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Boxing: How Pay-Per-View Works And Why Terence Crawford Is Headed There

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One of the biggest frustrations that both fans and media covering boxing have shared for over a generation has been how the business side of the sport came to dominate its landscape.

So it was no surprise that last Monday’s report from Dan Rafael of ESPN stating that Top Rank Inc. CEO Bob Arum was having World Boxing Organization light welterweight champion Terence Crawford, one of boxing’s fastest rising stars, make his HBO Pay-Per-View debut on July 23 after a potential fight with Ruslan Provodnikov fell through due to the Russian fan favorite signing a multi-fight deal with rival network Showtime was met with groans throughout.

That sentiment comes from what the perception of PPV has become when it comes to boxers as the realm for the sport’s elite. Crawford, a talented fighter with charisma along with a growing fan base, is seen as still not ready to make the jump from HBO Championship Boxing to PPV. While that argument has merit it misses Arum’s and HBO’s motivation in making this move. Part of understand it involves looking at how the PPV system works.

The PPV concept of purchasing private telecasts has been around in the U.S. since 1951 with its modern iteration taking shape throughout the 1970s and  1980s. Since that time PPV has become synonymous with boxing, mixed martial arts, and professional wrestling along with movies and concerts. PPV has unknowingly to much of the public become more commonly used thanks to sports leagues. That means when one subscribes to out-of-market packages from Major League Baseball (MLB Extra Innings), Major League Soccer (MLS Direct Kick), the National Basketball Association (NBA League Pass), and the National Hockey League (NHL Center Ice) they are in fact using PPV. These leagues along with MMA promotions like Ultimate Fighting Championship and wrestling companies like World Wrestling Entertainment have PPV arrangements as singular companies. This is where boxing thanks to its mercenary nature is unique.

The manner in which a boxing PPV normally takes shape is with a promoter making the main event and taking it to HBO or Showtime to be the distributor. If either network decides to carry the fight (which is fairly common due to prearranged agreements between both parties) they in turn take it to a PPV network to work out the details such as pricing, promotion, and profit sharing.

With few exceptions the PPV network that either HBO or Showtime deals with throughout the television carrier world is In Demand, which launched in 1985 as Viewer’s Choice and is now owned by four of the biggest cable companies (Bright House Networks, Comcast, Cox Communications, and Time Warner Cable) in the country. The normal profit split for PPV fights , as noted by Charles Jay in an article for Boxing Insider, is ten percent going to the distributor (HBO or Showtime), 45 percent going to In Demand and the TV carriers, and the remaining 45 percent going to the promoters.

There are exceptions to this breakdown, the biggest one being the megafight between Floyd Mayweather and Manny Pacquiao last May 2 which sold 4.6 million PPV buys priced at $100 dollars. In that fight according to John Branch of The New York Times the TV carriers split between 30 and 40 percent of gross PPV revenue depending on their level of marketing while HBO and Showtime, who produced the fight jointly, only received a 7.5 percent split. This means that out the $460 million PPV revenue the networks got a share of $34.5 million which they to split evenly leaving HBO and Showtime walking away with $17.25 million each.

Based on this model taking a fighter to PPV is very enticing for their promoter and on a smaller scale HBO or Showtime since either network doesn’t have to pay the licensing fees for a PPV bout. The model also allows the promoters to bypass the networks altogether and deal with In Demand directly like Top Rank did for the June 6, 2006 light welterweight fight between Miguel Cotto and Paulie Malignaggi. This is rare though because while the promoters can get a bigger slice of the PPV pie those gains can be easily erased in production costs. PPV fixtures like the UFC and WWE have business models and steady schedules that allowed each to develop strong in-house production infrastructures, something that boxing promoters don’t have the luxury of thanks to the irregular schedule of the sport. While promotions like Top Rank and Golden Boy Promotions have made strides recently with producing early undercards and club fights and broadcasting them via online streaming they still rely on HBO and Showtime to produce the main shows.

Just knowing how PPV works doesn’t fully encompass why Crawford is now being pushed there. The rest of the picture involves changes within HBO and boxing’s ongoing ‘Cold War.’

HBO has enjoyed great success since as the country’s top premium cable network but recently has seen strong competition from online subscription streaming services like Netflix and Hulu that are key to the recent consumer trend of ‘cord cutting’ from cable. As those two companies have begun producing an increasing amount original programming such as House of Cards and Casual HBO has countered not only with shows like Game of Thrones but news programs like Last Week Tonight With John Oliver and Vice. That increase in original shows has to come at the expense of other divisions and it has done so with HBO Sports. Boxing has been particularly hit as it has been allotted between $25 and $30 million out an operating budget ranging from $1.6-1.8 billion. That number could be further decreased by the launch of both a show and website centered around HBO’s newest sports personality Bill Simmons, formerly of ESPN.

Adding more stress to the mix is the sport’s current political climate. With last year’s launch of power broker Al Haymon’s Premier Boxing Champions series via time buys on various networks the promoters not affiliated with him were pushed to HBO by default. While the network has benefitted from having a majority of the consensus top ten pound-for-pound fighters as a result it does mean having to give them fights on an already depleted budget. The effect of this is making PPV a necessity rather than a luxury that can also be a double edged sword.

HBO has two PPV dates already on the books this year. On April 9 there is the third welterweight bout between Pacquiao and Timothy Bradley and on May 7 the title fight between World Boxing Council middleweight champion Saul ‘Canelo’ Alvarez and Amir Khan. With Crawford’s next bout along with possible fights like the light heavyweight bout between International Boxing Federation/World Boxing Association/WBO champion Sergey Kovalev and Andre Ward, another fight featuring Alvarez possibly against Gennady Golovkin, and likely two others heading to PPV oversaturation is a concern. Asking a boxing consumer base already unhappy with the rising costs of cable and ticket prices to pay (at the current rate of $75 dollars) between $450 and $525 dollars for PPV fights on top of those costs can be seen as too much and have the fighters involved be seen as greedy.

This is sadly the position Crawford has been put in simply because he wants to be more active.

Crawford fought three times in 2014 and had a banner year where he won not only his first world title, the WBO lightweight title against Ricky Burns, but Fighter of The Year honors from the Boxing Writers Association of America. In that time he also had his HBO coming out party in his first title defense against Yuriorkis Gamboa. In 2015 though Crawford only fought twice to his dismay with the focus both Arum and HBO put into Mayweather-Pacquiao possibly playing a factor. Even then Crawford has been able to grow his popularity along with his value and with HBO looking for a post-Pacquiao star the network would like to keep him on their airwaves at almost any cost.

In a fair market Top Rank could legitimately take the Crawford fight to Showtime and avoid the PPV situation. Boxing is not always a fair market though and Arum has only used the prospect of taking his fighters to Showtime as an empty threat in recent years thanks to that network’s association with Haymon. Arum might have got his way and not have Crawford on PPV if HBO Sports was still run by Ken Hershman, but with a new regime led by Peter Nelson running the division it may not be as easy as before.

Crawford would have become a PPV fighter in time with how his career is shaping up. Him heading there now is not him making a cash grab despite the perception.

It’s unfortunately the cost of doing boxing business now.

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Robert D. Cobb
Founder, Publisher and CEO of INSCMagazine. Works have appeared and featured in places such as Forbes, Huffington Post, ESPN and NBC Sports to name a few. Follow me on Twitter at @RobCobb_INSC, email me at robert.cobb@theinscribermag.com