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DAZN’s core market strategy highlighted by German deals and acquisitions

James Rushton, acting CEO, DAZN

Sports streamer DAZN has been very transparent in its recent strategy of refocusing on its core markets and this was brought into focus again this week with a number of deals it has tied up in Germany.

Chief among these was a high-profile launch on Vodafone’s GigaTV pay TV platforms, the GigaTV 4K Box and the GigaTV Net streaming box.

DAZN’s chief subscription officer Ben King, evidently enthused about the arrangement, said that the operator “shares our vision for providing instant and frictionless access to the best live sport.”

DAZN also bolstered its already impressive portfolio in the country by picking up the rights to the English Women’s Super League in both Germany and Italy. This is an astute move considering the explosion in popularity of women’s football – particularly in the WSL – over the past 12 months that is set to continue in the coming season.

In addition, local press in the country reported that a deal between DAZN and Deutsche Telekom will follow these in the coming weeks.

This all follows a flurry of deals in August with DAZN picking up 87% of Champions League and a good chunk of the Bundesliga from the 2021/22 season onwards, and renewing its sublicencing deal with a Eurosport that tried to get out of its rights deal in May. The company has gone so far as to brand itself as the “new home of live football” in the country.

Germany was, as Omdia senior research manager Tim Westcott points out, one of the first countries that DAZN launched in, but a combination of factors has seen the market emerge as central to the business. These include: “The availability of rights, relatively low pay TV penetration, availability of high speed broadband and the strength of the economy.”

The analyst also notes that Deutsche Telekom’s reluctance to challenge Sky’s sports rights supremacy has enabled DAZN to “position itself as a major player.”

While bucking heads for sports rights, DAZN and Sky are still partnered with the former’s app being available on Sky Q set top boxes.

DAZN is in a position where it aspires to disrupt the industry, but still wants to keep the established players on-side – a tightrope walk which Westcott says suits both parties: “Our research shows there is a big overlap between Sky and DAZN subscribers in Germany, so it’s a mutually beneficial relationship.

More broadly, any distribution deal is good for DAZN, as most of its viewing is on TV sets.”

While they share similar goals to get eyeballs on sport, a key difference between DAZN and those established players is cost.

DAZN’s deal with Vodafone is likely to stretch across multiple countries.

A Sky customer will pay €20 per month for access to Bundesliga matches – though it is also worth noting that Sky still has an increasingly archaic model where subscribers have to pay an extra €10 a month to watch content in HD. By contrast, DAZN is €11.99 a month for the entire package including the Bundesliga (albeit a smaller rights package at present), La Liga, Serie A, Ligue 1, the NFL and an embarrassment of other rights.

Omdia’s Westcott predicts that this price may be increased in the future but that “it’s quite a long way off – they will have to take into account the after-effects of COVID-19 on people’s spending power.”

Core strength

While Germany is seemingly the gold standard for DAZN to follow in Europe, there are a number of other core markets in which the streamer operates.

DAZN is still establishing itself in Spain, having marked its one-year anniversary in the country in February, but this new partnership with Vodafone could see an increased standing in the Iberian nation.

In announcing the German deal with the operator, DAZN’s King said that it was “the first of many consumer-centric collaborations being discussed between the two companies across Europe.”

With Vodafone only operating a pay TV offer a handful of operating markets, Spain is a logical market to which this partnership can be extended, and one which would again prove mutually beneficial.

Westcott however thinks that it “probably won’t” establish either as a serious mainstream challenger – neither has rights to the La Liga – but that it would “of course boost DAZN’s user base there.”

DAZN celebrated its first year in Spain with almost 50 million hours streamed by its users. The most popular live event was the MotoGP race in Catalunya.

This refocus on core markets, as opposed to expanding into new ones with the acquisition of local rights, has been underlined by a recent executive reshuffle under acting (expected to soon be made permanent) CEO James Rushton.

In Europe, this clearly laid out Germany, Italy and Spain as the markets of focus for DAZN, with Rushton saying: “We will continue to invest in our initial core launch markets – as evidenced by the recent announcements regarding the major UEFA Champions League and Bundesliga packages in DACH, whilst increasing our commitment to becoming a global sports destination platform through increased focus on DAZN’s forthcoming global service.”

DAZN was initially set to expand to 200 new markets and territories in May, but that has been pushed back to later in the year as a result of the coronavirus pandemic.

This global service, while being a grand statement of intent, is also a relatively low-cost investment for DAZN as it will rely on the global combat sports rights it already owns.

Wescott agrees that the company “will – initially at least – rely mainly on events which DAZN already has rights for,” but adds that it will provide a solid foundation and allow it to “look for opportunities in countries where it gains traction and where suitable rights become available.”

One such market of interest is the UK, with former CEO John Skipper last October saying that “obviously you need Premier League rights” to be a successful major sports broadcaster in the country. The industry will be waiting to see whether DAZN pulls this trigger when a domestic rights tender is issued for the 2022/23-2024/25 cycle.

Scaling back

But while it is pushing ahead in those aforementioned markets, DAZN is also scaling back its operations in a number of others – most visibly in Asia.

In July, DAZN announced that it was cutting short its UEFA Champions League rights deal in Southeast Asia by a year. This was hardly a surprising move given that it was sublicencing these rights in all countries aside from Japan.

Given the financial shackles placed upon the entire industry by the pandemic, companies of all shapes and sizes are looking to offload unwanted assets. (Even the biggest media players are not immune, with AT&T this week making it clear that it wants to sell off its unimpressively performing Xandr ad sales unit,)

Omdia’s Westcott says that “Asia is a tough market for online subscription services,” and suggests that “advertising may be a more promising revenue stream there – which is something has DAZN just started adding to its services.”

An evident lack of success across Asia for DAZN is curious given the company’s undoubted dominance in Japan.

Japan is DAZN’s largest market, with a predicted 1.8 million subscribers by the end of 2020.

One may think that Germany is DAZN’s biggest market, but Westcott points out that this is in fact the land of the rising sun. The analyst predicts that DAZN will end 2020 with 1.8 million subscribers, compared to 1.6 million in Germany.

A large part of this success is down to a combination of local sports rights including a 10-year JPY¥210 billion (€1.67 billion) deal for the J.League – described by the league as the largest broadcast rights deal in the history of Japanese sport – and deals with operators like Hikari TV.

While flying under the radar in recent Euro-centric news, Japan will undoubtedly continue to be a tentpole for DAZN.

Despite spending billions on sports rights and marketing, DAZN is still a relative newcomer and an industry disruptor, believes Westcott. “There is literally no-one else doing what DAZN is doing,” says the analyst.

DAZN will hope to maintain this edge while becoming an increasingly mainstream business with deep pockets.