How F1 found a secret fuel to accelerate media rights growth

Netflix’s Drive to Survive is typically credited with catalysing the boom in Formula One’s popularity. But it is the racing series’ in-house streaming experiment that is quietly building traction and increasing revenues for the sport.

Five years since the launch of F1 TV, the sport’s direct-to-consumer broadcast product is boosting its media rights revenues by attracting millions of subscribers eager to keep up with events throughout the season.

F1 TV has increased its global reach by expanding into 186 markets. But the Pro version, which carries live race streams, is available in just 87.

It represents a shift from traditional broadcasting models, forming a key component of the sport’s growth strategy under US owners Liberty Media, which took control of F1 in an $8bn deal in 2017.

Major markets such as Brazil, Mexico and the US are among countries where fans can watch races live with F1 TV Pro. It’s also available in the Netherlands, home of F1 champion Max Verstappen, whose orange-clad fans follow his every turn. “It gave us, for the first time, a direct relationship with the fan,” says Ian Holmes, director of media rights at F1. “I had a concern as to how it would sit alongside third-party rights deals.”

Originally, the interest primarily came from F1’s “more avid fans”, who wanted to watch more content in addition to the traditional broadcast. But F1’s thinking has evolved as new audiences have flocked to the sport. “It’s not just the avid fan,” says Holmes. “The younger fan is the most data-comfortable, interactive demographic out there.”

Holmes says F1 must be flexible in its approach. In some markets, such as Brazil and Mexico, F1 partners with telecoms companies and broadcasters, making them vital distributors of F1 TV, in addition to Apple and Android, where F1 sells the app subscription. In some cases, F1 and traditional broadcasters or networks also share revenues from distributing F1 TV Pro.

“We’re also looking at how to better distribute F1 TV rather than just go through the Apple Store or the Android equivalent,” says Holmes. “You start looking at direct billing relationships. Sometimes it’s more difficult — it’s probably the most frustrating thing in business if someone wants to give you money and you can’t take it from them.

“In some cases, it didn’t make business sense to force it into a market if it was going to cannibalise or overly cannibalise a third party licensing deal”.

Accounts for Formula One Digital Media, the entity that houses F1 TV, reveal that the service made more than $47mn in revenues in 2021. That was an increase of nearly 150 per cent on the $19mn figure in 2020, mostly driven by subscriptions to the Pro product.

In 2021, F1’s total media rights revenue totalled $860mn. Last year, that increased to $936mn — just over 40 per cent of the sport’s more than $2.6bn revenue total. It stood at roughly $670mn in 2020, when the sport’s season was postponed due to the pandemic.

Formula One Digital Media is yet to publish its accounts for 2022. However, Liberty Media said in its annual report for 2022 that F1 TV was one of the reasons for increased media rights revenues that year. F1 TV Pro’s strongest markets include the US, Mexico, Netherlands, Scandinavia and the Nordics, Holmes says, sitting alongside deals with traditional broadcasters.

Analysts see further growth. In March, a research note by JPMorgan’s David Karnovsky said F1 TV “was a bigger driver of [media rights] revenue growth in 2022 than we initially appreciated, and remains a point of potential upside to our estimates for 2023”.

However, traditional broadcast deals are also driving media rights revenues up. Karnovsky forecast that new contracts with the likes of ESPN in the US and Foxtel in Australia would help increase media rights revenues this year by 13 per cent.

Mike Kerr, managing director for Asia Pacific at beIN Sports, says he is not worried about the rise of F1 TV Pro because traditional broadcasters can aggregate a variety of sports and bundle them with entertainment and news channels.

F1 TV Pro is not available in beIN Sport’s markets — which include Hong Kong, Singapore, Malaysia, the Philippines and Thailand — as beIN has an exclusive deal to show races live on its ‘over-the-top’ streaming service, so fans can expect to “watch all of our content at any time, in any place on any screen”.

“I don’t think there is any sport that is big enough to to go direct to the size of audience that we can,”, and we can only address the audience because we’ve got different sport on our own channels,” says Kerr. “The first three races of this year have been the most watched content on our networks except for the Liverpool-Real Madrid Champions League final in 2021”.

The UK, Italy and Germany are also among the countries where F1 TV Pro is not available, as Sky pays for exclusive rights to screen live sessions and racing. The broadcaster has a dedicated F1 channel and is a key partner to F1.

But, ahead of this season, the F1 TV product has launched in India — giving F1 a presence in a market where it has not signed a traditional broadcast deal because, as Holmes explains, “the offers that were made, we didn’t think represented a fair valuation . . . people spent all their money on cricket”.

Next in line might be the Middle East, where the sport is negotiating with broadcasters, says Holmes.

F1 has been constantly trying to improve its media technology, as well. It’s no longer confined to smartphones — users can now “cast” the stream to their television screens. The next step could be to allow fans to engage onscreen with friends watching at the same time online, says Holmes. F1 is also “working hard” to make the Pro service available at circuits without a 20-30 second time delay. “It’s a continual evolution,” he says.