Upstart company beats UFC to the toy aisle, ties up key contracts

Denny Burkholder - As shoppers hunt for the best doorbuster savings this gift-giving season, there will be no shortage of products for the MMA fan. The sport has a larger presence at mass retail than ever before. You can walk into any major electronics retailer and pick up hundreds of hours of MMA on DVD. Then you can swing over to a sporting goods store and choose from various Tapout or Affliction T-shirts, while UFC-brand apparel is right at your local JC Penney and FYE.

Hop over the the Wal-Mart website and do a simple search for "MMA," and you'll actually find something called a "mixed martial arts heavy bag fitness set," complete with a heavy bag, gloves, hand wraps and a skip rope. They also have a dual-pad kickboxing trainer with a speed bag, or -- for the minimalist -- you can just buy a simple pair of MMA gloves. At Wal-Mart.

It was inevitable that someone would come out with a series of MMA action figures. What wasn't predictable is that somebody beat the UFC to the punch on that venture, given the value of the UFC name brand. The UFC has plans for its own line of action figures produced by industry-leading Jakks Pacific, hitting retail shelves in late 2009.

By that time, a small Canada-based company named Round 5 MMA will already be on its fifth or sixth series of collectible MMA figures, all of them available at mass retail at stores like Toys "R" Us, KB Toys and FYE. The second series hits shelves this week, and features some of the UFC's biggest stars in Anderson "The Spider" Silva, Wanderlei Silva, Rich Franklin and Sean "Muscle Shark" Sherk.

For a small upstart company, the fact that Round 5 has secured a chunk of shelf space at many large retail chains is pretty impressive. According to Round 5 MMA president and co-founder Damon Lau, the whole thing started as an off-the-cuff idea bandied around during a casual dinner with UFC legend Randy Couture.

During the dinner, Couture cracked a joke that he thought it would be funny if someone marketed a line of plastic cauliflower ears to sell at MMA events. Lau followed that with a suggestion for MMA action figures. What began as a light-hearted brainstorming session turned into a full-fledged business plan.

"We both sort of paused for a second," Lau recalled. "He said to me 'Damon, that's actually not a bad idea. If you ever do anything like that, let me know.' And that's actually how the whole thing started. He ended up being the first license that we signed."

Lau is an obsessive fan of MMA dating back more than a decade.

"I was the type of guy that when they were playing PRIDE fights in Japan and I couldn't find them on broadcast, I'd sit there on Sherdog late at night and just read the play-by-plays that people used to do in the forums," he said.

Lau was also a fan of Japanese MMA figures produced by HAO, which boasted very detailed likenesses of popular fighters, with somewhat exaggerated features -- large head and hands, bodies not exactly to scale. The Round 5 MMA action figures that first hit shelves in early 2008 are sort of a compromise between the HAO style and the conventional American standard of action figures. While there is plenty of detail and the head and fists are still a bit larger than normal, there is some articulation to the figures, and the bodies look more normal than the often stumpy depictions of HAO's much smaller figures.

The first series featured Couture, Tito Ortiz, Quinton "Rampage" Jackson and Matt Hughes. In putting together a lineup of famous fighters, many of them still under UFC contract, Lau said he offered the fighters very black-and-white, beneficial contracts. The fighters not only get a royalty per unit sold -- which means if a fighter's action figure flies off shelves, he shares in the profit -- but the fighters are also free to sell sponsorships on their figure's attire, just as they would for their real-life fight gear. In that way, Round 5 MMA enables the fighters under contract to make extra profit on the side.

"I was able to put some of my sponsors on there," Sherk said of his Round 5 MMA figure. "I was able to put the gyms that I train at on there. A lot of the sponsors were pretty excited about that. They're pretty excited to see their company logo on my fight shorts on my action figure."

Sherk said Round 5 MMA also gave him plenty of creative control in how his action figure looked. 

"Everything from the stance that I wanted to be in, to the style and the color of the shorts, to the sponsors, to the look," Sherk said. "I got to give a lot of input from beginning to end. I'm happy with the finished product."

 While Round 5 MMA is fighter-friendly, Lau noted that "90 to 95 percent" of their lineup is under exclusive deals, which would legally prohibit most of the UFC fighters under contract to Round 5 MMA from also having a figure in the UFC line by Jakks Pacific. Jakks revealed a wide selection of prototype UFC figures at a recent toy fair, including figure and packaging prototypes for Couture, Jackson, Anderson Silva and Wanderlei Silva.

"All I can say is that there's a likelihood -- well not a likelihood, but there's a fact -- that some of those figurines can not actually go into production," Lau said. "I've seen the prototypes as well, but the rights to those guys have been already signed over to our company."

Lau declined to identify all of the UFC figure prototypes that he felt would violate a Round 5 MMA exclusivity clause, with the exception of saying that the Randy Couture prototype depicted at the recent toy fair would be a violation.

"I've seen prototypes online, but unfortunately yeah, that does preclude him (Couture) from being part of that program," he said.

There was no Jakks prototype for Sean Sherk at the toy fair, and according to Sherk himself, there won't be a "Muscle Shark" figure in the UFC line for at least a couple more years, due to his own exclusive deal with Round 5 MMA.

"I wasn't able to sign with the UFC-Jakks deal," Sherk said. "I did sign my exclusive deal with Round 5 six or seven months prior to the UFC even announcing that they had an action figure deal."

The UFC was recently criticized for playing hardball with clothing company MMA Authentic after they secured shelf space at Wal-Mart for their products -- shelf space the UFC reportedly wanted to itself. The UFC banned MMA Authentic clothing from all UFC events going forward.

Sherk noted that the UFC didn't harbor any ill will over his obligation to a competing figure company.

"They were totally cool about it, and they understand business is business," he said.

While there is still about a year to go before Round 5 MMA figures will have to share retail space with UFC's Jakks figures, Lau doesn't foresee a turf war breaking out in the toy aisles. He explained that Round 5 MMA figures are more like collectibles geared toward older consumers, while the UFC figures -- if they turn out the way they're depicted in prototypes -- are true action figures, geared toward children.

"I wouldn't be surprised that when Jakks releases their product, that we'll be side by side (on shelves), simply because of the fact that the product is completely different," Lau said.

Even in a growing industry where every statement or action seems to be fighting words, Lau thinks when the time comes, it will be easy to co-exist with the UFC in stores.

"We haven't had any problems as of yet, and we don't foresee any problems in the future. We think it's a great market and there should be room for everybody."

Round 5 MMA plans to release series 3, 4, 5, and 6 -- one series per quarter -- in 2009. Lau wouldn't reveal the names fighters in the upcoming series, but he did indicate that they've looked beyond the confines of the UFC to bolster their upcoming selection.

For a guy like Sherk -- who collects memorabilia from all of his fights with the idea that it'll be fun to look back on his career one day with his children -- an action figure will be a great addition to his legacy.

"I think my kids will really enjoy seeing what their dad was doing when they were young, because they're still young right now," he said. "They're not going to remember any of this stuff. But 15 years from now they're gonna think it's pretty cool. That's why I collect all that stuff. I'm gonna have a whole slew of action figures now, too."
 

Back