TKO’s next frontier is the boxing industry, and with several of the world’s largest power players involved, it represents the greatest potential for a facelift.
While hardly a secret, last week’s formal announcement by TKO in association with Turki Alalshikh and the Saudi Arabian-based Sela group was the first definitive move in a multi-year project to seize sizable market control of boxing’s fractured industry.
While comparisons to Vince McMahon’s national expansion and Zuffa’s purchase of the UFC have been made, this endeavor poses many challenges from an existing statute known as The Ali Act, lifelong boxing promoters, and a thriving upper class of boxers that won’t be asleep at the wheel to forgo its paydays.
Dana White and Nick Khan are at the helm of the venture, and Saudi Arabia’s Public Investment Fund (PIF) ‘s financial muscle creates a unique circumstance where breaking even or profitability isn’t in the calculus—nor is any monetary investment required of TKO as protective cover for its shareholders.
If eyebrows were not raised prior, the mention by Ari Emanuel last month on The Pat McAfee Show regarding The Ali Act should have set off alarm bells throughout the boxing fraternity. The same comment about the “flaws” of the act was echoed by TKO’s Mark Shapiro. Neither Emanuel nor Shapiro explained what those flaws were and whether one man’s flaws were another fighter’s protections.
TKO has navigated a post-pandemic live-event business conglomerate from all angles and core to its business – primarily WWE and UFC – are ceilings on fighter/performer wages without the prohibitive watchdog of a union or association representing those classes.
When UFC fighter costs are held firmly under 20 percent of revenue, it becomes much easier to sign a cheque for $375 million to make an antitrust lawsuit go away rather than risk fundamental changes to its way of conducting business and sharing any larger piece of a rapidly increasing revenue pie.
WWE landing a multi-billion dollar deal on Netflix, UFC seeking half a billion dollars in its next domestic rights negotiations, countless sponsors popping up on mats and canvases, and all of this becomes found money for TKO’s coffers without any percentage earmarked for its product – the talent.
It is why the boxing industry was anathema to TKO’s way of conducting business because boxers have more rights and leverage through legislation such as The Ali Act. The attributes include safeguards for coercive contracts so that a promotion cannot lock up a young prospect for years on end as his or her star grows but his take-home pay does not. There is a clear line in the sand between promoters and managers, and never the two shall meet. Outside sanctioning bodies are in place to prohibit a promoter from creating his own championships with mandatory disclosures of revenues to create a level of transparency that equips boxers with numerical evidence of their worth to a promoter.
So, the question becomes, for whom is the boxing system broken?
Without getting carried away, there is plenty of fracturing within boxing and there is a pool of fighters that don’t enjoy any of the riches of the upper ten percent of the sport. Sanctioning bodies are fine in theory, hardly in execution and the proliferation of title belts and weight classes are a strain on fan engagement but a boon to fighters and equaling an uneven playing field. Say nothing of boxing’s endless politics that make being a fan a chore.
The UFC concept model is a very easy sell to its fanbase. Every fan wants to see the best fighters fight the best, and the way to achieve that is having every top fighter under one promoter’s control and, therefore, mortgaging a fighter’s options in service of the fights the public wants and the promoter reaping the benefit of a chokehold on its industry.
Francis Ngannou exiting his UFC contract as its heavyweight champion was a landmark move for a fighter exercising a rare example of control and leverage, but the result was fans not wanting to see Ngannou fight in the PFL, and the UFC train chugging along without the top heavyweight in the sport without missing a beat. Ask any MMA fan who they want to see Ngannou fight against, and every answer will be a UFC contracted fighter.
The UFC has successfully placed its commerce in line with the fans’ wants and allowed its own base to argue in favor of its restrictive business practices, which is something no other sports leagues can boast about, where the owners are being championed by a larger section of its fanbase.
The boxing venture by TKO will be funded by Saudi Arabia, but its battleground is in the United States, where dominance in the industry is up for grabs. With so many promoters hitching their wagons to DAZN, ESPN dropping Bob Arum’s Top Rank Boxing, and networks HBO and Showtime exiting the sport, it’s ripe for a disruptor with influence and deep pockets.
Dana White is easily the most influential fight promoter of this generation with a direct line to the most powerful operator in the world, Nick Khan is the media whisperer with direct contact to any power player in the field and often joked as the most powerful man at ESPN, and Turki Alalshikh has risen to become the most influential figure in combat sports with unlimited resources to finance the wildest of concepts and no signs of tightening those purse strings.
The timing of its rollout coincides with UFC entering the free market if/when it exits its exclusive negotiating period with ESPN, which expires on April 15. In a sports media landscape where no major contracts are up in the immediate future, the UFC is the belle of the ball and considered core sports programming for so many cable networks holding onto subscribers with the jaws of life and major streamers launching full force into live sports programming. It is led by Netflix, who is already in bed with TKO through its ten-year deal with WWE and in search of “big event” programming that UFC provides monthly as its embedded its brand into the cultural zeitgeist through a heavy lean into right wing politics and becoming an avatar for the state of the country.
TKO is the hot brand on the market, and it has just introduced a new toy to be offered up for a growing pool of sharks with a heavy appetite for sports.
Time will tell how the boxing industry reacts from promoters Eddie Hearn, Bob Arum, Al Haymon, and others. If they mount an initiative to ward off the incoming giant, or succumb like a modern-day version of Bill Watts, Verne Gagne, and Jim Crockett Jr.
The Ali Act is a solid defense mechanism, but who will enforce it? Is TKO’s calculus to actively eliminate the act or challenge the establishment to blink and stop them in their tracks if there are violations of the act?
Do the sanctioning bodies have a leg to stand on?
Will the top boxers be enticed by unlimited amounts of money to join this hot new promotion?
Will young upstart fighters sign deals of short-term exposure and long-term restrictions?
If the past is prologue, fighters standing up for their rights against restrictions is not a wise bet to make. However, while the TKO formula is keeping fighter costs low for maximum profit, that is out the window while Saudi Arabia is footing the bill. This venture will require excessive demand on the top executives of TKO, but the cost is unwritten, and there is zero profit motive, unlike its core businesses. It places TKO in direct opposition to its boxing competitors, whose sole initiative is running profitable cards.
Over the next year, boxing is going to be under the microscope and TKO is the focus in this petri dish as this massive experiment is officially underway.
