DAZN's acquisition of Club World Cup rights for a reported $1 billion, despite expecting minimal return, serves as a cautionary tale for the sports streaming market. The article highlights the company's struggles to secure lucrative sublicensing deals, receiving only $200-$300 million, a small fraction of its investment. This challenges the profitability of their approach.
The article underscores DAZN's financial losses and questions the feasibility of its business model. It mentions the company's previous withdrawal from a Ligue 1 deal after paying a substantial exit fee, illustrating their difficulties in attracting and retaining subscribers. The lack of interest from major broadcasters in acquiring sublicensing rights for the Club World Cup further highlights the risk involved in their strategy. The article also mentions the lack of an IPO despite significant investments.
DAZN's strategy of using the Club World Cup to enter the US market is deemed unlikely to succeed, with a source stating that advertising revenue will be insufficient to recoup costs. The low-cost sublicensing agreements, like the one with Channel 5 in Britain, further exemplifies their struggle to maximize revenue. The company's shift from a premium to a cheap product strategy is seen as a potential detriment to its revenue.
The article contrasts DAZN's approach with established pay-TV providers like Sky and Canal+, who offer diverse content to maintain subscriber retention. DAZN's limited focus on football-only streaming is identified as a major factor contributing to its difficulties.
In essence, DAZN's Club World Cup investment highlights the significant risks associated with establishing a niche, direct-to-consumer sports streaming service without a comprehensive content strategy and adequate market research.
DAZN paid an exit fee of around €100 million to get out of the LFP deal as well as additional outstanding sums. Remarkably, it may yet play some role in the direct-subscriber service Ligue 1 clubs are hoping to launch next season, although that has not yet been decided. Above all, it showed the problems of launching a new-to-market streamer that offers football and nothing else – a miscalculation that those in the Premier League will have followed closely.
It turns out that subscribers find propositions such as DAZN very easy to resist, especially without all the add-ons that established pay-TV providers like Sky and Canal+ offer to keep them from cancelling. In many quarters it was received as a salutary warning for those championing the Premier League going it alone with a global platform direct to consumers.
DAZN has a portfolio of rights across Europe, depending on the territory. In Italy, it shows all 10 Serie A games live every weekend. In Spain, it has half the Liga games as well as Formula 1 and MotoGP rights. In Germany, it has around half the Bundesliga games live as well as Champions League and NBA. It has every Japanese J-League game, live and exclusive. In December, it bought Foxtel in Australia, which is a major owner of live Australian sports rights, in a A$3.4 billion (£1.6 billion) deal. DAZN has invested heavily in boxing and MMA rights also.
Yet for some time now, though there has been talk of a DAZN IPO, most likely on the Nasdaq, it never seems to get any closer. It would seem that the market does not have the kind of appetite for the levels of losses with which Blavatnik can live.
Whatever DAZN might have paid for the Club World Cup rights, it will admit it will make nothing like that back in terms of its sub-licensees. In Britain, there was very little interest, with ITV offering a zero-pounds bid to show some of the games live.
A source with knowledge of DAZN’s long-term strategy said that the streamer using the Club World Cup as a way into the US market was a move unlikely to succeed. “There’s no way on God’s earth it is going to make the money back in advertising,” they said. “It [DAZN] has made some money back in sublicensing. I hear about $200 million to $300 million in sublicensing. A tiny fraction of that will be for the Channel 5 deal.”
It was Channel 5 with whom DAZN agreed a British licensing agreement for 23 games. The British broadcaster is doing it on the cheap. It is not establishing its own roster of studio talent for the Club World Cup – presenters, commentators, pundits – preferring instead to take DAZN’s own English-language live feed.
“I’m told ad sales are not going well at all,” the source said. “It’s a classic DAZN play where they force stuff into the market, rather than responding to the market and what the market wants and needs. Walker Jacobs, the chief revenue officer who runs DAZN’s US business, has gone from ‘this is a premium product’ to ‘right, stack it high and sell it cheap’. They will try to get away as many deals as they can. But essentially, that kind of cannibalises the revenue.”
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