Netflixing the sport: The DAZN model

Source: Perform Group (2018)

Over the top (OTT), media services provider Netflix is by far the biggest name in the streaming world. They have paved the way for a new generation of movies and series, burying the “Blockbuster model” (DVD and VHS renting service) once and for all.

Founded in 1997, the company started by renting DVDs via regular mail, before finally moving into the streaming business in 2007. The model as it stands is pretty simple: pay a monthly fee (around U$S10 depending on the country) for an all-you-can-watch subscription.

The general public has bought into the simplicity of the model, and the growth of the customer base has been exponential. In 2017, they hit 125 million subscribers worldwide.

From acclaimed television series to Oscar-worthy movies, the platform lets users watch (almost) anything they want, wherever they want. The success has been so monumental that Netflix is now producing its own movies and series, absorbing the production market to increase profit margin.

Where do sports come in?

With the success of Netflix upon us, many of us have started to wonder how feasible it would be to replicate this model in sports? Would it be possible to propose a service of this magnitude to sports fans worldwide? We foresee two main difficulties.

The first one is that a sporting event, conversely to a movie, almost always involves watching an event live. This changes the perspective from a technological standpoint: if you are watching Game of Thrones, and the connection falters, it doesn’t really matter, because you know the show will resume briefly. But if you are in the middle of the Wimbledon final, you would be absolutely furious to miss the winning point! Maintaining a live connection, no matter what would be a difficult feat to achieve considering individual differences in Wi-Fi speed, bandwidth, etc.

The second difficulty is the fact that sports rights for television are even more difficult to obtain than for movies. Let’s take the fanciest example of all, football. In 2015, the bidding war between Sky Sport, the pan-European satellite broadcasting company, and BT, a subscription-based television service, led to a rights-holding increase of 70% for the 2016-2019 cycle, leading to a splitting of the rights between those Sky Sport and BT. It means that if you want to showcase the Premier League games just in the UK for 4 years, you will have to spend the enormous amount of £5.1BN.

Source: BBC (2015)

It is challenging to compare with Netflix, but let’s examine two examples: Netflix paid U$S118M to acquire the entire TV series Friends, which was a television classic for a whole generation. They also budgeted U$S50M to produce every season of their Emmy award-winning series Orange is the new Black. Of course, the offering has to be wider for movies and series, but the public is also much larger than for sports. To enhance the comparison, four seasons of the Netflix series would cost approximately U$S200M to air, not much compared to billions…

The existing models

Until a few years ago, two existing sporting models stood out: the TV broadcaster and the League.  

The TV broadcaster model is best presented by ESPN. The US-based, global, paid-television sports channel, created 40 years ago, quickly became a reference in the sports industry, making a fast transition from a classic TV channel to an all-around sport content distributor. One of their extensions is WatchESPN, an Internet television website and mobile application that allows clients (mainly US) to watch their favourite sports, live from a computer or a website.   

The League model, on the other hand, is a smart way for some of the most well-known sports leagues in the world to generate additional revenue. Let’s take the NBA League Pass, the basketball package that allows its subscribers to watch up to 40 out-of-market National Basketball Association games per week. Videos of the games come from local stations and regional sports’ networks. This feature allows the NBA to sell exclusive games to their fans worldwide, increasing their own database at the same time. 

Keeping an eye on the FAANG

One of the keys to cracking the sport streaming code is definitely money. The companies able to make the biggest moves, from this point of view, are also some of the wealthiest, together known as FAANG: Facebook, Apple, Amazon, Netflix and Google.   

Let’s remove Netflix from the equation, since it doesn’t seem to be interested in live streaming, and replace it with Twitter, which is actually stagnating when it comes to users and looking for every available opportunity to keep up with its fellow tech giants. 

Quietly, these companies have started acquiring sports rights in the US and elsewhere: Twitter bought rights to the NHL’s and MLB’s weekly games, the PGA Tour, and the list goes on. Facebook went even bigger, purchasing the rights to live stream the UEFA Champions League (through a partnership with Fox Sports) in South America, as well as a large part of the NCAA basketball tournament. 

Source: Company Data, Jefferies estimates / via Variety (2018)

And that’s not all. Zuckerberg’s company got ahead of BeIN Sports and Fox Sports Asia to finalize its largest – if not its smartest – deal a few months ago, securing about £200M worth of exclusive rights to broadcast live Premier League matches in South-East Asia from 2019

This is a huge win, not only because the English Premier League is one of the most prestigious in the world, but also because the rise of viewership in the last 15 years has boomed in this region (thanks in part to the major European teams’ summer tours).   

Speaking of Asia, tech giant Alibaba is also on the move in Europe, eager to get its hands on the sports business. The enterprise created by Jack Ma will team up with Suning Co Ltd, a retail conglomerate with an annual revenue of around U$S22 billion, which owns Italian soccer club Inter Milan and is fast securing the rights to air Europe’s top league matches in China.  

While these clearly calculated moves are definitely changing the sporting landscape, it doesn’t come close to offering sports fans a service as convenient and centralized as Netflix. 

DAZN and the way forward

Is it possible to merge most of these sports into one integrated package and to give sports fans the streaming service they deserve? One company seems up to the challenge…  

DAZN (pronounced "Da Zone") was created in 2015 by Perform Group, a global, sports media company, based in the United Kingdom and operating across a wide range of digital platforms. The concept is quite simple: to build the Netflix of sports, with the same monthly subscription model.  

It is a tough road, but they are working their way toward their objective. At the moment, the platform offers more than 8,000 sports events per year, with a wide range of prestigious leagues such as Premier League, Bundesliga, La Liga, NBA, NFL, MLB, WTA, Six Nations, Formula One and UFC.   

Born from the merging of Premium TV Limited, an event sports broadcasting network, and the Inform Group, a digital sports rights agency, Perform Group has an established relationship in the world of sports broadcasting, making it ideally suited to grow rapidly in this new market.   

But still, how could they possibly acquire the holding rights for big leagues like the NFL? The answer is pretty simple for now: the NFL on DAZN is distributed in only a few countries like Germany, Austria, Switzerland and Japan, where viewership is low. The NFL is probably happy to gain some added visibility in countries where American football is relatively unknown, on the off chance that viewing rates increase and the sport gains a new, unexpected fan base – a win-win for both the NFL and DAZN.

Source: Perform Group (2018)

Since Perform Group is investing heavily in European football, DAZN seems to be going all-in in Italy, where they decided to challenge the colossus Sky Italia on the bidding rights for the Italian football league Serie A. They recently announced that they obtained a three-year deal to broadcast 114 Serie A matches per season, which, in terms of degree of change, is considered a revolution for this league. Even if the exact price of the deal remains a mystery, the Financial Times estimated the cost for this amount of time at €600M.

Based on this example, DAZN will probably pick its battles carefully.

Considering what they’re up against, can DAZN become the Netflix of sports? Only time will tell. In the meantime, their objective remains clear, as Perform Group CEO Simon Denyer stated on an article of the Guardian a few months ago:

“Netflix and Amazon have proved that large numbers of people are willing to pay a reasonable amount per month [for streaming services]. Prices have come down while the quality and quantity of content has dramatically increased. We want to do the same for sport.”

A The Consultancy Group article, written by Alessandro Di Benedetto 

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