Below is the transcript of a CNBC Exclusive interview with Chatri Sityodtong, Chairman and CEO, ONE Championship. The interview played out in CNBC's latest episode of Managing Asia on 24 April 2020, 5.30PM SG/HK (in APAC). If you choose to use anything, please attribute to CNBC and Christine Tan.
Christine Tan (CT): Chatri, like so many companies, COVID-19 has had an impact on your business. You had to postpone two MMA events this month, two more next month could also be shelved. Did you ever imagine the scale of disruption you're experiencing right now?
Chatri Sityodtong (CS): No, I mean, you know, it's incredible what has happened globally right, and it's not just ONE Championship, but there are some like 92 countries now, the borders are shut. We're in lockdown in many, many countries. Everyone's at home and never could I ever imagine… it's literally once in 100-year global crisis. Never seen before. So, I think all CEOs, all board directors, we're all in the same boat trying to figure this thing out.
CT: As you sit at home talking to me through Skype, how do you figure out what to do next?
How difficult has it been to do proper business planning, given all the uncertainty you're seeing?
CS: No, it's very, very difficult. I just had a leadership meeting today with my leadership team and I said the two key words or concepts that I want them to embrace is creativity and resilience. We're facing, problems never seen before and so you have to have incredible creativity, lateral thinking. Think about how you solve these problems that you've never faced before? At the same time, there are so many things, so many obstacles - you need resilience to overcome these obstacles. I really believe that every leadership team, if they embrace the concept of resilience and the concept of creativity, we'll get through these tough times. There's no question that these are very difficult times for the entire world on a personal and professional level. The only positive thing I see - it's actually a big positive -- is that everyone is spending more time than ever before with their families at home and the world is suddenly united across all borders against a common enemy for the first time in history. The pollution index is going to record its biggest drop in history ever. So, in this weird way, it's almost like Mother Nature, God or the universe is telling us to pause, rest and reflect on our way of life. So, it's spiritual as much as it is economic. I've had a lot of time to think about how I've designed my life and what's important to me, and I think the whole world is going through the same thing.
CT: You have a roster of over 500 fighters who train and fight for a living, do you worry about the financial impact the pandemic might have on them and their families?
CS: Yes, definitely. As leader of ONE Championship, I have a lot of responsibility to serve not only my team, but my athletes, our ecosystem, governments, brands, broadcasters and all that you know, we have to juggle in this time. My leadership team is very creative with coming up with solutions and we see ourselves throwing shows in many different countries during this lockdown period. We're working on those plans as we speak.
CT: Tell me some of those plans, what are the different business scenarios you've worked out to help you ride through this downturn?
CS: So, we have a few content stacks. One, obviously, is our events. That's obviously going to be more difficult to do at a large scale, but you can do events from a studio setting and you can do for many different countries. Another thing is non-event related content. For example, we're launching The Apprentice this year across Asia. That has nothing to do with events. That is just literally a reality TV show - general entertainment for the world. That, again, we can do and we're actually executing on right now. We also have our e-sport division that does online tournament and that doesn't require physical presence. So, we're kind of lucky in that we have both martial arts and e-sports as our two main uh business units. But at the same time, we have content stacks that have nothing to do with events and are able to continue on. And I think, again, that's the key. The key is for every company now, for every CEO to look for ways they can have business continuity, even though it's new revenue streams, new opportunities. That's the key.
CT: So, as a businessman, how long are you prepared to wait this out?
CS: Internally, we have a view that this is going to last at least 18 to 24 months. As much as I would like things to bounce back right away, I think what we're going to see - and we've had the very good fortune of having Sequoia Capital as our partner in our larger institutional shareholder of ONE Championship. They've been giving me very sage advice in that they've been speaking to the world's top infectious disease specialists. What they see is this being at least 18 months of ebb and flows, meaning that you're going to have spikes. You're going to have a period of stabilization. You're going to have periods of deceleration in the virus growth. You're going to have lockdowns. You're going to have spikes again. So, it's this kind of constant periods of stabilization with spikes, lockdowns, spikes, lockdowns. The good thing is there is definitely a finite end to this thing. In 12 to 18 months, we will have a vaccine, and testing is getting better and better so that's the upside case. The most likely scenario case of 18 months of stabilization and with periods of lockdowns and spikes and virus acceleration. But there's a finite end to this.
CT: In the meantime, what we're seeing is that even before the new circuit rules are put in place here in Singapore, you had already decided to hold your events behind closed doors without any audience. Are you hopeful at least you could resume your MMA fights under those conditions soon?
CS: Yes, definitely. Definitely. We're exploring all options and doing it behind the audience, free closed-door events, doing it at the studio. There are many options in which the show can carry on. Of course, right now in Singapore, the Government has rightfully, wisely, declared an essential circuit breaker, a partial lockdown of the country, which I think makes a lot of sense and get this virus growth under control. In the meanwhile, my team and I are working just as hard as every day using conference calls, video conference calls, meetings back-to-back all day long and pushing the mission for the company.
CT: I'm just curious, Chatri, what's it like watching your fights in the comfort of your living room? Don't you lose a lot of that excitement?
CS: Yeah, definitely. But that's what I mean about creativity, right? I've challenged our broadcast team, including myself, to come up with a broadcast part that really excites, that really creates the stadium effect of roaring thousands of people, the whole screaming type of thing. I've challenged my team to come up with a broadcast product that that can replicate that. So, again, we're in the R&D lab, putting our minds together, being creative, thinking about - how can we revolutionize the sports media industry with brand new products that had never seen before. There's a lot of technology out there, AR and VR. You're going to see a lot of creative things come out of ONE Championship.
CT: Do you worry that you might lose some of your audience in the process?
CS: Actually, no, it's the reverse. So, when we did our February 28 event behind closed doors, right, in an empty stadium, we actually had record TV ratings.
CT: Really?
CS: Yeah, it was very surprising for us right. Because it wasn't a huge part, either. It was a good part, but not under an incredible part. Again, the world is starved for live content, especially right now. Viewership numbers - we expect to be very, very strong.
CT: Chatri, do you think this pandemic has started the transformation process of how sports will be consumed in future?
CS: No, not really. I do believe the world will change somewhat. But I think in the middle of a crisis, you see a lot of these naysayers saying, "the world will forever change, and it'll change our entire way of living, doing business and riding planes and staying in hotels". I think a lot of that is B.S.. Obviously, we're in the middle of a crisis and so if you feed that crisis with all these crazy theories, people can buy into it. But I think the human spirit and humanity are far more resilient than that. Once we have the virus situation under control, people will start flying on planes again, stay in hotels, people are going to be working out in gyms, life is going to come back to normal. Will there be some changes? Yes, there will be. But I don't think it's going to be as dramatic as people say. People still want to enjoy their sports, whether in the comfort of their living room, whether it's in a stadium cheering for their heroes, I don't see that going away.
CT: What is the financial impact COVID could have on ONE Championship?
CS: Well, obviously, it's very difficult times. But again, like I said, we're in a very lucky situation in that all sports properties are effectively massive platforms that are very, very important to brands, broadcasters, fans, athletes, ecosystem governments, etc. Also, we're very asset-light and intellectual property-heavy as a company. It's not like we have tens of thousands of people, it's not like we have massive fixed assets. I think the tougher industries you know right now are the ones that have high fixed costs, whether it's industrial manufacturing, whether it's airlines, whether it's hotels - those are the ones that have real challenges. Is it tough times? Definitely. But it's not going to last forever. There is a finite end to this. I think everyone needs to remember, a vaccine or a cure is coming. And I can't tell you whether it's three months from now or whether it's 18 months from now. We are preparing internally for 18 months. So, difficult times at a minimum, and we're making adjustments.
CT: 18 months is a long time, Chatri, how's your cash flow looking, given all the postponements and the cancellations?
CS: So, you know, we're very lucky in that we have incredibly supportive institutional investor base and an incredible board of directors. We have a strong balance sheet that's going to last us, you know, easily a few years So, we're lucky that we're able to weather this storm. Our burn rate as a start-up is very, very low compared to other high-flying start-ups around the world that might have huge burn rates and huge capital needs.
CT: What are you doing to preserve cash in this environment? Where else can you cut costs?
CS: In this environment, we can't throw events. Events happen to be our biggest cost item. So, that's what I mean about the business model being very, very flexible. We have a variable cost fixed business model that if we don't throw events, we don't burn cash. Is it an ideal situation? No, but we have a huge content stack - both our archives as well as our current content stack that are very asset-light that don't cost a lot. It's up to us to produce them and feed them again like The Apprentice. It's a show that's going to go all over the world, very asset-light, very low-cost structure attached to it, and yet it's a huge form of content.
CT: Still, give me an idea of your cash flow. What sort of financial runway are you looking at? How many months are we talking about?
CS: Oh, a few years. That's the least of my worries right now. It'd be one thing if we were forced to throw event after event after event with no revenues in sight. But that's not the case. The case is right now our revenues have subsided definitely in some key areas. For example, sponsorship, because we are not throwing events, but our cost is also matched with that. We were heading for a plan that would head to profitability. Obviously, those plans have been shelved now. And now we have to be very careful with our cash, just like every other company in the world whether you are start-up or not. Even like a company like Disney furloughing 43,000 employees in America, taking out US$5 billion worth of working capital loans - the biggest of the best companies are definitely caught by surprise, and we have to adjust with creativity, with resilience. We're no different. If you look at NBA - NBA has 750 people in total at the global headquarters for a $52 billion sports property. That's the beautiful economics of sports media properties - they're very asset-light. Very few people need it, and yet they have massive scale globally.
CT: Your China business in the last few years has grown exponentially, but you had to cancel your first live event in Chongqing in April because of the pandemic. How big a setback is that to your China strategy?
CS: It's big. There's no question. But the same time, it's not ONE Championship-related. I mean, every sports property, including the CBA in China, was shut down right. Actually, globally right now, I don't think any sports property is operating. So, it's not us and it's a sign of the times. But again, like I'm an optimist, I believe in-in-in the power of the human spirit. I believe in resilience. I believe in my team. The show will go on.
CT: Speaking of the show going on, China was the first to enter into the infection. Now, it appears they are the first to recover. Are you hopeful you could restart your events in China soon?
CS: Yes. We have an event slated for June in Shanghai and knock on wood you know, it's all systems go. We're very optimistic, yeah.
CT: Chatri, the start-up you founded, ONE Championship in 2011 has strong key investors like Sequoia Capital and Singapore's Temasek Holdings. You've managed to go through four rounds of funding, raising something like US$275 million. What are your investors telling you at a time like this?
CS: They're telling us as they are telling with all start-ups - make sure you're efficient, make sure you're conserving cash, make sure all economic scene scenarios accounted for, make sure that at the same time that you're moving the ball forward. Extraordinary times make extraordinary companies. And I have no doubt in my mind that ONE Championship will emerge stronger, better, faster as a result of this crisis. And this is what I tell my team. Bad companies, global crises like these essentially make them go bust. We've obviously seen a lot of headline news about companies going bankrupt. So, I think bad companies with that are over leveraged and definitely susceptible in this environment. Good companies can survive. But I think extraordinary companies actually emerge even stronger. I think ONE Championship is in that category.
CT: How open are your investors to offering you financial assistance if things don't improve?
CS: We have a big runway. So, we're in a lucky position. But that being said, you know, I'm very grateful to the board of directors at ONE Championship. I'm very grateful to all our institutional shareholders. They've given us nothing but support, 100 percent unequitable support. And I'm full of gratitude and appreciation to Sequoia Capital, Temasek and everybody who's a part of ONE Championship. It's been incredible. I always say that you get to see people's true colours in times of crisis. When it's good times, everyone is your friend, everyone is your supporter, your cheerleader. When things are rough, you get to see that. You know, same thing with personal life, right? Not just professional but personal life. So, we're getting to see the true colours of our investors or our shareholder base. And I have to say that I'm eternally grateful to them. They've not only given me incredible advice, business advice, I can tell you Sequoia Capital has been by far the number one value-added partner of ONE Championship, from strategic advice to helping us hire, to actual execution, down to providing capital and providing support for the company in any way. We've been very lucky.
CT: You've spent the last nine years building ONE Championship, what sort of leadership do you aim to provide a company at a time like this?
CS: I've been very fortunate in my life to have gone through three major global financial crises. The very first being the Asian financial Crisis when I watched my family literally lose everything, including our home and my father going bankrupt, eventually abandoning the family. That obviously left a huge mark on me as a person. Then, of course, I went through the Silicon Valley meltdown in 2001 when I was an entrepreneur in Silicon Valley, and then obviously the 2008 financial crisis. I tell my team that a general is not a general until he or she has been through war. I've been through three major wars in my life. That's why I'm very calm and very confident in ONE Championship's ability to thrive and become better from this whole experience. I tell my team, I genuinely say to them, guys, be grateful, be inspired, be excited, that we are facing the worst global financial crisis in 100 years because this is when we get to test our mettle. This is when we get to shine, because in good economic times, every company shines right. So, here, if we can shine, if we can genuinely shine, then we will be in a rarefied air. That's what I tell our team, and I really believe it. This is the time for us to step up and if we can't produce incredible results and thrive and survive in these times, then we aren't worth our salt. I think a crisis is a massive opportunity not only to find incredible new revenue opportunities, but also find ways to do things better, faster, cheaper. So, obviously, we're renegotiating with all of our vendors. We are examining everything in our cost structure to make sure that we are doing everything efficiently and that we are lean, mean machine. So, we're taking that opportunity right now to make the company stronger. But again, I've been through global crises before, and it's nothing new for me. This is also why I you know, I shy away from debt both in my personal life and my professional life. I don't carry any debt.
CT: So, no pun intended, you're a fighter?
CS: (Laughs) You could say that, definitely. I would say that I'm a fighter on a team of fighters. Everyone is a fighter. Everyone is a warrior at ONE Championship. And that's why I'm so confident. A ship is not made for the calm waters of the harbour. A ship is made for the rough seas in search of new horizons. Great captains are made in rough seas.
CT: Spoken like a true fighter. And finally, Chatri, as a Founder and Chairman of ONE Championship, there are a lot of people out there who are sceptical, whether your business can actually survive this pandemic, what do you say to them?
CS: ONE Championship since day one has always had naysayers, doubters and haters. It has just been part of the whole process, and we've defied every odd to become Asia's largest global sports media property. From a business plan, when everyone said there's no way, no hell in chance we could ever pull it off. We'll always have naysayers, haters and doubters. But for me, I focus on positive energy. I focus on building. I focus on my passion. I focus on my team. I focus on the opportunities that every challenge presents itself. We're very fortunate that to be sitting on an incredible business model that's very well positioned for the future. So, you know, we're always going to have naysayers, haters and doubters, but that's not going to stop me.
CT: Chatri, stay well, stay safe. Thank you so much for talking to me on Managing Asia through Skype.
CS: Take care.
END
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