The hunt for 150,000 boxing fanatics

In 1974, 60,000 boxing fans showed up at 4am in Kinshasa, Zaire to watch Mohammed Ali fight George Foreman.

The ‘Rumble in the Jungle’ was one of the greatest sporting events of the 20th century. And the promoter, Don King, pulled out all the stops. He organised a three-day concert beforehand with James Brown, BB King and Bill Withers.

The fight was scheduled for 4am local time to appear on US live closed-circuit television at 10pm. Boxing fans at the time had to rely on screenings in smoky cinemas or pubs to catch the fight.

The truth is that even the great sporting events weren’t very fan-friendly until about 20 years ago. In this country, Sky changed all that, by turning televised sport into a great product which people were willing to pay for. The partnership has transformed sport – especially Premier League football – and made BSkyB into a giant.

Richard Brooke was the finance director at BSkyB at the time of its initial public offering (IPO) in 1994. Now he’s back for a second bite of the cherry as chairman of BoxNation, a dedicated boxing channel whose parent company, Nation Media, is in the process of floating on Aim.

Without big names, you’re nowhere

As the huge football deals have shown, content is king. The cornerstone of BoxNation’s content is its exclusive six-year deal with Frank Warren’s Queensberry Promotions. As well as being a leading boxing manager and promoter, Mr Warren is also a director and shareholder in Nation Media.

The Queensberry deal provides at least 16 big events a year at a fixed cost. This deal underpins the channel. Other live content is acquired from independent promoters on a short-term or individual fight basis. BoxNation also has access to the Warren stable’s archive footage.

In theory, BoxNation faces competition from TV giant Sky’s own boxing channel and the other main UK promoter, Barry Hearn. But in reality, this helps to stimulate interest in the sport. Because of their exclusive long-term deals with different promoters they are not in bidding competition for TV rights in the way that Sky and BT are in football.

Just as premium football rights drive subscribers to pay-TV platforms, blockbuster fights drive subscribers to a specialist boxing channel.

BoxNation currently has about 100,000 subscribers which is pretty good going from a standing start in late 2011. But in July 2012, the numbers swelled to over 200,000 for the David Haye v Dereck Chisora Licensed to Thrill contest at Upton Park.

BoxNation aims to deliver one mega event a year to drive fans to the channel and hopefully retain them as ongoing subscribers. Maintaining close relationships with big promoters is necessary to deliver these top quality international fights.

Former champion Oscar de la Hoya – and his Golden Boy Promotions – has been a key provider of big fights to BoxNation. BoxNation also screened the recent fights of the world’s best fighter, Floyd Mayweather Jr.

150,000 is the magic number

Attracting more subscribers is crucial for Nation Media. Viewers pay £10 per month. After VAT and platform fees, this leaves just over £6 for the company. With the current 100,000 subscribers, a lot of this revenue is absorbed by operating costs.

Once the content has been paid for, the company makes a loss. It will move into profit when subscriber numbers rise to about 150,000. Which is when the fun should start. Because the cost base is largely fixed, revenues from subscribers above this number will have very high profit margins.

The proceeds from the IPO will be around £5m. This will help maintain and improve the quality of content. And importantly, it will increase the marketing and advertising budget to drive subscriber numbers up into profitable territory.

A refreshing angle to the IPO is that Nation Media is making shares available to the public. Chairman Richard Brooke told me that he was keen on a public element to the offer. Interestingly the extra cost of doing this wasn’t significant; which makes me wonder why more companies don’t do it.

I first met Mr Brooke about 20 years ago when he was still finance director of BSkyB at the time of its float. This is obviously a much smaller and simpler business; but it’s reassuring to have such an experienced pay-TV hand in charge.

If he can grow subscriber numbers as planned, it could prove to be an interesting stock. And boxing fans can not only watch the action, they also have the opportunity to own a share of it as well.