Turns out many prizefighters and their hangers-on are actually sharp business minds. Sometime between the morning’s run, the afternoon’s heavy bag and the evening’s sparring, these pugilists accumulate imaginary credits towards a master’s degree in business administration. That’s what they want us to believe. Their supporters shout it on message boards and in mail bags.
Oscar de la Hoya is an exception. Unlike most of his half-naked peers, De la Hoya sought the acumen of an actual player in the business world, someone whose resume showed more than Chief Towel Boy or Extreme Sycophant. De la Hoya found Richard Schaefer. De la Hoya will be solvent long after others declare bankruptcy. But at what cost?
The answer to that question will not come this weekend. As part of “Homecoming” festivities, De la Hoya will battle Steve Forbes at Home Depot Center, Saturday. A De la Hoya prizefight will be on HBO, not pay-per-view, for the first time in a long while. “Homecoming” is a good way to remind us that De la Hoya’s gilded career began nearby. It’s also an economical title: “Changing the narrative of what happened a year ago against Floyd Mayweather so we can sell the rematch” is a bit bulky.
But back to the question of at what cost De la Hoya purchases his long-term solvency. Our answer will not come this weekend; in fact we’ll be farther away from it at the end of fiscal 2008 than we are right now.
This year promises to be a revenues extravaganza for De la Hoya’s company, Golden Boy Promotions (GBP). Its president plans to fight thrice. He’ll go to work with Forbes on Saturday, fight a rematch with Mayweather in September and do some sort of farewell event in December. And because the company president is the one making these sales, labor costs will be minimal. That means great earnings in 2008.
But what about 2009? GBP’s current blockbuster products are nearing obsolescence. Marco Antonio Barrera is retired. Bernard Hopkins should be. Shane Mosley is scheduled for a welterweight bronze-medal game with Zab Judah in May. And the De la Hoya line will be discontinued at year end.
Of the four blockbuster products that have made GBP great, earnings from De la Hoya will be the hardest to replace. Not only does he generate more sales than the other three products, but as president he essentially costs less. De la Hoya’s salary has supplemented other revenue streams from the start, covering many of GBP’s operating expenses.
For all its up-side surprises in revenues and earnings growth, though, GBP has been wanting in new product development. It has diligently invested in research and development (R&D), but its product pipeline has yet to yield any blockbusters. Good as it has been at cultivating relationships with television networks and sponsors, to keep its product line full GBP has had to purchase other company’s patents.
Nothing wrong with that, of course. But paying for other company’s mature products costs much more than developing those same products in-house. Products like Ricky Hatton and Juan Diaz will improve revenues. But they’ll also increase operating costs, which will proportionately reduce earnings.
In other words, who has GBP signed out of the amateurs and brought to the precipice of stardom?
Clinical trials conducted in Tucson bore mixed results. Abner Mares, Demetrius Hopkins, Vicente Escobedo, Rock Allen, Leon Green and Craig McEwan all fought at Desert Diamond Casino — something of a GBP research library. A couple of these products will grow earnings, and a couple will not. But will any of them be ready to headline a pay-per-view card, complete with “24/7” documentary, in 2009? Or 2010? Or 2015?
Probably not. And that’s a problem. If GBP is to be compared favorably with America’s best companies, year-over-year earnings growth is expected. GBP can contract existing world champions to grow revenues. But again, world champions aren’t cheap. Revenues may grow, but what about earnings?
In the business world a CEO like Schaefer can’t go on an annual conference call and say, “Fiscal 2012’s earnings again fell far short of the mark we set in 2008, but De la Hoyas don’t grow on trees, and we’re going to need shareholder patience as we enter the fifth year of our turn-around.”
Why is this of concern? Because so many of us want a happy ending for De la Hoya. He is better situated to retire with a sound mind and body, and sustainable wealth, than any prizefighter who has preceded him. In a profession that is centuries old, De la Hoya has a chance to be a first. That’s nothing to trifle with.
But what happens if GBP doesn’t improve its R&D? What happens if it cannot move the earnings needle? The prospect of coming-out-of-retirement parties for De la Hoya will loom large. With his company in need of cash, will De la Hoya be able to resist the temptation to keep fighting into his 40s?
There’s no telling. More importantly, the idea of De la Hoya having to fight on will seem an impossibility by the end of 2008. Alone, he may generate $100 million in revenue. That’s enough to live on for many lifetimes, isn’t it?
Ah, but boxing is a bitter and quirky mistress.
This Saturday is supposed to be a celebration. So no more furrowing our brow over abstractions a decade away. Those who watched “Countdown to De la Hoya-Forbes” already have a clue how last May’s narrative will be changed. Had De la Hoya only thrown more jabs, he’d have decisioned Mayweather the first time. Now that De la Hoya is reunited with Mayweather’s father, Floyd Sr., there’s just no stopping him.
Fair enough. We’ll not end on a suspenseful note, wondering if Forbes can pull a miracle out of his gloves. After all, such a turn would cause a revenue shortfall none of us can afford.