Mic Drop #44: Why DAZN Can't "Hyper-serve" 17MM Global Badminton Fans On Its Own
A surprising quote about niche sports from former DAZN Chairman John Skipper lands in PARQOR Hypothesis territory
Earlier this week former DAZN Chairman and Meadowlark Media CEO John Skipper was interviewed by Bloomberg’s Lucas Shaw.
He was asked about what he learned about the streaming video business while running DAZN, and this was his response:
I grew to understand quite acutely what a difficult technological challenge it is to distribute content in real-time at scale. You’re trying to do dozens of games in a short period of time, a sports weekend. That is exponentially more complicated than delivering a large repository of content that is already in the computers. Netflix isn’t sending 900,000 people a stream all at 3 p.m. on an afternoon.
The second thing I learned is pertinent to his new company. At DAZN we tried secondary sports and tertiary sports, thinking ‘they can’t work on pay-tv, but there are 17 million hardcore badminton fans. We just gotta get 9% to sign up and you’ve got 300,000 people.’ None of that stuff works. What works is top of the pyramid rights that people have to see.
I think the second paragraph hits on a core problem in streaming: there are absolutely passionate niche audiences that exist at scale for niche sports like badminton. But the value proposition of a streaming service, alone, does not map to what those passionate audiences need from a niche sport like badminton.
I had a fun back-and-forth on this topic with Antenna CEO Rameez Tase that quickly found its way into PARQOR Hypothesis territory.
This response from Rameez reminded me of my “Aha!” moment while reading the IAC Letter to Shareholders about its investment in MGM Resorts last year: streaming alone is not a business.
To succeed, a streaming service needs to integrate online and offline businesses and offer a wider range of services, both physical and digital, for consumers of their IP. Otherwise, on its own, it will struggle to scale.
That moment led to the PARQOR Hypothesis, which argues:
the streaming services most likely to succeed must meet a specific set of conditions (BEADS Acronym below). That said, not all media businesses are equally equipped to succeed in streaming.
Badminton may not be equipped to succeed in streaming by virtue of the fact the sport is not evolving into a PARQOR Hypothesis-type ecosystem.
Formula One’s Model
On this point, it’s worth highlighting Formula One’s success with Netflix for its docuseries Drive to Survive, and its improving metrics on ESPN:
The first season had a huge impact on Formula 1’s audience in the United States. Raceday ticket sales for the first United States Grand Prix held after “Drive to Survive” debuted in 2019 rose 15 percent from 2018. The race’s promoter Bobby Epstein said it was because of the show, and is preparing for an additional 20,000 fans for October’s race in Austin, Texas….
Formula 1’s TV audience in the United States has jumped since “Drive to Survive” was released. ESPN said its average viewers per race had risen to about 928,000 so far in 2021 from about 547,000 in 2018.
In other words, there are three separate, individual, and clearly-defined channels for consuming F1 in America:
Race tracks (events),
ESPN (linear), and
Netflix (streaming behind-the-scenes content)
All available evidence suggests the online elements of the business added by Liberty Media post-acquisition in 2017 (Netflix, in particular, but also esports) have had an on-line-to-off-line “flywheel effect” on ticket sales to events, and tune-in to broadcasts, and are driving growth.
That mirrors the logic of IAC’s investment in MGM Resorts:
Our history in driving off-line to on-line conversion gives us confidence in the path and, like other industries we’ve seen transform, a conviction that it will be assisted by natural tailwinds.
In other words, neither Liberty Media nor IAC sought to build anything from the ground up. Their investments were iterative improvements.
The Challenge for Badminton
A Badminton media ecosystem does not exist (yet?) because it would need to organize its business model around clear channels of consumption allocated to specified value propositions.
This makes John Skipper’s point notable for the blind spot it reveals: DAZN actually could succeed and scale as a distribution channel for Badminton to reach 17MM fans globally.
But, DAZN would need to be an incremental solution for Badminton. What both IAC’s investment in MGM Resorts and Liberty Media’s investment in Formula One have in common is they made incremental solutions to pre-existing ecosystems:
IAC is leveraging its online commerce skillset to help off-line-to-on-line with sports betting, and
Liberty Media is leveraging its media skillset to attract audiences old and new on-line in order to drive more off-line sales.
It’s also worth noting the relative size of F1 to the Badminton World Federation (BWF): BWF had gross income of $25.8MM in 2019 and $3.9MM in 2020 during the pandemic, whereas F1 had $2.02B in 2019 and earning $1.145B in 2020.
So, to rephrase John Skipper’s point:
There are 17 million hardcore badminton fans. If we got 9% to sign up, we have 300,000 people. But we need BWF to build out an ecosystem for these hardcore fans, first, and especially to figure out what keeps these folks excited, engaged, and buying data/gear/events, etc. on a daily basis BWF need to be centralizing those fans and monetizing them in multiple ways. Otherwise, DAZN is wasting everyone’s time and money hoping for these fans to tune in.
In other words, it’s not the “top of the pyramid rights that people have to see” in streaming.
Rather, it’s that distribution of niche sports have little value in streaming and broadcast without PARQOR Hypothesis-type ecosystems to hyper-serve those passionate fans, and then drive them to streaming.
There is only so much a DAZN can do on its own. That is something Liberty Media has understood unusually well with Formula One and ESPN.
Before it does anything else, BWF needs to reimagine its relationship with its hyper-fans as relationships it owns and hyper-serves. Only then can a niche sport like Badminton take off in streaming.
A Badminton version of a mic drop for the continued value of the PARQOR Hypothesis.
