In a league of DAZN

Last March I wrote a piece on the apparent sea-change in how fans consume live sport broadcasts. It focussed upon the launch of DAZN in the UK, and I suggested that the streaming platform were wise to begin building a presence by securing the rights to various combat sports across the globe. At every significant shift in media-consumption, from radio to TV to the classic pay-per-view model, boxing was often the first sport to test the waters.

Now Mike Coppinger of The Athletic reports that, as I predicted last March, Eddie Hearn has decided not to renew Matchroom Boxing’s long-standing partnership with Sky Sports, moving their boxing operation over to DAZN for UK viewers.

Whilst yet to officially announce the new deal, Eddie Hearn hinted at the reasons behind the switch in a recent IFL TV interview. Not only is the shift driven by the accelerating migration of both millennial and Gen-Z eyes from traditional media to the online space, it was also due to a desire for more control over event production.

“One thing that is an absolute given is that wherever we go, and whatever announcement we make, Matchroom Media will be running the production for our live events in boxing.”

- Eddie Hearn

Matchroom Media, an independent arm of the empire, was established in January and is headed by another member of the Hearn clan; Eddie’s sister, Katie. In the last twelve months, the group have shown serious intent when it comes to digital content, launching a podcast, increasing IGTV output, developing a partnership with influencer and presenter Josh Denzel, and even developing an in-house OTT service.

It was also announced on Twitter recently that Matchroom have acquired Loop Productions, a specialist live streaming and production company. This move is an indicator that Matchroom are indeed preparing to take on a greater role in the broadcasting of their events, and that these broadcasts will be streamed over the internet.

It appears clear that Matchroom has decided that Sky’s sports subscription-plus-PPV model is on the way out and the erosion of the US PPV market, where shows frequently cost $100 a time, can be expected at an even more rapid rate. In my writings from last March, I put forward that the Fury vs Wilder II match had felt like something of a watershed moment. The significance was not because of record-breaking windfalls – reports indicated that the promoters failed to secure the 1.1million sales required to break-even – but rather because of the way people watched the fight.

Although by most accounts the Fury v Wilder rematch represented a financial failure, 88-year old Top Rank mogul Bob Arum estimated “well over 300,000 buys” via OTT services, such as ESPN+, which eclipsed their pre-event projections. Wayne Lonstein, co-founder of piracy protection firm VTF Solutions, suggested that up to 20 million people may have illegally streamed the fight. Whilst pirate streams represent a number of issues, the online views, legal or otherwise, indicate that the consumers are increasingly using the internet to watch live sports.

A query I had early last year, when reviewing what these figures might mean for future productions, was whether the enormous purses involved could be fulfilled without the PPV model that has persisted for the last forty years. However, DAZN’s subscription model is giving increasingly strong indications that the PPV might be a dying format.

As an example, let’s take the average PPV viewership of Anthony Joshua’s two fights in 2019. Joshua is far and away Sky’s biggest PPV star, and they can only wish that all of their PPVs recorded the 1.1million sales that he averaged across his two fights with Andy Ruiz Jr. that year. Sky aired six PPV boxing shows across 2019, usually at the price of £24.95.

Generously assuming Joshua-level sales figures, Sky’s six 2019 shows represent close to £165million in annual revenue. So how can DAZN look to match that kind of income? It’s all about scale.

In order to match that annual revenue at a £1.99 monthly subscription, DAZN would have to recruit 6.9million viewers. That’s a big uptake, but we can assume that those customers who bought the £24.95 PPV are on board. That leaves 5.8 million pairs of eyes still to attract… unless DAZN up their monthly fee (which they inevitably will).

Charging just £4.99 per month, DAZN would only require approximately 2.75million subscribers in order to match the extremely optimistic PPV revenue generated by Sky in this example. That is only 1.65 million additional viewers. With DAZN currently costing $14 per month in the USA, and estimated to have attracted over 800,000 subscribers stateside by the end of 2019, it’s first year operating in the country, it looks like the platform’s scale model could match or even exceed the PPV model’s revenue capabilities in the near future.

This provides greater value to the consumer, who gets far more content for their money, and provides the requisite cash needed to broker world championship boxing matches, justifying the already $1 billion investment DAZN has made in Matchroom Boxing.

But DAZN is not a boxing platform, they already have regional rights to many of world sport’s top leagues, such as the NFL an NBA in multiple territories and a swathe of European football properties in various different countries, including the Premier League rights for Japan. It is recent rumblings of DAZN’s imminent intent to secure the domestic rights to the Premier League, however, that indicate the platform’s plan to dominate the industry and achieve their lofty goal of becoming “the Netflix of Sport”.

With an average viewership of 1.9 million per game on Sky prior to last year’s lockdown, that deal would attract a lot of attention. Sky’s most basic football package costs nearly £40 per month (for a box and Sky Sports) and sports fans are becoming increasingly put off by the provider’s high price. However, related rumours have surfaced that the Premier League are seeking renewals with current partners Sky, BT and Amazon on similar terms to their previous deal. This is likely in response to analyst suggestions that both the pandemic and recent Super League debacle could result in additional costs to consumers as stakeholders seek to recoup lost revenue and the rebel Premier League clubs continue to push for extra revenue. These additional costs would be in spite of projections that £600m has been wiped off the value of the broadcast rights, most recently judged at £1.5bn. However, that door appears to be closed for DAZN, for now.

Whilst securing the rights to the national sport will likely be the marker for whether DAZN can achieve their ambition of becoming “the Netflix of sport”, they have followed the model of previous home broadcast media by partnering with the UK’s leading boxing promotion and working to “Establish Dazn as the global home of fight sports”.

I am fascinated to see how DAZN continue to chart their course, what in-house production will mean for Matchroom’s boxing operation, and also how Sky will deal with the hole left in their boxing schedule. Could this be an opportunity for another promotional operation to step-in and develop with the backing of the Sky Sports juggernaut, which was so instrumental in Matchroom's rapid growth?