Thursday, October 30, 2008

Big Loss for CBS

CBS has posted a $12.5 billion loss in the 3rd Quarter. One of the factors contributing to the loss was a decrease in advertising revenue. Any one who watched the final EliteXC event got a first hand view of it every time they went to commercial. The breaks featured more Affliction ads (at a discounted rate) than any thing else. It was clear the ad space for the event did not sell too well. Some think the stagnant ad sales and today's reported $12.5 billion loss could signal the end of the network's MMA experiment. I happen to disagree. I think poor ad sales were caused by the terrible ratings for the second show. The enthusiasm for another MMA event was not present and it killed most of the ad space. With the increased viewership of the third event, it gives CBS a chance to gain back the trust of the advertisers, and move forward in their relationship with Mixed Martial Arts.

It has been reported that CBS took possession of EliteXC's fighter contracts to compensate for a loan that ProElite never paid back. All the details have not been worked out, but it would seem CBS would do one of two things. They could decide to hold onto the contracts or sell them off to the highest bidders. If they hold onto them, CBS will be looking for another promotion to work with. Basically they need a name to stage MMA events. This is where Affliction comes in. CBS hands the contracts over to Affliction in exchange for their promotional brand. This would essentially make CBS the bank for Affliction's televised events. CBS already financed the final EliteXC show, so it's not as far fetched as it seems.

Despite EliteXC's financial troubles, the shows brought in solid ratings 2 out of 3 times. CBS sees the potential in MMA, it's simply a matter of finding a working business model. After the trouble EliteXC had, it would be logical for the network to want to remain in control of certain elements. This keeps the promotion safe from taking any big financial hits and possibly going under. The downside for a company like Affliction is they see less profits. CBS is the one risking the most and they will see the big money (advertising) if things work out well.

The reason Affliction would go this route is simple. MMA events on TV are not their money maker. They intend to make their cash from PPVs. Agreeing to a deal with CBS would allow them to advertise their product (MMA and clothing) on network TV, while still raking in money from PPVs. At the same time it shields Affliction from most of the risk. They do not have to worry about losing a ton of money if tickets for a televised show do not sell. Obviously it is in their interest for it to be a sell-out and do terrific ratings, but if by some chance things go sour, Affliction is not on the hook. The only thing Affliction takes on is the added expense of the former EliteXC fighters they decided to keep. These extra fighters would be needed to fill out the additional 3-5 televised cards during the year. Affliction is no stranger to partnering with others and spreading out the risk. In a time of economic uncertainty, their cautious business model is exactly what CBS needs.

2 comments:

chappyd said...

the worst thing with elitexc going belly up is it showed people mma isnt like all the other sports. it hurts it alot.

lionit said...

EliteXC made things hard on themselves. They were sellouts and went for the easy sell with Kimbo.