One Championship has been weathering a barrage of hits from doubters lately after announcing on June 15 that it’s laying off 20% of its headcount.
But the sports media company appears to be in a comfortable cash position for now. In the same announcement, it also said that it had just completed a US$70 million fundraise. Existing backers Sequoia Capital and Temasek Holdings participated in the round, which also included a new investor described as a “blue-chip multibillion-dollar investment firm in the US with heavy sports media and tech expertise.”
Of course, One isn’t throwing in the towel and dropping its bid to become “Asia’s first global sports media property,” as company chairman and chief executive Chatri Sityodtong puts it.
“We’re grateful that we now have a multiyear runway under any scenario,” he tells Tech in Asia in an exclusive interview.
Assuming One continued its revenue growth trajectory in 2019, the company could be looking at a runway of close to four years, Tech in Asia’s research shows.
Covid-19, however, could throw a spanner in the works. One’s revenues from February to May 2020 were hit by social distancing and other measures to contain the pandemic, which forced the company to put all its events – its bread and butter – on ice. It held its last event behind closed doors in Singapore on February 28.
Losses are but a drop in a bucket.
It posted three consecutive annual eight-figure losses from 2016 to 2018 that amounted to more than S$175 million (US$126 million), according to company filings seen by Tech in Asia. The bulk of it stemmed from “marketing expenses, administration, and other expenses.”
Meanwhile, nearly two-thirds of One’s revenue in 2017 consisted of barter deals instead of cash transactions. Since its 2018 financial statement doesn’t single out barter transactions, it’s unclear how much of its sponsorship income that year consisted of cash and noncash deals.
The company declined to comment on how much barter transactions factored into its 2018 earnings but said it expects such revenues to “be flat over time.” Describing the nature of such deals, Sityodtong cites how One Championship received free business travel for its team in exchange for an advertisement spot at one of its events.
“Barter transactions are a way for One Championship to get essential services for events without paying cash,” he says.
Sityodtong shrugged off the deficits, saying they are “a drop in a bucket” as the company is building a “US$100 billion property.”
Every company needs to hemorrhage millions to build its empire.
“Like Facebook, YouTube and Amazon, every company needs to hemorrhage millions to build its empire – into its product, platform, brand, ecosystem and infrastructure, before it becomes legendary,” he observes. “We’re more than prepared to invest up to US$1 billion, if that’s what it takes.”
The CEO also criticizes media reports that “pick on” its losses, adding that the method of using financials to gauge a startup’s success is “seriously flawed.”
Indeed, internet startups normally rack up huge losses in their early days to build market share, although that is contingent on being able to raise more money from investors. But capital is harder to come by during a recession, which means that market sentiments now favor startups that prioritize profitability.
At present, One is focusing on increasing its viewership, with an eye on monetizing it down the line. “For a sports media property like ours, reach, frequency, and engagement are the most important health metrics,” Sityodtong notes, and the company’s digital social numbers can attest to that. “Even if One lost US$1 billion, I’d still be very happy, as long as our metrics kept on growing exponentially,” he stresses.
To prove his point, Sityodtong cites the 4 billion organic views that the firm racked up in 2019, which had grown “exponentially” from 140,000 in 2014. One is even on track to exceed that despite the sucker punch thrown by Covid-19. “There are no other media properties with those numbers,” he adds.
In 2019, One overtook US-based Ultimate Fighting Championship (UFC) to become the most-watched mixed martial arts (MMA) organization online. The Asian startup offers its content for free via its Facebook, YouTube and Instagram accounts as well as through its One Super App.
Squaring off with the UFC
However, while it has surpassed the UFC in online viewership numbers, One is still catching up in many other areas, such as revenue. UFC’s revenue reached US$666 million in 2016. In 2019, the MMA company struck a deal with sports broadcaster ESPN that was worth US$1.5 billion.
In comparison, One recorded S$37.2 million (US$26.7 million) in revenues for 2018. That same year, the company also secured a landmark “eight-figure sum” for the rights to air its events from US broadcaster Turner Sports.
Comparing their numbers, UFC seems less reliant on sponsors, while One appears to depend heavily on sponsorship income, which accounts for nearly half of its total revenue.
Another key difference is that UFC makes a ton of money from pay-per-view (PPV) sales as it’s part of a mature US market that’s willing to pay for combat sports content. UFC reaped an estimated US$180 million in PPV sales from a 2018 match between Khabib Nurmagomedov and Conor McGregor.
Since PPVs work so well for its competitor, shouldn’t One do it too? Sityodtong tells Tech in Asia that the company was aiming to launch such a model in the second half of 2020, but the pandemic pushed back its plan.
“We’re trying to get our PPV model up and running by this year’s fourth quarter, but it’s uncertain, given the current volatile Covid-19 situation,” says Sityodtong.
Getting viewers to pay for One’s content would be the perfect litmus test for market validation. If people are willing to pay for your content, it’s a sign that they value it. Consumers in many parts of Asia, however, still aren’t used to doing that.
Cultural impact is a metric that’s more difficult to measure. Established in 1993, UFC has produced bankable superstar athletes like McGregor and Ronda Rousey, who have attained fame beyond hardcore MMA fans. That often translates to ticket sales and other revenue streams.
One Championship, meanwhile, has been criticized for using “various tactics to try and mask the low turnout of its events, including giving away tickets for free” to fill arenas, according to The Ken.
One isn’t “a music concert organizer that only relies on selling tickets” to generate most of its revenue, Sityodtong says in response to these claims. “Sometimes, we don’t manage to sell out venues, but our biggest source of revenue is our broadcast rights. These media outlets… they don’t get that.”
Another consideration is that UFC took a long time to become a titan in this field. In contrast, One is a relatively young company that began in 2011 – 18 years after UFC was set up.
However, One should be showing accelerated revenue growth, given that it has a few things going for it: the explosion of social media, the elevated status of MMA (thanks to UFC’s pioneering work), and venture capital money.
“UFC controls an 80% market share of the western hemisphere, but One Championship controls 90% of the market share in the Eastern hemisphere. And we’re the two big 800-pound gorillas in the industry,” Sityodtong told Business Insider.
Sudden job cuts
Before it can get there, however, One is facing some hurdles like the Covid-19 crisis. The June 15 layoffs came out of left field, according to One employees who spoke to Tech in Asia.
“We were insanely busy and then the end came without warning,” says one ex-staff who requested anonymity. “The only message we got the week before was, ‘We’re not immune from the crisis.’”
“The leadership’s outlook seemed optimistic,” says another former employee, remarking that One seemed initially unfazed by Covid-19, even as reports of layoffs and struggling companies were rife.
The layoff figure may also be higher than the announced 20%, several sources tell Tech in Asia.
Sityodtong, however, explains that these employees may have a different perspective since entire departments in some countries were retrenched “all at once.”
“There are offices that were hit harder than the rest,” he says. While the decision to slash jobs was “heart-wrenching,” the CEO stuck to the official number.
“This is why we were generous with the retrenchment packages. We wanted to do right by those [who are] leaving us,” he says.
Returning to the ring
After fight cards got sidelined for over three months due to Covid-19, Sityodtong says the company’s immediate priority is to “get back up and running.” This weekend, One Championship is broadcasting its first public event in China since lockdown measures were imposed in January. Called “One Hero,” the competition will feature 12 fighters who want to be “Asia’s next martial arts superstar.”
One expects to fill stadiums again by this summer, relaunching its flagship events later this quarter. But Sityodtong remains on high alert because of the “very tricky” global environment.
“It’s still unclear when fights can resume because of the travel restrictions, quarantine and distancing rules,” he points out.
Apart from events, the company is going to work on its “content stack,” which includes two reality shows: travel-focused Warrior and The Apprentice: One Championship Edition, which will feature contestants facing off to clinch a “once-in-a-lifetime” US$250,000 job working under Sityodtong himself.
Though Covid-19 has cast a shadow on the company, it also gave other segments of One’s business a chance to shine. Its video platforms have seen “record-breaking growth” in organic traffic while online sales of its merchandise have also skyrocketed. “We’ll continue to push for success in those areas,” says Sityodtong.
Looking ahead, One’s head honcho has ambitions to televise in every country in the world within the next two years. The company currently airs its fights in “over 150 countries.”
“We’re constantly renewing agreements with current broadcasters and increasing our footprint. This is a huge opportunity for us, since we land deals in the eight and nine digits,” he says.
According to its financial statements, One saw a big bump in its broadcasting revenue, which went from S$4.7 million (US$3.4 million) in 2017 to SS$19.7 million (US$14.1 million) in 2018.
Sityodtong tells Tech in Asia that One is gunning for deals with more high-profile broadcasters. It’s also setting its sights on outstripping US football league NFL, which is worth about US$91 billion, to become the world’s most valuable sports property.
“We’ve already overtaken the Ultimate Fighting Championship in terms of online viewership. Just the NBA and NFL stand in our way,” says Sityodtong.
“You may see us churning out event after event and content after content. But at the heart of it all, our crown jewel is our sports property,” he adds. “In a perfect world, what would Disney or Amazon want to own as an asset? If they could, they would want to buy the NFL and the NBA, as they are incredible sports franchises that will keep up making money.”
Sityodtong cites ESPN’s deal with Netflix for Michael Jordan’s The Last Dance documentary to shed some light on his moonshot idea for One. “You need platform businesses that are heavy on intellectual property and very asset light. With that, you have the flexibility to make a lot of different content,” he says.
One Championship recently branched out into esports, but judging by its Facebook reach, that effort is still nascent. In December, the company launched its first event in this vertical, the Dota 2 Singapore World Pro Invitational, to a “surprising” reception, according to One Esports CEO Carlos Alimurung.
The tournament received more than 464,000 peak concurrent views, which isn’t a bad showing for an inaugural, especially when pitted against numbers pulled by League of Legends European Championship, which attracted 807,033 concurrent viewers across the world at its peak.
Alimurung says that One’s esports arm is on track to be profitable by 2021. The firm will also add “two to three” popular titles like Mobile Legends and Dota 2 to its lineup next year.
Apart from hosting esports tournaments, One is looking to develop its own games. But that comes with its own set of challenges as there’s no guarantee that the company can create a hit game that can recoup the production costs.
According to Sityodtong, One is taking “baby steps” towards this goal, starting with introducing two mini games its mobile app, which will feature “small adventure and quiz challenges.” He considers these moves as “fan service” – a way to keep fans engaged. “We get to speak to them loudly,” he says.
The company also intends to use the mini games as an experiment before delving into a major gaming project that Sityodtong mentioned during a recent fireside chat with Maria Li, Tech in Asia’s chief operating officer.
“We will launch a big video game in two years. Yes, it can be a hit and miss, and that’s why we have to start small with mobile projects,” he said during the discussion.
Despite Covid-19 putting a damper on its business, One says an initial public offering is still in the pipeline. “The time to go live [on the stock market] depends on the global economy. I can’t tell you exactly when, but it will still happen,” Sityodtong says.