According to its latest annual review, DAZN reached 15m subscribers globally in 2022, generating total annual revenues of $2.3bn. It represented a 70% year-on-year revenue growth for the sports-dedicated subscription OTT platform, which, in its seventh year of operations, has grown to become the 5th largest buyer of sports rights globally, leading the subscription OTT market by investment on sports rights.
DAZN has adopted a strategy of heavy investment in top-tier rights to accelerate subscription growth at an early stage. Indeed, Ampere estimates that, in its core markets of Japan, Germany, Italy, Spain and the USA, DAZN grew at a CAGR of 90% per year since launching in 2016. Despite the rapid growth in subscriptions, however, DAZN has yet to be profitable. In its annual review, DAZN has indicated that it is aiming to achieve run-rate profitability in early 2024.
Given that we expect DAZN’s rights spend to increase by a further 6% in 2023, revenues will need to increase notably for DAZN to reach profitability. Higher pricing helps: since 2021, DAZN has been raising its prices in most of its markets – resulting in an ARPU growth of 77% in its core markets, with only moderate impact on churn levels. In 2023, DAZN announced further price increases, including a new pricing structure in the US and the UK, where its rights portfolio is skewed towards fighting sports, to incentivise subscribers to take up annual, rather than monthly, subscriptions.
Currently, DAZN generates the vast majority of its income from subscriptions. To further boost revenues, DAZN has undertaken a number of strategic initiatives, including: the expansion of its programmatic advertising inventory (both on-platform and off-platform); a greater reliance on distribution partnerships to boost reach and manage seasonal churn; and the launch of new ancillary revenue verticals such as betting, digital collectibles (NFTs), retail, merchandise and ticketing.
Ampere estimates that, in 2023, subscriptions will account for 80% of DAZN’s total revenues, with the rest equally split between advertising and other ventures. In order to break even by the end of 2023, therefore, DAZN would need to grow subscriptions revenue by 34% (a lower annual growth rate than what it has achieved every year but one – 2020 – since it launched), while also generating $730m in advertising revenues and other activities. While this sounds ambitious, if we assume advertising accounted for half of this additional revenue, DAZN would be generating only around a third of the advertising revenue generated by rival Sky from a broadly similar-sized subscriber base.
This analysis is an excerpt of Ampere's recent report: "The role of sports in the global streaming wars". The full report can be downloaded for free at this link.