Sports rights to sports betting: what’s next for Blavatnik-backed DAZN?

DAZN’s new chief executive has one goal: to make the sports streaming group profitable and end its reliance on the pockets of billionaire owner Leonard Blavatnik, who has invested more than $5 billion in the losing company.

In his first interview since joining the London-based group last year, Shay Segev told the Financial Times his aim was “to make this business sustainable and profitable in the next 12 to 18 months”.

To do so, Segev, who was born in Israel and previously ran betting group FTSE 100 Entain, wants to expand beyond sports rights and into new areas such as betting, e-commerce and digital assets, including non-fungible tokens.

“Streaming is clearly a core part of our business. . . but we are much broader than that,” Segev said.

Blavatnik in 2018 renamed and restructured its sports media holdings in order to build the Netflix of sports. But his ambitious plans to date have resulted in billions of dollars in losses. DAZN lost around $3.7 billion between 2019 and 2021, with the pain exacerbated by the sport being frozen during the pandemic. Blavatnik’s Access Industries agreed in February to a $4.3 billion recapitalization to pay off DAZN’s debt.

Blavatnik told the FT: “In general, I’m not a patient person, but I understand that it takes time and money to build a global streaming platform for the 21st century.”

Segev has already put his own mark on the business, hiring executives such as Entain’s chief operating officer, Sandeep Tiku, as chief technology officer and BT’s Pete Oliver as chief marketing officer.

DAZN owns the rights to broadcast coveted sports like British boxer Anthony Joshua’s fights, as well as the domestic rights to matches from Italy’s Serie A, Spain’s La Liga and Germany’s Bundesliga.

Still, Segev has a lot of work ahead of him.

The challenge is that competition for sports rights and content is high. Newer entrants like Apple and Amazon, as well as traditional media giants like Disney-owned ESPN and Comcast’s Sky, have driven the market.

“If Apple comes to Europe and starts buying rights, like Amazon, at some point prices may start to go up again,” said François Godard, who covers media for the Enders Analysis research group. “I don’t know if there will be room for someone like DAZN.”

Shay Segev wants to expand into new areas such as gambling, e-commerce, and digital assets including non-fungible tokens.

Segev, who learned to code from a young age, says DAZN’s specific focus on the sport is an advantage in battling its much larger streaming rivals.

Instead of just buying the rights, he wants to “engage” with viewers and differentiate the group through features like chat boxes, a choice between a traditional commentator or a YouTube personality, online “watch parties” with friends, games and bets.

DAZN and its bigger rivals face the same challenge: how to make Internet sports viewing a viable business. Sports broadcasting rights are expensive, only last a few years, and are usually limited by territory. Meanwhile, streaming services are priced much lower than cable TV, making it difficult to turn a profit.

For these reasons, some industry executives warn that the numbers may never add up. “Sports is a very niche and complicated business,” acknowledged chairman Kevin Mayer, who previously oversaw the launch of Disney’s streaming services, including ESPN Plus. He also had a brief stint as the head of the Chinese video app TikTok. “Unless it’s his whole approach, which is ours, I think he offers a lot of challenges.”

DAZN expects to break even next year with revenue of $3.5 billion and become profitable in 2024. But that could change if the company expands into new markets, Segev said. This year, it expects to grow revenue to $2.5 billion from around $1.4 billion in 2021.

While consumers are constrained by skyrocketing inflation, Segev said subscriptions are holding steady at around 11 million and DAZN hasn’t “seen any impact yet” from the cost-of-living crisis.

Len Blavatnik
Leonard Blavatnik: “In general, I’m not a patient person, but I understand that it takes time and money to build a global streaming platform” © Matt Winkelmeyer/Getty Images for Warner Music

The group will launch its own sports betting service in the UK next month.

Segev says that the regulatory change is moving the market away from a “huge number of casino bets”. [with] high-stakes model. “You can see the market going: lower stakes, arcade, mass market, more fun, more entertainment,” he said. “This is exactly what I expect DAZN to do.”

It aims to emulate the success of Sky Bet, which was formed in 2001 and built on the growth of online gambling to become one of the UK’s biggest players. It is now part of Flutter Entertainment, the world’s largest gaming group.

Enders’ Godard is “skeptical” about DAZN’s ambitions in these areas. “Betting has much lower barriers to entry than sports video,” he said. “Once you have the broadcast rights, no one can go after you. In betting, it’s much more fluid, it’s much more competitive, and almost anyone can create something.”

In its core sports broadcasting business, DAZN is licking its wounds after the failure of a bid to acquire BT Sport, which broadcasts English Premier League and UEFA Champions League football matches in the UK. Instead, BT announced a joint venture with Warner Bros Discovery in May.

Blavatnik’s Access Industries “really wanted BT Sport to give them credibility and a name,” said a person involved in the deal.

As for DAZN’s future, analysts have speculated that the company is preparing for a sale to one of its biggest tech rivals.

Mayer said this “wasn’t the goal,” but added: “I’m not saying it won’t happen or couldn’t happen. Our goal is to make a great business, which . . . it can be a public company in its own right.”

Blavatnik, like any shareholder, wants to see progress, Segev said. DAZN’s “capital requirement is being reduced,” he added. Asked when Blavatnik might stop supporting DAZN, Mayer said that by 2024 the need for cash would “mitigate, if not completely disappear.”

“From the point of Leon [of view]The sooner the better obviously,” he said.

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