Affliction´s finances...

**Seikan** · 01-30-2009 02:15 AM

Affliction’s Day of Reckoning May Be Further Away Than Anticipated

January 27, 2009

Despite a solid card that produced several spectacular finishes and cemented the emerging legend that is Fedor Emelianenko, the MMA community’s focus when it comes to Affliction remains on one thing: its finances. It’s a narrative that has dogged the company’s entertainment brand since it launched last year with payrolls at levels previously unseen. While it’s fair, even accurate, to say that it is unlikely, if not impossible, for Affliction to recoup its costs through traditional live event revenue streams (i.e. pay-per-view, gate, sponsorships, licensing fees, etc.), that doesn’t tell the whole story.
Affliction is after all a t-shirt company at the end of day, as Dana White loves to remind everyone, and ultimately any money they make on these MMA events is icing on the cake to the brand building they are accomplishing. As a private company we don’t have much evidence as to how briskly sales are moving, but a recent BusinessWeek feature provides some insight.
An item from the January 26th edition titled “Youth Will Be Served” focused on the success of youth-oriented retailer Buckle. The company posted a 13.5% year-over-year gain in same store sales for the month of December’s, a stunning success in the current environment. For some perspective retail heavyweights Macy’s, Gap, American Eagle, and Abercrombie & Fitch posted declines of 4%, 14%, 17%, and 24% respectively in the same month.
Buckle is one of Affliction’s closest retail partners and was previously featured on the canvas at Affliction’s first MMA event. The article credits Affliction Clothing and MEK Denim as two of the hottest brands that have made the store successful. In 2008 overall sales for Buckle rose 26% to $780 million. While all of that is not Affliction, the point is: they’re selling a lot of t-shirts. More importantly, the company believes that these events help sell those shirts. Large sales spikes have been reported around both of its events.
Based on previously reported statements, Affliction Clothing does an estimated $125 million in annual sales with its MMA brand accounting for 20-25% of that or roughly $25-35 million in annual revenue. Using what I think would be a conservative profit margin of 40%, that would be profits on MMA apparrel alone at somewhere between $10 and $14 million annually.
Those numbers help put into perspective potential multi-million dollar “losses” on the MMA events themselves. These events really amount to an aggressive marketing/advertising campaign for Affliction’s core clothing business at worst. At best, if the company finds its footing as a live event promoter, it will have opened up a new revenue stream and diversified its business.
This isn’t exactly a groundbreaking approach. Red Bull has taken a similar path in NASCAR. After spending several years as a sponsor of events, the company chose to make the leap into team ownership. In the expensive world of Sprint Cup Racing it is very unlikely that the team turns a profit, but Red Bull doesn’t sit around wringing its hands about its multi-million dollar “losses.” Instead it watches its energy drink sales rise and is satisfied knowing that ownership of the racing team gives it a potential upside and possibility of recouping its investment that other traditional advertising and marketing expenditures simply don’t offer.
It’s essentially the difference between renting and owning your own home. Both accomplish the goal of having a roof over your head, but ownership allows you to simultaneously build equity.
So while Affliction may ultimately decide that its money is better spent outside of live event promotion, that decision will likely not rest entirely on the financial bottom line of the events themselves, but rather their contribution to the company’s overall finances, i.e. its clothing line.
Without understanding this essential difference between the company’s financial calculus and that of its chief competition (Zuffa) it is impossible to accurately and fairly evaluate the success or failure of the company’s promotional efforts.
At the end of the day Affliction really is a t-shirt company and that fact makes all the difference in evaluating its fate.

Everybody crying about Affliction losing money and what not, should carefully examine and think over the points Mr.Swift made in his article.

**T-Bone** · 01-30-2009 08:31 AM

Interesting stuff....did not know this:

An item from the January 26th edition titled “Youth Will Be Served” focused on the success of youth-oriented retailer Buckle. The company posted a 13.5% year-over-year gain in same store sales for the month of December’s, a stunning success in the current environment. For some perspective retail heavyweights Macy’s, Gap, American Eagle, and Abercrombie & Fitch posted declines of 4%, 14%, 17%, and 24% respectively in the same month.
Buckle is one of Affliction’s closest retail partners and was previously featured on the canvas at Affliction’s first MMA event. The article credits Affliction Clothing and MEK Denim as two of the hottest brands that have made the store successful. In 2008 overall sales for Buckle rose 26% to $780 million. While all of that is not Affliction, the point is: they’re selling a lot of t-shirts.

Even the detractors have to acknowledge the BRANDING that is going with the MMA venture.

**subgenius** · 01-30-2009 10:06 AM

So, the UFC should become a clothing company first and put MMA as a second priority? Should the UFC buy out TapouT in order to compete with Affliction? I still don't see how Affliction can maintain a viable MMA promotion with only one or two events a year and still hope to be a competitor with the UFC.

**Crazy Hawk** · 01-30-2009 11:45 AM

So then what this article does is it confirms what sub has said before which is the fact that affliction doesn't really care about mma & they are using mma events just to promote thier clothing.

I believe this is what dana white said before as well.

Now it is a good buisness idea, using mma events to sale thier shirts & it explains why when you go to afflictions website you basically have to dig around looking for the mma news but in the same respect this shows me that all the people out thier hating ufc & saying that ufc is not about the fighters & that affliction is *based on a pay check* that its all bs.

Don't get me wrong I like the affliction shows but if its to promote only thier clothing and not thier fighters, this is not good.

Maybe if they spent more time promoting the events & the fighters such as fedor then more NA people would know fedor.

**Cuts O Meat** · 01-30-2009 11:58 AM

Who cares if they are only trying to promote their clothing line?!?! They put on good shows! That's all I'm in it for.

**Crazy Hawk** · 01-30-2009 12:01 PM

Originally Posted by Cuts O Meat

Who cares if they are only trying to promote their clothing line?!?! They put on good shows! That's all I'm in it for.

I don't care that they are only promoting hier clothing.

What I am talking about is all the people who posted on other threads that affliction is about the fighters & they want to give ufc compettition & show the ufc what they should be paying thier fighters but in reality affliction is really about.... well affliction.

Basically what people like to put the ufc down about & praise affliction for is not true lol.

Just like myself & others had said before, its about buisness not the fighters & even though that sucks it is the reality of a buisness.

**KungFuGrip** · 01-30-2009 12:08 PM

Dana used to wear Affliction? http://www.mmaconvert.com/2008/07/14...thing-company/

Thought this was funny.

**T-Bone** · 01-30-2009 12:20 PM

Originally Posted by KungFuGrip

Dana used to wear Affliction? Tom Atencio: ‘The F*cking Clothing Guy’

Thought this was funny.

Yeah, that's a good one.

Hold on a minute...is that a Fedor series shirt?

**RustyShackleford** · 01-30-2009 12:20 PM

How can anyone say they are only in MMA to promote their clothing line? That's obviously a bonus, and i'm sure a huge factor when they decided to take on promoting MMA. But it would be a very bad business decision to take on something as difficult and costly as promoting MMA shows just to help sell their stuff. If that was their intent, there are much better avenues to take. You can't say they only care about their clothing when they are putting on events with the quality we've seen. Attencio has also said that competing with the UFC is not their goal, they just want to put on great events and showcase the fighters. Does anyone say Strikeforce or KOTC are trying to compete with the UFC? No. Because they don't put on the calibre of events that the UFC does. A side affect of putting out top notch events is being put in the same breath as the UFC. But saying that Affliction is in MMA to try to compete with the UFC or is only in MMA to sell clothes, that's spinning facts. I see a lot of people becoming increasingly biased towards Affliction because they don't agree with their business model. I don't agree with all their decisions, but they put out great events. So for as long as this ride lasts i'm going to enjoy the hell out of it and appreciate Affliction for what they are. A clothing line that got burned by the UFC so tried their hand at MMA and put on great events with some of the best fighters.

**subgenius** · 01-30-2009 12:40 PM

If Affliction put on as many shows as the UFC, then Affliction would not be able to sustain that. They use one or two MMA events to promote Affliction Clothing. If they cared about MMA and promoting the fighters, then we would see an Affliction event every month. The fact is that the money they make from selling clothing goes back into the business in order to keep it going. They don't make huge profits from MMA events.

If they truly went head-to-head with the UFC, then they would go bankrupt. I also cannot say that they put on great events when they have only had two events within a year. By comparison to the UFC, Affliction is not putting on great events. They are focused on the main event: Fedor versus [insert MMA fighter]. Affliction is essentially a clothing company promoting one fighter as the flagship of their Public Relations. If Fedor is not on the card, then they will cancel it or some such.

A lot remains to be seen from Affliction...

**Cuts O Meat** · 01-30-2009 03:04 PM

Originally Posted by Ventre

I don't care that they are only promoting hier clothing.

What I am talking about is all the people who posted on other threads that affliction is about the fighters & they want to give ufc compettition & show the ufc what they should be paying thier fighters but in reality affliction is really about.... well affliction.

Basically what people like to put the ufc down about & praise affliction for is not true lol.

Just like myself & others had said before, its about buisness not the fighters & even though that sucks it is the reality of a buisness.

They gave Arlovski 1.5 million... Nah, they don't give a **** about the fighters..

**Cuts O Meat** · 01-30-2009 03:08 PM

Originally Posted by subgenius

If Affliction put on as many shows as the UFC, then Affliction would not be able to sustain that. They use one or two MMA events to promote Affliction Clothing. If they cared about MMA and promoting the fighters, then we would see an Affliction event every month. The fact is that the money they make from selling clothing goes back into the business in order to keep it going. They don't make huge profits from MMA events.

If they truly went head-to-head with the UFC, then they would go bankrupt. I also cannot say that they put on great events when they have only had two events within a year. By comparison to the UFC, Affliction is not putting on great events. They are focused on the main event: Fedor versus [insert MMA fighter]. Affliction is essentially a clothing company promoting one fighter as the flagship of their Public Relations. If Fedor is not on the card, then they will cancel it or some such.

A lot remains to be seen from Affliction...

God you are full of it..

How do you know Affliction only produces MMA events to promote their clothing line? Where did someone from Affliction's staff say that?

And saying they don't care about the fighters because they don't put on a show ever month is absolutely ridiculous bull****!

**subgenius** · 01-30-2009 03:12 PM

If they cared about the fighters, then they would give them a venue to fight. Instead, we get two events in a year. That means that their fighters are not showcasing their skills or being promoted with fights on PPV events. I just don't see it as a MMA promotion as much as a clothing promotion. Until Affliction starts having monthly PPV events, or at least bi-monthly events, I will not see them as a top flight MMA promotion.

**Seikan** · 01-30-2009 03:26 PM

Originally Posted by Ventre

it confirms what sub has said before

**Cuts O Meat** · 01-30-2009 03:29 PM

Originally Posted by subgenius

If they cared about the fighters, then they would give them a venue to fight. Instead, we get two events in a year. That means that their fighters are not showcasing their skills or being promoted with fights on PPV events. I just don't see it as a MMA promotion as much as a clothing promotion. Until Affliction starts having monthly PPV events, or at least bi-monthly events, I will not see them as a top flight MMA promotion.

If they cared about the fighters they would produce as many MMA events as often as they could afford, so as to not go under leaving the fighters without a venue to fight.

And that's what they are doing.

The UFC didn't do a show every month a few years ago. Did they not care about their fighters?

**subgenius** · 01-30-2009 03:38 PM

Originally Posted by Cuts O Meat

If they cared about the fighters they would produce as many MMA events as often as they could afford, so as to not go under leaving the fighters without a venue to fight.

And that's what they are doing.

The UFC didn't do a show every month a few years ago. Did they not care about their fighters?

Good point. But, this is not the 1990s. With all the profits that Affliction supposedly has had, what are they waiting for? We are talking about a company that supposedly has $125 million. They have around $10 million or $14 million annually in MMA related sales. So, why is that not being put back into the MMA promotion? This is not KOTC, which has small financial backing. KOTC has around forty events in the books with a small financial backing. They have monthly events, on average, with the latest events on December 12, 2008 and January 9, 2009 and a new event coming up on February 6, 2009. And, KOTC is a small time promotion by comparison to the UFC or the money that Affliction has access to (supposedly).

**Seikan** · 01-30-2009 03:38 PM

Originally Posted by Cuts O Meat

If they cared about the fighters they would produce as many MMA events as often as they could afford, so as to not go under leaving the fighters without a venue to fight.

And that's what they are doing.

The UFC didn't do a show every month a few years ago. Did they not care about their fighters?

You know what interesting? First the wikipedia champions and forum trolls say hat Affliction is done and that it can´t survive with the salaries they pay, then they say that they are only in it for the money, as if Lorenzo, Dana or Tom, Dick and Harry are running a charity operation, specally if you look at the salaries they pay their fighters...THEN they say Affliction doesn´t care about their fighters because they only put on 1-2 events a year, but at the same time they say that Affliction couldn´t survive if they put on monthly fights like the UFC.

Some people are always going to be so full of crap, that it will start to come out their pores.

**subgenius** · 01-30-2009 03:42 PM

Originally Posted by SeikanJudanski

You know what interesting? First the wikipedia champions and forum trolls say hat Affliction is done and that it can´t survive with the salaries they pay, then they say that they are only in it for the money, as if Lorenzo, Dana or Tom, Dick and Harry are running a charity operation, specally if you look at the salaries they pay their fighters...THEN they say Affliction doesn´t care about their fighters because they only put on 1-2 events a year, but at the same time they say that Affliction couldn´t survive if they put on monthly fights like the UFC.

Some people are always going to be so full of crap, that it will start to come out their pores.

Be specific about who said what and when they said it. Wikipedia said what? Does Wikipedia post here? And, EVERYBODY knows that the UFC is in the MMA business to make money. But, they are an MMA promotion, not a clothing company trying to be an MMA promotion. When was the last time that the UFC canceled an entire event? If Affliction has the millions that the article claimed, then what is holding them back from holding more and more events?

**T-Bone** · 01-30-2009 03:54 PM

Originally Posted by SeikanJudanski

Some people are always going to be so full of crap, that it will start to come out their pores.

and some even carry that shovel around to use...even when it makes no sense.

**Cuts O Meat** · 01-30-2009 03:58 PM

Originally Posted by subgenius

Good point. But, this is not the 1990s. With all the profits that Affliction supposedly has had, what are they waiting for? We are talking about a company that supposedly has $125 million. They have around $10 million or $14 million annually in MMA related sales. So, why is that not being put back into the MMA promotion? This is not KOTC, which has small financial backing. KOTC has around forty events in the books with a small financial backing. They have monthly events, on average, with the latest events on December 12, 2008 and January 9, 2009 and a new event coming up on February 6, 2009. And, KOTC is a small time promotion by comparison to the UFC or the money that Affliction has access to (supposedly).

$125 million? lord have mercy! You need to learn what sales, revenue and profits are before you start mouthing off about Afflictions business practices..

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