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24 SEPTEMBER 2018

 

Are HBO and Showtime "Promoters" ?




By Thomas Hauser
The United States Senate adjourned for its August recess last week without voting on legislation that would create a federal boxing commission.

At present, there is no real enforcement of the Professional Boxing Safety Act anywhere in the United States. Presumably, a federal commission would take steps to enforce it. But the proposed legislation has stumbled over issues relating to the relationship between the television networks, fighters, and promoters.

Senator John McCain, who has been a driving force for the reform of professional boxing, has leaned toward protecting the television networks from classification as "promoters." By contrast, Senator Harry Reid wants to label the networks as "promoters" and put restrictions on their conduct.

McCain is a Republican, and the Republicans control the Senate. But Reid is the Senate minority whip, and McCain needs help from the Democratic side of the aisle if the legislation is to pass. The network issue is a small part of the overall proposal. But the manner in which it is resolved (if it's resolved) will have a huge impact on the balance of power in boxing.

At present, the Professional Boxing Safety Act defines a promoter as "the person primarily responsible for organizing, promoting, and producing a professional boxing match." It then includes a broad exemption for casinos and other host sites. One can argue that, under this definition, HBO, Showtime, and several other networks are promoters. But to date, the Act hasn't been enforced against them as such.

The television networks (HBO and Showtime foremost among them) don't want to be classified as promoters for several reasons:

(1) In today's world, the term "boxing promoter" is synonymous with slime, and such a designation would be bad for their image;

(2) If the networks are designated as promoters, they will be subject to the financial disclosure requirements of the Professional Boxing Safety Act; and

(3) If the networks are designated as promoters, they will enter into the murky area of legal liability to fighters and others. Litigation is inherent in boxing. The networks have deep pockets. HBO, Showtime, and their brethren don't want to be targeted as defendants in lawsuits alleging causes of action that range from breach of contract to wrongful death.

Traditionally, boxing promoters purchased all rights to a bout and then exploited them. In other words, the promoter was responsible for paying the fighters' purses and other expenses associated with a fight. The promoter's profit was the difference between these expenditures and revenue from the sale of tickets, television rights, and assorted ancillary rights such as merchandising and sponsorships.

But in boxing today, many people who call themselves "promoters" aren't; and others who say they aren't are. For many big fights, the promoter of record is simply a middle-man money manager. He doesn't even sell tickets. That chore is left to the site.

On February 5, 2003, HBO Sports president Ross Greenburg testified before a hearing of the United StatesSenate Committee on Commerce, Science, and Transportation and argued against legislation that would label HBO a promoter. The thrust of his argument was that HBO simply buys television rights to the best programming it can offer its subscribers and that the steps it takes in pursuit of this goal don't make it a promoter.

In relevant part, Greenburg declared, "We agree that any entity which in fact has a promotional agreement with a boxer and is primarily responsible for organizing and promoting a boxing match should be subject to the provisions of the Act. However, it would be patently unfair and wrong to define and regulate telecasters that televise boxing matches as 'promoters' per se. The view that television networks should be regulated as if they were promoters reflects a misperception that the television industry and boxing promoters perform roughly the same function and have similar relationships with and economic power over boxers. This simply is untrue. It would turn free market principles on their head to subject telecasters like HBO to regulation merely because, as the result of arms-length bargaining, they enter into agreements to pay large fixed license fees in exchange for the exclusive rights to televise a boxer's matches over a fixed period of time."

But a strong argument can be made that HBO and several other television networks are promoters. The network contract is the dominant piece in any big-fight promotional puzzle. Nothing else of consequence is finalized until the television license fee is in place. Greenburg has sought to downplay his network's role in the process. Testifying before Congress, he declared, "A boxing match cannot take place without a promoter. On the other hand, most boxing matches are not televised."

But in truth, television is a prerequisite for a big fight. In fact, it's not uncommon for a promoter to win a purse bid for the right to promote a championship fight and then default on the bid because he is unable to secure a television contract.

Let's look further at the issue of money.

HBO puts up most of the financial guarantee for virtually every big fight it televises. It's usually far more at risk financially than the promoter of record. HBO might not participate in revenue streams from a given fight except for income from pay-per-view buys. But it has had ancillary rights such as international sales written into longterm contracts with many fighters. Also, HBO is "paid" in the form of viewer ratings for its regular telecasts. Ratings translate into subscriber dollars.

HBO and Showtime co-promoted Lennox Lewis versus Mike Tyson no matter how one views it. And Showtime was Tyson's de facto promoter during the entire post-Don-King period through the Clifford Etienne fight.

It's also worth taking a look at the scheduling of fights.

Greenburg testified that, "HBO's offering large license fees to a promoter to purchase the television rights to a boxing match between two top fighters is no different than a network offering large fees to purchase the television rights to a tennis match or golf match."

But that's not so. Everyone knows that the Masters will take place next April in Augusta and that there will be tennis at Wimbledon next summer. By contrast, HBO often determines both if and when a particular fight takes place and charts the course for many of its fighters.

After Vernon Forrest lost to Ricardo Mayorga, he wanted to take an interim bout before seeking to regain his title. But Forrest was told by HBO that he had to fight an immediate rematch against the man who had knocked him out or the network would cancel his contract. If Forrest had fought an interim fight, it would have improved his chances of beating Mayorga the second time around. The flow of the rematch was very different once six rounds passed and Vernon's crisis of confidence abated.

HBO wasn't necessarily wrong to demand that Forrest engage in an immediate rematch. It made for good television and was within the network's contractual rights. But the network was matchmaking with a heavy hand; not just bidding on a fight offered by a promoter.

And HBO does more than matchmake. There are times when HBO executives get on the telephone with managers, ask how much a fighter wants for a particular fight, and push and cajole when the answer isn't to their liking. HBO executives also ask site officials whether their arena is available on a given date and how much the site fee for a particular fight might be. On occasion, they become actively involved in site negotiations.

HBO imposed Madison Square Garden as the site for Lennox Lewis versus Michael Grant because it wanted a Manhattan media buzz to boost pay-per-view sales of the fight. More recently, it imposed Buffalo as the site for a September 27 heavyweight card headlined by Joe Mesi. Again, there's nothing wrong with either demand. But choice of site is traditionally a perogative of the promoter.

Recent years have seen the phenomenon of superstar fighters supposedly acting as their own promoter. Thus, Roy Jones is "promoted" by Square Ring; Lennox Lewis is "promoted" by Lion; and Naseem Hamed is "promoted" by Prince Promotions. But it's an illusion that these fighters promote themselves. The de facto promoters of their fights are the television networks. Often, they are assisted by the sites (usually casinos), which pay large site fees in exchange for the live gate.

The networks also prepare press kits, issue press releases, and organize promotional tours. On occasion, they even influence the choice of officials.

Showtime demanded that Harold Lederman be removed as a judge for the ill-fated Evander Holyfield versus Henry Akinwande fight that was slated for Madison Square Garden in 1998. Prior to the bout being cancelled, the New York State Athletic Commission complied. In Atlantic City on June 7 of this year, HBO suggested that Larry Hazzard remove Eugenia Williams as a judge for Michael Grant versus Dominick Guinn because of her role in the first Lewis-Holyfield fight. Williams was removed. HBO then more forcefully prevailed upon Hazzard not to designate Eddie Cotton as the referee for Grant versus Guinn because its production team had already prepared graphics listing Benji Estevez as the third man in the ring. There's an argument to be made that the television networks should try to influence the choice of officials and should refuse to televise fights from jurisdictions where ring officials are incompetent or corrupt. But traditionally, that's an area reserved for managers and promoters.

If it walks like a duck and quacks like a duck and looks like a duck, most likely it's a duck. HBO and Showtime might not be promoters in the traditional sense. But on a big fight level, virtually no one in boxing is anymore. The networks are involved in every aspect of a big fight. They put up the money, control match-ups, organize press events, and approve (or dictate) various crucial elements such as fight date and site. Showtime even chooses the ring announcer, Jimmy Lennon Jr.

That then brings us to the present impasse in Congress. Part of the problem in gaining passage of the proposal to create a federal boxing commission is that no corporate entity with clout is pushing for it and the networks would rather see the legislation die than be labeled promoters. Meanwhile, some very influential interested parties have gotten involved.

One of Harry Reid's largest campaign contributors is Bob Arum. Don King has also been a generous supporter. Arum and King want to discourage the networks from signing contracts directly with fighters. And they want to perpetuate the system that has given them so much control over boxing in recent decades.

Thus, among the positions Reid has pushed is the proviso that a network be branded a promoter if it has a direct contract with a fighter. That would give a competitive advantage to major promoters such as Arum and King because it would encourage the networks to go through them rather than deal directly with fighters. In other words, under the Reid proposal, the promoters would win both ways. There would be a firewall between the fighter and the network to protect the promoter's position. And it's less likely that a fighter would get financial data from the network to help him in negotiating with his own promoter.

Discussions between the McCain and Reid staffs have been extremely contentious. Then, just before the congressional recess, Reid suggested further limits on the networks' conduct. That raises the question of whether Reid wants to regulate the networks in a constructive way or simply strengthen certain promoters. And it's an important issue because, as Charles Jay notes in his groundbreaking Operation Clean-Up series, "When we talk about defining someone as a promoter, what we're really doing is defining their responsibilities. We're identifying them for the purposes of subjecting them to some kind of regulation, a constraint on behavior so that, if they do not conform to certain standards, they can be disciplined."

HBO has more influence over boxing today than any other entity. And it has more influence over boxing than any television network has ever had over any sport.

There are times when it seems as though a sense of entitlement permeates everything that HBO does. There are also moments when the network is perceived by some as coming dangerously close to anti-competitive conduct. Some of its counter-programming against Showtime has raised eyebrows. And given the fact that Showtime's annual budget for boxing is under $25,000,000, one boxing insider asks, "Why does HBO spend $100,000,000 a year on boxing when it could accomplish the same thing for $60,000,000?"

HBO says that it spends as much as it does on the sweet science to give its subscribers the best programming possible. Another reason for the expenditures might be that HBO Sports is protecting its budget turf. That is, it doesn't want to give up anything within the AOL Time Warner empire. But the fact that HBO pays huge license fees also makes it harder for Showtime to attract quality fights. And whatever the motivation, HBO uses its checkbook to advance its own agenda.

Thus, Craig Hamilton, who has dealt extensively with HBO, observes, "HBO is usually fair to the fighter, very fair. But HBO tries to exercise control over every important aspect of a fight, and then it tries to insulate itself from being held accountable. If there's a problem, HBO wants to palm it off on a middleman promoter, who's often nothing more than a vehicle for the network to avoid liability. If something goes wrong, HBO wants to be able to say to the fighter or the fighter's estate, 'Gee, that's a shame, but it's not our fault."

"And what happens," Hamilton queries, "if someone new comes in at HBO and says, 'I don't want to be fair?' What happens if HBO starts giving out dates the way Bob Yalen does it at ESPN? ESPN doesn't fairly distribute dates. ESPN has given dates to promoters who don't have a single fighter under contract. The networks can create a promoter anytime they want to simply by giving dates."

Charles Jay echoes Hamilton's thoughts and says, "What the public doesn't understand is that a television network can literally create a promoter out of thin air. It has happened. It is happening. As long as some TV executive says 'yes', virtually anyone can become a successful promoter."

Moreover, in exercising their power, television executives can be motivated by a desire to make money and provide the best entertainment possible to viewers. They can be motivated by an interest in doing what's good for boxing. Or they can be motivated by petty personal prejudices, financial kickbacks, and women on the side. And no matter how one cuts it, the people who exercise this power are dominant forces in an industry that has traditionally exploited fighters.

If one adheres to the view that professional boxing should be regulated by the government, then the television networks should be subject to some form of regulation. The networks have argued against this. They take the position that the legislation in question is designed to protect fighters against the predatory conduct commonly engaged in by traditional promoters, not the networks. And certainly, television hasn't been guilty of many of the abuses engaged in by promoters. But neither have some promoters. The promoter isn't always bad.

The ultimate issue then, is whether the television networks should be regulated given the dominant role they play in boxing. To achieve this, it's not necessary to define the networks as "promoters" within the meaning of the Professional Boxing Safety Act. The statute can carve out the same exception for television networks that currently exists for sites and then regulate any entity that puts up a television license fee that is more than a given amount or is estimated to be above a certain percentage of gross revenue for a particular fight.

If the networks are regulated, the ultimate goal of the legislation should be fairness, particularly for the fighter. In that regard, the most meaningful requirement that Congress can impose on the television networks is financial disclosure.

It's often said that there are no secrets in boxing. But in truth, there are. Fighters are frequently left in the dark when it comes to the size of the television license fee and other revenue that a promoter receives for a particular fight.

Under the present law, promoters are obligated to reveal certain financial data, but this requirement is largely ignored. Also, the mandatory disclosure doesn't have to occur until the day of a fight; no final accounting is required; and some promoters take the position that they will "show" the required financial information to fighters but not give them copies of documents or anything else in writing. Side-deals further undermine the disclosure process. Suppose, for example, instead of paying a license fee of $2,000,000 for a particular fight, a television network gives the promoter a license fee of $1,500,000 plus an additional $500,000 for the right to show tape excerpts from an unrelated bout.

Financial disclosure goes to the heart of the biggest problem in boxing today; the financial exploitation of fighters. Right now, if the promoter doesn't make disclosure or discloses phony numbers, the networks look the other way and say, "It's not our problem." That should change.

The United States Senate will reconvene in September. At that time, it will reconsider the formation of a federal boxing commission. John McCain wants the commission and will compromise to get it. There's a possibility that, to achieve his goal, he will agree to insert language in the statute that denominates the networks as they presently do business as "promoters."

If that happens, rather than be classified as promoters, the networks might pull back and cede some of their power to Bob Arum, Don King, and others. Or they might decide to go all out and jump into the promotional cesspool with both feet, rendering promoters even less relevant than they are now.

There's also a third option. HBO and Showtime might say, "We don't need this hassle," and abandon the sweet science altogether. Where would that leave boxing?

Date: August 5, 2003



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