Saturday, January 18, 2020

Will DAZN Increase Subscription Prices?

The year 2019 ended with two of sports top digital streaming networks DAZN and ESPN+ in a great position to continue their respective growth in 2020 and beyond. With the success of both platforms, it is only natural for rumors and/or other speculation to surface. When new platforms enter the market, the goal more often than not is to break new ground and deliver a new, fresh presentation that stands apart from their competitors.

In regard to sports, this is a formula that has been seen numerous times through the years. Some may recall the 2002 launch of the Yes Network or Yankee Entertainment and Sports. The first sports network owned by a professional sports team, the New York Yankees. While Yes Network was truly a groundbreaking milestone for the sports television industry where a team chose to launch their own platform rather than negotiate with more established network platforms, it was not without its share of critics. Yes Network, which for many years operated solely as a regional sports network (RSN) in the New York region faced some backlash for a time from various cable subscribers who could not access the network shortly after it launched due to the network not being available on some cable platforms.

Although the network was available and marketed as being available on satellite television providers like DirecTV, which enabled access to the network nationally in the United States, some criticism remained for a time. Eighteen years later, the network now offers a national feed to both cable and satellite providers and served as a model for other sports networks to try and follow.

One of the appeals of digital streaming networks is that it operates on a direct to consumer model making the potential of a network not being available on a traditional television platform largely a thing of the past. This fact however, has not made digital streaming networks immune from criticism and/or rumors.

Recently, a story that has made the rounds was a suggestion by Eddie Hearn, one of Boxing’s top promoters, that DAZN, the digital streaming network that has a $1 Billion deal with his promotional company Matchroom Boxing, increase their monthly subscription plan from the current $19.99 per month price point to $50 per month with the thinking that it would encourage those monthly subscribers to instead opt to subscribe to the network’s yearly annual subscription plan.

In the interest of full disclosure with the reader, this observer is a subscriber to DAZN on a yearly basis and, despite the fact that yours truly has rarely written a column or other form of article both in online and print mediums over the last two decades yours truly has covered Boxing and other combat sports based solely on rumors, this is a subject that should be discussed. It is also important for me to state that this column will offer strictly my opinion and will not offer a negative point of view.

Regular readers of The Boxing Truth®️ know that one of the more consistent themes of yours truly in recent years has been the benefits of streaming technology and how it can benefit Boxing. While one should look no further than a few short weeks ago at the beginning of 2020 where I discussed this subject at length, one who may be uninformed may wonder what the benefits are and exactly what I have been talking about.

In short, streaming services/networks delivered over the internet, often referred to as Over The Top (OTT) digital distribution offers the consumer generally low cost options on a wide scale of entertainment that unlike cable/satellite television is available directly to the consumer and not part of a large bundled programming package. Although as the OTT distribution model has rapidly increased in recent years with several new platforms either entering the market or will soon be launched, the pricing structure has largely remained the same where consumers can choose what they want to subscribe to and do so at a reasonable price point.

As the market has increased, it was only a matter of time before sports platforms would be introduced and join the game.  For the most part, I feel both DAZN and ESPN+ have succeeded in providing value for the price of a subscription in a largely untapped portion of the market when it comes to streaming. It is important to consider however, that unlike ESPN+,which is only available in the United States, DAZN is a global streaming network that is currently available in nine countries.

A challenge for DAZN in regard to the United States was entering the market during a period of time where various broadcasting rights to numerous sports, many of which they hold international rights to, are currently not open for bidding to cover the U.S. market. With limited options in terms of acquiring rights in the United States, they chose to focus on combat sports. Although prior to their official launch in the U.S. DAZN had to contend with a relatively crowded field of broadcasters offering combat sports, primarily Boxing and Mixed Martial Arts (MMA), the network was able to take advantage of the decision of HBO to exit Boxing after a forty-five year run at the end of 2018.

In a relatively short time, DAZN increased their content offerings by striking broadcast deals with Bellator MMA, Golden Boy Promotions, and several other Boxing and MMA promotions in addition to their deal with Matchroom Boxing, which has also allowed Eddie Hearn to expand his promotional company into several branches around the world, providing even more value for the subscriber by providing content in an innovative way that had not been seen before on a network platform.

One of the deals DAZN was able to strike that received significant attention and skepticism was the eleven-fight $365 Million deal with Saul “Canelo” Alvarez, in addition to a deal to provide a broadcast platform for his promoter Oscar De La Hoya’s Golden Boy Promotions stable of fighters after previously being aligned with HBO. The deal with Alvarez was significant both in terms of opening up potential opportunities for fighters to potentially secure lucrative deals that had not been seen before in the sport. It also represented the first legitimate pay-per-view draw to take a step into the digital subscription age and away from what this observer has often called an overpriced and undervalued model of pay-per-view.

For a streaming network that has marketed itself as a legitimate alternative to the pay-per-view model, signing a fighter of Alvarez’ stature was a win for DAZN. Despite their successes in establishing a subscriber-base of reportedly eight million global subscribers with an estimated subscriber-base of under one million in the U.S. according to several media outlets including the Wall Street Journal, skepticism has remained.

It is understandable how some may have their doubts as to the long-term viability of a platform that has only been available in the U.S. for just over one year. After all, DAZN is challenging a previously tried and true model of sports television in the United States and is doing so while competing with more established sports network platforms in the country including ESPN and Fox Sports to name a few. It is also true that DAZN has spent significantly in terms of fighter contracts while also trying to acquire any rights that might be available including the launch of their ChangeUp nightly studio show in a deal with Major League Baseball (MLB). Although as of 2020 the deal does not include live full games, the live look in, whip around style show did get DAZN’s foot in the door to potentially acquire further rights for live games down the line while also leaving the possibility open for similar content to be developed for other sports leagues while waiting for respective broadcast rights to become available on the open market.

Some might argue however, by being so aggressive in spending money to not only sign fighters, but also establish the platform in the U.S. while also acquiring more rights over time that it could create a difficult scenario for the network in the long-term picture. This argument has fed the skepticism of some.

While this observer does not currently work for DAZN or any other network or outlet outside of my own, I do not share the same skepticism of some and believe that for a network that has only been available in the United States for over one year, the network appears to be in great position for further growth after initially launching internationally in 2016. As for the current subscription plans of either $19.99 per month or $99 per year that were introduced in the U.S. last year, it is important to note that initially DAZN entered the U.S. market by offering a $9.99 per month subscription option following a thirty-day free trial. 

This was done as an introductory offering before increasing the monthly price point to $19.99, but also introducing the $99 annual subscription option, while keeping the $9.99 price point for existing subscribers for a period of time. Although this was met with skepticism, criticism, and rumors that DAZN was struggling, what was not explained clearly was that the introduction of the $19.99 monthly subscription option and the $99 annual subscription option moved the U.S. offering of DAZN to the same pricing structure as what the network offers internationally.

Despite this fact, skepticism and rumors of another potential price increase has remained. As far as criticism regarding how much the network has spent and invested, I believe it is in some ways similar to where ESPN was when they launched on cable television in the late 1970’s and into the 1980’s. It took a significant period of time stretching several years for the network to establish itself, increase access, grow subscriber numbers and over time acquire significant and lucrative broadcast deals with various sports leagues. A necessary component for ESPN and really any sports network was to spend and invest significant resources to grow their platform. In 2020, ESPN is one of the power players in sports in the United States and like DAZN, are now establishing their footprint in the digital streaming age, that many including yours truly believe will ultimately replace the traditional cable/satellite television model.

While taking a brief vacation that I often refer to as a staycation towards the end of last year, I kept a keen eye on news regarding both DAZN and ESPN+ as I routinely do. Although I do not like to pen columns based on rumor an innuendo, I have seen some fans on social media suggest that DAZN should attempt to enter the pay-per-view realm and this along with numerous speculation pieces I have read regarding the network, it became clear that it would be a topic I would have to address.

In regard to the possibility of another price increase at least for those who choose a monthly subscription option, I cannot say as someone viewing things from the outside that a price increase will not come in time as has been the case for digital streaming networks like Netflix and Hulu for example. I cannot see however, a price increase occurring shortly after an increase was introduced into the market as a way to get the U.S. on the same pricing structure as other countries where the network is available. It would not surprise me however, to see a price increase come at a point where the network is able to acquire broadcast rights to a major sports league or leagues as has been reported as a possibility involving the National Football League (NFL) down the line.

As far as the stance of some that DAZN should consider a pay-per-view option, I disagree. It would be a step backwards for the network that marketed itself to Boxing fans as providing 100+ fight nights per year across both Boxing and MMA “Without The Pain Of Pay-Per-View!” When one considers the current state of the cable/satellite industry that is in decline as cord-cutting continues to grow and the general decline of the pay-per-view industry that both due to the decline of cable/satellite and the ever increasing price points of pay-per-view, pay-per-view Boxing events rarely draw the type of revenue that makes the model sustainable in the long-term. 

Although I put the blame for this both on the price points, which average between $70-$90 on a per card basis as well as cord-cutting, there is also the issue of piracy that also contributes to the general decline of pay-per-view buys more so than a lack of interest. This is one reason why it is rare to see a pay-per-view Boxing card come close to drawing one million buys regardless of what the main event might be. There are of course, the rare exceptions such as the Floyd Mayweather-Manny Pacquiao bout in May 2015, which drew 4.4. million pay-per-view buys even with the expensive price tag of $100. This however, is more the exception than it is the norm.

For DAZN to adapt a pay-per-view model would be a lose/lose scenario for their network. Though critics will remain regardless of what a network offers, the sensible option would be for DAZN to not only stay the course, but also continue presenting value and content that makes it stand apart from both the pay-per-view model, but also their other competitors. Over time growth will continue and more importantly in time, the network will not only see returns on their investments, but hopefully will also prove that while breaking ground is seen initially as a risk, without risk there is no innovation and without risk there is no reward. 

“And That’s The Boxing Truth.”

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