Pay-Per-View Has at Least as Much at Stake as Boxers : Television: If viewers buy the Douglas-Holyfield fight, it could serve as a forerunner for future promotions.
If Steve Wynn is so smart, how could this be happening to him?
He’s going to hold a heavyweight championship fight at his Mirage hotel Thursday night, a fight that has a chance, because of pay-per-view television, to earn more money than any fight ever.
It could also lose more money than any fight ever.
Wynn, whose winning purse bid for the Buster Douglas-Evander Holyfield bout was $32.1 million, has packaged Douglas’ first title defense in a unique pay-per-view promotion that, he says, may be a forerunner of future pay-per-view sports and entertainment shows.
To start with, Wynn controls the telecast of this fight. Past major pay-per-view boxing events were sold to regional promoters around the country who, in turn, marketed the bout to local cable systems.
A New York City pay-per-view distributor, Lou Falcigno, said Wynn is simply eliminating middlemen by producing his own telecast of Douglas-Holyfield.
“What he’s doing is gaining back 10% of his pay-per-view income that would go to regional promoters,” Falcigno said. “He’ll lose money on the fight itself, but nothing like $10 million to $15 million, like some think. Steve wants to do this telecast himself, to see how it can work for him in the future.”
Said Wynn: “If we can do this well, if this telecast works and we show people in the entertainment world that the Mirage can be a major event center, then it carries enormous implications for my business, beyond boxing.
“For proprietary reasons, I don’t care to discuss what I have in mind beyond boxing, but let’s just say pay-per-view has my complete attention these days.”
So in a sense, Douglas-Holyfield is an experiment, possibly a look at how Americans might be entertained in their own homes within a few years.
In other words, get ready for (choose one):
--One night with Bruce Springsteen at the Mirage ($49.95).
--One night with Michael Jackson at the Mirage ($49.95).
--One night with Frank Sinatra at the Mirage ($49.95).
Or maybe Led Zeppelin--there are strong rumors there.
The number of cable television households in America, those with addressable systems--the capability of ordering a pay-per-view telecast--has grown to 14.9 million, cable TV industry experts say. Historically, pay-per-view boxing and pro wrestling telecasts have attracted the most viewers, but that could change now.
Paul Kagan Associates, Inc., a Carmel-based firm that publishes cable television industry newsletters, maintains a ranking of the top 76 grossing pay-per-view shows, and boxing and wrestling dominate the top of the list. Last year’s Sugar Ray Leonard-Robert Duran fight at the Mirage was the highest-grossing pay-per-view show ever, at $27.3 million, although that figure is disputed by many in boxing.
“The two highest-grossing PPV shows ever were Mike Tyson-Michael Spinks and Ray Leonard-Marvin Hagler,” said Rick Kulis, a pay-per-view regional promoter of both those fights as well as many others. He’s working for Wynn this time, marketing the Douglas-Holyfield telecast.
Kulis added: “Both of them did about the same in PPV revenue, around $30 million. This fight, we think, will be right up there with them. Remember, there are millions more cable households than there were for Hagler-Leonard.”
The pay-per-view numbers achieved with major boxing shows have by now caught the eye of everyone in the cable television and entertainment industries.
“What Wynn is doing with this Douglas-Holyfield show is totally unique,” said Doug Stewart, vice president of Denver-based United Artists Entertainment, one of the country’s largest cable conglomerates.
“For the first time, the hotel is the exclusive owner of the telecast. Everyone in the cable industry will be watching how Wynn does on this, because the industry is starved for revenue-producing PPV shows.”
Why has boxing done so well on pay-per-view?
“Because boxing is time and date specific,” Stewart said. “It’s a live event, it occurs on a specific date and will occur only once.”
So why have movies--the average cable household orders an average of one pay-per-view movie every four months--and rock concerts flop on pay-per-view? According to Paul Kagan Associates, Inc., the highest buy rate ever for a pay-per-view music show was a 2.2% by the Rolling Stones concert last December.
“Everyone who’s ever promoted a PPV music show has blatantly violated all the reasons why boxing does well,” Stewart said. “In the past, PPV rock concerts have been part of some group’s tour. Leonard and Hagler fought only once. It was special. You can’t say that about all the music shows that have been tried.”
Which is where Led Zeppelin comes in.
“I’m a big proponent of PPV music shows,” Stewart added. “I think eventually music will be huge on PPV. There is a rumor in the cable industry now that Led Zeppelin will re-form and do a 50-concert tour. And there’s talk that the last stop on the tour will be sold as a PPV show.
“That won’t work, in my opinion. What would work is if they do one, single concert, say from the Meadowlands, shown only on PPV, with no delayed telecast. Just one show. Figure it out. If one million households (out of 15 million) order it at $20 each, that’s $20 million in one night.”
As for the fight itself, Wynn indicated this week that whatever he loses will be recouped in the Mirage casino.
“The way the numbers add up right now is, worst-case scenario, I lose $3 million, which is exactly what I lost on Leonard-Duran III, and that night we made $5 million in the casino,” he said.
Another Las Vegas hotel executive, experienced in major boxing shows but who asked not to be identified, added up the estimated overhead for Douglas-Holyfield and projected revenues and showed an $8.5-million loss, even assuming a $15-million return from pay-per-view.
Wynn has written bigger checks than he has written for this fight. He’s paying magicians Siegfried and Roy $57.5 million for five years to perform three weeks out of every four.
He is paying Douglas $24,075,000--$4 million of which has already been paid to rival promoter Don King for last summer’s settlement of their lawsuits--and $8,000,025 to Holyfield. Wynn projects at least a $9.5-million live gate sale at his 16,200-seat outdoor stadium.
Many of those tickets, priced from $200 to $1,000, were purchased by other Las Vegas casinos. Wynn sold the delayed telecast, to Showtime, and foreign TV rights for $5 million, and he expects to earn $1.5 million from closed-circuit rights and another $1 million from merchandising.
The rainbow ends in the casino, however. There’s a reason why this is a Thursday night fight. It means most of his high-roller casino customers are in the hotel Wednesday, Thursday, Friday and Saturday nights.
“People bet $100 million a month at the Mirage, and that’s table games only,” Wynn said. “Saturday is a big night. So with this fight on a Thursday, we in effect have four consecutive Saturday nights. We could do $60 million in those four days.”
Other casino executives in Las Vegas say a casino generally wins back 16% to 20% of the “drop"--the amount of money wagered in a casino.
Many of those adding up Wynn’s costs for the fight include the $3 million he’ll spend in a national advertising campaign.
“We will spend that much,” Wynn said, “but remember . . . I had a hotel advertising budget to begin with, before we made the fight.”
Wynn said he’d been looking for a major fight for the Mirage for which he could own the telecast.
“I watched Tyson-Douglas at my home in Sun Valley,” he said, “and when Buster knocked him out, I said, ‘That’s it, Douglas-Holyfield, there’s my fight.’
“There is nothing like a heavyweight championship fight. If I put Frank Sinatra in my showroom, I get Sinatra fans. Same with Michael Jackson. But you hold a heavyweight championship fight, and you get people from all over the world, from Tokyo to Guadalajara. It transcends every socioeconomic barrier.”
Douglas-Holyfield would be history now were it not for a New York trial in which King and Douglas sued each other and then settled. When the fight was finally on track, Wynn brought in a major San Francisco advertising agency, Hal Riney and Partners, creators of the successful Bartles and Jaymes wine cooler campaign.
Elizabeth Allen, an account executive with the firm, said: “Tom Tieche, our associate creative director, and I met in Steve’s office on July 12 and, in talking the fight out, came up with the ‘Moment of Truth’ theme.”
“We designed a national campaign, in 110 markets, for TV, radio and newspapers. It was designed right down to the day of the fight, when full-page ads will appear in newspapers around the country.”
Later, the TV commercials were filmed at Johnny Tocco’s Ringside Gym in Las Vegas.
For boxing, as well as any other pay-per-view-suitable show, the numbers grow to breathtaking levels. Las Vegas boxing promoter Bob Arum predicted a year ago that by the end of the 1990s, given the growth of pay-per-view in Japan and Europe, a major fight could gross $500 million. Falcigno said a pay-per-view Super Bowl could do a $320-million gross in the late 1990s.
A key number in any pay-per-view projections is the buy rate, or the percentage of pay-per-view homes ordering a telecast. Leonard-Duran III last December, rated by Paul Kagan Associates, Inc., as the biggest pay-per-view show ever, had a 6.5% buy rate. The more available pay-per-view homes, the more the revenue--providing the buy rate stays the same.
In the days before a major pay-per-view boxing show, Kulis, Wynn’s pay-per-view marketing chief, closely watches sales at a half-dozen major cable systems, which traditionally, he said, produce high sales rates for boxing shows.
The six are Cox Cable of San Diego, with 270,000 homes; Cencom of Alhambra, 130,000; Continental Cable of Los Angeles, 208,000; Brooklyn-Queens Cable of New York, 228,000; Garden State Cable of Garden City, N.J., 50,000; and Suburban Cablevision of East Orange, N.J., 102,000.
“Those six generally will account for about 25% of all gross PPV revenue for a fight,” he said.
Marty Youngman, pay-per-view coordinator for Cox Cable of San Diego, said Douglas-Holyfield orders are running at a near-record pace.
“Right now we’re way ahead of Leonard-Hearns (1989) and just a little behind Tyson-Spinks,” he said. “Usually, 50% of the orders come in the last 24 hours, so if that holds up, we’ll have an 8% buy rate and we’ll be very happy with that.”
Wynn sold a four-tiered pay-per-view deal to cable systems, with three of them carrying some risk to the system operators. But one of them, representing 3.8 million households, calls for no risk to the cable systems, and a 70-30 split for the Mirage.
“That’s our favorite,” Wynn said, “if this fight kicks in big, we win big on that deal.”
Closed-circuit telecasts, which steadily fade in significance as more homes are cabled, is still a winner in New York. Falcigno, the closed-circuit syndicator there, sold the fight to 96 restaurants, bars and private clubs for prices ranging from $1,000 to $20,000. At Mickey Mantle’s Restaurant, for example, you get dinner for two and the fight for $135.
Of reports that Wynn plans non-boxing pay-per-view PPV productions in the future from the Mirage, Ed Bleier, president of pay TV for Warner Bros., said he’ll have to break new ground.
“If he were to do a Led Zeppelin show, for example, I don’t think it would work if it was just another concert on a tour. But if he were to do a one-night-only type of show, that’s an entirely different matter.”
If within a decade or so, pay-per-view entertainment shows become routine viewing at home, it might be traced back to 1990, when a couple of heavyweights named Buster Douglas and Evander Holyfield paved the way.