The streaming service you’ve never heard of aiming to be the ‘Netflix of sport’
In the coming week Amazon will add Premier League broadcaster to its long CV.
The latest expansion is designed as another bonus for Amazon Prime subscribers, with the cost of rights subsidised by online shopping, web services and dozens of other ventures.
But Amazon is not Britain’s biggest player in streaming sport. That title goes to Sir Len Blavatnik, a Ukranian-born billionaire who is said to be worth £20bn and is bankrolling an ambitious bid to turn sports streaming into a lucrative business in its own right. Sir Len, a US and UK citizen who was knighted in 2017, is among Britain’s very richest men.
He has ploughed billions into Dazn (inexplicably pronounced “Da-Zone”), a streaming venture billed as the “Netflix of sports”. But even for Sir Len the costs of sports rights are taking a toll. This year alone, his holding company has pumped an $550m (£428m) into Dazn. Rivals and industry watchers are now asking how long that can continue.
Sir Len moved to America in 1978, founding Access in 1986. He made his early fortune in the post-Soviet aluminium industry then turned his attention to the global stage. The 62-year-old’s deals include a $3.3bn agreement to buy Warner Music in 2013. He has made London his home, living on “billionaires’ boulevard” in Kensington and building a circle of friends among business leaders and high society.
Dazn is Sir Len’s first attempt to build a media giant effectively from scratch. In late 2014, Access took Perform Group, a FTSE 250 sports rights business, private for £700m.
The old Perform business was sold off this year to the Texas private equity firm Vista, leaving Dazn to stand alone as a multibillion-pound start-up.
For a monthly fee of $20, it offers live sports from football to boxing over broadband. Analysts say the concept remains new and unproven, however. Netflix, for one, has stayed away from live sport.
“Early players stayed away entirely for obvious reasons,” says Brian Wieser, a media analyst at GroupM. While Netflix is able to build up a big catalogue of programmes that it can exploit over a long period, live sports rights have no shelf life and the costs keep coming.
Although the value of most British sports rights are now in decline after BT and Sky declared a truce, for an international player such as Dazn the cost is still rising. Some $38bn was spent on sports rights last year, twice as much as in 2012, according analysts Ampere.
Netflix has consistently said it is happy to leave the field to others. “Our content is our crown jewel,” boss Reed Hastings said last year, “We don’t do sports.”
Dazn has made some punchy rights acquisitions, but is little known among British consumers despite being headquartered in Hammersmith with 2,800 staff. It has avoided its home market as the cost of rights in the UK is among the highest in the world. Sky alone spends £2.4bn each year on rights and must charge more than £40 per month to recover its costs.
Dazn has targeted less competitive markets where the broadband infrastructure is capable of delivering to large audiences. In Japan it has committed $3bn to show football, baseball, NFL and the Champions League. It holds rights to a number of exclusive Series A games in Italy at a cost of €193m (£166m) per year. It also has rights to a variety of sports in Brazil, Spain, Germany, Austria, Switzerland, Canada and the US.
Dazn has also made some heavyweight hires. John Skipper joined as executive chairman last year, having pioneered ESPN’s expansion for 27 years before stepping down and publicly admitting a substance abuse problem. Simon Denyer, a founder of Perform, serves as chief executive, while Ben Lavender, part of the team that launched BBC iPlayer, leads its product development.
According to Skipper, Dazn will surpass cable as media consumption changes, which will “be overwhelmingly about streamed content,” he told SportsMediaPro last month. “It’s valuable because of the level of passion people have for it.”
But, even before the Premier League rights, its ambition comes at a price. From Dazn’s launch in 2016 to 2018, it lapped up more than $1bn in funding, much of this coming from Sir Len’s Access, according to data from media specialists Enders Analysis.
So far in 2019, Access has committed an additional $550m in loans at 10pc annual interest, an analysis of Dazn Group’s accounts reveal. Separately, it is also reportedly hunting a further $500m and has hired Goldman Sachs to advise, in what has been taken by the market as a signal that Sir Len would now prefer others to share the burden. Industry sources suggest Softbank or one of the major Chinese digital players might chip in to fuel more growth for Dazn.
According to its accounts, for the year to December Dazn Group made £373m in revenues, up 45pc. However, its losses were £486m, which grew 31pc. Sources close to Dazn say it has a four to five year path to profitability for all its markets, and for now it appears Sir Len will continue to support the venture.
The streaming firm is hoping to make a big splash in the US, where it launched in 2018. It has acquired boxing rights, such as paying $365m for a deal with boxer Canelo Alvarez. The company now talks of bidding for rights to stream NFL games. In Germany, it may also look to the Bundesliga.
“The real litmus test of their credibility as a product will be the NFL rights auction,” says Thomas Thomson, an analyst at Enders.
Analysts say there is a path to profitability, albeit a challenging one. “It is not clear how much loss-making Blavatnik will stomach,” Thomson adds.
Minal Modha, of media research firm Ampere, predicts that, based on an estimated outlay of $600m in three core markets, Japan, Germany and Italy, it would need 5.6 million subscribers to break even. “They are tracking well in those markets. It’s not completely unachievable,” she says.
According to industry sources, Dazn now has around eight million users worldwide.
For now, Dazn is set to eat up financing. It has £4.7bn of broadcast commitments and is targeting plenty more.
Dazn remains reliant on Sir Len’s deep pockets, but it will need to convince others of its vision if it is to secure its title as the home of sports streaming.