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DAZN John Skipper by Jamel Toppin for Forbes 22485

DAZN vs. ESPN: Loaded With A-List Athletes—Canelo, Ronaldo, LeBron—The Billionaire-Backed Streaming Site Wants To Be The Worldwide Leader In Sports

The first Saturday in May is one of the biggest sports days of the year. In addition to the gambling-friendly Kentucky Derby, the date has been a target for boxing’s biggest pay-per-view stars over the past 15 years, thanks in part to the fact that its proximity to Cinco de Mayo helps it attract the sport’s avid Mexican fanbase. Tens of thousands of fans, including countless celebrities, descend on Las Vegas for it.

This year is no different as Mexico’s Canelo Alvarez squares off against American Daniel Jacobs in the T-Mobile Arena in Sin City. But missing from the action Saturday night are HBO and Showtime, the PPV homes for boxing’s biggest events of the past three decades.

Alvarez is by far the biggest PPV boxing star today. Over the past six years, he has racked up more than 8 million buys and $600 million in revenue fighting for HBO and Showtime. But his new home is the over-the-top (OTT) sports streaming service DAZN (pronounced “da-ZONE”). The video subscription business launched in Europe and Japan in 2016 before emigrating to the United States last fall when it signed Alvarez to an astronomical $365 million contract for 11 fights over the next five years. At the time it was the largest guaranteed contract in the history of sports (baseball’s Mike Trout has since surpassed the record with his $426.5 million deal in March).

Leading DAZN is former ESPN president John Skipper, who was hired last May to oversee the operations of DAZN’s parent company, Perform Group. “This was potentially a very big opportunity because of first-mover advantage,” Skipper says in his office at DAZN’s New York headquarters in the Financial District. “I think there is the possibility of building a company with a very significant value.”

Buying sports media rights and launching an OTT service are both wildly expensive and risky. Disney says it will lose $650 million each of the next two years on its version, ESPN+. The worldwide leader in sports hopes to attract 12 million subscribers by 2024, up from the current 2 million-plus. AT&T’s B/R Live is also a big player in the U.S., while just about every sports property from the WWE to UFC to NBA has its own OTT service.

DAZN is also bleeding red ink as it builds out its technology and snaps up rights. Its media rights bills are well over $1 billion annually. But Skipper, who negotiated several league deals at ESPN, expects new markets to be profitable after four to five years.

DAZN has built a sizable war chest, selling a minority stake to Japanese ad firm Dentsu in 2018 and unloading the business-to-business piece of DAZN Group last month to Vista Equity Partners. “We are not trying to raise our next round of $20 million,” Skipper says. The company’s main bankroll is Ukrainian-born Len Blavatnik, who is DAZN’s majority owner and is worth $18 billion.

“I met him at breakfast, and he asked me if I wanted to do this,” Skipper says. “That’s the benefit you can have as an entrepreneur of means.”

Three years ago, the streaming service launched in Austria, Germany, Japan and Switzerland with an array of top-tier soccer programming—including England’s Premier League and Spain’s La Liga. It will add Brazil this month as its ninth country for subscribers. DAZN controls most of the important live rights to sports in Japan, as well as soccer league Serie A in Italy and Champions League in Germany. The Serie A rights got a boost last summer when global soccer icon Cristiano Ronaldo joined Turin-based Juventus F.C. DAZN added Ronaldo as its first global ambassador in August under a two-and-a-half-year partnership.

DAZN currently has more than a million subscribers in Japan. The company won’t reveal global totals, but Forbes estimates they exceed 4 million, well ahead of the 2 million-plus Walt Disney reported last month for ESPN+.

“The pay TV model is the best model for media in the history of the universe,” says Skipper. “Will OTT be better? In some ways, yes."

The “Netflix of sports” is the quick descriptor for what DAZN wants to build—it now streams some 20,000 events a year—and the company is happy to be considered in the same league. It’s a lofty goal considering Netflix’s recent market cap of $166 billion. DAZN holds streaming rights to the NFL, NBA and NHL in multiple countries outside the U.S. Cricket, field hockey, gymnastics, MMA, rugby and tennis are also staple programming. DAZN recently partnered with LeBron James’ media company, Uninterrupted, to produce a behind-the-scenes documentary series leading up to big fights.

For now, Skipper is largely using boxing to drive subscriber growth in the U.S. “Boxing is one of the few places where fans have actually been paying money directly for a specific event and a specific sport,” he says. “There were very few long-term TV contracts that precluded entry.”

DAZN partnered with British promotion company Matchroom Boxing last year in a deal worth up to $1 billion to show 16 U.S. fights in the U.S. annually over eight years. The big ticket in Matchroom’s stable of fighters is world heavyweight champion Anthony Joshua, who fought in September under the DAZN banner. Daniel Jacobs is another Matchroom fighter.

DAZN signed Kazakhstani boxer Gennady Golovkin to a six-fight deal worth more than $100 million in March. Alvarez and “GGG” under the same banner likely sets up a fall meeting between the two rivals. Their first two fights had 2.4 million PPV buys that generated $200 million in revenue.

Alvarez’s inaugural fight with DAZN in December drove hundreds of thousands of people to sign up for the service, but barely half of them stuck around beyond the one-month free trial to pay the $9.99 monthly rate. More than 90% of customers who cancelled the service said another Alvarez fight is what would get them to pay.

In response, DAZN launched a new pricing plan to fix the retention issue. Free trials in the U.S. are no longer offered and the monthly rate has doubled to $19.99. DAZN introduced a $100 yearly plan, which is a fraction of what two Canelo PPV fights would have typically cost. “We are trying to drive people to a yearlong subscription,” says Skipper. “If you figure out a way to get people to buy for a year, you have 100% retention for the year.”

DAZN’s offices offer panoramic views of New York City from the 72nd floor of One World Trade Center. But Skipper, 63, is not your typical television titan. He’s the son of mailman who majored in English literature at UNC-Chapel Hill. He speaks slowly with a North Carolina drawl.

He had stints at Rolling Stone and Spin starting in late 1970s before joining Disney’s publishing group in 1991. His entrée to ESPN came in the late-’90s when the network wanted to start what became ESPN The Magazine, which grew to 2.1 million subscribers before it was announced this week that it would cease publication. Skipper eventually oversaw all of ESPN’s business outside of TV, which, he liked to joke, according to one former employee, was “like being in charge of North America except for the United States.”

Skipper took over as president of ESPN in 2012 and oversaw massive rights deals with the NBA (nine years, $12.6 billion) and Major League Baseball (eight years, $5.6 billion).

“I’ve always found him to be a fair yet tough negotiator,” says Nick Khan, who coheads CAA’s television business and has often been on the opposite side of the table during major deals. Khan says Skipper liked to open negotiations by saying, “Clearly, we the buyer want to pay $1, and you the seller would want to get $1 billion. Now we just need to find the price in between that works for both of us.”

Skipper’s ESPN tenure ended abruptly in December 2017, when he resigned only a month after signing a new three-year contract. He cited a “substance addiction,” although many believed there was a deeper story, particularly with the Me Too movement gaining momentum. That proved not to be the case when Skipper detailed his exit three months later to Jim Miller, who wrote the definitive narrative on ESPN in Those Guys Have All the Fun.

In an interview published in the Hollywood Reporter, Skipper explained that someone he bought cocaine from had tried to extort him. He disclosed the threat to Disney CEO Bob Iger. “He and I agreed I had placed the company in an untenable position and as a result, I should resign,” Skipper told Miller. Skipper won’t comment on the subject beyond this 2018 interview.

Despite his unceremonious exit from ESPN, it is hard to find anyone who has negative word to say about Skipper. He gave DAZN instant credibility when he was hired 12 months ago. Sports rainmakers might not have known DAZN, but they all knew Skipper.

“He was always an excellent dealmaker,” says CAA’s Khan. “He came in and started making deals where DAZN can gain ratings/subscribers, relevancy and revenue. The three things that matter most in the content business.”

Skipper’s deep connections mean that everyone returns his calls. He bumped into MLB commissioner Rob Manfred, who is an old friend, at an event last summer just before DAZN’s American launch. The meeting set the stage for a three-year, $300 million deal for a nightly live show, ChangeUp, giving DAZN subscribers live look-ins on the best MLB action—essentially NFL RedZone for baseball.

“I have a history of good partnerships and there is a level of trust,” says Skipper. “There is a reason no one has ever suggested I was tricky in any of these deals. I intend to do the same thing here. You build on that level of trust.”

For MLB, whose average viewer is 58 years old according to Nielsen, it is a way to reach a younger demographic. For DAZN, Skipper says, “It was a little declaration that we’re here, and we’re going to be around for the next round of media rights bids, but we’re not necessarily waiting. We want to be in business now.”

“There will be the existing partners and possibly tech companies, plus pure-play over-the-top,” says Skipper about the next round of sports rights bids. “You will have at least one pure-play OTT at the table and that will be DAZN.”

As the technology continues to improve, more and more video, including sports, will be watched over the internet. “The pay TV model is the best model for media in the history of the universe,” says Skipper. “Will OTT be better? In some ways, yes. It will be better mostly because of interactivity and the ability to not be constrained by a linear stream.”

DAZN believes it can handle up to 10 million concurrent streams. It hasn’t had an event to test that many but did have more than one million for the Joshua fight in September. There were recently 800,000 concurrent live streams in Italy without any significant issue for a Serie A soccer match, which represented 24% of the Italian broadband infrastructure at the time.

All of which explains why DAZN is among the parties talking to the NFL about the NFL Sunday Ticket, according to sources. Skipper won’t comment on a potential NFL deal but reveals his hand when he talks about the future of sports media rights bids. “There will be the existing partners and possibly tech companies, plus pure-play over-the-top,” he says confidently. “You will have at least one pure-play OTT at the table and that will be DAZN.”

Cover Photograph: Jamel Toppin for Forbes