How F1 found a secret fuel to accelerate growth in media rights

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By Netflix Drive to survive he is generally credited with catalysing Formula One’s boom in popularity. But it’s the racing series’ in-house streaming experiment that is quietly building traction and increasing revenues for the sport.

Five years on from the launch of F1 TV, the sport’s direct-to-consumer broadcast product is boosting media rights revenues by attracting millions of subscribers eager to keep up with events throughout the season.

F1 TV has increased its global reach by expanding into 186 markets. But the Pro version, which streams live races, is only available in 87.

It represents a shift from traditional drivetrain designs, forming a key component of the sport’s growth strategy under US owners Free Mediawho took control of F1 in an $8bn deal in 2017.

Major markets such as Brazil, Mexico and the United States are among the countries where fans can watch live racing with F1 TV Pro. It is also available in the Netherlands, home of F1 champion Max Verstappen, whose fans dressed in orange they follow his every turn. “He gave us, for the first time, a direct relationship with the fan,” says Ian Holmes, director of media rights at F1. “I was concerned about how it would go hand in hand with third party rights deals.”

Originally, the interest came mainly from F1’s ‘hardcore fans’ who wanted to see more content beyond the traditional broadcast. But F1 thinking has evolved as new audiences have embraced the sport. “It’s not just the avid fan,” Holmes says. “The younger fan is the most data-savvy and interactive demographic out there.”

Holmes says F1 needs to be flexible in its approach. In some markets, such as Brazil and Mexico, F1 partners with telecom companies and broadcasters, making them viable distributors of F1 TV, as well as Apple and Android, where F1 sells the app subscription. In some cases, F1 and traditional broadcasters or networks also share revenues from the distribution of F1 TV Pro.

“We’re also looking into how to better distribute F1 TV rather than just going through the Apple Store or Android equivalent,” Holmes says. “You start looking at direct bill relationships. Sometimes it’s harder: It’s probably the most frustrating thing in business if someone wants to give you money and you can’t get it from them.

“In some cases, it didn’t make commercial sense to force him into a market if he intended to cannibalize or overly cannibalize a third-party licensing deal.”

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Reports from Formula One Digital Media, the entity that hosts F1 TV, reveal that the service made more than $47 million in revenue in 2021. That’s an almost 150% increase on the figure of $19 million. dollars in 2020, mainly due to subscriptions to the Pro product.

In 2021, F1’s total media rights revenue amounted to $860 million. Last year, it increased to $936 million, just over 40% of the sport’s more than $2.6 billion in total revenue. It stood at about $670 million in 2020 when the sports season was postponed due to the pandemic.

Formula One Digital Media is yet to release its reports for 2022. However, Liberty Media said in its annual report for 2022 that F1 TV was one of the reasons for the increase in media rights revenues that year. F1 TV Pro’s strongest markets include the US, Mexico, the Netherlands, Scandinavia and the Nordics, says Holmes, alongside deals with traditional broadcasters.

Analysts see further growth. In March, a research note from JPMorgan’s David Karnovsky said that F1 TV “was a major driver [media rights] revenue growth in 2022 versus initially appreciated, and remains one point of upside potential versus our estimates for 2023.”

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However, traditional broadcasting contracts are also driving up media rights revenues. Karnovsky predicted that new deals with ESPN in the US and Foxtel in Australia would help media rights revenue grow 13% this year.

Mike Kerr, Asia Pacific chief executive at beIN Sports, says he is not concerned about the rise of F1 TV Pro because traditional broadcasters can aggregate a variety of sports and bundle them with entertainment and news channels.

F1 TV Pro is not available in beIN Sport’s markets, which include Hong Kong, Singapore, Malaysia, Philippines and Thailand, as beIN has an exclusive agreement to show the races live on its “over the top” streaming service, so fans can expect to “watch all of our content anytime, anywhere on any screen.”

“I don’t think there’s a sport big enough to directly reach the size of the audience that we can,” and we can only target audiences because we have different sports on our channels,” says Kerr. “The top three races this year are been the most watched content on our networks with the exception of the Champions League final Liverpool-Real Madrid in 2021.”

The UK, Italy and Germany are also among the countries where F1 TV Pro is not available, as Sky pays for the exclusive rights to broadcast live sessions and racing. The broadcaster has a dedicated F1 channel and is a key partner for F1.

But, ahead of this season, the F1 TV product was launched in India, giving F1 a presence in a market where it hasn’t signed a traditional broadcast deal because, as Holmes explains, “the offers that have been made, don’t we thought it represented a fair assessment . . . people were spending all their money on cricket.”

Next in line could be the Middle East, where the sport is negotiating with broadcasters, Holmes says.

F1 has also been constantly looking to improve its multimedia technology. It’s no longer limited to smartphones – users can now “cast” the stream to their television screens. The next step could be to allow fans to interact on-screen with friends who are simultaneously watching online, Holmes says. F1 is also “working hard” to make the Pro service available on circuits without a 20-30 second delay. “It’s an ongoing evolution,” he says.