Everyone knows that Formula 1 brings in a lot of money from TV rights revenues, but how does the sport compare with others when it comes to what TV companies pay per event?
The TV rights to any event are initially owned by the venue. In the case of sports teams that have their own grounds, what generally happens is that all the teams in a league will join forces and use collective bargaining to get the best price from the TV companies involved. In the case of a sport like motor racing, where the venues are not run by the competitors, the right to exploit the TV is up for grabs. In Formula 1, the Formula One group managed to get control of the TV rights, which were once controlled (but not owned) by the teams. The FIA is deemed to be the owner of the rights, in that a venue cannot get a World Championship event without the FIA agreeing to it – and that agreement means that the TV rights have to be signed over. The federation chose to have its commercial dealings done by a private company, rather than having its own division. People may say that the European Commission would not allow that, but this is not strictly true. The Commission was only ever involved in F1 because there was a complaint about the way things were done. If the FIA wanted to set up its own commercial division when the existing rights deals are over, it could do so.
In NASCAR it is the sanctioning body that negotiates its own TV deals, but it gives the venues a large percentage of the money and the venues and the sanctioning body together pay prize money to the competitors.
There are many different business models to be found in other sports, depending on who has been doing the deals.
One reads of massive TV deals in soccer and American football, which are reckoned to be the biggest sports globally and in the United States. And NASCAR too has had some pretty impressive deals as well, but how does it all boil down?
It is reckoned that each year Formula 1 generates around $600 million from TV revenues and about the same from race fees from its 20 events. That is a fairly easy calculation. Each F1 race generates $30 million in TV revenues.
Over in the United States, NASCAR is deemed to be pretty hot when it comes to TV rights sales and there has been much trumpeting of late about a new deal with Fox – which is owned by Rupert Murdoch’s News Corporation – that will bring NASCAR $2.4 billion over an eight-year period from 2015-2022. That is for the first 13 races of each season, including various non-championship affairs and the Daytona 500, which is the biggest rating race of the year. NASCAR still has a second package to sell, with 23 races on offer, including the 10-race Chase for the Sprint Cup at the end of each season. The current deal is shared between The Walter Disney Company’s ESPN and Time Warner Inc’s Turner Broadcasting System. It is worth $4.48 billion, but the talk is that a new deal will bring at least $6 billion because the new NBC Sports Channel, which is owned by the Comcast Corporation, wants a piece of the action. If one assumes that the two deals when completed will bring in $8.4 billion over eight years for the 36 championship races, one can calculate that NASCAR pulls in $29 million a race, which is not far short of the F1 figure, although the sport’s reach is much smaller than F1 because its international sales are relatively small. However US television companies are much more switched on to advertising (which is almost constant) and so TV companies can make more money from each programme than in some other countries where the culture is different.
Premier League soccer in the UK has recently done a series of new global deals that are expected to bring in as much as $8 billion over a three-year period covering the 2013-14, 2014-15 and 2015-16 seasons. This breaks down to $2.6 billion per season. Obviously these are higher numbers than Formula 1, but there are 380 games in a Premier League season and so the value per event is only $6.8 million, a third of the figure of F1 and NASCAR. That said, viewing figures are higher because of the number of events.
When it comes to the National Football League (NFL) Sumner Redstone’s CBS (which is part of an empire including Viacom, MTV and Paramount Pictures) shares the TV rights with NBC, Fox and the Disney-owned ESPN. Together they will be paying $39.6 billion for the TV rights for the NFL between 2014 and 2022, a nine-year deal with 256 games per season, which breaks down to the relative modest per-event total of $1.7 million.
There may be higher numbers generated by occasional competitions, such as the Olympic Games and the FIFA World Cup, but when it comes to regular leagues/racing series, Formula 1 comes out on top!
And one of the lures of the US market for F1 is that if it can ever grow to a marketable level, it could get its hands on some sizeable rights payments from the big US media players…