Wednesday, 9 November 2016

It's on (without government funding)!

It's on, folks! December 10 at Vector Arena - Joseph Parker fights for the WBO world heavyweight title against Andy Ruiz.

In the end, it didn't need government funding either! Although Martin Snedden, CEO of promoters Duco (as reported in the media) was bullish about whether the announcement yesterday justified the call of the Government to not fund the fight:
"That's rubbish. When we started out on this commercial route only 35 days ago we had no commercial contracts in place. We didn't know what would happen. We trusted our loyal sponsors and supporters but we were asking a lot of them... but we've hit a threshold in terms of risk assessment where we are saying that we're prepared to go for this."
Their initial threshold might well have included government funding as a buffer of sorts, but even without government funding, they've decided to make a go of it with private funding. Kudos for going for it despite the risk, but that's the nature of private enterprise - you'd be doing pretty well if your business was a sure thing.

Now that it is confirmed, expect it to cost New Zealanders to enjoy a piece of the action. Duco have already said that it won't be available to view at rock bottom prices.

Duco are a shrewd bunch of people who know their boxing and know how to run a fight night. This will likely be their biggest opportunity to make something of Joseph Parker's title ambitions in this country. If he wins, he may well seek bigger opportunities that the market in this country may be unable to support. (I won't think about if he loses - except to say that David Tua was still a popular fighter in this country after his title fight loss to Lennox Lewis and his fight with Shane Cameron was the biggest fight in this country prior to what will go down on December 10, 2016.)

As a boxing fan, I am right behind Parker in his goal to win the title. As to whether that will extend to parting with any of my scarce income ... let's wait and see.

Saturday, 5 November 2016

The Parker fight takes another body shot

Just as it seemed things were becoming clearer regarding the Joseph Parker fight ... then comes news today that Auckland City's ATEED have decided against providing ratepayer funding for the fight.

According to the article, ATEED's contribution was expected to be in the hundreds of thousands of dollars.

The CEO of ATEED, Brett O'Riley said:
"While there is clear potential to generate international exposure if the fight is held in Auckland, we are unable to make a robust assessment of the potential of this event until the fight is confirmed to take place here and domestic and international television rights are secured."
It is a body blow to promoter Duco's chances of hosting the event in Auckland - especially since it appeared that it was banking on ATEED's financial support to make the fight happen.

Of the public funding possibilities, ATEED's support appeared most sensible on the surface from an economic perspective - the benefits of the fight were likely to be highly concentrated in Auckland - even with up to 50% of fight attendees hailing from outside the city (as claimed in the article). Auckland was also the most likely beneficiary of national and international broadcasts - although the value of this publicity is far from certain. Given that the length of time to promote the fight is shrinking by the day (the fight was believed to be scheduled for December 10), the ability to market and sell the fight becomes that much more difficult the closer we get to fight night.

O'Riley was also quoted as saying:
{I}it was not clear if staging the fight in Auckland would have "the desired outcomes of Auckland's Major Events Strategy" so the decision was made "not provide financial sponsorship for the fight."
It definitely looks like the fight has become a political hard sell - and without government backing it now stands as a true test of whether there is a market of sufficient size to make such an event commercially justifiable in New Zealand.

Thursday, 3 November 2016

Pondering pugilistic price discrimination .... maximising the value of the world title fight

News today revealed that Joseph Parker's WBO world heavyweight title fight against Mexican opponent Andy Ruiz will take place in Auckland on December 10 at a venue to be decided. The fight will take place without central government funding in big a about-turn from last week's announcement from Parker's promoters Duco when they withdrew their application for government funding that the fight was 80% likely to head offshore.

It is not 100% privately funded, though. One of the backers of the Parker camp is the Auckland City events arm ATEED, so there are already taxpayer dollars being funneled into the fight.

Now that the fight is taking place in Auckland, the question becomes whether the fight will generate economic benefits for the city and for New Zealand. In short, the benefits are likely to be confined to Auckland city and are not likely to spill over outside the city boundaries. The extremely short-term nature of the event itself will likely mean that any impact is short and sharp - don't expect longer-term economic impacts - even if Parker happens to win the fight. We can also expect the promoters to attempt to extract as much of the local consumer benefit in the form of higher broadcast prices and ticket prices. This isn't extortion or in any way unfair - it is market forces at work. Duco is a monopolist here - and they have the ability to set the price people must pay to see the fight. Parker vs Ruiz will be the biggest and most important fight ever staged in New Zealand, and people will be willing to pay to watch it. David Tua vs Shane Cameron was a big fight in New Zealand and attracted a huge amount of interest - this fight will be even bigger.

There is an interesting option that is on the table for Duco that they have already done but now that the stakes are as high as they have ever been (for boxing promoters in New Zealand), do they have the same willingness to test the market's willingness to pay for this fight? That option is perfect price discrimination - something that Duco did for Parker's fight with Carlos Takam in May of this year. This was labelled by promoter Dean Lonergan as
"an entertaining experiment in microeconomics"
In the Takam fight, Duco auctioned off 520 general admission tickets at $1 reserve on TradeMe. The intention of this experiment was an attempt to eliminate the possibility of scalping occurring with these tickets - people buying cheap and selling at higher prices.

With interest in this fight likely to be significantly greater than what it was for the Takam fight, it will be very interesting to see if Duco try it again. If anything, they have more to gain from giving it another go - one would expect the willingness to pay for a title fight to be much greater than for a build-up fight. Yet there is always a risk that they may not make the money that they are seeking - but they are likely to sell the tickets and fill the venue. At the same time, charging a fixed price is not a sure bet either - people might decide that the price is simply too steep and there could be empty seats as a result. There is also the possibility that the price might be set too low - and scalping could occur.

That they have already tried the auction method is a credit to the promoters. Only they will know whether it paid off last time. It would be fascinating to see Duco try this again because of the potential gains the practice offers them as sellers of a sought-after commodity (which are potentially much higher with this fight). Even if it was for a small proportion of tickets, it is a way of letting the market decide what the ticket is worth.

Lonergan also mentioned that
"You'd never get the New Zealand Rugby Union doing what we're doing because they'd see it as too controversial". 
This is Duco's version of a top-tier All Blacks test - their World Cup final - will they be game enough to roll the dice once more?