 25, 2009 9:18 PM EST reply actions 0 recs

i guess i just dont posses your “experience with capitalization” but i dont see how someone who is willing to put their money on the line is made anymore confident by the fact that you were able to pay Oscar to show up and sit ringside. if De La Hoya was investing his own money in the venture then i could see how that would make one feel more confident about investing money, but the idea that an investor will put money into a product which loses money hand over fist on the strength of Oscar’s involvement is suspect.

by #5mmafan on Jan 25, 2009 9:43 PM EST reply actions 0 recs

Getting funding is often a game of smoke and mirrors.

If Oscar is dedicated to doing PR for them and committing some of goldenboy’s resources, it will make people on the fence more willing to get into it.

by Michael Rome on Jan 25, 2009 10:10 PM EST up reply actions 0 recs

I’m sure the average investor sees Golden Boy as a sucessful fight promoter and that could lend the appearance of confidence to what they are looking at even if it is different business models between sports.

by who me on Jan 25, 2009 10:36 PM EST up reply actions 0 recs

It’s amazing the effect the “team” has on capitalization. You can go in with the greatest plan ever and never get read, but if you have people on top with a track record of success, they get millions to put together a ski ranch in death valley.

by Michael Rome on Jan 25, 2009 10:39 PM EST up reply actions 0 recs

Wouldn’t you say Trump is enough?

by The Bronzeville Bully on Jan 26, 2009 12:54 AM EST up reply actions 0 recs

Investors know Trump’s number’s game already but Golden Boy actually has a sucessful history promoting fights and investors probably won’t look deep enough to tell the difference between being successful promoting boxing and MMA.

by who me on Jan 26, 2009 2:20 AM EST up reply actions 0 recs

ODLH Didn't do any promoting before the fight

so I doubt it.

by banter on Jan 25, 2009 10:55 PM EST reply actions 0 recs

This isn’t right. He flew to New York and did press there before coming back and doing another press conference for them here. He was involved with pre and post fight press conferences, and chose to go to their show over a boxing fight.

by Michael Rome on Jan 26, 2009 12:35 AM EST up reply actions 0 recs

There was also the Golden Boy name being attached to this for months now and whatever ODLH’s company did for Affliction for this show (anyone know exactly what they did do?).

by who me on Jan 26, 2009 2:22 AM EST up reply actions 0 recs

So what’s going to be his level of involvement? They certainly haven’t shown much commitment during the partnership.

by bigweeze on Jan 25, 2009 11:11 PM EST reply actions 0 recs

When watching Golden Boy boxing events I’ve seen large Affliction banners hanging just above the ring . . . . could that be part of the $5 million dollar deal?

by bignerd on Jan 26, 2009 12:39 AM EST reply actions 0 recs

I guess.

They’re not going to get anything back from Goldenboy worth anywhere near that money. The only value in this is if they can get funding somehow.

by Michael Rome on Jan 26, 2009 12:47 AM EST up reply actions 0 recs

I kinda of agree that it’s difficult to think they will get their money back. The banners seem to promote the clothing brand and not the entertainment company. It’s kind of a Budweiser like approach to advertising, but honestly I have no clue how to evaluate advertising effectiveness on that level.

Part of that advertising deal might have meant that Oscar had to give Affliction some face time. In this case they might have made him suck it up and attend their MMA event. Than again you get people do a lot for a $5 million.

I’m not sure what Affliction’s play is after the 3rd show. They seem to be building a real commodity in Fedor and after their 3rd PPV most of those expensive contracts will be off the books. Still, I do get the impression they are searching for an investor or buyer.

by bignerd on Jan 26, 2009 1:09 AM EST up reply actions 0 recs

Affliction clothing sponsors a lot of boxing events, that is unrelated to Affliction entertainment (although using the same name and branding gets them attention too).

by who me on Jan 26, 2009 2:23 AM EST up reply actions 0 recs

I thought Golden Boy promotions was already some how involved with Affliction. I can’t believe they paid him any money at all to show up let alone five million dollars. How does it help anyway? Oscar is not a mixed marital artist and he got his ass wupped last time he was in the boxing ring. Paying people to come to their fights? Stupid BS. Pay the un-famous fighters that risk their ass more money.

by J_Maddux on Jan 26, 2009 1:52 AM EST reply actions 0 recs

1) Oscar is a draw, win or lose. Period. He’s the man when it comes to the fight game. This was basically a hail Mary pass by Affliction. They’re hemorrhaging money, and I actually think it was a smart move to get the biggest name in the fight game to see their show. It’s not like they paid Joe the Plumber to go see their fight.

2) Affliction is already paying the fighters too much money. The huge purses is part of their problem. They’re not bringing in enough revenue to justify the expenditure. So no, they shouldn’t pay more to the fighters at this point, because it would be foolish to do so with their current business plan.

by pud333 on Jan 26, 2009 2:07 AM EST up reply actions 0 recs

I just don't get it...

I know that he’s not in the fight game, but if the Donald isn’t big enough to get some investors on board, then why does anyone think Oscar could keep the ship afloat?!?

If they’re looking for investors who don’t understand the MMA scene fully, wouldn’t those people jumped on after Trump did as well?

Omar...I'm done with you. Hello Darren Ford! Come to papa.

by PacBellBoozer on Jan 26, 2009 2:05 AM EST reply actions 0 recs

have jumped on…

Omar...I'm done with you. Hello Darren Ford! Come to papa.

by PacBellBoozer on Jan 26, 2009 2:06 AM EST up reply actions 0 recs

This isn’t about Oscar it’s about Oscar’s very successful fight promotion company, that is what investors will see. Oscar being there in person lends to the appearance that his company Golden Boy promotions is taking Affliction MMA seriously.

by who me on Jan 26, 2009 2:26 AM EST up reply actions 0 recs

So let me ask a question that’s probably been asked over and over again….

If Golden Boy is so serious about MMA, then why were they counter-programming the PPV event this weekend with a PPV of their very own? I know that there’s a different audience for boxing and MMA, but I can’t say that’s the smartest of business decisions really.

Now if they’d of done something truly new and different, perhaps they could of offered the two PPV’s as a package deal. Something like…for another $15 you can pick up the MMA as well…that would of shown more commitment than having to pay and exorbitant fee for the the face of the organization to show up.

Omar...I'm done with you. Hello Darren Ford! Come to papa.

by PacBellBoozer on Jan 26, 2009 2:36 AM EST up reply actions 0 recs

If the 5 million was their pay to produce the event then their interest was in earning the money, it was a job for them. There is a real difference between them being partnered up with Affliction and interested in going forward with them and Golden Boy being paid to be there and present the appearance that ODLH was personally interested in his company going forward with Affliction MMA. If Affliction is looking for a buyer/investor then the appearance of Golden Boy being behind them is very significant(even if they actually are just doing it for the money).

by who me on Jan 26, 2009 2:46 AM EST up reply actions 0 recs

Oscar going berserk during that main event certainly didn’t hurt.

Anybody got a picture of GIF of this? I totally missed that.

by pud333 on Jan 26, 2009 2:12 AM EST reply actions 0 recs

“a picture or GIF” I meant. :)

by pud333 on Jan 26, 2009 2:13 AM EST up reply actions 0 recs

I’m sure Oscar like that ending. Arlovski forgetting 1st rule of boxing, always to protect yourself. Fedor, pulling a page out of the boxing101 handbook, when pushed to the corner throw hay maker towards your charging opponent.

by bignerd on Jan 26, 2009 2:17 AM EST up reply actions 0 recs

Oscar didn’t get 5m to just show up to the show…

He got the dough to attach his name to the promotion and obviously show up to certain press conferences… the same way Donald Trump is getting paid.

Affliction also bought over 1 million dollars of the gate and gave the tickets away.

I doubt we will ever see another show unless an Investor steps up to bank roll this.

by mmalogic on Jan 26, 2009 2:55 AM EST reply actions 0 recs

i agree with you, I wonder how much the million really hurts. I know what they’ll do. They will file without claiming the 1 million as income, and they just paid the 1 million to themselves, so it’s not like they lost a million.

of course, loss is relative, they did lose a million in some ways compared to what they wanted to make and could have made if they really sold those tickets. In the end, their “real” gate is probably close to 500,000. The pond has to be like 200k to run, and if the ODLH costs are true, the costs of running this show look like 12 million +. Something’s gotta give.

They desperately need an investor.

by Michael Rome on Jan 26, 2009 5:05 AM EST up reply actions 0 recs

I’d mostly disagree with this. An invester is going to know whether or not Oscar was paid to attend this or not. You could get Colin Powell to attend something for 5 million. That doesn’t mean it’s profitable. Money is scarce these days, people aren’t going to lob millions around.

Here’s what I don’t get. Why are these guys paying their fighters so much more than the UFC? They’re paying out $200 000 for an undercard fight (lil’ Nog). Many of these fighters are either UFC castaways and don’t want to fight for the UFC, or went their way when pride folded. Why not negotiate a contract so that Affliction stands a chance of getting on top of things quickly, with guarantees of profit sharing when the company starts seeing success? Surely they could’ve gotten Sylvia to fight for $200 000 ish, instead of the $800 000 they gave him. Soku and others are getting mind-blowing amounts of money when there aren’t any other options for them unless they’re on good terms with the UFC? I’m assuming most of them don’t want to fight for the UFC.

Does this confuse anyone else? Has it been addressed elsewhere? Is Affliction not desperate to trim their fighter salaries a little bit?

by Dooda on Jan 26, 2009 3:03 AM EST reply actions 0 recs

If you breakdown the salaries of this latest event you will notice there new fighters were paid significantly less than the fighters signed for Banned. The problem is those contracts offered for Banned were three fight deals.

If Affliction continues to offer events they will have leverage to negotiate down those contracts. You said it, it’s them or the UFC and many of the guys don’t want to go back to UFC. Maybe pay them 10-15% more than a UFC contract instead of 300-400% more. Payroll would drop from $3.3 milion to $1.5 million which would make them sustainable.

Another aspect not discussed is Tim Sylvia, Andrei Arlovski and Matt Lindland have now lost. Technically, Afflction management could terminate their contracts and try to force them into more reasonable contract terms.

by bignerd on Jan 26, 2009 3:18 AM EST up reply actions 0 recs

I think you’re both overlooking Japan, which is still an attractive offer for a lot of these upper level fighters who have a certain price that the UFC might not be willing to offer. I can’t pinpoint it exactly, but I know that Jeff Monson was offered a quarter million to fight Roger Gracie in Sengoku, and he is the lower paid of the two. And for DREAM to have snagged CroCop, there must have been some kind of situation where UFC was no longer willing to offer him his negotiated rate, and FEG became the high bidder.

Of course, the sponsorship situation is even worse in Japan than Affliction.

by smoogy on Jan 26, 2009 3:54 AM EST up reply actions 0 recs

Someone mentioned something about a Zuffa kill order, which was applied to EliteXC if I remember correctly. It meant that the UFC would match the other promotions offers until the pay got too expensive for the rival promotion to make any money. Since the UFC has much more exposure, the fighters would be able to get much better sponsorship deals there, thus the rival promotion would have to way overpay them to compensate them for the lost sponsorship money.

by iiowyn on Jan 26, 2009 3:26 AM EST up reply actions 0 recs

The matching of a contracts has been verified. Tito says he cannot sign a contract til June in order to avoid giving Zuffa the chance to match. Arlovski’s contract was also verified to be negotiated under those circumstances.

Until a non-top flight fighter comes forward and talks about sponsorship money I am going to continue to assume the money isn’t there. After 3 or 4 years I would have expected one fighter from the UFC to come forward with bitch session complaining about how some match up killed their sponsorship payment. I’ve heard similar rumors as you, just haven’t seen any evidence.

by bignerd on Jan 26, 2009 3:39 AM EST up reply actions 0 recs

Matching bid clauses in contracts are pretty common, that had nothing to do with trying to kill off any organization that is just a standard thing to have (probably something they added after BJ Penn ran off on them). Thee will be a no compete period and then there will be a matching period after that. Bidding wars are something that could be part of competition but it would be different than the matching clause in a contract. If anything matching clauses can work out really well for the fighters in negotiations because it can push a company to have to pay more to keep them if they can get another bid from a company. Arlovski probably would of been happy if the UFC would of matched Affliction’s crazy high offer, Tito may have to worry about other companies lowballing him to the point where the UFC can sang him even cheaper than before(assuming the UFC even wants him).

Not sure what you are talking about when you say the sponsorship money isn’t there? Fighters and managers have talked about that in the past.

by who me on Jan 26, 2009 4:11 AM EST up reply actions 0 recs

I am talking about people who do not fight for Zuffa, Zuffa would match the offer the rival promotion would give to any fighter they looked at. Thus making them overpay for every single fighter, not just the ones they would be courting away from Zuffa.

by iiowyn on Jan 26, 2009 4:14 AM EST up reply actions 0 recs

Haven’t heard of that rumor, but would not put it past them. Public perception is Zuffa is cheap, you would think other promotions would know which contracts they would and would not match.

by bignerd on Jan 26, 2009 4:23 AM EST up reply actions 0 recs

Zuffa normally doesn’t get into bidding wars but then they don’t have to. There are more things on the table than just pay, the sponsorships are better and company is a lot more stable with more possibilities at fighting and exposure/growth in the sport. Of course other companies would have to pay better to lure guys in because they can’t show any of the other benefits that Zuffa gains from being the largest, most stable and best known company in the industry. They can put pressure on other companies to make them up their bids for fighters without actually getting into bidding wars for guys.

by who me on Jan 26, 2009 6:27 AM EST up reply actions 0 recs

Really, I haven’t heard any solid info on sponsorship money. Any news you can share would shed some light on me.

I assume Dana will let a fighter put a condomdepot.com logo on his ass for $500 a fight but if he catches wind a fighter is getting real money from an outside company he bans their product than opens UFC sponsorship negotiations immediately so he can get piece.

by bignerd on Jan 26, 2009 4:19 AM EST up reply actions 0 recs

Joe Lauzon made over 50k in sponsorship money for his Florian fight. Chuck Liddell makes millions. Rich Franklin’s agent said Rich made a million in sponsorship in 2007.

You’re incorrect on this assumption. The top fighters make a lot of money on sponsorships, someone like Randy probably made millions for his last fight outside of the UFC money.

Fighters are apparently being offered very good money for sponsor spots on their video game characters too.

by Michael Rome on Jan 26, 2009 5:12 AM EST up reply actions 0 recs

Ken Pavia’s stated rule of thumb was that sponsorships basically double a fighters show up money, of course that was what he said in an interview a year and a half ago so it could be even better money for guys now.

interview:
http://www.youtube.com/watch?v=6R4ajQOysvM

You are wrong about how Dana White works the sponsors, they do have rules in place because a fighters sponsorship could appear on a UFC telecast which would make the UFC liable for that so they have to approve them all ahead of time but they don’t “steal” sponsorships from guys. Heck lots of fighters have very good sponsorships (Rashad Evans somehow hooked up with Microsoft). These things have been pretty well documented from fighters and managers.

by who me on Jan 26, 2009 6:20 AM EST up reply actions 0 recs

There was a whole article about this on MMA weekly with a mid tier fighter talking about it. It’s common knowledge among fighters you make a lot more in the UFC on sponsorships.

http://www.mmaweekly.com/absolutenm/templates/dailynews.asp?articleid=7110&zoneid=13

by Michael Rome on Jan 26, 2009 5:10 AM EST up reply actions 0 recs

More eyes = more money.

by iiowyn on Jan 26, 2009 1:31 PM EST up reply actions 0 recs

Tito is full of shit on this matching thing. He was going to sign with Elite supposedly, remember? Tito always has a new excuse for why he hasn’t signed with a company besides the UFC.

by Michael Rome on Jan 26, 2009 5:14 AM EST up reply actions 0 recs

Is Oscar worth the money?

Basically Affliction went all in (or doubled down) on the River with a straight flush draw against 4 aces…

The odds of pulling the straight flush on the river is very low but you already put alot of money into the pot so why not let it ride…

by mmalogic on Jan 26, 2009 4:59 AM EST reply actions 0 recs

5 million more is a pretty heavy commitment, but it strikes me that they realized that with their current structure there is no hope at all of making money.

It’s not a great trump card, but at least it’s something. I would not be shocked if they get someone to bite.

by Michael Rome on Jan 26, 2009 5:08 AM EST up reply actions 0 recs

No way does Oscar bring anything to the table. He was bought, and any savvy investor would realize that. Affliction was one clean Gilbert punch and 2 more smart rounds of AA dancing around Fedor from pulling an Kimbotanic sinking. Investors will look only at the gate and the PPV. If Dana signs Fedor, Affliction is T O A S T!!!

by Stevefiji on Jan 26, 2009 5:04 AM EST reply actions 0 recs

People here seriously overrate investors’ knowledge. Recall that investors were taken for a ride by ridiculous companies like IFL, Bodog, and EliteXC, none of which ever had any hope of making money.

The real question is whether you can convince investors you can be pepsi to the UFC’s coke. For most that don’t understand the business, they are susceptible. Especially with Oscar on board.

by Michael Rome on Jan 26, 2009 5:07 AM EST reply actions 0 recs

Affliction has enough in their favor for this deal except the right economic climate…

18 months ago they would have been good to go.

But today it’s a long shot… possible but not probable.

by mmalogic on Jan 26, 2009 5:54 AM EST up reply actions 0 recs

As a fan I am hoping it happens.

The only outcome Affliction can ever have is death, but if investors can prolong it for 2 years and get us more cards like this I’m all for it.

I was chatting with someone in the Valley last night, the money here for new tech companies has seized up like quicksand. They are sticking with known commodities, guys that have delivered in the past. Not taking any risks. It’s going to be very hard to pull this off.

by Michael Rome on Jan 26, 2009 6:04 AM EST up reply actions 0 recs

Very hard…

Right now you can actually buy things of value for pennies on the dollar.

Cash is king and whoever has it… it’s like being able to buy a dollar for 25 cents if you look at the right sectors…

The biggest money in history was made right after the 1929 depression.

Affliction may also try a public offering…

by mmalogic on Jan 26, 2009 10:30 AM EST up reply actions 0 recs

What we’re seeing right now is completely different from 1929.

If the dollar collapses like it’s poised to do and you’re holding onto cash you’ll strongly resemble a donkey.

by Dooda on Jan 27, 2009 3:33 PM EST up reply actions 0 recs

Investors tend to look at numbers, a lot of times they don’t even understand the business they are investing in as long as the numbers make sense. That will be what Affliction will have to overcome because they have made the rest of it to look good enough. Two years ago painting a pretty picture would of probably been enough but in this economic climate investors have gotten way more picky about putting money out there.

by who me on Jan 26, 2009 6:34 AM EST up reply actions 0 recs