US media billionaire John Malone was keen to buy into the Formula One group last year, but for whatever reason (some say money, others say Bernie Ecclestone) the US cable magnate decided against the idea and instead made a much smaller investment to buy a chunk of Formula E. Malone’s objective was to acquire content for his cable empire and he knows that live sport is the most effective way to attract subscribers and so he may just be waiting to see what happens in F1 and could jump in again later if things change.
F1 is really of very little importance in Malone’s world, as he continues his quest to consolidate the global cable market. He has just taken a major step towards that by agreeing a $130 billion purchase deal with two of his rivals – Time Warner Cable and Bright House. The deal will turn Malone’s Charter Communications into the world’s biggest media company with operating profits that will likely be three times those of Rupert Murdoch’s empire. It will also create a firm with 75 million cable subscribers around the world, although to keep competition authorities happy Charter will still only be the second largest U.S. Cable firm, its 24 million subscribers still being fewer than Comcast’s 27 million customers.
A Formula 1 deal remains a very sensible step for Malone. F1 remains the world’s most effective live sport, with a concentrated audience at regular intervals. Soccer is bigger but it is much more complicated because there are too many matches and things like the Olympics and the FIFA World Cup do not happen frequently enough. F1 is perfect because not only would it bring Malone more customers and, because his content is bundled with such things as Internet access and phone calls, it would also boost F1’s flagging viewer numbers. It would be a sweet deal for Malone because Murdoch would have pay him for the rights if he wants to continue using F1 to increase the global Sky subscriber base.
The other element that such a deal would bring would be much more F1 exposure in the US.
The key question is really whether Malone did not do a deal with CVC because they wanted too much money, or whether it was because he did not want Ecclestone involved. At CVC the pursuit of profit is the only goal and it is odd that they did not jump at this chance. Malone was willing to pay decent money for the business and CVC would be happy to be shot of the investment and they really don’t care what happens to the sport once they have sold up, so it is strange that the opportunity was wasted.
Unless, of course, Ecclestone must be “sold” with the business…
As Sky’s viewing figures show, F1 is barely even functioning as a loss leader, never mind as a cash cow. Also Malone’s strategy is not to focus on exclusive content, or on leading the market in TV. He leads with internet speed, TV just follows. That’s why there are no channels exclusive to virgin.
However consider the scenario where Charter buys exclusive World Wide rights for F1. Then BT in the UK, who seem to have unlimited funds, courtesy of their rapacious retail and wholesale rental rates on an effective monopoly of infrastructure, outbid Sky for the UK F1 rights. That would be yet another monthly fee to pay and unless you are a BT subscriber, with a BT box, you would have to purchase a secondary BT subscription via a Sky subscription. It all sounds like potential bad news for the poor customer, while the big boys roll in yet more dollars. I can also see the BBC throwing in the towel on their partial coverage, which is neither fish nor fowl. With John Whittingdale as Culture Secretary, the BBC is likely to have less money to throw around in future and will have to make a number of hard economic decisions on content purchase.
Wilson
I think that the older generation has to accept that all TV of any value will eventually disappear to cable and/or satellite.
“TV of any value will eventually disappear to cable and/or satellite”
In that new world, the key word is ‘value’. I fear that F1, certainly in its current circumstances, may not offer these brutal TV companies that much value. So it gets a few seasons then a TV exec says ‘there’s a new xyz coming and it’ll be mega..’ Bye bye F1 on big TV.
People might believe that would be the perfect storm and that F1 would return to public service/free-to-air TV – except they might not have the capability or people interested in doing it any more.
As an example, 25 years ago the BBC used to have substantial sport departments all over the UK including huge UK-wide Outside Broadcast capabilities…then Sky got the football off them. Increasingly the BBC will be marginalised to still-picture News inserts and Highlights packages (if we’re lucky).
Of course, things may change and F1 might begin to promote itself as the next great money-spinner for all……
Surely internet is a better bet than either? Speaking as part of ‘older generation’ (like yourself) I’m not averse to change when it comes to technology, when I see a benefit other than a fad. To me cable seems old hat (and unavailable in the sticks), satellite clumsy but a necessary evil until the internet improves out of town. One bit of rogue space debris and it’s curtains for SKY – hooray!
Finally, the idea of ‘value’ is surely a matter of opinion? Can’t see the BBC moving to satellite or cable (although the BBC comes up first on SKY’s own TV schedules). What about free terrestrial TV?
It’s well nigh-on impossible to disagree with this statement.
Hello Joe
Channel 10 in Australia, free to air, is only showing half of the races this year and the others are exclusive to Foxtel. You know what, Channel 10 did me a favour. I get better coverage, no ads and I can record races such as Canada and watch the morning after….good value for an old guy!
For sport on TV you’re probably – and sadly – right. If David Attenborough is sold to The Man, though, I will not be responsible for my actions.
As to watching over that Internet, that they have now, there are areas of London where bandwidth is insufficient to use iPlayer and its ilk, so how one is expected to use it in rural areas is a mystery. There was a piece on the news the other day with people on Anglesey saying that their so-called “broadband” connections were no quicker than dial-up.
‘. . . F1 remains the world’s most effective live sport . . .’
‘. . . F1’s flagging viewer numbers . . .’
. . . ??? . . .
If you are on top of a big mountain and you descend a few feet are you at the bottom?
That depends, which way you move, cliffs can be quite steep.
Perceptions are always relative . . .
If the mountain’s tip just pokes out of the ocean then that ‘few feet’ differential is the difference between standing firm and desperately treading water.
Argument aside, the point Joe is making is easily understood.
Yes, numbers have fallen, but…
Yes, they are still above everyone else.
Simple analogies aside, it’s not that complex of a point to get.
‘Understanding’ is easy . . .
Questioning is necessary –
Or else a good blog could be diminished by sycophants.
Or it might be the realisation that, if F1 became exclusively Pay-per-View, the TV audience numbers would plummet…
He’s like Gollum going after the ring, you cannot shake the little runt off !
His quote in F1 racing this month was along the lines of ‘They’ll only get rid of me when i’m in my coffin and even then, they better nail it shut well’ or something similar. There’s a great piece attached to the same article, noting all of Bernie’s about turns on various issues across the years, how he’s said one thing and then said the opposite, shortly after.
that first sentence caused me to spit half my lunch across my desk!!
Brilliant
If it was a choice between Bernie and Malone I’d pick Bernie every time!
Ecclestone’s inclusion in any sale agreement would be a deal breaker for most companies, just ask herr Gibrowsky.
Much the same as VW-Audi group seem disinterested in F1 (or so they say) because BCE is still there. One would hope that McKenzie and Co have seen the light and are working out how to get rid of him..
If that was going to happen it would have happened two years ago. Clearly BE has something that keeps him where he is, no matter what CVC thinks.
Bernie is still in place, because he does the deals and brings the money in. Pretty simple really, no one so far can do what he does. Yes they have not tried to kick him out and test that theory, but then again CVC is in it to make money for their investors. They just don’t care about anything else.
If you had invested in this CVC Fund, then you’re laughing all the way to the Bank, when you cash in your pension cheque. So to the little man on the street, CVC and Bernie can do no wrong. End of story.
does bernie have an unbreakable contract with CVC , with a terminal date perhaps …like …when they bury me ?
Why get rid of the goose that lays the golden eggs?
I understand that Sky UK’s F1 operation has seen significant layoffs to help pay for the company’s huge bid for Premier League football rights, so much so that they now have to share some items with Sky Italia F1. I’d love to know more if any readers have inside knowledge …
It seems Bernie’s circus is far less of a catch for Murdoch than it once was. I’d love to hear an impartial TV professional confirm that F1 is the ‘world’s most effective live sport’. I’d be amazed if it were true.
Sadly Joe, motor racing barely registers in North America now with the general public be it on TV, radio or in the newspaper. NASCAR is all that editors and sports programming execs are aware of so consequently that’s all the public see. Stick and Ball is all that exists in North American sport, end of story.For an educated overview of what it’s REALLY like for our sport over here, collar my old friend Gordon Kirby at the Canadian GP and pick his brain whilst enjoying a glass.
If you were a subscriber to The Business of Motorsport newsletter, you would know that I have been writing about global motorsport for more than 20 years and I have a pretty good grasp of what is happening in North America. I am not simply an F1 reporter.
Who said anything focused on North America, let alone make a jab at the author of this site who understands the sport on a global level? Malone may be a US investor, but his businesses are global. Liberty Global (his) is the world’s largest global cable operator, no operations in the US. Charter, in which he has a minority stake, is a US cable firm that will grow larger if the TWC and Brighthouse deals are approved, but will still be 2nd largest in the market. I suspect Malone’s interest is not driven but some belief that there is large demand for F1 in the US.
If you are going to take swing at someone who knows what they are talking about, you should at least get your info accurate.
Stick and ball? LOL. Americans call it “Baseball”. Funny, you say you are from here though.
Try Football at 35%. Baseball is quite a way down in second at 14%.Followed by College Football at 11%, Auto Racing at 7%, and then NBA at 6%, NHL at 5%, and College Basketball at 3%.
Facts which are easily obtainable online. Facts help bolster arguments.
7% is still a big number in the US. “Barely registers” is hardly accurate.
“Stick and ball” refers to ALL the major North American sports( baseball, football, hockey, basketball), not just baseball.
Exactly…
Maybe the phrase should be “stick and/or ball” 😉
Jeez, people… david m-k wasn’t rude about anything… he just didn’t realize that Joe does more than report on races, that’s all…
No need to get all prickly about it… he was just making a suggestion, he wasn’t attacking our tribe’s chieftan 😉
The last time I could get TV over the air was 1984. Since then it has been cable and satellite only, and I have selected same for F1 coverage.
In the US, F1 is is, for the most part, televised on the NBC Sports Network channel, which is carried in turn by all of the major cable providers (Comcast, Time Warner, etc.) as well as the telcos (AT&T Uverse and Verizon Fios) and satellite (DirecTV and Dish.) In all cases NBCSN is provided as part of the “basic” package of channels or, at worst, the next step up. In no cases, to my knowledge, is it part of a separate “add-on” package or priced individually. The only places where it is not available are on some rural “mom and pop” cable providers and generally this is due to lack of interest in F1 out in the hinterlands. So it’s difficult to see how Charter’s ownership would increase exposure in the States.
About the only place F1 is missing (other than a few races per year) now in the US is on Over The Air (rabbit ears antenna) which is commonly termed “free” TV here since the is no TV Tax. (Just as an aside: Any of the above alternatives are often termed “pay TV” which I believe leads to some misunderstanding in the discussion, but this is nothing new. See: hood/bonnet, trunk/boot, choke/strangler.) This represents somewhere between 20-25% of the potential audience but is in many cases composed of, as the saying goes, “folks who can’t afford anything better” so is not a prime demographic for F1. There are three or four races per year that are broadcast OTA, but these are generally time-shifted and truncated and you would still need “cable” to view practice or qualifying.
Sadly, F1 currently does not generate better numbers than golf, tennis or figure skating so will not preempt them and will always be preempted by baseball, football (oblong tetrahedronal sort) and basketball, so likely it’s best position is where it is right now. NBCSN does a good job of broadcasting the races at the original times and later at more viewer-friendly hours as well as the practice and qualifying and pre- and post-race shows.
Good analysis Jay, thanks. As an American F1 fan, with boots on the ground, it is hard to see how F1 is going to increase their audience here. Bernie is constantly talking up the American market as his last great frontier, but the reality is different. F1 is simply a very minor sport with no coverage in newspapers or on TV. I don’t see how the audience can be generated, especially as there is absolutely no promotion here in the US.
Jay makes some interesting points that need a bit of reiteration; In the US having internet access is not having access to cable TV, it is simply a portal to the larger world. To watch television on cable one has to not only pay for internet, but also for the cable TV channels. The basic channels provided by cable generally do not include NBCSN, which carries F1 in the US; to receive NBCSN one has to pay for a premium cable package. So the approximate cost is, if ‘bundled’, $40 for internet, $40 for cable, and $20 for a premium service – about $100/month. For this sum one gets several hundred channels of totally worthless sh*t and about 5% viewable content. There has been a growing trend in the US to just dump cable TV and purchase a couple of internet streaming services, such as Netflix or Amazon Prime.
Television viewing is actually going down in the US and for good reason. My wife and I are amongst those who do not watch television anymore, and we live better lives for that. We subscribe to Netflix for $7/month and watch movies several times a week; we earn a six figure income and are the sorts of people who have the cable and TV companies worried as we are a prime selling demographic but longer participate in TV bullsh*t and are no longer viewing advertisments. Formula 1 is going to have an EXTREMELY tough sell to generate any market here in the US of A, especially as they do absolutely nothing to sell their product.
So I watch races, less and less frequently, on the interwebs with no commercials. I have been a fan for so long I feel old and am fading away; this is an issue for CVC and Bernie. Yes, I could buy a Rolex, and no I don’t want one. And, increasingly, I don’t want the product Bernie is selling. Bernie, with his ‘business plan’ that can discount the fans is making me discount him.
Sorry, but you are dead wrong about NBCSN somehow being a “premium” offering on C/T/S providers. I took a look at almost all the large providers some months ago about this issue and found it to be offered as part of the most basic TV packages on almost every one. On the few it wast wasn’t, it was offered it on the next step up – typically a $10 step up. Since Charter was the focus of this article I checked there today and yep, NBCSN is part of their most basic TV package as well.
Also, and a small point, you absolutely can subscribe to cable TV w/o internet access (or vice versa.) While the two are typically bundled together at a discount, the two simply are not necessarily dependent on one another. Satellite TV is delivered w/o IA.
I understand some folks decision to “cut the cord” as it were, but since you’re already willing to spend a few bucks a month to watch some Netflix movies why wouldn’t you be willing to part with a few bucks to also watch some races? Alternatively, what would F1 have to do to gain your viewership back?
I’d agree the bulk of what comes with my TV package is worthless, but OTOH there’s enough programming of interest to me to make the overall price worthwhile. Were I forced to subsist solely on Hollywood movies I’d probably just shoot myself in the head.
I don’t want to part with a ‘few bucks’ to watch some races because the US coverage totally sucks and is unwatchable. And I don’t want to pay $40/month = $480/year to watch cr@p.
Jay, I’m not sure I understand your sort of nasty aggressiveness here about what I watch or how I watch it. I don’t ‘subsist solely on Hollywood moves’, I have a life that doesn’t revolve around television. I read a lot, I climb, I garden. I live my own life and don’t have to live vicariously through others.
Jay, you are correct. And if Malone were to get the rights to F-1, my guess is that anyone not on th Charter/Time-Warner/Bright House monopoly, will lose their ability to view the races at all.
But the bar to entry would be so low that a lot more people would be watching
In which way would the bar be lower? Remember, very few people will buy a specific package to watch a sport they know nothing of, to generate new viewers the content has to be readily available.
Lance, that would never happen… it has (sadly) become pretty normal for a cable company to own content… and it’s *always* available from other cable companies…
Only very rarely do cable companies compete in the same area… as a general rule, they benefit from territorial monopolies… the worst thing that ever happens is that negotiations over the price paid by a customer cable company for a given channel get stalled and customers must do without a given channel for a few days until they sort it out…
Lance, that never happens… it’s already true that some cable companies provide content… and they *want* to sell it to everybody…. they want viewers for their content… restricting that is self-destructive….
Cable companies all have territorial monopolies, so they’re not really competing against each other… except in a few localtions, you can’t ditch one cable company and sign up with another one…
All very sensible, Joe, except for one thing: I don’t see how Malone acquiring F1 would boost it’s viewer numbers here in the US.
It’s already available to cable/sat subscribers right now, and that’s almost everybody who watches TV. It’s generally not on the basic tier of cable, but rather is on the 1st step up from basic, which many (I would guess most) people already choose to get.
(Some posts here confuse that with a “premium package”, but that term generally refers to a number of competing packages, each of which includes a family of movie channels such as those provided by HBO, Showtime, etc. In contrast to a “premium package”, NBCSN generally comes with a very slight upgrade that includes numerous channels beyond Basic. The Basic package exists primarily to make cable service sound a bit cheaper than it really is, with most subsscribers choosing some form of upgrade.)
The only way having a new rights holder would increase viewership here would be if he promoted the hell out of it. Given the general interest level over here, that would seem to be an odd target. There is probably more to be gained by promoting the Premier League.
Please don’t misunderstand… I really do wish a new rights-holder would increase F1 viewership… but I simply don’t believe it. Put at least 6 F1 races in the US (not in US time zones, but actually inside the US), and you’d then have a pretty good chance. Without that, it will continue to be what it is to the US market: a very fringe thing.
If you really want F1 to be a big deal in the US market, here’s how to do it:
* 6 US races, plus Canada, plus Mexico, for a total of 8 in North America
* 6 European races (in *Western* Europe, not Azerbaijan; even Hungary is iffy)
* 6 races elsewhere, including Japan, China, Singapore.
* Limit the Mideast to 1 race, if that: nobody here wants to even think about he Mideast… so the less of that the better, marketing-wise.
Does it seem unfairly US-centric to put 6 races here, plus another 2 in our neighbors? Yes, of course it does. But do you want the US market or not?
Superb, Steve. And exactly right.
Signed, Keith in the USA.
“To watch television on cable one has to not only pay for internet, but also for the cable TV channels.”
Huh? Not with Comcast at least. I can just buy the Cable TV service, I don’t need to buy the internet service from them. For the convenience of having it all from one provider I do purchase Cable TV, Internet and land line phone from them, but you can just purchase any of the three alone too.
And NBCSN is part of the basic service. Speed back in the day wasn’t.
I guess it varies. With my only choice for fast internet, Charter, I would have to purchase internet and then pay for cable plus an upgrade to get NBCSN, which I chose not to do for reasons stated. DSL is a non-starter for me.
That’s illegal… they can’t make you buy internet to get cable… if they’re doing that, it’s only because nobody sued yet…
They are not forcing you to do anything. It is a package. That is how cable is sold.
Joe, you’re dead wrong about this… in the US it is illegal to require customers to purchase a bundling of TV and internet (and phone) services…
In almost all locations (except in a very few areas of a very few big cities), a given cable-TV provider is a gov’t licensed monopoly and restrictions apply to what they can force customers to do…
What cable companies usually do is offer steep discounts on bundled services for the fist year of service, after which the prices go back up to the standard “bend over and smile” prices…
I am not suggesting that anyone force anything. Thus I am wrong. I am suggesting that one can bundle. And you can.
I suspect we’re in violent agreement…
This might be another case of misunderstanding caused in you seeing comments not in context… I only meant to clarify an earlier post in which it sounded as if someone was saying he was required to bundle…
Mountains out of molehiles, etc.
Also, sorry for a couple redundant comments… the first ones were there, then they weren’t, but now they are again… (God only knows why…)
My comment used to be here, but now it’s disappeared…
This not how cable is sold in the US… it’s illegal to require customers to buy bundled services… in almost all areas, cable companies have a gov’t sanctioned territorial monopoly, and they are prohibited from forcing bundled services…
What they usually do is offer significant discounts for the first year of bundled service, after which the price goes back up to indecent levels… that’s legal… forcing bundles services is not legal…
The American broadcaster of F1 races, as another commenter has mentioned, is currently NBC/NBCSN, which is owned by Comcast. There is ample literature out there about industry disruptors like Netflix, Amazon Prime, YouTube, and Hulu influencing the way Americans watch programming traditionally shown on television. It seems like unless Management is ready to offer some kind of streaming subscription service online, F1 is not exactly an evergreen investment for Malone’s business interests. Overall, F1 is an incredible investment — but there are too many “innovation disruptors” to account for now in the realm of television and sports programming (in response to these trends, baseball and American football all now have their own online streaming subscription plans). We see the WEC and Formula E embracing online streaming (either via an official channel or through new technologies like Periscope), but the best FOM has offered is its broken F1 Access app. (Probably doesn’t help that FOM appears to farm the tech work out to TATA, which is known for being a budget systems integrator firm).
With the massive purchase mentioned in the article and the currently rumoured mega merger with (the european bits of) Vodafone maybe this Malone fella is just too busy to be dealing with a dysfunctional sport at the moment.
Be careful of what you wish for if you get rid of Bernie. You might get Tony George.
Joe you mention Malone decided to invest in Formula E. What’s your take on Formula E? It appears to be attracting sponsors and interest from manufacturers but does it have a long term future?
Right now they lack a good product.
Joe, I agree. I tried watching the most recent race…the cars are painfully slow. Needs more cowbell.
Based on some of Bernie’s deals in the past, I wonder if he has a 100 year contract to run F1 with CVC, with no break clauses and 85 years left on the contract…