F1 is being acquired by Liberty Media at a valuation of $8bn. In Part 1 I summarised the main points of the deal and how the new owners might increase sponsorship revenues over the next few years. In Part 2 I looked at increasing revenue from race hosts/promotors. In Part 3, here, I analyse how Liberty Media might drive F1’s broadcast and media revenue — an area Liberty Media expertise, and therefore should be fairly successful!
How to Increase Broadcasting Revenue:
It has been said for some time that Formula 1’s broadcast deals are dwarfed by that of other sports. In the latest English Premier League broadcast deal, UK networks Sky and BT Sport are paying an average cost of £10.2m per match. The three year contract is worth £5.1 billion — that’s a great deal per year more for UK-only rights than Formula 1 earns globally. (Of course the Premier League also has many more games than F1 has races, so this should be taken into account).
Liberty Media will undoubtably analyse the current state of F1’s broadcast agreements and see where and how it can add value and drive up the price. The most obvious market for growth is the USA, where Liberty Media obviously has vast knowledge, and where the broadcast contract is up for renewal in just one year.
Arguably one of the biggest opportunities for increasing broadcasting revenue though comes from new technology. There’s a vast array of new technology hitting the market that could provide additional new revenue — and Virtual Reality and Mixed Reality are just a few! Formula 1 has a legacy of pioneering television broadcast technology.
Whilst you’d say Formula 1 has kept with the times of recent, it unfortunately hasn’t led the way. By offering new innovative broadcast options, Formula 1 would be able to up-sell existing to tier 1 broadcasters or provide it to avid fans via a paywall/subscription. The task is to create enough value-add or a truly unique experience. If, for example, I had been able to watch live in POV (point of view) as Daniel Ricciardo was making a move ‘from downtown’ like he did in Monza, I’m certain it would have been an experience worth paying for.
One area F1 is hugely underdeveloped in is digital media and digital broadcast. This is one area Bernie Ecclestone has himself admitted he has struggled to monitise, and another area that Liberty Media in theory has strong expertise in.
As heat around the acquisition rose, I recently blogged comparing F1 to the recent acquisition of UFC (Ultimate Fighting Championship) to WME-IMG. You can read that HERE. One of the areas I touched on was the UFC FightPass subscription based content platform. This is owned by UFC and is a central platform where UFC create and curate video content from the sport. The volume and the quality of video content for fans to consume should be considered the current best practice model. The platform has approx. half a million subscribers paying $9.99 per month, and is the sort of platform Formula 1 is crying out for.
Formula 1 broadcast has become a bit too predictable. On this online F1TV platform the sport would have the opportunity to be creative, and of course because it’s F1’s own platform, access is not a problem. Here Liberty Media could delve deeper into the personalities in the sport and tell interesting stories. If there’s some animosity between drivers, tell the story. Like it or loath it, we are in a world where drama and gossip are the light entertainment people crave.
Formula One Management also have an archive of 60+ years of compelling stories. Formula 1 should use curate this content and put it on the F1TV subscription platform. Better yet, have the personalities from the day commentate on it. Niki Lauda did recently commentated on the Rush movie (in Italian) and I’m told it was captivating viewing — even if you don’t understand Italian!
There’s no reason why you couldn’t also use today’s drivers in features like this. Why not, Lewis Hamilton reviewing old footage of his idol Senna? Formula 1 has been criticised by media and fans for being too ‘corporate’ and not being able to see the driver’s real personalities — this is one solution.
Why not also open this up to official F1 partners, like has recently been done with Heineken. Their new advert with Jackie Stewart is a great example — here you see Jackie in his heyday and when entwined with a great story it’s compelling footage.
This OTT F1TV product may attract varying interest depending on the content produced, marketing of the platform, accessibility, and the price point. But based on similar numbers (subscription and price) to that of UFC, within a 5 year period F1TV might contribute in the region of $60 million per year. When this is combined with annual increases of the current broadcast deals, new larger deals and the potential that new technology provides, Formula 1 Group might see additional annual revenue increase anywhere between $150 million and $600 million within 5 years.
You can check out the other parts to this blog on Medium, or read the whole peice over at my website now: http://www.jamescparrish.com/single-post/2016/09/09/How-Could-F1s-New-Owners-Accelerate-the-Sports-Revenue