November 19, 2018

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The $365 million man: Canelo lands bumper deal in changing sports broadcasting market

The richest athlete contract in sports history”. That is how ESPN described the deal between boxer Saul ‘Canelo’ Alvarez and streaming service DAZN, which is worth a reported $365 million for 11 fights.

The agreement with Canelo sits alongside a broader “exclusive” partnership between DAZN and Canelo’s promoter, Golden Boy Promotions, which is due to run until 2023. DAZN has certainly made a statement to its competitors with the deal, as the UK-based company adds to its stable of combat-sport content.

The scale of Canelo’s remuneration has already prompted rival boxer Gennady Golovkin to consider his next move very carefully, given his current status as a broadcast ‘free-agent’.

Perhaps more significantly the deal is the latest indication of a shifting landscape in sports broadcasting, away from traditional linear TV broadcasters and towards standalone over the top (“OTT”) service providers such as DAZN. Indeed, Eleven Sports have recently made waves in the UK, acquiring the rights to broadcast various European football leagues, including La Liga and Serie A, via its streaming platform.

Licensors of content typically break-up broadcast rights into (i) individual territories or groups of territories, and (ii) the various methods of content distribution, such as linear TV, OTT and video-on-demand (“VOD”). This practice has been very profitable for content licensors, who have tended to see greater returns by splitting-up broadcast rights in this way. However, it has become increasingly common for standalone VOD and OTT services to seek exclusive licences to broadcast content across multiple territories, regardless of the method of distribution, and many platforms are prepared to pay big money to achieve this exclusivity. DAZN’s deal with Canelo and Golden Boy Promotions is just the latest example of this trend. This begs the question, how can these nascent platforms afford to spend such vast sums to obtain exclusive licences?

As with other OTT and VOD platforms, DAZN has pitched its product at a relatively low price-point, with a monthly subscription costing $9.99 in the US. DAZN will be relying on consumers subscribing in their droves in order to make the platform profitable, although some reports indicate that DAZN have the financial backing to absorb losses over a number of years.

The fact that DAZN is providing premium boxing content on a monthly subscription basis is momentous in itself, given that pay-per-view has long been the distribution model of choice when it comes to boxing’s biggest fights. Whether other broadcasters follow suit remains to be seen, but it is certainly an aggressive first step into one of the biggest markets in sports broadcasting.

© Copyright 2018 Squire Patton Boggs (US) LLP

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