TOKYO -- Mei Yamaguchi is five-foot-nothing and built like a bulldog, barely standing taller than the top rope in the gym in suburban Tokyo where she trains. Yamaguchi, a 36-year-old wrestler, boxer and martial artist, has been fighting for more than a decade, but for most of her career competed in small venues in front of crowds of family and friends, working part-time jobs so she could devote herself to training.
"It's great to have supporters around you, but it was like; what am I doing this for?" she said. "We couldn't rely on the money we got for the fights ... a lot of people quit. There were fighters who had potential, but they couldn't continue."
That changed three years ago, when Yamaguchi asked her agent to try to find her a fight overseas. She was booked for a bout in Singapore with One Championship, a promotion based in the city-state that was just starting to make waves in the MMA world. She lost that fight -- the inaugural women's "atomweight" title -- to the Singaporean Angela Lee, but signed on with One, which finally gave her the chance to truly go pro.
Half a dozen fights later, she had a chance to compete on home turf. More than 42 million people watched One Championship's first event in Japan in March, and Yamaguchi was on the card.
"When I got in the cage, and when the fight started, that's when I really noticed the crowd," she said. "Finally, I feel like I'm an athlete. A professional athlete."
One Championship, which is returning to Tokyo for its 100th event later in October, is Asia's largest sports promotion by some distance. The company has tracked the proliferation of smartphones and social media across Asia with a product that is boxing for the Snapchat generation -- short, over in minutes, and easy to edit for the smallest screen. Last year, its videos of fights and fighters were watched 5 billion times.
The company has fueled its expansion with large cash injections. Since its foundation in 2011, it has raised more than $275 million from investors that include Sequoia Capital and Temasek Holdings, Singapore's sovereign wealth fund. A $166 million Series D round in October 2018 pushed its valuation to over $1 billion.
Like many of its fellow unicorns -- private companies with ten-figure valuations -- One is yet to make a profit. To change that, it will have to navigate an entertainment industry that is undergoing massive disruption by the same factors that propelled it to its current scale.
"The metrics that they always talk about, which is how many people watch it on YouTube and so on, that's all great. But most of it doesn't make you any money," said Marcus Luer, an industry veteran and CEO of sports media company TSA Group. "One Championship has done well ... in convincing people that they're building something that is potentially going to be worth billions in the future, and that people can keep throwing money at it. And all you can hope for is that, one day, they'll be right."
One Championship's founder Chatri Sityodtong is not a man held back by a lack of confidence. "I am the only full-time martial artist of all the global CEOs," he said, surrounded by fruit baskets and pastries after a promotional event at a Tokyo hotel in late September. "Everything my athletes have gone through, I know exactly. Any technique they throw, I can do."
Chatri, a Thai-born kickboxer, Harvard MBA and former hedge fund manager, told the Nikkei Asian Review that he launched One Championship -- then called One FC -- partly as a counterpoint to the "blood sport" version of mixed martial arts that was breaking out in the U.S.
The Ultimate Fighting Championship is widely credited with codifying the modern sport of MMA and packaging it for a mainstream audience. The UFC put "cage fighting" on prime time through a reality TV show, signing multibillion dollar rights deals and attracting blue-chip sponsors despite controversies surrounding some of its most bankable stars. The company was bought for $4 billion by an American talent agency, WME-IMG, in a private equity-backed deal in 2016.
"I feel a sense of disgust for the way that martial arts is portrayed in the West," Chatri said. "Martial arts is about integrity, honor, respect, courage, compassion. I feel like the West has hijacked the word 'martial arts.'"
With One, Chatri said that he wanted to bring MMA back to its roots in Asia, and to turn a fighting sport into family entertainment -- something that "a six-year-old and a grandmother can celebrate together."
"[One's] mission is to unleash real-life superheroes who ignite the world with hope, strength, dreams and inspiration," he said, the last five words rushing out in a practiced staccato. "When you think about our formula for success, the foundation of One Championship is values, heroes and stories."
"Values, heroes and stories" is a mantra for Chatri, who is so relentlessly on-brand that at times he sounds like a kind of motivational video. A conversation with One Championship's founder is a flurry of punchy sound bites -- "creating heroes"; "all my global competitors are selling fights. I'm building heroes"; "even though our genre is martial arts, our platform is actually humanity." Chatri used the word "heroes" 15 times in the first 10 minutes of his interview with Nikkei. By the end, he was averaging just under one "hero" a minute.
On a prosaic level, though, "building heroes" is a genuine part of the company's strategy. One has worked to identify and popularize fighters whose back stories can be packaged to resonate with its audience, which is 80% millennial or Generation Z, and mostly Asian. The company would not share a more detailed breakdown of its audience.
National identities and rivalries also play a part. One makes sure that at every event there are local fighters on the card, amping up the interest and giving fans a champion to cheer for. Some, like Myanmar's Aung La "The Burmese Python" Nsang, have become household names in their home countries.
To complement its matches, One pumps out vast amounts of content featuring its stars, mostly through social media. In 2019, the company will produce and distribute around 12,000 videos, from clips of fights to documentaries to video blogs, to locker room footage, creating an immersive experience.
"It's the kind of thing in boxing you only see in the Rocky movies; you don't see it in the actual boxing coverage," said James Walton, sports business group leader at Deloitte Southeast Asia. That is particularly well-tailored to a millennial audience, who tend to value immersion far more than previous generations, Walton added.
"Older generations watched the sport and read about it in the newspapers," he said. "Millennials want to know: What is the food that gets eaten by the player? What is the playlist that the player listens to before he goes on the court or on the pitch?"
"Older generations watched the sport and read about it in the newspapers. Millennials want to know: What is the food that gets eaten by the players? What is the playlist [they listen] to before [going] on the court?"James Walton, sports business group leader at Deloitte Southeast Asia
One's success is as much medium as message. Its core audience is in Southeast Asia, where the penetration of smartphones has gone from just 25% five years ago to 63% today. More than 400 million people in Southeast Asia now have access to the internet through their mobiles, according to research from the digital marketing agency We Are Social.
Social media penetration among internet users in the region is almost 100%; not only are mobile devices the main screen through which Southeast Asian users are accessing content, most are also heavily reliant on social media platforms to deliver it to them.
"If you look at the rise of the smart mobile device in the last eight years, if you look at the rise of social media globally, never in history has it been easier to create a global brand from scratch," Chatri said.
As other unicorns in Southeast Asia and around the world are finding out, however, the reach that digital platforms offer is not easy to translate into sustainable revenues.
"The current models that have got [One] where they are ... are very good models for building up a fan base, but don't necessarily lend themselves to monetization," Walton said.
Owners of sports-related intellectual property are still reliant on three main revenue streams: ticket sales to live events, advertising and sponsorship, and TV rights. Advertising in Asia certainly has potential. With more mature markets slowing, Asia-Pacific is increasingly the driver of growth in global advertising spending. The research company Zenith estimates that ad spending in the region is growing at 5%-6% per year, and will overtake North America to become the largest advertising market by the mid-2020s. In the U.S., more than 35% of TV advertising spend goes on sports. Reliable figures are hard to come by for Asia, but analysts estimate the proportional spending on sports is probably not yet in double figures.
"The money is there. There's massive potential, much more than the U.S. in terms of commercialization," said Bima Said, Asia vice president for the global sports marketing company Mailman Group. "But it's still not as mature as it should be."
When that advertising market grows, however, there are questions over just how valuable it will be for content producers. Just as they already have in other parts of the media industry, platform companies like Facebook and Google, which owns YouTube, are likely to dominate.
"It's a CPM game," said TSA's Luer, referring to "cost per mille," a standard metric for pricing online advertising. "And therefore, even if you truly have millions [of clicks], the only one who really makes money out of it is Google."
As sports move online, either onto platforms like Facebook and YouTube, or onto "over-the-top" streaming services, pay-TV operators are likely to suffer as subscribers migrate to cheaper online options. Sports IP-holders have historically had a symbiotic relationship with pay TV, and the slow demise of these channels is likely to push down the value of broadcast rights -- a market worth $5 billion for Asia-Pacific ex-China in 2019, according to research and consultancy company Media Partners. Pay-TV penetration for the same region is 42%, but the future of sports broadcasting will be digital and mobile -- even more so once fifth-generation networks are rolled out.
"The whole television model is completely broken at this point in time," Luer said. "And it's broken by OTT."
Digital channels are already active in bidding for sports rights. In India, Disney-backed Star India paid $2.55 billion in 2017 for the rights to the Indian Premier League cricket league, to be streamed through its subscription-based Hotstar digital platform. Bidding against Hotstar was Facebook, which reportedly bid $600 million for five years' rights online. Facebook's interest underlines the divergent models emerging in the industry -- Hotstar wants users to pay; Facebook sees sports as a way to keep users on their platform.
While the numbers being paid for rights by digital platforms look good for IP holders, analysts said that they may not be sustainable. Neither are they likely to match the money that pay TV has pumped into sports over the past few decades.
"The economics are challenging," said Vivek Couto, executive director of Media Partners Asia. "There are online players that are monetizing [sports], but it's arguable whether they're monetizing online to the scale that TV ever did. ... For most rights holders, they hoped to be given maybe a stronger window on TV for a few more years before going fully online, because that online scale isn't there yet."
"Values, heroes, stories"
For One Championship, and other sports brands, success could come down to the amount of runway that they have. Fortunately for Chatri, investors have backed his vision.
"In our opinion, One Championship is a very unique company with no direct competitors in Asia," Shailendra Singh, a managing director at Sequoia Capital, which was the lead investor in One's $166 million Series D round in October 2018, said. "The largest sports properties in the world are all very profitable, and we expect One Championship to be no different in the long term. As their reach grows, so does their appeal to advertisers and broadcast partners."
Chatri is characteristically bullish. He told Nikkei that the company does not need to raise any more capital, will be profitable within 18 to 24 months, and that an initial public offering will follow, possibly within three years. He added that he thinks One Championship will eventually outgrow even the world's most valuable sports property, the NFL.
"The reality is that sports media properties, in general, are some of the most incredible business models. Asset-light and IP-heavy," he said, adding that One's scale has not always been fueled by spending its investors' money. "In 2015, our average viewership for an event was 700,000. This year, we crossed 26 million per event. Same cost structure of the event."
One's strategy to monetize its reach is a global, multiplatform blitz. The company signed a 10-year revenue-share TV deal with Fox Sports Asia in 2012, and late last year secured distribution in the U.S. with TNT. Its Tokyo event in October will be its first to be shown on live TV in America. To take on the market leader in its own backyard, One has signed recognizable talent from the U.S., including the former UFC flyweight champion, Demetrious "Mighty Mouse" Johnson.
Alongside its TV deals and live events, One has its own paid-for mobile app to generate revenues directly from its customers, and will launch a merchandise line later this year.
"I want to be on every platform," Chatri said. "The idea is to have a whole ecosystem so our content proliferates across all platforms."
Perhaps the company's most significant move will be its investment in esports, launched this year in a joint venture with Dentsu, Japan's largest advertising agency. Global revenues from esports passed $1 billion in 2019, according to Newzoo, a research company, and the industry's center of gravity is in Asia.
The move doubles down on One's play for Asia's millennial and Gen-Z audience, Chatri said. Diversifying into esports also give it some insurance in case the MMA boom, less than a decade old, peters out as its fans age -- something that Chatri absolutely does not believe will happen.
"Values, heroes and stories transcends time," he said. "It transcends geography. It transcends culture. ... As long as we stick with our formula of values, heroes and stories, with authenticity, it'll resonate irrespective of geography or age group."