DAZN folding USA and Brazil into global service; Canelo sues over $365m deal
By Simon Ward
DAZN, the international OTT sports subscription platform, is winding down its dedicated offerings in USA and Brazil, with job cuts in both countries, as part of a refocus on core markets and a planned new global service.
The job losses amount to 2 per cent of the company’s workforce, or around 50 people.
Meanwhile, DAZN and boxing promoter Golden Boy Promotions are the subjects of legal action from Mexican fighter Saul ‘Canelo’ Alvarez, who is seeking damages of least $280 million for alleged breach of contract in a money-spinning rights deal.
DAZN, which is owned by Russian billionaire Len Blavatnik’s Access Industries, launched services in USA in 2018 and Brazil in 2019 as part of an international drive to challenge the established pay-television model for premium sport.
This took the number of markets with DAZN services to nine (the others being Germany, Austria, Switzerland, Italy, Spain, Japan and Canada), and the company subsequently announced plans for a global service featuring top boxing, among other sports.
However, its business model – monthly subscription fees with no long-term contracts – has been particularly susceptible to the coronavirus pandemic that has decimated the international sports calendar this year, and contributed to a change in strategy.
With their relatively small rights portfolios, the US and Brazil services are being folded into the forthcoming global service, with the result that fewer staff are required in the New York and Sao Paulo offices. Those offices will focus on customers in their domestic markets, but also elsewhere, supporting the global service.
There were already signs of a scaling down in Brazil, with DAZN having exited contracts seen as loss-making, including those for the Copa Sudamericana, the secondary South American clubs competition, and Italy's Serie A.
The other country-specific platforms will remain in operation, with DAZN targeting more subscribers in markets such as Germany, where it offers Bundesliga and Uefa Champions League soccer games, Italy, with Serie A, Canada, with the NFL, and Japan, with the Nippon Professional Baseball Organisation and J. League soccer.
Last month, it was reported that DAZN had revived efforts to secure new funding of up to $1 billion to support its global expansion, with talks taking place with advisers about options including a stock market listing or divestment of assets, according to Bloomberg.
DAZN was understood to be in the early stages of considering an initial public offering and had held discussions about going public through a deal with a special purpose acquisition company and potentially selling a stake.
In the meantime, DAZN is gravitating to a new rights payment model, as shown by its extended deal with the J. League, which puts greater emphasis on profit sharing, with lower upfront fees.
In early August, DAZN unveiled a new-look senior management team in anticipation of the launch of the global service with chief business development officer John Gleasure taking on the new role of executive vice-chairman, working alongside acting chief executive James Rushton and executive chairman John Skipper, while Ed McCarthy was appointed chief operating officer.
Veronica Diquattro and Ben King were also promoted, to chief customer and innovation officer, and chief subscription officer respectively.
DAZN is looking to increase the focus on non-live content and the strategy was recently outlined to staff by Rushton as the business continues to rebuild off the back of a devastating second quarter caused by the pandemic.
The company now expects its global subscriber base to return to pre-Covid-19 levels, around 8 million, by the fourth quarter of this year, with the global OTT service being rolled out in the next few months, following an ongoing beta testing phase.
However, there is the notable distraction of a legal dispute with Alvarez, with whom DAZN signed a five-year, 11-fight deal worth $365 million in 2018, shortly after the launch of the US service.
On Tuesday, the boxer filed a lawsuit in a federal court in California, accusing the streaming platform and his promoter Golden Boy, headed up by Oscar de la Hoya, of failing to honour the terms of the contract.
The complaint reads: “This lawsuit arises from the breach of the single largest contract in this history of boxing, and one of the largest in all of sport.”
As a result of the pandemic, but also wrangling over the DAZN contract, Alvarez has not fought this year, with the company claiming that Golden Boy has not fulfilled its obligation to deliver one premier fight per year.
The boxer’s lawsuit states: ''After extended discussions between the parties, DAZN offered to pay Alvarez and Golden Boy Promotions a fraction of the contracted $40 million licence fee in cash and some DAZN stock in advance of a potential IPO. However, the entire value of the package - for a bout against another World Champion - was substantially less than Alvarez' contractual guarantee."
It added: "Given that DAZN had made it clear that it would not honour its contract, throughout the spring and summer of 2020, Alvarez repeatedly asked Golden Boy Promotions to explore alternative broadcast options for a fall 2020 bout. Although Golden Boy Promotions reported that it was talking to various broadcasters, it failed to put forth a single alternative plan by which it would pay Alvarez the $35 million it had promised him for each of his fights."
The suit alleges that Golden Boy failed to meet its fiduciary duty to the boxer and that “Alvarez has suffered harm and damages, including, but not limited to, the denied guaranteed payments, lost gate revenue, and opportunities for ancillary revenue associated with bouts, such as sponsorships and apparel revenue."
DAZN and Golden Boy have so far declined to comment on the legal action from the Alvarez camp.
Since signing the deal with DAZN, the boxer has had three pay-per-view fights on the OTT platform, against the UK’s Rocky Fielding, USA’s Daniel Jacobs and Russia’s Sergey Kovalev.
Alvarez was set for a super middleweight bout against the UK’s Billy Joe Saunders on 2 May, but it was called off due to the pandemic, and Golden Boy was believed to be in discussions to arrange a clash with fellow Briton Callum Smith before the end of the year.
However, it is understood that neither a bout with Saunders nor Smith is considered a huge fight by DAZN on a par with the likes of Gennady Golovkin, who Alvarez fought in two high-profile encounters in 2017 and 2018.
A much-anticipated trilogy seemed imminent after DAZN signed a three-year, six-fight deal with Golovkin in 2019, but it is still to materialise some 18 months after the agreement with the Kazakh boxer.