Will DAZN’s international rollout withstand pandemic pressures?

Almost three months after it was meant to launch with aplomb, DAZN announced this week that it will resume its international rollout with a free beta test at the end of July.

In March, the John Skipper-chaired company revealed a huge expansion to more than 200 countries and territories at the beginning of May – up from a current total of 9 – but this was unfortunately timed just before an unforeseen global pandemic which brought the entire sporting world to a screeching halt.

Now that we are over the worst of the coronavirus (or at least better equipped to deal with it in regards to appropriate social distancing practices and able to stage sporting events), sports all around the world are starting to resume and DAZN has decided that the boxing match between Vergil Ortiz Jr and Samuel Vargas on July 24 is the right time to pick up where it previously left off.

And while an expansion to over 200 new markets is an ambitious one, it is arguably more vital than ever for DAZN’s long-term prospects at becoming a worldwide leading sports broadcaster.

Alexios Dimitropoulos, senior analyst at Ampere, points out that while “DAZN already has the rights and therefore will not see any additional outlay for sports rights early on,” the current economic uncertainty has made expansion “even more crucial for them as they need the monetisation and exposure.”

Money talks

DAZN is not strapped for cash by any stretch; it is backed by multi-billionaire Len Blavatnik who is the third-richest man in the UK. Still, this didn’t stop the company from moving to defer payments to sports leagues amid the lockdown and even reportedly furloughing an unspecified number of employees.

It was also reported that DAZN is looking at offloading its football news site Goal.com in an effort to generate funds and that it had reached out to a number of media titans such as Liberty Global for investment with the sale of an equity stake being preferred.

James Rushton, acting CEO, DAZN

Despite these funding drives, it is clear that DAZN under just-installed acting CEO James Rushton views the swift resumption of international expansion as essential to its viability and a route towards greater profitability.

Dimitropoulos says: “The cost of the expansion will be significant, but since DAZN has experience in rolling out its service in multiple markets, the long term gains might be greater than the short term loss.”

For the service to be successful in this expansion, it will undoubtedly rely on distribution deals with leading local operators. This was an admission made by Joe Markowski, the EVP charged with leading the global rollout, when he spoke to Digital TV Europe in March.

“Operator distribution has been an essential part of our strategy,” the exec said prior to the lockdown. Partnering with operators like Sky Italia and Hikari TV in Japan has provided “a good way of ensuring everyone becomes DAZN members,” particularly older audiences.

Dimitropoulos agrees that, especially given current uncertainties, sorting out agreements is essential. “We do believe that distribution deals are important for the service especially in markets that DAZN has a big portfolio and will want to be able to maximise its reach in order to best monetise the rights,” he says.

“In the short term, we might not expect many significant deals, however if DAZN serves to plug a big gap in a pay TV operator’s portfolio – for example with Serie A in Italy, where it has a partnership with Sky, or with the Bundesliga in Germany, where it recently secured a large suite of games alongside Sky. Purely with its boxing slate, we might not expect many distribution deals in the new international markets for now.”

It is also worth remembering that July 24 is not the full-scale launch of DAZN’s international product, but rather a beta.

Maria Rua Aguete, technology fellow and executive director for media, service providers, and platforms at research house Omdia, says that this is the “perfect” timing and that “DAZN needs to make sure the technology works before the big fight return, probably in September.”

Tale of the tape

That DAZN is rolling out with a combat sports product rather than a broad slate of rights as it has in much of Europe, may serve to actually help its chances of success, Ampere’s Dimitropoulos says.

“Combat sports generally have smaller fan bases, however they tend to be more willing to pay in order to access them,” the analyst says. “The monetisation opportunity will vary by market, but by approaching such a large number of markets will enable DAZN to access more avenues with which to see return of investment for its boxing TV rights.”

But when it comes down to figures, DAZN will need to see a significant number of subscribers to justify the expense of expansion amid a time of economic uncertainty.

Prior to the pandemic, Omdia estimated that DAZN ended 2019 with a total of 6.41 million subscribers in its nine available markets, and that it would amass a total of 11.64 million subscribers by 2023 in those markets.

The research house said that Japan is its best-performing single territory with an estimated 1.59 million subscribers and rights to high profile sports like the Nippon Baseball League, English Premier League and La Liga.

Ampere slightly differs with its estimates, with Dimitropoulos asserting that “DAZN had less than eight million subscribers paying directly across nine markets in Q1 2020 before the impact of COVID-19” and that many of those “would have opted-in for pausing their subscription during the pandemic with the loss of live sports.” Ampere also expects that “a fair proportion [of subscribers] will have churned.”

Japan is DAZN’s largest market, where a distribution deal with Hikari has seen it amass 1.59 million subscribers as of the end of 2019

But it’s not all doom-and-gloom for DAZN, the analyst says. Pointing to the example of other streaming services like Kayo Sports in Australia, Dimitropoulos says that “sport fans are coming back to sport services when competitions restart.”

Rua Aguete at Omdia shares a similar optimism, saying that “churn was lower than we expected,” which could be down to a large number being “happy with the 250 pieces of new content DAZN produced a week.”

She estimates that DAZN will “go back to pre-covid numbers and even higher, to around eight million subscribers at the end of this year.”

The expansion of a service to more than 22 times its current number of markets is a bold move at the best of times, but appears even more risky in the current climate.

Since its 2016 launch though, DAZN has proved to be no slouch and has quickly emerged as a serious player in the sports world without the suffering that befell many who overextended themselves. (This was the case with Eleven Sports, and chairman and founder Andrea Radrizzani recently confessed as much).

Despite a temporary setback, DAZN is on course to become, as Markowski described it in March, “the world’s first truly global sports broadcaster,” but it remains to be seen just how much of a success it can be and whether it will prove to be a knockout hit in an otherwise murky time.