MMAjunkie.com Fight Biz – Round 5 MMA's path to entrepreneurial success
Like many innovative ideas before it, the creation of Round 5 MMA began well removed from the boardroom.
Damon Lau, a Toronto-based MMA fan with a background in marketing and a friendship with Randy Couture, raised the idea of mixed-martial-arts action figures on a whim during dinner with Couture in the summer of 2007.
"We were joking around with some things, and Randy was telling me about this idea that he thought would be very, very funny," Lau told MMAjunkie.com (
www.mmajunkie.com). "He thought somebody should create a plastic cauliflower ear that people could wear at the fights. We were just having some fun, and I was always a huge fan of the figurines they used to have for PRIDE. So, I said, 'Hey, Randy, wouldn't it be really neat if someone came up with MMA action figures in the States?' We both kind of stopped and paused for a second."
Round 5 MMA soon emerged from that spontaneous dinner conversation and, appropriately enough, Couture was the first fighter signed by the company.
Lau co-founded the Toronto-based company with his brother, Barron, and launched its first line of action figures in April of this year, featuring Couture, Quinton Jackson, Matt Hughes and Tito Ortiz. The collectibles were an instant hit.
"Based on what I've gathered from other industry professionals within the toy industry, it's simply phenomenal," said Lau, 27. "From the sales records that we have and the distribution we've opened in a short amount of time ... it's been a really hot item."
The two keys to Round 5's immediate success were demand and mainstream distribution. First, the company produced a product that filled a void in the MMA space. Secondly, Round 5 locked in agreements with major retailers, such as K.B. Toys, Toys 'R' Us, Champs and FYE.
With the UFC slow to expand its brand to toys, Round 5 got to the market first with a distinctive product that is more collectible, less toy. At a retail price of $16.99, the Round 5 product is at the high-end of the price point for action figures. The company's target demographic is the male 16- to 40-year-old collectible market.
The private company, which now employs a team of 16, does not provide sales figures. However, its success can be measured by the fact that seven months following the introduction of the company's first line, it's rolling out a second series with Anderson Silva, Wanderlei Silva, Sean Sherk and Rich Franklin.
"The feedback has been so good that, in 2009, we're going to be launching a new series every quarter," Lau said.
Lau won't say which fighters will be included in each quarterly four-pack release, but fans can expect to see more of their favorites, along with former and current champions.
And, for those fans who simply can't get enough of Gina Carano, it's quite likely that they will have a chance to own Carano immortalized in plastic in the near future.
"Women's MMA is a really interesting field, as well," said Lau, who stopped just short of naming names.
So far, Lau and company have operated unchallenged by the UFC and its plans to produce a line of figurines.
"I'd say around 95 percent of the (fighter) licenses that we currently have signed are exclusive," he said. "We haven't run into very much of a problem with regard to having conflicts with the UFC doing its own program. We're not particular with any one organization."
Round 5 cuts deals directly with fighters and gives them complete creative control over the development of the figure, down to sponsor logos on the shorts. And, Lau says their agreements typically pay fighters three to five times the industry average for a toy license.
That type of fighter-first approach could make it more difficult for the UFC to convince its athletes to cut merchandising agreements for action figures. The promotion already has lost the action-figure opportunity with high-profile fighters such as Couture, Jackson, Franklin and Hughes.
However, Lau downplays the head-to-head competition between the two companies, saying there's room for both, given their different approaches to product development.
"I've seen some prototypes of what the UFC and their partner have done, and I think they're creating a fantastic product," he said. "I just think that the positioning of that product is a lot more toy-oriented, as opposed to what we're doing on the collectible side. I think the positioning of both products is at different ends of the scale. I think there's definitely room for both."
Round 5 is also contemplating a slight diversification of its product line, moving from action figures to "fan memorabilia." Lau says the company has no plans to venture as far as clothing or training products, but rather stick with other types of collectibles.
It's a business plan that's worked thus far in a true entrepreneurial success story beyond the cage.
White, AKA take contrasting approaches to business differences
No one is immune to the wrath of UFC President Dana White.
F-bombs and ridicule are part of White's M.O., which seems suited to the counter culture of mixed martial arts. However, when adversaries choose to take a path less littered with profanity and insults, it can make White look increasingly disconnected from the real world.
Take White's latest dustup with the American Kickboxing Academy squad. In comments to Yahoo! Sports' Kevin Iole, White blasted AKA and its Zinkin Entertainment management company, saying AKA fighters "aren't partners with us." He went on to add, "[Expletive] them. All of them, every last [expletive] one of them," and said he no longer wanted to work with the group.
The spat stemmed from some of the fighters expressing concern about signing lifetime contracts to allow their names and likenesses to be used in a UFC video game – a key element of growing the UFC business beyond fights and TV deals. The opportunity put before the fighters reportedly tied them to lifetime contracts that did not offer significant compensation or a benefit for their families in the event of a fighter's death.
White's very public outburst, which was directed at a camp housing some of the UFC's best fighters in Jon Fitch, Josh Koscheck and Mike Swick (though Swick wasn't a specific target because the two spoke directly about the matter), is something unseen other sports.
Since White went verbally postal, the UFC's Lorenzo Fertitta and Fitch have spoken to reach some type of accord to keep the welterweight in the UFC. However, Zinkin has chosen to stay out of the crosshairs, at least publicly.
A statement from the company says that it prefers to refrain "from commenting on it any further at this point so that our fighters and fans can focus on the upcoming fights."
Plenty of work ahead for new CSAC chief
Whoever ends up replacing Armando Garcia as executive officer of the California State Athletic Commission will have his or her hands full.
Less than two months after announcing that a new drug-testing contract was in place with UCLA to utilize the university's World Anti-Doping Agency-certified lab, comes word that the commission chose not to order drug testing at the Nov. 21 Strikeforce show in San Jose.
Bill Douglas, who's been appointed assistant executive officer of the CSAC while the commission searches for Garcia's replacement, canceled drug testing until a revamped program could be put into place this week.
This decision comes following reports that raised serious questions about Garcia's handling of state funds during his three years at the helm of the commission, and that he faces a sexual harassment lawsuit filed by a former co-worker.
Those revelations have further damaged the credibility of an agency that came under heavy scrutiny for its handling of the drug-testing cases involving Sean Sherk and Phil Baroni in 2007.
While Garcia's seemingly forced resignation marks a much-needed change at the top of the commission, that's merely a first step. The new executive officer will need to take immediate action to address the perception that the CSAC isn't capable of policing its own staff and procedures, let alone the fighters it licenses.
