4
BUSINESS
doubts it would remain so.
Most locals, he argued, would
be better served by a
combination of a forthcoming
store on the site of the old
Topshop flagship on Oxford
Street and its online service.
Last year, Ikea UK returned
to the black for the first time
since 2017, but operating
profits of £61.2 million were
less than half the £136 million
achieved five years ago.
Weaker sterling and the shift
to e-commerce, which made
up 45 per cent of Ikea UK’s
£1.96 billion sales last year,
has added to costs. Ikea’s
performance has, though,
easily beaten most rivals.
Jelkeby stresses that Ikea’s
big out of town stores will be
a part of its future — and the
evidence in Hammersmith
shows that some shoppers
are not ready to let go of the
old Ikea way. To appease
those who were lost without a
one way system Ikea stuck
some arrows on the floor
instead.homes. Today, the Swedish
giant trades from 21 large UK
stores. Moving beyond that
has proved painful.
Early efforts to open
smaller stores were hampered
by stringent rules from head
office, such as that only a
fraction of its range could be
sold at its smaller “order and
collection” points. And when
it opened these stores,
primarily for click and collect,
Ikea’s systems, it is said,
weren’t equipped to
efficiently handle such orders.
Over the past two years,
Ikea has closed a collection
point and two planning
studios in London. The
retailer has instead joined
with Access Self Storage to
allow customers to collect
online orders from lockers in
five facilities for a £10 fee.
Ikea announced the
closure of its store in
Tottenham, north London in
August. Jelkeby said that
while the store was
profitable, the company hadin Hammersmith will be a
breakthrough. Unshackled
from the customary one-way
system, shoppers can peruse
about half of Ikea’s 10,000
products. They can buy
2,400 of the smaller ones to
take away and order others to
be delivered to their homes.
It is a seismic change for Ikea.
Today, Ikea trades from
468 stores in 63 countries. Its
wildly successful model was
conceived by frugal founder
Ingvar Kamprad, who saved
costs by having customers
fetch their desired furniture
from the warehouse and
assemble it themselves.
Rising levels of car ownership
in the western world meant
Ikea could open cheaper sites
on the edge of cities.
Ikea’s first UK store opened
in Warrington in 1987. As it
expanded nationally, Ikea
launched a memorable
advertising campaign urging
Brits to “chuck out their
chintz” and embrace
Scandinavian pine in theirDAZN has the
rights to bouts
featuring Katie
Taylor and
Anthony Joshua,
but after waving
his wad, Len
Blavatnik is
staunching the
bleeding of cash£1.96bn
IKEA IN NUMBERS
number of Ikea stores468
decades, been able to attract
consumers from miles
around. But young shoppers,
used to getting anything from
a beer to a sofa delivered to
their doors, are not so
amenable. Will future
generations be willing to
spend all Saturday navigating
Ikea’s labyrinthine one-way
system and then assemble
their own furniture?
“If we see online
[shopping] is growing and
think we can just sit and
watch, then we are not going
to be relevant. We can’t just
be what we always were,” said
Peter Jelkeby, head of Ikea’s
business in UK and Ireland.
Becoming more accessible
to consumers is proving
tough for Ikea. The retailer
has trialled order-collection
points and planning studios
only to then shut them. And
the cost of delivering
furniture to homes does not
fit with Ikea’s penny-pinching
ethos.
Jelkeby is hopeful the storeAt any given time,
somewhere in the world an
exasperated shopper is
working up a sweat trying to
cram unwieldy boxes of Ikea’s
flat-pack furniture into the
boot of their car. But with car
ownership declining in big
cities, Ikea is confronting the
reality that fewer bargain
hunters are willing to schlep
out to its iconic blue and
yellow megastores on the
edge of town.
This explains why a new
Ikea store has opened on the
high street in Hammersmith,
west London. The two-storey
shop, about the size of a small
department store, has 18
showrooms over two floors
and a café that fills up with
commuters in the morning
rush. About 80 per cent of
shoppers arrive by public
transport.
The ubiquitous Swedish
furniture giant’s stylish coffee
tables and Billy bookcases
offer such great value for
money that Ikea has, forIkea’s UK sales last yearDAZN’s first blow. Before Joshua’s defeat
to Ruiz Jr, Mexican superstar boxer Saul
“Canelo” Alvarez struck an astonishing
£300 million contract with DAZN in 2018
for 11 fights. However, after just three
fights, the deal was cut short last year
amid a dispute over the terms.
After winning the Serie A rights, DAZN
teamed up last year with Telecom Italia to
distribute the games to the Italian com-
pany’s customers. But the deal has been a
disaster. It boosted revenues less than
expected for Telecom Italia and the pair
are now renegotiating the terms of the
€1 billion (£850 million) agreement.
In the US, the strategy has changed,
too. The initial plan had been to launch
with boxing and then expand into other
sports — but now DAZN has opted to focus
purely on boxing. It has also decided to
include “pay per view” fights in the same
way the traditional broadcasters do — a
climbdown after it had previously
claimed the model did not work.
Canelo’s fight with Dmitry Bivol last
month was DAZN’s first foray into PPV
and cost viewers $59.99 (£49). Those who
paid got a month’s free access to DAZN.
“The only way to make it economical
for fighter and platform is to go pay per
view,” said a source close to DAZN of the
high-profile fights.
There is another, bigger shift under
way — beyond just streaming. DAZN is
quietly creating a broader service that
will include news stories, ways to bet on
sport, some content that is free to view,
and e-commerce and ticketing. Shay
Segev arrived in 2021 from FTSE 100 gam-
bling giant Entain in a sign of where the
company was headed. It is also introduc-
ing advertising as part of this.A
mid the cost-of-living squeeze, Net-
flix has been shedding subscribers
for the first time in its history. To
counter this trend, DAZN is looking
at introducing tiered pricing in its
key markets of Italy, Spain and Germany
to keep hold of cash-strapped customers
— meaning there will be options with less
live sport for a cheaper price.
There has also been a shake-up of the
company structure, giving more auton-
omy to each country. As part of this,
DAZN is laying off about 50 jobs in Lon-
don; it employs about 1,000 in the UK
and 2,500 globally. Ben King, the chief
subscription officer, is also leaving.
Covid hit the company hard. There was
no live sport and customers left because
they are not locked into long contracts, as
with Sky. DAZN does not reveal subscrip-
tion numbers, but research group Kagan
estimated it had about 7.6 million paid
subscribers at the end of 2020.
DAZN raced to secure its financial
future and had Goldman Sachs bankers
hunting for fresh funding to keep it afloat.
Sources said a few parties expressed an
interest in investing or buying the com-
pany, but the valuations did not match its
expectations so did not progress.
Blavatnik ultimately had to dip into his
pocket again, and now some say the end-
game is to find a buyer such as Disney or
float the business — but both options
seem distant in the current climate.
Asked whether it would be the last
time he would inject funds, Blavatnik
said: “Access will support DAZN’s contin-
ued growth as warranted.”There
does not
seem an
obvious
path to
profits
$1.1bn
lent after that
by Blavatnik$4.3bn
refinance of
DAZN this year$1bn
staked on a deal
with Matchroom$1.3bn
loss made by
DAZN in 2020How Ikea is
adapting for
a car-free
generation
The Swedish furniture giant is making
big changes to adapt to ever-rising
numbers of young customers who do
not drive, Sam Chambers reportsA
nthony Joshua marched out
confidently at Wembley On
September 22, 2018,
between giant flaming letters
reading A and J. After that big
entrance, he didn’t disap-
point the 90,000 fans in the
stadium and the millions
watching on TV, displaying
his power to beat Russian
fighter Alexander Povetkin.
It was also the ideal platform for DAZN,
Sir Leonard Blavatnik’s ambitious sports
streaming service, to showcase its own
talents to an American audience for the
first time. DAZN, pronounced “Da-zone”,
had just struck a $1 billion (£800 million)
deal with Joshua’s promoter, Eddie
Hearn’s Matchroom, to broadcast his
fighters’ bouts to US viewers. But nine
months later, Joshua and DAZN’s Ameri-
can dream lay in tatters. Joshua lost to
underdog Andy Ruiz Jr in New York, set-
ting back his career.
“Everything was staked on him break-
ing America — and he lost. I don’t think
DAZN ever came back from that,” said an
industry source. More recently in the UK,
Blavatnik’s company lost out to US cable
giant Warner Bros Discovery in the battle
to buy BT Sport.
Blavatnik, 64, has been funding the
ambitious plans of London-based DAZN,
which has racked up billions of pounds in
losses as it looks to challenge the domi-
nant players in sports broadcasting such
as Sky. DAZN, which sold a 10 per cent
stake to Japanese advertising giant
Dentsu in 2018 at a £3 billion valuation,
made a $1.3 billion (£1 billion) pre-tax loss
in 2020, prompting Blavatnik to lend a
further $1.1 billion to the business.
In February this year, the tycoon’s
Access Industries agreed a $4.3 billion
refinancing of DAZN that left the com-
pany free of debt. But a float looks off the
cards for now given that investor appetite
for loss-making tech and media compa-
nies chasing fast growth has waned.
So where does Blavatnik’s most expen-
sive gamble go from here?
It was back in 2007 when the Ukraine-
born magnate, who is worth £20 billion
according to The Sunday Times Rich List,
first crossed paths with DAZN. Back then
it was called Premium TV, which ran
internet streaming sites and many Pre-
mier League websites such as for Chelsea
FC. Blavatnik, known as Len, bought it
for about £25 million, introduced to the
deal by his long-serving media invest-
ment chief Jörg Mohaupt.
Less than a year later, he merged Pre-
mium TV with content distributor Inform
Group to form Perform Group. He listed
Perform in 2011. But just a few years later,
following a profit warning that ham-
mered the share price, he took the com-
pany private for £700 million.N
etflix, at the time, was taking the
world by storm and had launched
in the UK two years earlier. Blavat-
nik wanted to replicate its success,
this time in sport. No longer would
households need satellite dishes and set-
top boxes. Instead, Perform would pro-
vide a sports streaming service through
wi-fi, available to view on smart TVs,
smartphones and tablets.
It created DAZN, aimed at shaking up
sports broadcasting round the world, and
sold off parts of the old Perform business.
It was dubbed the “Netflix of sports”.
In 2016, DAZN launched in Austria,
Germany, Japan and Switzerland. In
2018, it opened up to the US and Italy. In
December 2020, it launched in more
than 200 countries including the UK,
where it initially cost £1.99 a month
before lifting the price to £7.99.
In 2018, it hired John Skipper, former
president of ESPN, as executive chair-
man; he was replaced last year by former
Disney executive Kevin Mayer. The plan
was to conquer a range of sports, with
Blavatnik providing the financial fire-
power to acquire the expensive TV rights.
The $1 billion deal with Matchroom
gave it a foothold in boxing and the rights
to screen fights featuring boxers includ-
ing Joshua and Katie Taylor.
DAZN also swooped on football rights
when opportunity knocked. In Italy, the
competition regulator blocked Sky from
the rights to Serie A, which left DAZN free
to pounce. In Germany, it won the rights
to screen most of the Champions League
after Sky pulled out, as well as 106 games
a season in the domestic Bundesliga. In
Spain, it won the rights to La Liga for theJAMIE
NIMMOnext five seasons. “In all three markets,
DAZN moved in when the biggest player
stepped back,” said François Godard at
Enders Analysis. “They moved in without
creating inflation in prices — they didn’t
throw money at it. But it doesn’t mean
there’s an obvious path to profitability.”
DAZN spotted a similar opportunity in
the UK when BT was looking to offload BT
Sport. But after months of negotiations,
the newly merged Warner Bros Discov-
ery, which also owns Eurosport, emerged
victorious with a joint venture with BT
that gives the US company the option to
take full control. The competition regula-
tor is investigating the tie-up.
A source close to DAZN admitted that
missing out on BT Sport — and access to
Champions League rights in the UK and
some Premier League matches — was a
disappointment, but insisted that it was
not willing to pay over the odds. It will
now stick with its basic service offering
some boxing fights. Blavatnik said of los-
ing out to Discovery: “We are disciplined
investors. It was the correct decision not
to chase an unreasonable price.”T
he source of Blavatnik’s vast wealth
is not in media. Born Leonid Blavat-
nik in Odesa when Ukraine was part
of the Soviet Union, he moved to
Russia as a child. At university in
Moscow, he met his business partner Vik-
tor Vekselberg, who is now under US and
UK sanctions. Together, they set up
investment group Renova.
During the fall of the Soviet Union,
they began acquiring stakes in alumin-
ium smelters that were being sold off at
the time and formed Rusal, the country’s
largest aluminium company.
The pair went on to team up with
Mikhail Fridman and his investment
group Alfa in 1997 to create Alfa-Access-
Renova, which bought 40 per cent of ail-
ing oil company TNK for $800 million and
then took full ownership. It sold a 50 per
cent stake to BP in 2003 for £4.2 billion.
A year after that, Blavatnik distanced
himself from his roots. He bought a man-
sion in Kensington, west London, for
£41 million and took a stake in Warner
Music before going on to buy the whole
company for $3.3 billion in 2011. Warner
floated in New York in 2020, generating
$1.9 billion for Blavatnik as he offloaded
part of his holding. Warner is now valued
at $15 billion.
He donated large sums to western cul-
tural institutions such as the Tate Mod-
ern, the Royal Opera House and the
National Portrait Gallery and was
knighted in 2017 for his philanthropy.
Blavatnik strongly denies any links to
Vladimir Putin and says he has not met
him for more than 20 years. He became a
US citizen in 1984 when he studied there
for a master’s and an MBA, and became a
UK citizen in 2010.
However, sources suggest BT will be
relieved to have avoided a deal with
Blavatnik, given developments in
Ukraine and the risk of sanctions.
Asked about this, Blavatnik
replied: “I find this comment and
question extremely offensive. There is
no more basis to imply that I should be
sanctioned than you should be sanc-
tioned. Any implication otherwise is a
simple case of racial profiling.”
Missing out on BT Sport was far fromHow
to
blow
£1bn
in a
year
Len Blavatnik’s DAZN
has ploughed huge sums
into sports streaming,
but it keeps getting
knocked to the canvas
ILLUSTRATION: TONY BELL