With cash infusion, DREAM targets international expansion, pay-per-view model

With cash infusion, DREAM targets international expansion, pay-per-view model

by Steven Marrocco on Jul 17, 2010 at 9:30 am ET

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DREAM's American representative says the Japanese promotion's prosperity depends not only on new capital, but a plan to spend it well.

And when that happens, DREAM hopes more fans will part with their cash.

Mike Kogan, Director of FEG USA, on Friday told MMAjunkie.com (www.mmajunkie.com) that the lucrative new deal between DREAM's parent company, Fighting and Entertainment Group, and Shanghai-based investment bank PUJI Capital is an important step in regaining MMA's foothold in Japan and the rest of the world.

But for DREAM to thrive, Kogan said it's crucial that the company converts some of its fanbase to "a paying public."

FEG, which also heads the preeminent kickboxing promotion K-1, recently announced that PUJI will stake the fight promotion company in an aggressive worldwide expansion effort – to the tune of up to $230 million U.S. dollars, according to the investment bank.

While the shape of the expansion is not entirely clear, FEG president Sadaharu Tanikawa said the effort will begin in 2011.

Tanikawa said the expansion is a "declaration of war against the WWE and UFC," though the company plans specifically to avoid the U.S. market, where he feels they are outgunned by the pay-per-view giants. The company has not promoted a show in the mainland U.S. since August 2007 for the K-1 World Grand Prix in Las Vegas.

Tanikawa admitted the company has lost a huge portion of its market share in the martial arts business and that its business model needs to change.

"From Asia, we will take the world," Tanikawa said.

Kogan, who's worked with FEG since 2006, maintains that the Japanese MMA market is bigger than the U.S. even amid an overall decline in attendance and television ratings. The problem, he said, is that FEG is not poised to capitalize on its audience.

He claims an average primetime DREAM broadcast on Tokyo Broadcasting System (TBS) draws 11 to 12 million people, while a late-night broadcast garners around 3 million.

Kogan said the massive viewership of the primetime shows perfectly illustrates the potential for Japanese MMA to continue to thrive.

"Imagine if Strikeforce received 12 million viewers (on CBS)," Kogan said. "(CBS executive) Les Moonves would be doing cartwheels all the way down into the cage. Nick Diaz and Nate Diaz could beat the [expletive] out of the whole crew; they could have melees every other day and nobody would give a [expletive]."

But while those numbers are strong, the revenue that's generated from FEG's TV deals and event attendance are not enough to drive growth.

And without growth, the promotion fights an uphill battle in building stars who could convert some of those television watchers into pay-per-view customers. Kogan said that was an essential part of what kept PRIDE Fighting Championships afloat during the heydey of Japanese MMA – an average of 50,000 people bought the promotion's broadcasts before it was brought down in 2007 by a Yazuka scandal.

In the wake of PRIDE's collapse, several of its stars migrated to the UFC, which took away much of the casual fanbase that paved the way to stellar TV ratings (and the sponsorship dollars that came with them).

Kogan said the UFC has done well to leverage its talent into a lucrative customer base, and DREAM needs to catch up. In other words, DREAM needs to get back into the pay-per-view business.

"The (Japanese) audience was brought up watching it for free on TBS and Fuji," he said. "Well, they're not a paying public. The UFC has a hardcore fanbase that's ready to lash out $50 for whatever the [expletive] they put on TV, with at least an average of 300,000 (pay-per-view) buys. So the UFC knows that they will receive at least $15 million dollars in revenue.

"Put that in perspective with Japanese MMA. Imagine if out of those 12 million people, half a million were ready to cough up $50 each time DREAM was on?"

Kogan said the new infusion of cash could go toward developing new talent and ways to get DREAM's product to consumers in Japan and around the world – hopefully, at a premium. But he is at heart a realist and says that money alone is not the solution to DREAM's problems.

In line with Tanikawa, Kogan said FEG's goal is to get strong in Japan before it branches out in Europe and other markets.

"Just funds alone are not enough," he said. "That's one of the biggest reasons why all these MMA organizations that come out in the U.S., [such as] EliteXC, IFL and all these other places – even Bellator, I think Bellator is on their way out pretty soon – they think that you go get venture capital money, and you're like, 'OK, I've got 100 million dollars, I'm going to get all these people to fight each other and life will be good.' Obviously, as its shown, that's not true.

"The focus (for DREAM) right now is on lightweights and featherweights just because there's a bigger talent pool, especially in Japan. But realistically speaking, if you want to get big, you need big guys. That was the biggest thing that PRIDE had was the heavyweights and light heavyweights that drove the organization."

Meanwhile, DREAM.16 is set to take place Sept. 25 in Nagoya, Japan and may feature its lightweight champion Shinya Aoki as well as a light heavyweight title match between former Strikeforce and DREAM middleweight champion Gegard Mousasi and Tatsuya Mizuno.

If FEG can convince 50,000 fans to pay see that on TV, things will look a lot rosier for Japanese MMA.



Im not sure about PPV as that depends entirely on the stable of fighters they can develop. If they have a capital injection though they maybe able to offer better salarys than the UFC and fighters like before will defect. Very interesting times ahead. Remains to be seen as to what they can do with the K1 as that desperately needs a fresh injection of new talent.

 

You mean like when the Ferritas bought the UFC for peanuts back in the early 2000's when it was broke?

 

Prety subjective article. PRIDE didnt implode because they lost a TV deal. They went to the wall because of the Yakuza scandal.

Either way both organisations DREAM and the UFC benefited or are going to benefit from a capital injection. The fact that ones a capital injection and one was a buyout is academic. You wouldnt put venture capital behind a project if you knew it had the potential to be a bust. Additionally there only trying to corner the Asian market.

 

I think the point just went completely over your head. Are you saying theres a comparison between US MMA fans an Japanese MMA fans?