A Child’s Guide to Boxing Economics

lemonade_stand


by Paul Magno

From the general lack of urgency among the boxing media and fans, one would never know that the sport we love is on the precipice of a deadly fall.

As live gates become less and less of a factor in determining fighter’s purses and as boxing gets pushed further and further out of the mainstream, it seems obvious that we are all in desperate need of some remedial economics lessons if we are to turn things around. So, please, bear with me:

On the first day of Summer vacation, Billy decided to put up a lemonade stand in front of his house.

He carefully constructed his wooden stand, painted his sign, and got together the ingredients for some cool, tangy lemonade.

Billy put his lemonade stand on the curb, near his house and called over neighbors and passers-by for a refreshing drink.

On cool, rainy days business was down and he had to work to make a profit, but, overall, Billy made decent money and his lemonade business actually began to grow.

One day, Uncle Joe came to visit and stopped for a drink at Billy’s lemonade stand. He was quite impressed.

“Billy, this is some tasty lemonade…no wonder you have so many customers. I have an idea. I just built a playground in my back yard for my kids and we have all the neighbor kids over all day. Why don’t you set up your stand in my back yard and just make lemonade for my kids and their friends? I’ll give you 20 bucks a day and I’ll even buy all the materials you need.”

Billy loved this idea. Regardless of the weather or any other conditions, he would have guaranteed money and he wouldn’t have to try so hard to bring customers to his stand.

For awhile, things were great for Billy…nice and easy. He’d just show up, make his money, and go home.

Things got so easy that Billy got lazy. The quality of his lemonade got so bad that even his cousins and Uncle Joe’s neighbors didn’t want the free lemonade.

Uncle Joe, although a nice guy, couldn’t justify paying 20 dollars anymore for lemonade that nobody was drinking, so he nicely dismissed Billy.

Billy was back to where he started, but in his absence, 3 more lemonade stands had popped up on his street and, with Summer drawing to a close, the prospects of making any more real money were very slim indeed.
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For anyone remotely familiar with the situation: Billy represents boxing promoters, Uncle Joe represents the premium cable channels paying ridiculous fighter fees for exclusive rights, and Uncle Joe’s back yard represents the casinos that lure fights away from the real fans by paying large site fees.

By spoiling fighters and promoters with outrageous rights fees, HBO (and to a lesser extent, Showtime) has created a system where the fighters are essentially fighting for HBO’s amusement only.

In the process, promoters have lost their drive to even promote the fights. With guaranteed money on the table, there’s no longer any urgency to actually sell the public on a fight. There’s no reason to do the grunt work of making quality match-ups and no point in working to get mainstream publicity if none of that really matters anymore.

Boxing has come down to promoters pitching fight ideas to TV execs and the fans are a mere afterthought, both logistically and economically.

How else would you explain fighters’ purses often exceeding ten times the amount of the live gate? The fans are simply not paying the bills anymore.

HBO’s most recent televised bout featured Yuriorkis Gamboa against Orlando Salido on September 11th. The paid attendance was just slightly over a thousand and the money from the live gate totaled $133,650. Unfortunately, Gamboa, alone, made $350,000 for the night’s work.

The thousand or so fans who bothered to pay their way into the Palms Casino & Resort in Las Vegas were not even necessary. They were mere props to make the TV show look better, but HBO was paying the bills and the promoters will always cater to those with the easiest pocket to pick.

More and more the fans are being side-stepped and those in the working end of the biz are going straight at the money. There even seems to be a general contempt for the fans and a blatant effort to opt for TV-friendly fights rather than the fan-friendly variety.

High-end Boxing has become solely dependent on premium cable rights fees to such an extent that any change in HBO’s or Showtime’s policies would mean a total crash in the way the sport is run.

Without HBO or Showtime, fighters looking to make the same inflated purses would have no choice but to take their fights to pay-per-view, further alienating an already-frustrated fan base and taking yet another full step away from the general sports fan.

Sooner or later, this bubble is going to burst and boxing, like little Billy and the lemonade stand, will find itself the victim of its own short-term greed.


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Paul has been in and around the sport of boxing for more than thirty years. You can read his work on Fox Sports, Yahoo Sports, or on his own website, The Boxing Tribune. In the past, he has done work for Inside Fights, The Queensberry Rules and Eastside Boxing. Paul currently resides in Michoacan, Mexico, where he has worked as a licensed boxing official as well as co-trainer at Ruben Olivares' gym.
  • labori

    The bubble is going to burst is the perfect phrase and the truth, just like the housing bubble burst and dragged down with it our entire economy, and the world’s economy.

  • ptmagno

    Yep…what kind of business model is it to have a guy like Andre Berto making a million plus while only drawing 972 fans to a fight?

    Boxing makes the US auto industry look like the MENSA party planning committee…

    By the way, I edited my typos out of the article…They were the product of a 5 am writing plan…I almost crossed over into Examiner.com terrain…

  • jdone

    baller article