TV viewing figures were one of the keys pillars of the Formula One company’s business model, giving everyone involved the opportunity to sell the sport to sponsors and to the general public, a percentage of which would then attend races and pay enough for the promoters to be able to pay the Formula One company substantial fees to host races. TV companies were also able to use the huge numbers to sell advertising and thus Formula One was able to push up the demands for the TV companies.
That is all changing. The Commercial Rights Holder decided some time ago that the best profits come from pay-TV, even if this destroys the viewing figures. The danger of this strategy is that the sport will struggle to reach the same kind of numbers as in the past and is thus becoming less and less attractive. There is also the danger of failing to attract new viewers as with pay-TV no-one is going to stumble across the sport and thus it will generate less interest in younger generations, particularly as it has had a Stone Age attitude towards social media. Obviously, a few rocks needed to be thrown at the F1 greenhouse to get the folks within to stop pottering with their roses and comprehend that they HAVE to engage with the fans outside.
The move to pay-TV is one that is probably essential at some point because all sport is gradually disappearing behind paywalls (admittedly of different kinds) and there will soon come a time when the next generation will see it as being quite natural to pay to watch things. This is actually logical, because we do not go to the theatre or cinema and expect to be let in for free, nor would one go to a professional sports stadium and expect free entrance.
The problem is the changeover between free-to-air and pay-TV. And, bear in mind, that pay-TV is probably only a step towards the ultimate business model, which is direct-to-consumer coverage. When that happens and the sport is big enough, the sponsors will return, unless there is something better on offer. There will also be untold possibilities for targeted advertising.
But, in the short term, the switch to pay-TV has been painful, particularly in the five core European markets (UK, Germany, Italy, Spain and France), all of which currently have either split free-to-air/pay-TV or simple pay-TV. The numbers are stark. Free-to-air is attracting about seven times as many viewers as pay-TV.
However, the profit-loving Sherman McCoys at CVC Capital Partners don’t give a toss about this as long as the profits keep going up, although in the finest traditions of cowboys, they are going to eventually be “headed off at the Pass” by the competitors and will be lucky to survive with their boots, if they do not learn to accept more compromises. The sport was going to be sold by Christmas, in much the same way as the First World War was going to be won in the same timeframe, but the reality is that we are probably stuck with these people for a few more years because they cannot afford to sell the business for less than they want, because they have to satisfy other investors to whom promises were made.
Thus, the only way forward is to go on driving up the profit in order to pay the debt and by doing that they may eventually get the business to a place where someone will buy it at a price that will not embarrass the Shermans. The problem with that is that time is running out. There must be new commercial agreements in 2021 and the big teams, in league with the manufacturers, are not going to give up as once they used to do and there may come a time when the TV companies and the big teams will get together and we will see a sort of Premier League moment, at which point the FIA will have to decide to go with the show, in order to retain any realistic World Championship. In that scenario, the Shermans will be bazooka-ed and the 100-year rights deal will die, possibly after a failed attempt to turn GP2 into a World Championship. A sustained civil war, if it comes to this, would only do to the sport what CART and IRL did to American open-wheel racing, leaving the way open for NASCAR Europe, or whatever, to fill the void.
For now, however, we’re in a state of flux with more and more pay walls being erected in other markets, such as Australia, Latin America and Asia. For viewers in the UK, the exit of the BBC from its TV coverage of F1 has opened the way for Channel 4, which will hopefully bring new energy and new ideas to the show. Having said that I notice that the races that will be shown free-to-air only include some of the big races, notably the British GP, Spa, Monza and the finale in Abu Dhabi. It is sad to see that Australia, Monaco and Singapore are not on the list. I guess that Sky has a block on these races.
Oh dear, oh dear, oh dear…