In Tokyo and want to watch this weekend’s Mayweather-McGregor superfight? You won’t need a satellite dish or a sports bar — just an app.
Japan’s boxing fans can view the $500-million bout, the richest global sporting event this year, with their smartphone and a $15 subscription to DAZN, a U.K.-owned sports streaming service that’s seeking to turn sports nuts into cord cutters.
The shift to OTT — over-the-top, or non-traditional — web-based broadcasting is shaking up the landscape in a country where network TV still dominates. In the past year, apps backed by billionaires Masayoshi Son and Len Blavatnik have begun offering live and on-demand streaming, ramping up spending on rights in a fight for customers that offers a glimpse into the future of global sports broadcasting.
“The way the media broadcast industry works here is very traditional, it often takes someone new to be disruptive,” James Rushton, the CEO of DAZN, said in an interview at newly opened offices in Tokyo. For DAZN, Japan was an opportunity neglected by traditional pay TV. “We didn’t think they were offering Japanese sports fans a fair deal.”
The year-old app, backed by Blavatnik’s Access Industries Holdings LLC, is also available in Germany, Austria, Switzerland and Canada. It rattled Japan’s broadcasting world with an audacious ¥210 billion ($1.9 billion) swoop to stream the nation’s J-League soccer competition, and has snapped up rights for sports from MLB to UFC. It’s hungry for more acquisitions, and plans to expand into new markets across the world.
DAZN’s arrival has been a sucker punch for satellite broadcaster Sky Perfect JSAT Holdings Inc. The company says it lost about 100,000 subscribers as a result of DAZN’s acquisition of the J-League.
“We were stunned” at the loss of the competition it hosted for 10 years, says Sky Perfect director Joji Komaki. “Our annual revenue is less than ¥200 billion. We can’t consider spending that on just one content.”
The soccer league, for which DAZN now holds 10-year rights, is the clearest example of the surging cost of broadcast rights in Japan since sports streaming services such as SoftBank Group Corp.’s SportsNavi Live came to the market last year. DAZN declined to say how much it paid for this weekend’s money fight, which will cost American fans about $100 to watch on pay-per-view TV.
“Mayweather vs. McGregor truly is a unique event and I doubt there will ever be one quite like it in the future,” Rushton says. “We are analyzing how fans react to having this fight on DAZN and will evaluate if it’s something we want to continue doing in the future.”
Despite some of the best internet connectivity in the world, Japanese viewers have been slow to move online. Netflix Inc., for example, has only been on the market here for two years. But when it comes to sports, fans have little choice but to go where their chosen fare is shown.
“It’s going to be harder now for broadcasters such as Sky Perfect to get new subscribers,” says Tomoichiro Kubota, an analyst at Matsui Securities Co. in Tokyo. “I don’t think the number of subscribers will fall rapidly, but if their profit falls then their stock price will follow. It’s going to be tough for Sky Perfect.”
Shares in the Tokyo-based broadcaster are down 8.4 percent this year, compared with a 4.9 percent gain in the Topix.
Sky Perfect’s Komaki says the company will seek to compete by creating original content and promoting lesser known sports, as it waits to win back some of the rights it lost. “Pay TV is our main business,” he says. “We’re in this for 100 years.”
Japan has not been a unanimous success for DAZN. The service had a disastrous opening weekend for the J-League, when buffering and broadcasting glitches led to fan complaints and a formal apology. “It’s something that we’ve learned from, and something we’ve made sure won’t happen again,” Rushton says.
Sky Perfect’s Komaki wonders if similar issues could occur this weekend. “Mayweather-McGregor is better for broadcast TV,” he says, asserting that traditional television is better suited for high-demand real-time events. “Everyone will want to watch it at the same time. It’s a nightmare for internet providers.”
Little information is available on the size of the market for these apps — both DAZN and SportsNavi Live declined to give subscriber numbers. DAZN for Docomo, a partnership with Japan’s largest mobile network, had 360,000 subscribers as of the end of March, according to NTT Docomo Inc.’s earnings statements, but the streamer declined to say what percentage that was of its total.
SportsNavi Live says its main objective isn’t to beat DAZN or Sky Perfect, but to grow Japan’s sporting audience.
“There’s not much point in just attracting the people who really want to watch sports,” says Akihiro Oshima, head of SoftBank’s service content division. “The size of the pie of people who’ll pay to watch sports is only about 3 million. The idea of Wowow Inc., Sky Perfect, DAZN, SoftBank all competing for a pie of that size is nonsense.”
Oshima says he’s focused on expanding user engagement by offering amateur and other content not traditionally broadcast in Japan. “We need to turn those 3 million into 30 million,” he says.
Japan may prove a test case for the likes of Walt Disney Co.’s ESPN and Time Warner Inc.’s Turner, as streaming platforms with deep-pocketed backers snap up sporting rights across the world.
Turner has bought the rights to the UEFA Champions League and plans to launch a U.S. streaming platform in 2018 for Europe’s top soccer tournament. Amazon.com Inc. has deals to stream Thursday night NFL games and ATP tennis, and Tencent Holdings Ltd. got the rights this week to stream NFL games in China.
In the past few months, DAZN has bought up Japan rights for the Champions League, and started showing some English Premier League games — both competitions that until recently were available on Sky Perfect.
DAZN’s Rushton says that in any market it’s seeking positive cash returns within four to six years.
“The great thing about sports, unlike movies and entertainment, is that it would be very difficult for someone in this market to launch something competitive, because we own the rights,” he says.