DAZN’s game plan: inside the UK streaming service’s $1bn raid on the US sports TV market

DAZN on Apple TV

DAZN may be less than three years old and little known in its UK homeland, but don’t let that fool you when its chief exec says it’s on course to become “the largest and most significant sports broadcaster in the world”. The streaming service that styles itself as a “Netflix for sports” doesn’t just talk a good game, it puts its money where its mouth is. A billion dollars, to be precise.

The London-based firm stunned the sports world last week when it announced a $1bn US broadcasting deal with Matchroom Boxing, the promoter behind heavyweight champion Anthony Joshua and the fight game’s stadium-filling resurgence in the UK. Hyped as "the biggest deal in boxing history", it is billed as having the potential to radically transform how the sport is broadcast in America.

For decades, boxing has been indelibly tied to pay-per-view TV, with promoters pitting rival cable networks HBO and Showtime against each other for the rights to show the biggest bouts. In turn, US fight fans have been charged anywhere up to $100 a time to watch the sport's most exciting talents duke it out. DAZN's pitch, however, is that subscribers will see regular pay-per-view quality fight nights but for a flat monthly fee rather than a princely one-off outlay. In short, it wants to lay the pay-per-view boxing business on the canvas.

This sporting land grab represents DAZN’s move on the US after already establishing itself in Germany, Austria, Switzerland and Canada, where it is priced at $20 a month. Across all its territories, DAZN claims to stream 10,000 live sports events a year ranging from Premier League football to Formula 1 and the NFL. And in an interview with The Drum, chief executive James Rushton says the US service (pronounced da-zone and available on smart TVs and various app formats) will similarly offer “a load” of other sports in time. For now, boxing is its ticket to an American launch in June.

'PPV doesn't work'

“The US boxing market needs shaking up,” says Rushton. “I don’t care how much of a boxing fan you are, you can’t tell me paying $70, $80, $90, $100 for a fight is good value.

“Outside of the top one or two big pay-per-view events per year the rest were doing relatively small [viewing and revenue] numbers. There’s a weird situation where the one or two fighters were almost sucking up the entire pay-per-view revenues and the pyramid was broken. We think that’s wrong.”

The alternative model will see Matchroom use its $1bn windfall to recruit a stable of high-class fighters and stage 16 shows a year across the US streamed live by DAZN, the first in September. The platform’s schedules will be bolstered further by screening Matchroom’s 16 fight nights a year from the UK by taking a feed from host broadcaster Sky Sports. It is this Matchroom UK deal with Sky, which has given fighters like Joshua the profile to sell out 90,000 tickets at Wembley Stadium, that DAZN is confident it can emulate in the States.

Rushton does not expect the US broadcasting establishment to take its advances on to their turf lightly, however. “We recognise that it’s going to be a competitive process over the next few years,” he says. “The other stakeholders in this space in the US will no doubt react, but some of the fundamentals of their business can’t change just because DAZN and Matchroom are looking to do something special in the US around boxing.

“Those platforms and promoters have traditionally been building an audience for a pay-per-view event. The last five years of pay-per-view have shown that doesn’t work unless you’re Floyd Mayweather and that’s pretty much it. Are we expecting competition? Of course we are. But we’re very confident we can take on those guys and deliver a brilliant product and service for fans, and be successful in terms of the KPIs I care about – subscribers, revenues…”

In the broadest strokes, DAZN reckons there’s in the region of 10 million avid boxing fans in the US – that’s classed as people who’d list boxing among their top three favourite sports. Its deeper data analysis, however, has identified about 3 million “hardcore” boxing fans that have either cut the cord on their cable packages or are likely to, and have paid to watch a boxing event in the past. “It’s those hardcore customers we’ll initially go after, prove our worth to and then expand from there,” Rushton says.

Rethinking 'ad-free'

One of DAZN’s selling points in other markets is that, like Netflix, it is ad-free. But as it expands into a country where sport and marketing go hand-in-hand, Rushton admits for the first time that it is giving serious consideration to allowing advertising on its platform. “We’re still in the discovery around that, but I could see a scenario whereby we start to experiment with different types of sponsorship and ad formats on DAZN around the world next year. But that’s not necessarily a purely USA thing.”

A more immediate marketing concern for Rushton is how it will sell itself in the US market. He boasts that DAZN has “a significant market budget” and it is working with North American Dentsu Aegis agencies McGarry Bowen, MKTG and M1 to devise its launch campaign (Dentsu, incidentally, owns 10% of DAZN’s parent company Perform Group). A mix of brand building creative, programmatic-led direct response targeting and influencer activity can be expected from late Q3 into Q4. “We won’t be launching DAZN quietly,” Rushton says. “This is not a soft launch in any way, shape or form.”

One of the curious things about DAZN is that while it is headquartered in London, the service does not operate in the UK. Rushton does not rule out expanding into its home market but admits that the prohibitively high cost of acquiring sports rights in the UK, and the deep pockets and digital maturity of dominant broadcasters Sky and BT, make it less attractive than other nations. “The challenge with the UK is you’ve got two highly competitive, triple-play, quad-play businesses that, from a pure standalone basis, would be difficult to compete with.

“The return on investment in the UK versus several other similarly sized European markets is hard to justify. There's no burgeoning desire to prove to anyone that DAZN works just because we’ve launched in the UK. If the opportunity comes along and it stacks up against our usual bunch of financial and non-financial metrics then of course we’d love to be here. If not then we’ll happily continue to grow in a bunch of other markets both in Europe and across the world."

As in the UK, sports rights acquisition is similarly challenging in the US, where premium properties like the NBA and NFL are locked into lucrative long-term deals. But backed by Perform, which was taken private by multi-billionaire Len Blavatnik’s Access Industries for $702m in 2014, DAZN has deep pockets of its own and an appetite to compete for rights as and when they become available. “While boxing is key, and we’re very proud to launch with it, DAZN is not just a boxing service,” says Rushton. “We’ll be announcing a load of stuff – a load of new rights, a load of new partners – prior to launching at the end of the summer.”

DAZN’s plans are nothing if not ambitious. “We’ve got a very simple aim – we want to be the largest and most significant sports broadcaster in the world,” says Rushton. Its target is 20 million subscribers in 20 markets by 2021/22 and Rushton believes the expansion into the US, “a market we all feel we need to be in to drive this business forward" and one that can "deliver significant shareholder return for the business in the long-term", will provide the springboard towards those goals.

Whether this upstart can trouble the US sports broadcasting business as it desires remains to be seen, but one thing is for sure: its battle to do so will be a fight worth watching.

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