Industry observers have touted DAZN’s recent acquisition of Eleven Group’s global sports media business, which includes Eleven Sports and Team Whistle, as an inflection point in the streaming revolution. They see the large number of OTT services in the market, the abundance of content choices available to consumers, and the difficulty distributors are having making the business’ economics work, and suggest the deal is evidence that a widely anticipated consolidation trend is underway.
But the Eleven acquisition was not a consolidation play. Consolidation occurs when two players in the same market merge to form a more powerful value proposition that cuts through, is able to capture mind and wallet share against competing offerings, and creates operational efficiencies. Looking at the overlap between the DAZN and Eleven businesses, there is just one country—Italy—in which they both operate.
It would be more accurate to describe DAZN’s latest acquisition as a strategic effort to increase geographic reach, generate new revenue streams and expand its football rights through M&A.
JWS’ Take: Despite reports to the contrary, DAZN has not made any statements regarding plans to postpone its IPO. “And any discussions in relation to such are not connected to this deal,” Shay Segev (CEO, DAZN Group) said. “We are well-backed by our long-term investors at Access Industries, and as a high-growth business there are several paths that we could take in the long term. An IPO is just one of them.”
But one media rights consultant who asked for anonymity said in his opinion the Eleven acquisition only makes sense if DAZN plans to “try to sell or IPO as it adds revenues to the top line that can be multiplied; DAZN has so many other balls up in the air” that it otherwise would not be worth the trouble.
In the meantime, DAZN will focus on “delivering market-level profitability through diversifying our global platform and driving deeper engagement with consumers,” Segev said.
Its not clear how the acquisition of Eleven Sports, a multinational sports and entertainment platform, and Team Whistle, a social-heavy sports content company, aid that initiative. Eleven does not improve DAZN’s economics in existing markets with significant cost bases. The company lacks a presence, beyond its globally available content, in Germany, Japan and Spain.
Eleven Sports has a local operation in Italy, but the desire to grow market share in the country seems like an unlikely driver of the acquisition. Eleven is no better than the fifth-largest paid sports broadcaster in Italy, behind Sky Sports, Mediaset, DAZN and Eurosport.
And the $300 million in annual revenue Eleven generates does not appear as if it will materially affect DAZN’s top or bottom line. For perspective, DAZN has committed to spending more than $825 million per year on domestic Serie A rights in Italy alone.
Eleven will give DAZN locally relevant, profitable operations and positive brand recognition in Portugal and Belgium that complement its existing positions in core European markets; 89% of Eleven’s current revenue is derived from those two countries. “This will all be underpinned by DAZN’s powerful global platform, with its proprietary technology already allowing our customers to watch sports they love in over 200 countries and territories,” Segev said.
The acquisition also supports DAZN’s desire to generate more value and engagement from its direct-to-consumer relationships.
The company launched its NFT marketplace DAZNBOXING.io in July and DAZN Bet in the UK in August. Segev said it is too soon to tell how those business lines have impacted annual revenue per user (ARPU).
OTT economics require distributors to diversify revenue streams. Services like Spotify have redefined the value for money expectation. So streamers are increasingly looking for new ways to lift depressed ARPU levels closer to that of the pay-TV bundle, which is ultimately where monetization needs to be in order for these businesses with less scale and greater turnover to become profitable.
It is worth noting DAZN has tightened the screws on subscription pricing in at least some of its core markets. It has increased the price in Germany from $14.99 last Bundesliga season to $29.99 this season and introduced tighter controls around concurrent streams and devices.
Team Whistle is a top-10 ranked U.S. media sports property, generating 4.2 billion monthly video views globally across 32 million monthly active users. “Beyond distribution, the acquisition means DAZN will have a highly creative content studio with proven success of creating hit shows across multiple formats and genres,” Segev said. “These elements, alongside Team Whistle’s social media presence, will enable us to speak to a highly engaged generation of sports fans in new and unique ways.”
Eleven and Whistle also bring a complementary portfolio of long-tail global rights to DAZN. The media company is the co-exclusive international broadcaster for a host of mid-tier European soccer leagues.
While many streamers do not find those assets worth owning, DAZN and Eleven are believers in economies of scale. Logic suggests if an OTT player can spread and allocate costs and overhead across 200-plus countries, small viewership gains within each can add up.
A robust global rights portfolio can also be used to test the viability of new markets and serve as the content and engagement base layer, to be built upon with local rights acquisitions, once the decision to enter a new market has been made.
But there is more strategic value than monetary value in a global strategy. To convince public or private market investors that the sports-centric OTT business is viable long-term, DAZN is still likely going to need to show a path to profitability in their most mature core markets, which are now more than five years in the making. The company debuted in Japan and Germany back in 2016.
DAZN has publicly stated it expects to make significant strides towards profitability over the next 18 months.
While DAZN failed in its $800 million bid to land BT Sport in February, Eleven should not be viewed as a fallback option. The attempt to acquire BT Sport was driven by its need to nail the UK, the second biggest broadcasting market. Eleven does not maintain a local presence in the UK.
FWIW, the acquisition is not going to aid DAZN’s efforts to gain market relevance in the U.S., either.