Recent reports indicate DAZN is engaged in late-stage discussions to purchase BT Sport, a deal that would provide the sports-centric subscription streaming service with valuable U.K. broadcast rights to the English Premier League. The acquisition would also give DAZN an established business; in essence, the horse they need for their cart. Former Turner Sports president David Levy explained streaming companies “need additional arms and legs—other businesses that enable them to [generate] the revenues needed for growth.” Standalone digital companies really can’t afford to pay for the tier one rights they need to build a business under the current economics of streaming, which explains why DAZN has also made a major push to build out its advertising business and why they hired former Entain CEO Shay Segev to bring sports betting revenue into the portfolio.

Our Take: BT Sport is Sky Sports’ chief rival in the U.K. Think of it as the FS1 to Sky Sports’ ESPN.

To be clear, it is not certain BT Group will sell BT Sport. But it won’t be surprising if they do. While pay TV remains a growth business in Europe, BT Sport is not growing as fast as BT’s telco and broadband services. So, by unloading the network, BT could eliminate the steep costs associated with rights packages and use the additional powder on the balance sheet to invest in more profitable, higher growth services.

It won’t be surprising if DAZN ends up with the network, either. As Yannick Ramcke (OTT lead, OneFootball) said, it has been a “very likely conclusion” ever since DAZN pivoted to focus on European markets and didn’t object to the bilateral rollover of the current three-year domestic EPL broadcasting deal with Sky, BT Sport and Amazon without a proper tender process having taken place. If the broadcaster was to get significant EPL rights before 2025, it was always going to have to do a deal for BT Sport. Sky was never going to do align with DAZN after the streaming company outbid them for Serie A rights in Italy and Champions League rights in Germany.

DAZN declined to comment. A BT spokesperson said: “We’re in discussions to explore ways to generate investment, strengthen our sports business and help take it to the next stage in its growth. The discussions may or may not lead to an outcome and we will only progress with any option if we feel it’s the right one for the business and our shareholders. At the moment, there are three options: 1. outright sale; 2. a partial or stake sale; 3. no sale and continue with the status quo.”

If DAZN ends up buying BT Sport, it would indicate the company concluded it is an uphill battle for a streaming-only company to pay for tier one content rights priced for an entirely different universe (the company has stated many times that mid- to long-tail rights alone can’t support the business). Remember, it wasn’t long ago media reports were suggesting DAZN would be a player for NFL rights.

BT Sport would provide DAZN with an established business it could lean on while building out their digital platform in the U.K. The strategy has worked well for DAZN in other European markets. “Look what they did in Italy,” said Patrick Crakes (principal, Crakes Media Consulting). “They partnered with Sky, TIM and Vodafone, established platforms that produce the economics capable of paying for rights fees and helping to pay for the digital infrastructure. That enabled them to get Serie A rights.” TIM alone contributes about 40% of the rights fee. The company also partnered with terrestrial television in Germany and has since landed Bundesliga rights (DAZN 1 and 2 are on both Sky and Vodafone).

From a media rights perspective, the addition of BT Sport would strengthen DAZN’s position in future negotiations. “They can’t [afford to] buy tier one rights without some established infrastructure,” Crakes said. “But by having subscribers on BT Sport, they should be able to re-up with the Premier League.” It’s worth remembering that pro sports properties also still value scale. So, the additional reach of the linear platform would make DAZN a more viable destination for league partners.

The acquisition of BT Sport would almost certainly come with a large transfer of subscribers, too. Like DAZN’s deal with TIM in Italy, a deal with BT Sport would likely allow the network’s linear subscribers access to the streaming service as part of their subscription. DAZN’s pay-TV subscribers would have an opportunity to watch the EPL games on either platform.

Strategically, a deal for BT Sport makes sense. It would allow DAZN to “hit the ground running in a market they needed to enter [with potentially a] built-in customer base and established cashflows, much-needed cable/satellite distribution when addressing the mainstream consumer, production facilities, sponsorships and brand relationships,” Ramcke said. It would also make the company more attractive to a potential acquirer executing a roll-up strategy (though, a potential acquirer could just buy BT Sport themselves if that were the motivation). The big question: What will the acquisition cost? Reports have indicated the deal would be hundreds of millions of pounds.

It’s not clear who else might be interested in the pay-TV network, and there’s not an obvious fit. EPL rights are costly, and the deals are redone every three years, making it a tough property for a network to build around.