Lots of people are astonished by the news that Affliction apparently paid Oscar de la Hoya $5 million to come to their show. We don’t know this is the actual figure, but there hasn’t been any denial yet.
Even if it is the figure, it could end up being the best expenditure ever made by Affliction. Coming out of the second show, Affliction is in serious financial trouble. Their contracts are all based on assumptions that proved faulty, and they simply can’t keep financing this thing from the inside. They need capital.
Enter Oscar. He is not going to supply the capital. But by getting him to the show and paying him to associate himself with the product in a visible way, they have increased their chances of getting funding many times over. My experience with capitalization is limited to the technology sector in Silicon Valley, but the principles are the same all over. Next to the raw numbers, the most important thing that investors look for is a team they can be confident in. They want to see people in charge with a history of success, and names that people can believe in. When it comes to the fight world, it’s hard to beat Oscar.
In Hollywood, it’s often said that when Tom Hanks is in a room with studios, he gets what he wants. In a lot of ways, the same is true for Oscar. Trying to get funding with Oscar behind you is a whole different game than trying to get funding with Todd Beard behind you.
Affliction: Day of Reckoning was a giant commercial for investors. I have no doubt they had numerous organizations there to consider potential investments, and having Oscar going berserk during that main event certainly didn’t hurt. Realistically, if I was making the calls, I would not invest in Affliction because I don’t believe there is any way they can make money. But most investors don’t know the MMA game. They will see the UFC’s numbers and assume they can do it too. Sadly, fans are now in a position where they need to hope investors are clueless.