Coasean Floor

Case Study: the Boxing Industry

admin — Mon, 16 Nov 2009 16:12:09 +0000

Its easy to forget just how many ‘industries’ are actually are out there. Once upon a time, sports was a pastime. Now its an industry and courtesy of American Airlines seat number 33C, Miami International to London Heathrow, I got a window on one part of that industry: the world of professional boxing.

Now there are two things guaranteed to sustain my interest: sport and businesses that I know nothing about. Turns out my fellow passenger was a boxing manager and after a quick trip through our favourite fighters and favourite fights, we got on to something much more interesting: the business of boxing. Turns out, boxing is virtually devoid of big players, with the exception of the television companies from whom they derive the bulk of their revenues. Its a huge cottage industry with manager, trainers and promoters constantly in a state of flux, all making a living based on a percentage of the fighters purse. The equivalent would be Volkswagen teaming up with Bosch, Continental and all their other suppliers, based on a cut of the final sale price of a car. ten per cent for a manager, ten per cent for a trainer. Promoter puts up a purse. Every fight is hand crafted: all of the various players are brought together on one night and then disappear once the show is over: for one night only.

My fellow passenger had just returned from Madison Square Garden, his fighter was a world champion, but he had to run a second job to make a living. It turns out that very few people are making any real money, bar the really big promoters and the really big fighters. Everyone else has second jobs or gyms which draw in people who pay to associate with the ‘fight game’. But the passion is palpable. As with any industry, the rewards are disproportionately earned by the top players; its closer to the 95-5 rule than the 80-20. People are drawn to the sport and don’t want to leave because they love it. Is it inevitable that in an industry where people love their job, their reluctance to leave the industry drives down returns for everyone?

How small companies can thrive in the design industry

admin — Thu, 08 Oct 2009 18:00:18 +0000

Ulla-Maaria Mutanen has a few things to say on how getting big is not essential to success in the design industry.

Less is more part 1

admin — Thu, 08 Oct 2009 17:52:03 +0000

In the aftermath of the credit crunch, there seems to be a significant amount of public anger and resentment directed towards big business, particularly the big banks. The backlash may see us entering a new era of less is more in the business world, but can lots of small players realistically take on a few big ones? The recent omens don’t look promising; small retailers in the UK are hardly prospering at the expense of Tesco. It begs the question of why business is so obsessed with getting big in the first place? Part of the answer is that big businesses like to have other big businesses as suppliers and customers. Part of the answer is that stock markets obsess about growth.

The intellectual godfather of big business was Ronald Coase. He gave good economic arguments as to why companies chase growth and how getting big meant getting effective. That was seventy years ago and the advent of the Internet has sparked something of a counter revolution, but we’ve yet to see an intellectual standard bearer emerge with a coherent argument for reversing the trend and a framework for making it happen.