Last December, the sports-streaming service DAZN lowered its subscription price in Brazil, from BRL 37.90 to BRL 19.90. In an interview with LABS, the company’s executive vice president in the country, Bruno Rocha, stated that the new price is part of a strategy to accelerate the growth of the platform in Brazil, also supported by the exclusivity of smaller soccer championships, such as the Paranaense Championship (of teams from Parana, Southern Brazilian state) and by competitions from other sports, such as NBB, the top-tier club competition of the Brazilian Basketball League, in addition to the production of original content.
Worldwide, streaming in general can beat paid TV in number of users in 30 countries as early as 2020, according to a survey by consultancy Ampere Analysis. But within a niche such as sports and in a country where the transmission of the main events in the segment is monopolized by one or two communication groups, this dispute is still far from a definition.
DAZN was born in 2016 in Europe and Japan–it only arrived in the United States, the land of opportunities when it comes to streaming, in the second half of 2018. Since then, it has become one of the most downloaded sports applications, according to data from digital intelligence company Sensor Tower, in a fierce dispute with ESPN +, the streaming service of ESPN, now a company owned by the giant Disney.
So it is no coincidence that DAZN has hired the former ESPN president John Skipper as head of its parent company, DAZN Group.
In 2019, Disney said that it is willing to lose $650 million in revenue to make ESPN + the largest sports streaming in the world, with 12 million subscribers by 2024 (today, the platform has about 3 million users, according to the American press).
DAZN, according to sources heard by the Wall Street Journal in December, in its turn, has about 8 million subscribers in the nine markets in which it is present (Japan, Germany, Austria, Switzerland, Italy, Spain, Canada, USA and Brazil).
In the United States, where each broadcaster or sports organization has launched or is launching its own platform, the fight is especially fierce. The arrival of new companies in the industry in emerging countries and passionate about streaming such as Brazil is a side effect of this war, driven by the continuous digitalization of sport and the expansion of 4G and 5G networks in Latin America.
The secret of DAZN may be in the search for different markets, even before the US. Knowing the audience of each country is essential for a niche streaming platform like DAZN, and for any business that involves the world of sports.
Within the strategy to gain more subscribers, the company has bet on original content not restricted to the platform. Weird? No. DAZN is not known as ESPN and it has a difficult name to pronounce (it’s da-zo-ne, by the way). In Brazil, this use of original content as marketing pieces has been made in the wake of major sporting events or moments in the country.
In the second half of last year, for example, DAZN subscribers were able to follow the seven-episode series on the backstage of Flamengo, Sem Filtro: Flamengo (something like Without a Filter: Flamengo), produced with the Brazilian independent production company Conspiração Filmes. The team won the Brazilian Championship and the Libertadores da América in 2019, becoming a sport sensation throughout the year, but ended up losing the Club World Cup to Liverpool.
In the United States, ESPN has also been betting on original content outside its platform to gain more subscribers. According to an article published by Digiday this Monday (27), ESPN wants to launch 500 programs on its channels on YouTube, Facebook, Twitter and others (in 2018, there were 400 programs, and in the previous, half of that). The company also refurbished the studio previously used for the production and broadcast of one of its most famous television shows, “First Take”, to give ESPN’s digital programming a home of its own, over 2,750 square-feet.
If for ESPN this diversification of platforms is necessary for its survival beyond traditional TV, in the case of DAZN, this strategy occurs almost naturally, because the company was born digital. But that does not mean that the challenge of growing in this segment is easier for DAZN.
In Brazil, DAZN will need to win a broadcast monopoly
With the exception of Fox Sports, which broadcast Libertadores last year, almost all major football championships are in the hands of Globo and Turner organizations in the country.
Last year, DAZN “inherited” the transmissions of the Sul-Americana from the former paid channel Esporte Interativo, and closed a contract for the exhibition of the C Series of the Brazilian Championship.
Until it has the Brazil Cup and the A Series of the Brazilian Championship, two competitions tied to Globo and Turner until 2024, however, DAZN will not reach its true potential in the country.
Amir Somoggi, consultant from Sports Value, explains that DAZN has already invested $1 billion worldwide in original content. “But what people really want to watch, in a sports streaming platform, are the games, the competitions, first hand, on the cell phone, on the iPad, wherever they want. It seems to me that if a bigger competitor appears in the world, the DAZN may break. (…) Either the company gives everything it has for the best championships, or it will become a second-tier platform, “says he.
Somoggi explains that with the price reduction that occurred, there was a very sharp drop in the possibility of profitability in Brazil. “The price was completely outside the reality of the streaming model, which has to be cheap, so it may increase (the number of users). But even so, the marketing effort that DAZN will have to capture (new subscribers) can generate a negative result. What I talked to people abroad is that this group is not sustainable in the long term, spending what it is spending to acquire rights on the one hand, and not getting more subscribers on the other,”says the consultant.
For Somoggi, compared to Netflix, which has a very high content acquisition cost and is betting on markets outside the USA to grow even more, DAZN does not seem to be taking advantage of a rising market as the Brazilian one as it should. “Without the Brazilian Championship, without Libertadores, without the World Cup… it is as if Netflix had not bet on the best content in the world to be the biggest”, evaluates Somoggi.
In addition to subscriber revenue, there is also the advertising revenue challenge. “There are several studies that show that no one keeps watching a soccer game all the time on a cell phone. The sponsor knows this. So it is necessary to make new deliveries, outside the broadcast platform, in a close relationship with the subscriber–which, in my opinion, may be the way for these platforms to diversify revenue and not depend so much on the subscriber or on the production of original content.”