Formula 1 to break sports broadcasting mold going OTT direct

Ever since Liberty Media acquired Formula 1 (F1) from Bernie Ecclestone for $4.6 billion in January 2016 it has been clear that the sport was in for a major move online. This has now come to pass with announcement that races will be broadcast via a direct streaming service from 2018 in those countries where F1 has not already sold rights to traditional pay TV operators running up to 2023. This is not just about going online but follows a review by Liberty Media – a sister company of pay TV group Liberty Global – over the wider relationship between TV, sponsorship and audience participation.

Following this review F1 has as good as admitted that it is not happy with those rights deals negotiated by Ecclestone but concedes it has little choice but to honor them. This also has some relevance for some other sports because F1’s main gripe with those deals is that they sacrificed long term audience retention and gain for shorter term pay TV revenues. In the UK F1 viewers fell by 3.8 million after Sky assumed exclusive coverage of the sport around 2012. Cricket is an example of a sport that lost viewers even more heavily in the UK because of rights being acquired by Sky, with audiences peaking at 8.4 million for the Ashes matches with Australia in 2005, slumping to 467,000 for the same event in 2013. Cricket is really a second-tier sport and so more prone to loss of audience when going to pay TV, as compared with say football where large numbers of people are prepared to pay to view.

F1 is not as popular as soccer or the major US sports of basketball, football and baseball, but has global reach and a very large potential aggregate audience. This makes it ripe for global OTT, which is partly why it has moved towards its own-label OTT service before other major sports. At the same time F1 has identified a return to some Free To Air (FTA) coverage as an essential step to gain and retain audiences, especially for a sport that relies more even than some others on grabbing people at a formative age. At the same time F1 cannot afford to give up pay TV coverage entirely given that broadcasting has accounted for an ever-higher proportion of revenues, reaching 35% of its $1.8 billion revenue for 2016.

For such reasons F1’s commercial MD Sean Bratches has hinted that a 30-70 split between FTA and pay TV might be optimal, which could be implemented just by showing some of its races free and keeping others behind a pay wall. This split could also be varied by country, perhaps showing races free when they are at home. OTT could also play a part by showing some races free to a global audience, while perhaps making others available in just some markets through geo-blocking.

This idea that free access has an important role to play in maintaining audience reach which in turn can translate into sponsorship and other income, as well as advertising, is also relevant for those other sports that are eyeing OTT via a distributor rather than going direct. For this reason, some see Amazon as a potential partner because of its model to bundle video in as part of a subscription to its Prime service. That is also why Amazon’s entry into live sports is so feared by legacy operators. This is already happening with Prime now lead sponsor of the NFL Redzone channel providing free access to 10 US football games.

OTT offers other advantages of course beyond extended reach, one being diversification of the content, which holds potential for a technical sport such as F1. OTT can give viewers access to details about cars, crews and sponsors, as well as all those alternative camera angles and cockpit perspectives.

This is also true for most sports governed by statistics, interest around the players, with in many cases scope for zooming in further on audiences or events around the stadium. The main point is that OTT does offer increased scope for growing audiences as well as for generating additional revenue. It erodes further the appeal of linear TV, whose decline will be accelerated by moves online by major global live sports.