Respect Your Universe (RYU) Closes The Door on MMA

Respect Your Universe (“RYU”) is no longer a Mixed Martial Arts (“MMA”) brand, what they are is still yet to be defined.  Lets take a look at the rise and fall of RYU in MMA.

The new CEO of RYU said “That direct association with the sport and the UFC has ended. Endorsement deals with individual fighters and Ultimate Fighting Championship (UFC) expired in December and will not be renewed.”  He continued  “The MMA community is a small market, even when I ran Sports Authority I didn’t want anything to do with MMA brands.  There’s not enough opportunity.”

RYU started off as a concept with an amazing management team.  In April of 2010 RYU became a publicly traded company under the stock symbol “RYUN”.  RYU was listed on the Pinksheets, which means they were still a development stage company and did not meet the assets or market cap to be on the OTCBB or an even more prominent stock exchanges like AMEX, NASDAQ or the NYSE.

The company began to form around executives with solid backgrounds.  We are talking about former Nike, Armani and Lululemon executives.  The team looked poised to take over the MMA apparel market.

I never had the chance to work with RYU but what I saw on their mission statement made a lot of sense.  They were not just another MMA Lifestyle brand, they were planning on launching functional, organic and sustainable clothing.  There is no question that MMA is a great proving ground for this type of concept.  Countless numbers of top name professional Martial Artist have suffered from viruses that live in most MMA gyms.  For some these are life threatening or career ending diseases.

What did not make sense is they seemed to focus on athletes that did not promote this aspect and to my knowledge none of their signed athletes were affected by any health issues.  A perfect candidate for a brand like this would be a guy like Cole Escovedo.  Well known, hard working and his plight with infections from training almost cost him his life and surely altered his career path.  His blessing would carry more weight than a Jon Fitch, who likely is better known than Cole but is not going to move more products.

On news releases alone the stock soared to new highs, pushing the valuation of the company north of 60 million dollars before ever making a single garment.  This valuation was based on the perceived value of the MMA market, the RYU logo, business plan and management team.

As the company continues to announce their management team the stock price increases from .30 cents to over $1.60 per share.  RYU is able to leverage this increased valuation and raise about $2.9 million dollars from outside investors.  Now armed with a logo, concept and a couple million dollars they began to aggressively push into the MMA sponsorship arena.

Sponsorships of top name athletes like UFC’s Jon Fitch, Bellator’s Ben Askren, UFC’s Cheick Kongo and more.  At this point the company is still without a website for e-commerce and even if they did have a webstore or reseller they still had not made any garments.  Yet that did not stop them from spending money and making the brand known in the space.  From MMA magazine print campaigns,  becoming a Title sponsor on UFC events, sponsoring huge names in the sport and huge UFC after-parties at Tryst in Las Vegas.

The super star management team was caught in the fandom that erodes many endemic MMA brands bottom line.  Look no further than Tapout who sold a 200 million dollar business for less than 20 Million dollars to see the potential pitfalls of “bro based” business decisions.  For your reference the management team and their bios are below:

Management & Directors

Kristian Andresen – Chairman / Director

Current experience: Producer and Executive producer. Mr. Andresen currently owns and operates Transmission Films, which has been in business since June 2007. Theatrically Transmission’s most recent picture is a joint venture with Hydraulx titled Skyline which released in November 2010, grossing over 70 million.

Christopher Martens – CEO

Christopher Martens brings a rich history in the sporting apparel industry to RYU including serving as General Manager and Merchandise Director at Nike Inc. He also served as the Global Director of Apparel for the 2008 Beijing Olympics Nike, Inc., Divisional Merchandise Manager for Global Nike ACG and Global Nike Outerwear, Nike, Inc. Mr. Martens has 11 years of retail experience at Eastern Mountain Sports. Christopher is recognized within the industry for successfully capitalizing on new opportunities and reigniting mature businesses with dramatic results. One of his key strengths is his ability to identify global trends. Mr. Martens aims to create product and brand strategies in an effort to maximize profits as well as enhance brand appeal.

John Wood – President / Director

John, a Shodan Blackbelt in Judo, continues to train in Judo, as well as Muay Thai and Jujitsu; placing him alongside the martial arts athletes and super-stars of yesterday, today, and tomorrow. He has spent many years developing strong relationships with elite athletes, managers, and trainers in the mixed martial arts realm increasing his ability to lead our sports marketing and development efforts. His work as manager for the Armani Group provides him with experience and insight into the apparel industry paramount in building and running a successful apparel business. His past experiences include Executive Director for XS Nightclub at Encore and Tryst Nightclub at Wynn Resort both in Las Vegas.

Erick Siffert – COO

Mr. Siffert previously served as Director of Product Operations at lululemon athletica where he devised and implemented protocols and business practices in the areas of sourcing and product development for an Internationally recognized company. His vision, dedication, and drive was an integral part of the success story that has become lululemon. Mr. Siffert also served for over 19 years at Nike Inc. where he developed global sourcing strategies for the Nike Outdoor and Global All Conditions Gear divisions. Under his guidance and by executing his strategies and innovations, he streamlined sources and processes helping Nike Outdoor product realizing some of the greatest results the brand had ever seen in terms of profit, growth, and branding. Mr. Siffert also managed the Nike European Liaison Office and was instrumental in helping open and expand sourcing throughout Europe with great success.

Emmanuel Brown – Chief Marketing Director

Prior experience: Marketing director for Jordan brand, a division of Nike, Inc. Mr. Brown drove local, national, and global market executions to support brand initiatives throughout the key categories and consumer segmentations. Emmanuel led research projects related to market trends, consumer profiles, and competitive intelligence, and has also provided direction, ensuring alignment with corporate strategic objectives. at RYU, Mr. Brown will be responsible for brand marketing, sports marketing, business opportunities, and brand execution.

With the influx of capital and this powerhouse team the money flowed out the door creating a lot of noise for the brand.  In June of 2011 they announced (via press release) that they will soon have some tee shirts available, although it was a limited run.  The logo, the plan and management team were supporting a 50M plus market valuation with no revenue and focusing on dominating MMA.

In 2012 RYU took over naming rights for a MMA training center (House of RYU) in Las Vegas and announced the pending opening of it’s very own RYU branded retail store in Las Vegas.  With the eventual launch of the website, UFC Event sponsorship, Training Centers, Top Tier MMA Athlete sponsorships (Jamie Varner, Jon Fitch, Chiek Kongo, Ben Askren, TJ Dillashaw, Mike Pyle, John Hathaway, Mike Massenzio, Danny Castillo, Marcus LeVesseur and Alex Soto, UFC After Parties and so on. The results?

Revenues, net

$ 107,522 $ – $ 171,648 $ – $ 176,456

Cost of Goods Sold

61,796 – 97,708 – 106,922

Gross profit

45,726 – 73,940 – 69,534

Operating Expenses

Marketing and Advertising

783,259 213,955 1,444,106 213,955 2,343,616

Marketing and advertising – related party

– – – – 63,900

Product Creation

156,640 – 156,640 9,912 166,856

Product creation – related party

160,421 24,000 475,821 154,162 1,832,666

General and Administrative

1,556,053 1,323,557 2,546,554 1,345,079 8,405,063

Loss on impairment of website

– – – – 31,890

Total operating expenses

2,656,373 1,561,512 4,623,121 1,723,108 12,843,991

Net loss

$ (2,610,647 )

http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=8773874 (soource)

According to RYU they also had several outside of MMA sponsorships these include Boston Red Sox player Darnell McDonald, 2011 Mr. Olympia Phil Heath, and endurance athlete Christian Isakson.  There is no indication if these opportunities will continue.

Jon Fitch who was recently cut by the UFC was the RYU’s Brand Ambassador on multiple levels. He was utilized for product feedback through his training, social media, digital and ad campaigns, as well as at the grassroots gym level.   It is hard to say if Jon moved the needle as an Ambassador but it is clear that the biggest brand in the sport of MMA, the UFC did not see any value in being in the Jon Fitch business.

Obviously the company spent more money than it made and likely overpaid for the athletes it sponsored.  Unfortunately for the future of MMA sponsorships the results are not positive.  This is not the first brand with major players who struck out seeking the MMA market gold.  Companies like BSN called it quits after losing tens of millions of dollars in MMA sponsorship arena.  Is it really so bad that these brands are throwing the baby out with the bathwater and starting over in a totally new direction.  In the case of RYU it looks like they are leaving MMA and not looking back.   Millions of dollars are now gone from the MMA landscape.

It remains to be seen who will come up with the winning formula or maybe it is really as former Sports Authority President and current RYU CEO David Campisi says ““The MMA community is a small market, even when I ran Sports Authority I didn’t want anything to do with MMA brands.  There’s not enough opportunity.”