A million dollars in cash is manageable. Weighing 22 pounds in $100 bills, according to the U.S. Treasury, it can fit in a large grocery bag with room to spare.
The $41.5 million Golden Boy Promotions is paying Floyd Mayweather Jr. to fight Saul "Canelo" Alvarez Saturday night in Las Vegas?
That's a different story.
At a weight of 913 pounds, Mayweather might need to add a few guys to his entourage if he wants to collect it in crisp $100s. And he might consider bringing the Bentley and not the Ferrari. It's a better fit.
Put into perspective, Mayweather will make, in a single night, nearly half of what the Oakland Raiders will pay their entire NFL roster over the course of the 2013 season. And while Mayweather's record-breaking payday is certainly not typical, it's not unusual for top boxing stars like Manny Pacquiao to clear eight figures a fight.
They're staggering numbers, digits that beg a simple question: how? How can promoters, like Golden Boy's Richard Schaefer and Oscar De La Hoya, possibly afford such an astronomical payoff?
"We have kind of revolutionized the pay-per-view industry, which is amazing, because we are a relatively young company—unlike others who have been in the business for 40 or 50 years," Schaefer told Bleacher Report in an exclusive interview, taking a less-than-subtle shot at rival Bob Arum of Top Rank. "It's something I take a lot of pride in, and it's something that has its roots in my banking days."
To Schaefer, once an executive at one of Europe's biggest banks, UBS, the key to making these mega-events possible starts with six simple income streams, each one carefully scrutinized by a team of experts, then combined to maximize revenue. The total, when it is all said and done, is bigger than the sum of its parts.
"The night of the fight is really the culmination of three solid months of work by, really, hundreds of people," Showtime executive VP Stephen Espinoza said. "This is a three-month-plus endeavor. And even three full months feels really rushed. There are just so many parties that we pull together. It's a very complex puzzle with more than a dozen entities coming together. It's a pretty amazing accomplishment."
It's an undertaking no one could handle on their own. It takes a talented promoter, a committed team of distributors, Fortune 100 partners and bucketloads of cash just to get the event off the ground. And it all starts and ends with pay-per-view.
The Most Comfortable Seat of All
Two million, five hundred and fifty-two thousand, five hundred and sixty-six.
It's a number Schaefer knows by heart—the record-breaking pay-per-view sales from De La Hoya's 2007 fight with Mayweather. It's the gold standard in combat sports, and a mark Schaefer and Golden Boy have firmly in their sights for Saturday.
At an average cost of $70 (about 60 percent of viewers will choose the $74.95 high-def broadcast), if things go perfectly and they approach the all-time record, the bout will gross about $180 million on pay-per-view sales. But before Schaefer and De La Hoya celebrate too hard, they first have to split the take with their distributors in the world of satellite and cable television. And because they own the mechanism of delivery, the distributors' price is steep.
"It's potentially a $90 million windfall for the pay-per-view industry. And I am stuck paying the fighters! I basically carry the full risk," Schaefer said. "About half of it goes to the carrier from whom you buy it...they don't take up any of the expenses, and they don't have to pay the fighters."
But the pay-per-view industry, with entities like In Demand, Dish and DirecTV, does contribute in other ways. Their percentage doesn't just start at an even 50 percent—they have to earn it with a commitment to market the event.
"The more they do in terms of marketing, the better their split is," Espinoza explained. "Everybody who's a part of this event is contributing to the marketing and promotion. The distributors contribute, not just on their airwaves, but for an event like this, the majority of the distributors are actually putting cash contributions into co-op advertising with us.
"There's a range, but for an event like this, most of our distributors choose to take the full marketing option which will get them to about a 50/50 split. The other 50 percent comes over to our side of the ledger."
The bulk of the remaining PPV money goes directly to Golden Boy to be divvied out to partners, most prominently Showtime.
As the exclusive television partner of Mayweather, and the event's distributor, Schaefer said the pay cable network will collect about five percent of the proceeds (a number that varies from show to show). It's a fee that takes into account production costs, advertising and another critical component: cash up front.
"We negotiate with them a fight-night advance," Schaefer said, explaining the initial costs would be too much for him to bear otherwise. "When you're at home and you order the pay-per-view, you're not going to pay Saturday night. But I have to pay Monday morning! You're going to pay your provider when you get your next bill, which might be a month from now. By that time, most fighters have spent the money already."
The Nevada Athletic Commission, by law, requires the promoter to deposit every penny of the fighters' salaries into an account, to be distributed by state officials on the night of the bout. For "The One," including Mayweather's record haul, that cost will be in the $60 million range.
"Monday morning, bright and early, these fighters are going to go to the bank and they're going to cash their check," Schaefer said. "I have to make sure come Monday morning that I have $60 million in my bank account. Otherwise, checks are going to bounce, and my reputation is ruined."
"If you add in all of the various marketing expenses, production expenses, travel, you easily add another $10-15 million on top of that," Espinoza said. "There is a big and immediate cash outlay."
The problem, he says, is the long delay in any significant return on that investment.
"The money from our cable and satellite partners can take as long as six to nine months and sometimes even longer to be collected,” he said. “The bulk of it will come in in three to six months, but there's a meaningful amount of money that won't come for up to a year later."
In addition to providing part of the bank roll to fund the event, Showtime is also in charge of television production. For a show of this magnitude, they'll be pulling out all the stops.
Instead of 10 cameras (standard for a big boxing match on Showtime), there will be 15, including special slow-motion and reverse-angle rigs. The total cost of getting the signal to air, Espinoza said, will approach seven figures.
"It's an enhanced production,” he said. “Sort of comparable to what a free TV network would do for the Super Bowl compared to a regular-season game."
In the end, no one knows if all the work will pay off.
"You never know. Is it going to be a home run? Or is it going to be a flop? I don't know if 1.5 million or two million or three million people are going to buy the event," Schaefer said. "I hate to lose money, but that goes with the territory. If you don't take any risks, you aren't going to gain anything either. And by the way, that does happen sometimes."
"It can happen," Espinoza concedes, admitting it is indeed possible to lose money, even on a mega-event. "Obviously everyone does their best to avoid it. It's not all fun and games—there's a lot at stake. One of the somewhat unnerving parts of the pay-per-view process is the fact that 95 percent of the buys will come in the last couple of hours before the pay-per-view starts. There's very little from which you can project performance up until the last minute.
"We have some very preliminary numbers now, but it's really not until a week after the event that you really start getting some reliable estimations of what the number will be. We're still projecting, even a week after the event.
"'Terrifying' is a good word for it. We are, to a large extent, flying blind. There's a lot that will happen in the hours, and even minutes, before the pay-per-view starts that will determine whether you have a massive success or not."
But worst-case scenarios aside, Espinoza believes that "The One" has been set up to succeed.
"It's hard sometimes for us to know because we are sort of inside the bubble...but I can't think of another event that's anywhere near this level of visibility," he said. "And I was involved in Oscar De La Hoya's career and the last six or seven years of Mike Tyson's career. None of the Tyson fights, none of the De La Hoya fights garnered this kind of attention."
The MGM Grand has more than 6,000 rooms. On a normal weekend, the cheaper ones go for around $200 a night.
This weekend, with a fight at MGM Grand Garden Arena? A quick search on the MGM website revealed the most meager accommodations will cost more than $500. When you extrapolate that extra income throughout the hotel, including in the more expensive luxury suites, Schaefer says you understand why events like "The One" are at a premium in Las Vegas.
"Just in the rooms alone, they're making millions of dollars. A night," he said. "And all of these people, they're going to eat, they're going to drink, they're going to gamble. It's a huge, mega-event for the MGM."
In a typical boxing arrangement, the MGM would pay Golden Boy a site fee for the pleasure of hosting the event. For a flat fee, the casino would control ticket sales completely, pocketing whatever profits they can.
"We never do that," Schaefer said."You leave money on the table that way. We believe in the strength of our event. We don't need your guarantee. It's like paying us with our own money.”
Instead, Golden Boy pays for their own security, cleanup and metal detectors. Rather than being guests of the hotel, they buy their own rooms and pay for their own food.
"We want to keep 100 percent of the money," Schaefer said. "If you, as the casino, want to buy tickets, of course! Be our guest. How many do you need? But you're going to need to pay just like everybody else."
It's a decision that paid off for Golden Boy in a major way. They sold out all 16,800 seats at the MGM Grand Garden Arena, with tickets priced from $350 to $2,000, in just one day.
The result was a box-office performance of $19.9 million, breaking their own record of $18.4 million set at the De La Hoya-Mayweather bout. And circling back as he often does, Schaefer said performance at the gate is often a prelude to pay-per-view success.
"We are looking at indications of an event that might shatter the PPV record," De La Hoya said simply.
For the most part, pay-per-view is a distinctly American phenomenon. A handful of nations will also offer the event at a cost, including Australia, Canada, Puerto Rico, New Zealand, Spain and the United Kingdom. But most of the world—including Mexico, where experts predict a record-shattering performance on Televisa—will watch the fight on free television.
All told, the event will air in 160 countries.
"I couldn't believe there were 160 countries, so I asked for a list. And it's true," Schaefer joked. "It gives exposure to our fighters and the Golden Boy brand all over the world."
It's this global presence that has led to comparisons with the World Cup or the Olympics. And while it may be easy to dismiss such talk as promoter-hype, Espinoza says it would be wrong to dismiss them entirely.
"The revenues that we'll generate in that three- to four-hour window Saturday night rival some of the bigger movies."
Schaefer has a team of four, headed by Araceli Villegas, who came over from NASCAR, whose only job is handling foreign television sales. That's given Golden Boy a strong presence in Mexico and elsewhere and, according to Schaefer, helped lead to a haul of between $4 and $6 million for "The One," depending on performance metrics.
But he believes the international impact runs much deeper.
Says Schaefer, "When you look at the global implications this fight has, and you add together the money people are going to spend all over the world—not just the pay-per-view, but the drinks and food and parties and barbecues—and you have these things going on in 160 countries? I bet you it's going to be over a billion dollars of economic impact this fight will have on a global scale."
There's something about being in Las Vegas for fight night, feeling the energy and feeding off a crowd hyped up on booze and violence.
"They want to be in Las Vegas," Schaefer said. "They want to soak in the fight atmosphere and the city."
Luckily for fight fans, the MGM owns 11 properties on the Las Vegas Strip, not just the MGM Grand. Between their various conference and ball rooms, and the Mandalay Bay's 10,000-seat arena, more than 25,000 tickets (priced at $100 apiece) will be available for fans to watch on the big screen.
Closed circuit, however, has two additional components that add significantly to the bottom line. First and foremost are sales in bars and restaurants. At costs ranging from $500 to $10,000, depending on capacity, it's a windfall that generates up to $5 million for promoters.
On the cutting edge of closed circuit is a recent relationship with Fathom Events, a company that specializes in the advertising you see before movies, to put the fight in more than 500 theaters nationwide.
While the theater deal may net $3 million (money they will split equally with the theaters and Fathom), it's the additional advertising oomph that may be the most valuable component.
"It's something that's very expensive, but we worked out a barter where they gave us inventory in the movie theaters to market the event," Schaefer said. "We want to surround the consumer everywhere they go. We want to remind them, 'Hey, there is a big pay-per-view.' We are surrounding them with one message: there is a big fight. Make sure that you don't miss it."
When you go to a UFC event, apparel companies like Tapout and Bad Boy permeate the crowd with their flashy T-shirts and sweats. At an NFL game, licensed apparel is the norm. From XXL to infant, there are jerseys to fit every size, gender and age.
No such market yet exists for the boxing industry. In fact, you're more likely to find bootleg gear being sold outside the arena out of giant plastic bags than licensed products on the Strip. T-shirts and programs will account for just $500,000 in sales. In this area, at least, if Golden Boy wants to capitalize on a revenue stream, they're going to have to invent it first.
"There's tremendous growth potential for the sport of boxing," Schaefer said. "I don't think anyone has done it right yet. You have 10 or 15 million people watching the fight in the U.S. alone, and we sell a couple hundred thousand dollars worth of merchandise? I think that's a joke. That's going to be the next area I turn my focus on."
He's eying a partnership with a major retailer to carry a line of clothing associated with each big-time fight. Sales would be nice, but they aren't the primary goal. Everything comes back, time and again, to selling the pay-per-view.
"Do I care how many shirts they sell there? Not really," Schaefer said. "But if I am in every Macy's or every Bloomingdale's and there is a section with my shirt and people walk by, guess what? It's another eye contact with my message, 'Hey, there is a fight.'"
The final piece in the puzzle is the event's sponsors. Golden Boy has lined up a who's who of major players, including AT&T, Corona and Valvoline.
Some of the relationships are fairly unique. Valvoline, for example, is giving customers $35 off the PPV cost with the purchase of an oil change. Corona will have displays in 25,000 stores all over the country promoting the fight.
The payoff for Golden Boy at a major event totals between $500,000 and $2 million. But, again, it's their role in getting the word out about the event that Schaefer and Showtime value most.
"I've never seen this level of sponsor activation," Espinoza said. More than $80 million will be spent to make people aware of the fight and its sponsors all told. But the genius of Schaefer's plan is that much of the spending is essentially found money.
"All these big Fortune 100 companies, they go and buy blocks of advertising time on CBS and NBC and Fox," Schaefer said. "They buy these blocks at the up-fronts and commit to a certain amount of money with those networks. They've already allocated the money.
"What we told them is, 'Why don't you utilize the fight?' Instead of just running an AT&T spot, they ran a spot with both fighters—promoting AT&T and our event. That's great for us. We've got another commercial running. It's good for them because they don't have to spend additional money with us. They've already allocated that money. They're just converting their existing ad buys."
On Margins, Costs and Motivation
Schaefer left the family business to take up the fight game with De La Hoya in 2000. For an urbane man who collects ancient Swiss stamps, it hasn't always been easy—personally or fiscally.
"On a Mayweather fight, we have extremely thin margins," Schaefer said. "Somebody asked me the other day if we were going to make $10 million. I said 'Are you crazy?' No way. A fraction of that. Which is OK. Golden Boy is doing about 100 televised events a year. We are making our money with volume, like Walmart or Costco. They can sell their merchandise for less.
"It's been a key to our success attracting fighters. Because we have such great volume and work on such small margins, we are able to put more money in the fighters' pockets. And who doesn't like that?"
The costs, he says, when jotted line by line, make up a much longer list than the revenues. If everything goes perfectly, and Golden Boy revenues hit $130 million for the show, there are still plenty of checks to cut.
"Travel, hotel, food, doctors, insurance, ring announcers, press tour, anti-doping tests, sanctioning fees, state fees, taxes, marketing, the ring, the setup, the cleanup," he says, rattling off expense after expense. "The list goes on and on."
It's these expenses that require the support of each and every partner to make the event a success. And, Schaefer says, it all starts with the fighters. If boxers were typical modern athletes, distant with the media, sparse with their words and reluctant to engage the press, fans or even each other, the show would be a failure from the jump.
With this in mind, he gives fighters an incentive to make sure the event is a hit. In addition to their guaranteed purse, the top fighters on the card are also eligible for a cash bonus with every pay-per-view sold after certain benchmarks are met. With payouts ranging from $5 to $10 per sale, an extra 500,000 buys can mean as much as an additional $5 million in a fighter's pocket.
"Now you have another group of very motivated people marketing the fight. And that's the fighters," Schaefer said. "With other athletes, football or basketball players, you have to drag them out and beg them to do an interview. You have no access to them. Here you have fighters doing media days, media tours, media calls, workouts and interviews. They make themselves available because there is a direct implication on how much money they are going to make."
Despite this extra effort, success may hinge on outside factors. It helps that the pay-per-view audience has expanded, from 60 million homes in 2007 to 90 million today; it hurts that the national economy, still strong in 2007, hasn't recovered from a prolonged slump.
In the end, it may come down to football. Defending national college football champion Alabama takes on Texas A&M and Heisman winner Johnny Manziel Saturday on CBS, Showtime's parent network. It's sure to draw a huge audience (22 million last year)—one that will soak in advertisements for the fight.
"What really helps me sleep better at night is the CBS corporation's involvement," Espinoza said. "Everyone focuses on the CBS network and their ability to reach a broad audience of 10, 15, 20 million or more people at once is a key part of our marketing. But CBS Interactive, CBS Radio, CBS Outdoor are all platforms that are being activated to really reach people everywhere they go. Whether it's in the doctor's office, whether it is driving down the highway, or watching NFL or college football."
Schaefer, though recognizing the potential power of outside events, still feels strongly that he has something special on his hands.
"This is not just a boxing match," he said. "I haven't seen anything like it."
Mayweather agrees, tipping his proverbial hat to the Golden Boy boss.
“I take my hat off to Richard Schaefer. He works very, very hard,” Mayweather said, summing things up as he arrived in Las Vegas this week. “This is not just a fight, this is what we call an 'event.'”
Jonathan Snowden is Bleacher Report's lead combat sports writer and the author of three books, including Total MMA: Inside Ultimate Fighting. Unless otherwise noted, all quotes were compiled firsthand.
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