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In depth with John Skipper part two: The DAZN rights strategy

The second part of SportsPro's feature length interview with John Skipper explores DAZN’s global approach to acquisitions, the role of incoming OTT players, and the implications of the expanding digital marketplace for rights holders.

by Eoin Connolly
In depth with John Skipper part two: The DAZN rights strategy

DAZN has big ambitions. According to executive chairman John Skipper, the former ESPN president who joined in May of last year, it wants to be the “leading global streaming service” for sport.

That creates twin challenges at the heart of the DAZN operation.

“Ultimately, the rights business is a local business,” says John Skipper, executive chairman at DAZN, “though we will put an overlay of international rights on top of that, eventually,” Skipper says. “We’ve begun some of that work. The technological platform is going to be overwhelmingly global.

“At the London headquarters, we think about the overall brand promise and what our company values are, what our mission is. We think locally about: what are the rights? How do we want to market? Who do we want to have as local ambassadors? How do we want to sell ads locally?”

Launched in 2016, DAZN is now operational in Japan, Germany, Austria, Switzerland, Italy, Spain, Brazil, Canada and the US. While the “lodestar” for DAZN as a company is to be “the global leader in over-the-top sports streaming services”, offering a “new, more high-value, interactive way that you watch”, each national operation has to offer what local fans want.

“Each of our local products is distinct and specifically intended to drive our business in Japan or our business in Italy,” says Skipper. “We don’t, at the moment, have a global product. We do believe that to get people to subscribe, you have to have content that really matters, whether that be Serie A in Italy, whether that be MotoGP in Spain, Bundesliga in Germany, J-League in Japan, fights in the US, NFL in Canada. You really have to build the product around must-have, must-see content.”

Despite not having a channel in those territories, DAZN currently holds rights to Uefa Champions League soccer in Thailand, Laos, Cambodia, Taiwan, Singapore, Malaysia, Brunei and the Philippines, something which could provide impetus for further Asian expansion. Though he does not offer specific comment on future target markets, Skipper notes that each DAZN arrival to date has been “sequential”.

“We launched in Germany and Japan in ’16, Canada in ’17, Italy and the United States in ’18, Brazil and Spain in ’19,” he says, “because the timing was such that we could get enough content to launch.”

As for any OTT provider, those channels have demanded a substantial technical undertaking – DAZN Canada’s performance in year one, which had been glitchy for some users, has been improved by investment in higher-quality feeds and dedicated compatibility encodes. More than anything, though, they are built on the acquisition of premium rights – with one “anomalous” exception.

“We felt like we needed to establish our brand in the United States because it takes a long time to build a brand in the United States,” Skipper says. “The US does account for 28 per cent of all global consumption of sports, so it just felt like you’ve got to get started in the US.”

We felt like we needed to establish our brand in the United States because it takes a long time to build a brand there

The difficulty in finding a place in Skipper’s homeland was that “the big leagues are mostly tied up for a long time with someone, either ESPN or NBC Sports or CBS, Turner or Fox”. That meant moving the market in a different way.

“Boxing is not really controlled by the big US media companies,” Skipper says. “It was overwhelmingly a pay-per-view sport controlled by HBO and Showtime. HBO and Showtime’s core business is entertainment; they didn’t have omnibus contracts that gave them all the content.”

DAZN set about putting together a schedule of top-level cards. It began with a comprehensive eight-year deal in May 2018 with Eddie Hearn’s Matchroom Boxing, whose rich stable of fighters includes former world heavyweight champion Anthony Joshua, that will be worth as much as US$1 billion. Mexican icon Saul ‘Canelo’ Alvarez was signed to a five-year, 11-fight agreement worth US$365 million last October, while his rival Gennady Golovkin was tied to a nine-figure, six-fight deal in March.

The goal is to target “people used to paying 40, 60, even 80 bucks to watch a fight” and encourage them to spend US$19.99 a month instead for a season of regular boxing events through the autumn and winter. “It’s tough work,” chuckles Skipper at the thought of arranging that calendar, “because it’s not a sport that’s used to being organised.”

Matchroom Boxing was the starting point of DAZN's US launch

The likes of Hearn have bought into the vision, however, while the schedule has also been leavened with the acquisition of rights to a rematch between YouTube influencers KSI and Logan Paul at Los Angeles’ Staples Center in November. Their first bout recorded 1.7 million global concurrent live viewers, making it the fourth most-watched live event on Google’s video platform.

The promotional push has also been supported through content from the likes of LeBron James’ Uninterrupted company, which works with Alvarez, and the intention is to build credibility and market presence in the US until the big leagues become available.

“We did a deal with Major League Baseball to do a programme during the regular season as sort of a clear declaration of intent that we were going to expand,” Skipper says, “but we will be, relative to live events, overwhelmingly a fight channel throughout most of 2019 and ’20 just because there aren’t a lot of other available rights that come up. The major sports rights begin to come up in ’21 and we’ll be a player in trying to acquire some of those packages.”

To this point, the OTT sector has been synonymous with entertainment streamer Netflix, with competition growing from the likes of Amazon Prime Video. That is all set to change, not least in the US, where Disney is heading a beeline of new entrants with its US$12.99 a month Disney+ bundle, which includes ESPN+, are at the front. 

Apple TV+, HBO Max and NBC’s Peacock are among those set to follow and this generational shift has prompted a scramble for original content and legacy programming. The rights to 90s sitcom favourites Friends and Seinfeld have changed hands for nine-figure sums, with the scripted entertainment marketplace becoming as hotly contested as at any time since those shows aired on linear TV.

“That’s where most of the competition is right now and my encouragement would be that all those companies concentrate on that and leave sports to DAZN,” jokes Skipper. “That would be my suggestion.”

John Skipper says DAZN's MLB cut-in rights deal is a statement of intent with regards to its US service

That flurry of new launches nonetheless raises its own questions about what is to come, with the concept of ‘subscription fatigue’ mooted among consumers who have only recently abandoned high-cost pay-TV bundles, and the prospect of media companies focusing their resources away from sports rights. Skipper, though, is keen to frame these arrivals in positive terms.

“We think, generally, the introduction of all those new over-the-top services is good for us because, one, it gets people used to aggregating their own content and buying indirectly,” he says. “I do think it accelerates the decline of pay television as more people get used to it. I do think some of that is generational, and a younger audience is going to be less likely to ever get a pay-TV subscription.”

He also sees Disney’s offer in particular as “a harbinger” of more “aggregated over-the-top services”.

“I do not think people want to have 26 different subscriptions for different kinds of content,” he says. “I think people would like to buy a few very important pieces of content.”

The same goes, he argues, for sports services. “If you’re in the UK, you’re going to want to watch rugby and cricket and football and maybe some other things – I don’t think you want a rugby app and a cricket app and a Premier League app and a Champions League app and a snooker app. I think you’re going to want to get all of that in one place.

“There’ll be room for competition, right? Just as there have been a couple of sports entities in most countries, over time there will undoubtedly be more than one [OTT] sports entity. I don’t think it’s feasible for anybody to aggregate all sports into one app, either locally or globally.”

In that environment, what will define DAZN and its competitors more than their technology is their access to the best coverage. That upcoming set of major rights tenders in the US is part of a broader slate with the potential to profoundly reorganise the market.

“Sports is of course highly predictable in one way: the deals will come up when the deals come up,” Skipper says. “In the US, we know that the National Hockey League comes up, the next deal there will be done in a year or 18 months. We know that the NFL is a year behind that. We know that the NBA is three years behind that. I think you’re going to see us actively pursuing deals around the globe when they come up.

“For most of the rest of the world, of course, it’s about football. As rights come up across Europe for the major European leagues or club competitions, the Champions League or in Latin America, where we have Copa Sud rights, the Copa Libertadores is interesting. When those things come up it’s interesting.”

Even if DAZN are participating in those contests in the next couple of years, it may be that another cycle or two passes before there is a radical break from the current way of doing things. “I think companies are trying to figure it out,” Skipper says.

There has been some evidence to date of a different way of thinking, such as the 12-year, US$2 billion global rights deal between Discovery and the PGA Tour that led to the creation of GolfTV. Skipper makes sure to point out that the agreement did not include US rights, and he still expects rights holders to pursue whatever options are available to bring in revenue.

Skipper believes the US rights to the PGA Tour will be divided up by the rights holder to generate "as much money as possible"

“The leagues want to generate as much money as possible so, ultimately, they’ll do what generates the most money,” he says. “The PGA Tour in the US will still try to divide up their rights among multiple players to generate money. They sold to Discovery because they offered them the most money, and they asked them to aggregate it. So those are a couple of the important things to follow: the local versus international, and linear versus over-the-top.”

This, he says, will lead rights holders to further “bifurcate domestic and international” and “bifurcate over-the-top and linear”, delivering as much value from each sector as possible until the new order emerges. “Because, as you know, club owners remain highly focused on driving more revenue so they can buy better players,” Skipper says. “And it’s a global market so they’re worried about competing in a global market.”

DAZN, too, is competing in a global market, albeit one that will continue to be shaped by local interests. “I think that sports is probably, at the top of the pyramid, more local than entertainment,” Skipper says. “By which I mean that there’ll never be anything that matters more in Spain than La Liga. So it’s local. But once you get down, there is interest in international basketball, there is interest in tennis, in women’s football around the world.

“So I think just like Netflix does some local content in big markets, and then they fill that in around international content or a broad menu of content, I think we’ll do pretty much the same thing. I think it will be hard to have a good business in Japan without Japanese baseball.”

Making an entry over the top... Skipper's guide to launching a streaming service

Any new sports media entrant has a range of challenges to consider, from rights outlay to production and marketing to distribution. For an OTT player, operating solely in the digital space, the opportunities are wider but the challenges are deeper. Any difficulties launching are noticed, and noted, by target consumers.

There is much to be considered, beginning, naturally, with local broadband access. That varies not just from country to country but within countries, too: in Italy, Skipper notes, there is a “north-south divide relative to the quality of the infrastructure”.

Companies like DAZN must also account for the relative usage of a whole range of digital devices, from mobiles and tablets to smart TVs. Resources are directed accordingly. “The US, as you know, is overwhelmingly an Apple market,” Skipper says. “Lots of other countries are Android markets. So you’ve got to deal with that.”

Other device platforms, like Roku and Sony Playstation, also come into the mix, each best served by a different compatibility encode. “You’ve got all of that which is quite complicated, and I’m happy to say we’ve got a good, smart, technical group that understands that. We do have one of the two platforms, we think, in the world that can handle the concurrent live streams that you’ve got to be able to handle.”

Skipper says DAZN has one of the two platforms in the world able to manage the concurrent live streams "you’ve got to be able to handle"

Once the technical demands have been addressed there comes what Skipper describes as the “consumer challenge” – the level of guidance users might need about the product to get access.

“Have you got to download an app? Have you got to get it up on your smart TV? They understand how to do that in some places better than others. Depending on what age you are, you might understand it better than your father or your grandfather. So you’ve got to educate people on how to do it.

“And then there’s a hurdle of acceptability. If you’ve got a pay-TV subscription and you’ve been used to getting all this content by putting on channel 83 and suddenly you’ve got to download an app, you’ve got to educate people as to how to do it and why ultimately it’s better value and it’s a better product.” 

Faced with those obstacles, OTT broadcasters are increasingly looking to distribution partnerships as a way of reaching audiences. In September, DAZN signed a deal with Comcast in the US to appear on its Xfinity Flex and Xfinity 1 platforms. Apple TV is another vital partner in the US, Skipper says, as is Sony Playstation in Canada.

“It’s a big help when you don’t have to start from folks who have got to figure out how to download the app, get it from their phone, get it on to their smart TV,” he adds. “If you can just have somebody get a oneclick download, that’s very helpful.”

This is an adapted version of an interview in issue 107 of SportsPro magazine. The first part, in which John Skipper discusses his move from president of traditional sports media powerhouse ESPN to executive chairman global OTT frontrunner DAZN, was published on Monday.