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How Does Boxing Make Money?

By  +Follow September 20, 2013 9:21AM
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This last weekend saw the undefeated Floyd Mayweather defeat Mexican boxer Saul “Canelo” Alvarez in one of the major sports events of the year. While boxing has largely been relegated to the back of public consciousness, running well behind most other major sports in popularity and facing a stern new challenger in the combat sports arena with the continued rise of Mixed Martial Arts (MMA), that didn’t stop Oscar De La Hoya’s Golden Boy Promotions from paying Mayweather a purse of $41.5 million. And that’s before undisclosed payouts based on the pay-per-view numbers that could push Floyd’s payout even higher.

To put that $41.5 million in perspective, one needs only realize that in one night Mayweather made more than double what LeBron James, Kevin Durant, Carmelo Anthony, or Peyton Manning pull down in a year for playing their respective sports. No wonder the Grand Rapids-born fighter is known as “Money.”

So where’s this money coming from?

Gambling?

Good though, but no, not really. This is not to say that there isn’t a lot of money being made off of people betting on boxing, just that it isn’t really what pays for Mayweather’s purse. “Money” isn’t the only one cashing in on his name, casinos like Wynn Resorts, Ltd. (WYNN) , Las Vegas Sands Corp. (LVS) , MGM Resorts International (MGM) , and Caesars Entertainment Corporation (CZR) can expect a healthy boost to their sports book’s income because of this last week’s action. In fact, last weekend ended up being what 30-year Vegas veteran Jimmy Vaccaro called "the perfect storm" between the fight, the Alabama-Texas A&M game on Saturday, and Sunday night's big match-up between the Seattle Seahawks and San Francisco Forty-niners.

"In all my years, I've never seen a schedule that sets up so perfectly for betting," Vaccaro told ESPN (DIS)  the Friday before the fight. "You can't put together a schedule like this. It just happens, and when it does, it's definitely good for business. It's going to be off the charts."

Ticket sales?

Oh, man, that was funny. Ticket sales! No, certainly not. While the fight attracted very healthy attendance, breaking a record by selling over $20 million in tickets to see the fight live at the MGM (with an additional $2.6 million in tickets bought by closed-circuit viewers in Las Vegas), that’s still less than half what Mayweather made off the fight.

Television?

Bingo. It’s not exactly rocket science, but that’s where Floyd’s “Money” really comes from. It’s something he knows and banks on when he's negotiating deals with HBO (TWX) or Showtime (CBS) . His company, Mayweather Promotions, made the following announcement prior to his May fight with Robert “The Ghost” Guerrero:

"Mayweather is the [pay-per-view] king and averages over one million PPV buys per event, which is the highest PPV buy average of any boxer in history. At this record-setting PPV performance level, if all six fights contemplated by this deal occur, it will be the richest individual athlete deal in all of sports."

And the fight with Alvarez appears to have set all new records for pay-per-view receipts. While it doesn’t appear to be on the verge of passing the 2.5 million subscribers who shelled out to watch Mayweather fight Oscar De La Hoya in 2007, it should pass that fight’s record gross of $136.9 million because this most recent fight cost viewers upwards of $75 instead of the $50 they paid to see Mayweather-De La Hoya. With an estimated 2.2 million people purchasing the fight, its estimated to clear $150 million. Which should explain why Floyd Mayweather’s worth $40 million a fight.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


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By  +Follow September 20, 2013 9:21AM
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