Why Arum Turned Down HBO PPV To Handle Pacquiao-Vargas Himself

By Keith Idec

The math made perfect sense to a Harvard-educated man who has made more millions than anyone knows promoting boxing over parts of the past six decades.

That encapsulates why Bob Arum decided to turn down HBO Pay-Per-View’s offer to televise the four-fight Manny Pacquiao-Jessie Vargas show from UNLV’s Thomas & Mack Center on November 5. Arum’s company, Top Rank Inc., is handling all distribution and advertising for the show, functions typically executed by HBO Sports for its 7.5-percent-per-event fee.

The two most important things fight fans need to know are that purchasing Pacquiao-Vargas still will cost $65 or $70, depending upon your cable or satellite provider, and that, without HBO’s involvement, the fight will not be replayed the following Saturday night. HBO typically televises all pay-per-view main events the ensuing Saturday night, which Arum believes has hurt pay-per-view sales at times, along with piracy.

“By not having anyone show the fight the week after, we think we drive sales,” Arum told BoxingScene.com. “Because a lot of people say, ‘Look, if I can see it a week after, why the f*ck do I have to spend all this money the week before? So that was a plus for us.”

Pay-per-view figures for Paquiao’s last fight, a unanimous-decision victory over Timothy Bradley in their unnecessary third fight April 9 in Las Vegas, were not as low as pre-fight criticisms from fans and media might’ve projected. Pacquiao-Bradley III drew roughly 400,000 buys.

That’s obviously a far less impressive number than Pacquiao’s previous fight – a record 4.6 million buys for his heavily criticized fight against Floyd Mayweather Jr.

Arum is more concerned, however, with improving Pacquiao’s numbers in comparison to the Filipino superstar’s fights against Miguel Cotto, Ricky Hatton and Juan Manuel Marquez. Las Vegas’ Vargas, the WBO welterweight champion, possesses neither the star power nor the resume of those men, but Arum has been encouraged by the response to this fight according to the social media experts he hired to help promote it.

“So far our messaging seems to be working,” Arum said. “We don’t have any statistics yet from the pay-per-view companies, the cable and satellite providers, except that they have put a lot of money into the advertising. They are very, very, very, very upbeat about the results. And ticket sales are really great. We’re gonna have a sellout.

“And Joe Gaglardi, the guy that handles the closed circuit – the chains and the bars and the mom-and-pops – I talked to him [last] Friday, and he doesn’t believe what’s happening. He says these numbers that they’re getting – and this is money, signed contracts – are on pace with the old Manny fights. Not Mayweather-Pacquiao, obviously, but the old big Manny fights. So that gives us a lot of enthusiasm because one generally follows the other.”

Arum almost always paints a positive picture prior to a pay-per-view event. Rarely does he avoid saying a fight will sell out, particularly Pacquiao fights.

In this case, however, he would only be kidding himself if he were promoting for the sake of promoting. Unlike most pay-per-view events Top Rank Inc. has promoted, especially events of this magnitude, the risk solely has been absorbed by Arum’s company.

If Pacquiao (58-6-2, 38 KOs) versus Vargas (27-1, 10 KOs) tanks, Top Rank would lose more money than any previous pay-per-view shows have cost the company because its usual deep-pocketed partner, Time Warner (owner of HBO), has been forced to sit this one out.

And that’s fine by Arum, the only promoter in boxing regularly willing to use much of his own money to take these types of risks.

“First of all, the distribution of the pay-per-view to the various pipelines, like DirecTV, Dish Network, the telecoms and the cable systems, we’ve done that ourselves,” Arum said, referring to previous lower-level pay-per-view events and helping HBO Pay-Per-View with bigger events. “When [Mark] Taffet was [at HBO], he did more of it than we did. But we were always involved in the process. This is nothing new. So we had that experience.

“Then we looked at what HBO was doing and what the HBO deal was, and we then said, ‘Where are we?’ So No. 1, HBO charges a distribution fee of 7½-percent for handling the distribution, which is really next to nothing, but also for getting involved in the advertising and so forth. And also for giving us an advance on fight night, so we can pay the fighters. Then they would do the production and so forth. We looked at all of those instances.”

Those considerations, combined with the benefit of not replaying the fight, made this experiment a no-brainer for Arum.

Timing also was a factor.

Pacquiao could fight only during a two-week window this fall because his responsibilities as a senator in the Philippines require him to serve more days on the job than his previous position as a congressman. Further complicating matters, HBO Pay-Per-View will televise another pay-per-view event, headlined by Andre Ward versus Sergey Kovalev, just two weeks after Pacquiao-Vargas.

The light fall boxing schedule offered by HBO deterred Arum, too.

HBO Sports usually promotes pay-per-view shows during live boxing events for months prior to those events. The network hasn’t shown a live fight since September 10, though, which diminished the network’s promotional value.

Despite its significant subscriber base (roughly 31 million in the United States), Arum estimated that HBO’s “24/7” franchise and comparable promotional programming accounts for roughly 150,000-200,000 viewers on average. That’s what made Todd duBoef, Top Rank’s president and Arum’s stepson, devise an aggressive strategy, “All In,” to advertise Pacquiao-Vargas through Facebook, Instagram and Twitter.

“The shoulder program, which appeared on HBO, whether it was 24/7 or a cut-down version, that’s very expensive and it’s paid for by us,” Arum explained. “In other words, it’s shown on HBO, but the promoter pays the expenses of it. So Todd came up with this. ‘Let’s take that money that we’re paying HBO to show it only on HBO, and let’s do shoulder programming in a different way, in a more modern way,’ and we have. We call it, ‘All In.’ It will be flooding all of the Internet, all of the social media sites [started Monday]. Whether it’s Twitter or Instagram or Facebook, you’re gonna see it and different versions of it [until fight night].

“We have professionals doing that, obviously, because we can’t do that ourselves. We didn’t know how, so we hired the biggest company to do it. So we figure that with the shoulder program on HBO, where we’re lucky to have it watched by 150,000 or 200,000 people, we are going to be reaching tens of millions of people over these two weeks. Now that doesn’t mean, necessarily, that they’re gonna buy it. But we’re reaching them. We’re telling them about the fight, telling them about the event. Because part of this whole thing is it’s not just one title fight, with Manny Pacquiao and Jessie Vargas. It’s four title fights, four competitive title fights, four interesting fights. So that’s the message that we’re sending.”

The impact of that message remains to be seen. Arum won’t begin to learn whether this experiment can be considered successful until several days after Pacquiao-Vargas, once cable and satellite companies start reporting buy rates.

Regardless, he is comfortable with putting more money than usual out of pocket prior to a pay-per-view show to find out whether this business model is sustainable.

“The night of the fight we have to pay the fighters, cash for the fighters [in the form of checks],” Arum said. “But it’s an advance [from HBO Sports]. So let’s say they pay, and I’m just using a number, $10 million. And then within the next 60 or 90 days our money flows back to them, before it gets to us. Then they take a distribution fee, then they reimburse themselves for the fight-night advances. If there’s a shortfall, which there occasionally was, then we owe them the money and would pay them the money. So it’s really a non-interest-bearing loan that they make.

“So we went to our bank and made the same arrangement. Thank God interest rates are so low, because it really doesn’t come at a great cost. So that’s how we handled it. For us it opens up opportunities and it opens up the ability to do this in different ways. It opens up the way for us to bring in a new announcing team that people may be curious to hear. This Stephen A. Smith is some character. So for me, it’s, and I don’t want to denigrate what [HBO does] – but for me it’s an opportunity for us to do better.”

Keith Idec covers boxing for The Record and Herald News, of Woodland Park, N.J., and BoxingScene.com. He can be reached on Twitter @Idecboxing.