Opinion: COVID-19 Response Highlights Dazn’s Struggles

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As the COVID-19 health crisis in March escalated to the point where government lockdowns and bans on public gatherings were implemented across the globe, it was revealed that OTT media streaming service Dazn would not be paying sports leagues for any canceled games during the coronavirus pandemic. According to a source within the company, the subscription-based startup let its partners know that they would only be remunerated for sporting events that had actually taken place, omitting any games that had been canceled or postponed due to the virus. While the move seems logical from an outsider’s perspective, sports leagues traditionally have been able to rely on media revenue during previous stoppages, calling into question what effect the move will have on future partnerships with Dazn once COVID-19 has passed.

Much more alarming, however, was an internal memo to employees from Dazn CEO Simon Denyer, in which the executive stated that the company’s board was “officially placing Dazn in survive mode.” The over-the-top streaming organization has recently put a moratorium on hiring and laid-off employees in response to the pandemic, with Denyer calling the crisis “the biggest challenge” that Dazn has ever faced. The organization has also refused to refund customers who have purchased its annual subscription, instead allowing customers to put their membership on pause for up to four months while the majority of sporting events have ceased.

Since the company entered the United States market, Dazn’s aggressive rights acquisition strategy has been a costly endeavor. The streaming service entered into a $1 billion partnership with Matchroom Boxing in May 2018, and five months later, the organization announced it had signed Canelo Alvarez to an 11-fight $365 million contract—at the time the richest deal in history for an athlete in terms of an annual fee. Less than 30 days later, Dazn announced a $300 million digital rights agreement with Major League Baseball, adding an American sports staple to its ever-growing library. The company was able to spend such exorbitant amounts on these deals due to its owner, British-American businessman Sir Leonard Blavatnik, self-funding the London-based startup with his estimated $25.7 billion fortune.

Blatvatnik’s enthusiasm for the business, however, appeared to be waning even before the COVID-19 pandemic began. Dazn in October was reportedly seeking to raise around $500 million of outside investment in a move that many interpreted as Blatvatnik signaling he was no longer interested in writing the company a blank check. Motivations for the billionaire’s change of heart were made clear in 2020, when, according to Boxing Scene, an industry source revealed that Dazn’s original financial model had estimated that the streaming service could have 3.5 million paid subscribers by the end of 2019—more than four times the actual number of subscribers Dazn ended up acquiring. The service has also resorted to “celebrity boxing”-style fights in order to draw in more viewers, showcasing famous YouTubers Logan Paul and KSI in the headliner of an event where Billy Joe Saunders defended his WBO super middleweight title on the undercard. While the bout did manage to bring in viewership, it was also heavily criticized by pundits and viewed as a sign that not all was well inside the organization.

It doesn’t take an expert to see that Dazn is in an extremely precarious position. The streaming service put its faith in boxing to give it a foothold in the United States market, hoping to turn a profit through its subscriber base before bidding on larger media rights deals such as the NFL down the road. By all accounts, that strategy seems to have failed, and with the billionaire stopgap between the startup and insolvency seemingly removed, the company will have to find a creative way to entice investors to climb aboard what appears to be a sinking ship. The biggest red flag? While Dazn’s challenges are problematic enough under normal circumstances, the COVID-19 pandemic has exacerbated them tenfold.

That’s not to say Dazn is beyond salvation. The firm hired former ESPN President John Skipper to be its executive chairman in May 2018. He was a key player in making the iconic sports network the brand it is today. Florida has also classified professional sports and media production as an essential service, paving the way for individual sports such as MMA and boxing to resume in the state during the pandemic before larger team sports are able to coordinate a plan to adhere to various social distancing guidelines and rules. If Dazn can capitalize on the lack of sports, like the Ultimate Fighting Championship and other MMA entities plan to do in the coming weeks, it may be able to get its subscriber count closer to the original financial models.

Exactly how much runway Dazn has to turn things around is not known, but it is clear that the London-based startup needs to pivot. Facing an array of internal and external obstacles, as well as the perceived loss of its main financial backer, the company needs to define a new strategic vision that can not only keep it afloat but help it thrive in whatever the new sports media market looks like. What type of strategy will help it reach that goal remains to be seen, but Dazn will need to implement it quickly if it wants to avoid ending up on an unfortunate list.