Why Amazon’s big bucks could be a huge boost for F1

[ad_1]

Such a deal looks increasingly likely, and while Amazon isn’t the only player with big bucks to spend, its existing commercial deal with F1 via its Web Services division gives it a foot in the door.

The sport has always made its money from three main pillars, namely broadcasting rights, race promotion fees, and sponsorship. Last year the contribution made by the races fell dramatically, as many events were cancelled.

Those that survived, and the replacements that were hurriedly added to the calendar, paid a lot less. Sponsorship was also hit – companies expecting to be title sponsors of certain Grands Prix couldn’t be asked to pay the contracted amount if those races didn’t happen.

In contrast a respectable calendar of 17 races ensured that TV income almost remained as planned, although fewer races triggered discounts for some broadcasters. Despite that TV’s share of F1 revenues shot up from 38% in 2019 to 55% last year.

Although F1 continues to seek lucrative new race deals, such as Saudi Arabia, it’s clear that the world has changed in terms of dealing with promoters. They can no longer be relied on to pay more and more each year.

In contrast Liberty believes that there’s much more potential on the TV side, and inevitably that will involve deals with digital streaming giants like Amazon. The huge success of Drive to Survive on Netflix, although the service has no plans to get involved in live sport, has provided a taster for what such global exposure can do.

Former F1 boss Chase Carey always had his eyes on the longer term, and key to that was improving the TV show, hence making racing more attractive for fans, both existing and new.

“Chase and team did a ton of great stuff, they really set the stage for improved on track racing,” Liberty CEO Greg Maffei said in a recent webinar.

“With what’s coming in the Concorde Agreement, they set the stage for more evenness among the teams, because it really created franchise value.

Greg Maffei, CEO, Liberty Media

Greg Maffei, CEO, Liberty Media

Photo by: Sam Bloxham / Motorsport Images

“And you’ve seen that in some of the statements, for example, that Lawrence Stroll made on Aston Martin. He wouldn’t have invested without the changes that we put in. You’ve seen that with a more level playing field in terms of payments for winning teams and historical teams versus less competitive teams.

“You’ve also seen that probably most importantly, with the cost cap, which was originally going to be $175, and is now $145m.

“And all of those create a situation which I think the on track performance and the quality of racing, in terms of overtaking and evenness, is going to be more exciting than ever. So all to the good. We now have Stefano [Domenicali] for the next generation.”

F1 employs a hugely complex pattern of TV distribution, with different arrangements in each territory, and thus different splits between pay and free to air.

It’s a complicated conundrum of taking big money from a small audience versus compromising sponsor interest because the total numbers are down. There’s also a fear that fewer fans watching on TV could mean fewer people willing to buy a ticket for a race.

“I think you’re always going to be weighing,” said Maffei. “And our sport, not uniquely, but perhaps more than most, is balanced between promoter interest, fan interest on site, TV revenues, and advertising and sponsorship.

“If we went all pay, we might get a large amount of broadcast revenue, but it would have a negative effect on our advertising and sponsorship, and perhaps even our fan interest at promoter level.

“So you want to maintain that balance, and you want to look market by market and make trade-offs. In some cases, it’s make sense to move to more pay, as we did in Germany. In other cases, it’s better to stick with free to air, as you weigh all those factors.”

F1 TV, the sport’s “over the top” direct to viewers streaming service, was supposed to be a cash cow. That hasn’t proved to be the case, and Liberty appears to have accepted that it’s hard to go it alone.

Others have found the same, notably World Wrestling Entertainment, which had its own OTT subscription service, showing hundreds of fights per year. However after a $1.5bn deal was concluded in January it has now become a dedicated channel on Peacock, NBC’s streaming service, rather than an independent entity.

“I think we’ve learned that it can be an unbelievably powerful fan engagement tool,” Maffei said of F1 TV.

“But it’s hard at the amount of content we have, 23 races and even shoulder [extra] content, to build enough content to probably build a compelling service for a broad, broad group of people.

“To be a fan engagement tool, great, to be something that is amazing for a really dedicated hardcore fan group, perhaps.

“But to be something which substitutes or overruns our traditional partners, or the large pay partners, or the large digital partners, I think that’s going to be harder to see.

Damon Hill, Sky TV, and Simon Lazenby, Sky TV

Damon Hill, Sky TV, and Simon Lazenby, Sky TV

Photo by: Mark Sutton / Motorsport Images

“We don’t have enough content, but I think a lot of sports are going to have that problem, building a broad enough content interest on an ongoing basis to build a subscription product that really replaces what they have.

“Look what happened to WWE, pulling back and going to Peacock, that’s an example. And they have a heck of a lot more content than we do.”

There’s a lot happening in the sports TV rights world at the moment, with football revenues taking a hit in Europe. However, Maffei believes that F1 has the potential to continue to put its prices up.

“I think F1 is in a different position,” he said. “One, worldwide, different markets, different situations.

“Two, I think, in general, we’re under-monetised compared to many of the sports that have commensurate levels of interest.

“Three, I think the things I mentioned earlier about creating greater fan interest are going to be important.

“And we’ve seen that, and the growth in social media is an example of why we have fans who are getting more interested and more rabid for our sport. And lastly, I think the most important thing that drives sports rights is competition.

“And to the degree that we begin to see new distributors, large digital distributors and the like, enter the markets, that’s a positive. We in some cases are seeing trade-offs between free to air and pay, and then a new version of pay, those digital players.

“I think having new players, new entrances is probably the most positive effect we can have. And I do see that likely to happen for some of the sporting events, and some of the countries we have.”

Amazon is already flexing its sporting muscles, and not just in Britain’s Premier League. Having had a small involvement in the NFL – showing one game a year – it recently acquired exclusive rights for all Thursday games, part of a huge $110bn 11-year overall package that also involved deals with CBS, NBC, Fox and ABC/ESPN.

“Amazon’s moved from a bit player in NFL, to being a serious player,” said Maffei. “I suspect they’re only going to get more serious over time. And I expect they won’t be the only ones.”

The man at the heart of all F1’s broadcasting deals is its director of media rights, Ian Holmes, a veteran of the Bernie Ecclestone era. He makes it clear that streaming deals are on the way.

“As you would expect, we’re in pretty regular contact contact with the likes of Amazon, Facebook, YouTube,” says Holmes.

“Netflix we talk to anyway, different situation, and they maintain their positioning that they will not be acquiring live sports rights. Would be nice if they did, but let’s see.

“On the Amazon front, we’re actually engaged in them on a couple of discussions at the moment.

“You’ve got Amazon Prime, which is where you see the content they buy, quite a lot of tennis depending on where you are. It sits within their content offering. If you’re a Prime subscriber, you get that content for free.

Carlos Sainz Jr., McLaren and Lando Norris, McLaren speak to Paul di Resta, Sky, TV

Carlos Sainz Jr., McLaren and Lando Norris, McLaren speak to Paul di Resta, Sky, TV

Photo by: Charles Coates / Motorsport Images

“They also have a thing called Amazon Channels where they carry additional OTT offerings, in some cases linear channels, in some cases OTT offerings. And we are in discussions with them on both fronts.”

As usual, deals are likely to be tailored for each country: “One or two places, we’re talking to them about specifically acquiring our rights, in the same way you would sell to any other media company.

“But we’re also talking to them about a channels arrangement, where we have got the opportunity of putting F1 TV into the market.

“Now, could you do a deal where on the one hand they acquire your rights, we carve out F1 TV, and F1 TV is carried on channels? Maybe. They’re no different from any other pay TV offering, in the sense that if they’re acquiring the rights, they may want exclusivity.

“But in some markets, they’re not acquiring the rights, and some of the markets we’re talking to them about channels, and we already have a deal in place with another party, so we couldn’t do the rights side.

“So the answer is we’re talking to them, we talk to them generally, and we’re talking to them specifically on a couple of examples.”

Others are also in the frame: “Apple have made no secret of the fact they already launched Apple TV. They’ve got a similar sort of situation, maybe they acquire rights for Apple TV.

“But they also offer an equivalent of that channels model. If you have Apple TV on a device, you will see that they carry that stuff on there. Ted Lasso, if you like that.

“They also carry other channels and OTT offerings. So there’s a different type of discussion to have with them, depending on kind of where you’re talking about.”

As Holmes noted, F1 always has the problem of juggling customers with different interests.

F1 TV is not available in the UK, potentially a very lucrative market, because Sky’s existing deal would not allow it. New or extended contracts elsewhere have had F1 TV factored in, but keeping traditional broadcasters happy is always an issue.

“There’s one extreme where I sell the rights to a broadcaster, media company, whatever we want to call them, what we consider to be the core, traditional rights,” says Holmes.

“They’re exclusive to you, they’re all yours, happy days, pay us lots of money. But we’re just going to put our product into the market as well. It’s a very specialist product, don’t worry about it, it’s OK.
“They reluctantly accept, perhaps, sometimes they’re quite relaxed about it – rarely! And that’s what we have in a lot of markets. It’s no problem.

“The other extreme to that is the broadcaster goes, ‘No chance! You want me to pay you, we’re not going to allow you to put it in.’ Or, ‘We’re going to allow you to put it in, but it’s only available to my existing subscribers.’

“It’s like an up-sell, which is kind of what we’ve done in Germany starting this year. F1 TV will continue to be available in Germany, but through Sky. Existing subscribers have been grandfathered, so they’ll carry on as normal.

“They’re the two extremes, and there are a lot of opportunities in between, and I think it’s those opportunities in between which we think are probably more representative of what is good business. What is super-serving the avid fan, but not cannibalising the core rights, and their desire for exclusivity.

“It’s not going to be achievable everywhere – we might not want to do it everywhere. But I believe there is a lot of opportunity there where F1 TV could be seen as additive to our core partner.

“I believe that you’ll see more of those types of arrangements going forward, because it’s playing between those two extremes.

“It’s a little bit like trying to have your cake and eat it, but doing it in a way that doesn’t devalue or damage the opportunity to do the best possible core rights deal, I would say.”

Liberty could not be more motivated to boost TV income and hence F1’s profits, because when they go up, the owners will get a bigger slice of the pie.

“As we grow revenue, we start to take a larger percentage, and we have more upside,” says Maffei.

“I’m not sure 2021 is the year we’ll be able to capitalise on that, because of the potential for COVID to disrupt some of the promoter revenue.

“But in future years, I think we’re going to be the beneficiary. And we’ve set the stage, we have the right guy [Domenicali] in place. Now I’m very excited.”

[ad_2]

Source link

Leave a Comment