Chasing the money, but not the viewers

In a story that seems to be repeating itself over across Europe, today saw another deal being announced between Formula One Management and a pay TV operator. This time it was the French audience that was the victim. It was announced that their Formula 1 action would be moving from TF1 to Canal+.

Ignoring the money influenced issues for a moment, the move itself probably is not too surprising. I assume that audiences in France have been declining as a result of no French drivers’ coming through the ranks, and no French Grand Prix probably added to the lack of interest. Below is a summary of the moves that I have covered since beginning the blog:

Italy
Netherlands

There have been more, the UK one being the first of its kind. My personal opinion is that Formula 1 should be available to the widest possible audience in front of the biggest audiences. That has always been my perception. Yes, as good as the Sky Sports product here is in the UK, due to its position on the EPG among other reasons, it will never be able to grab the public’s attention like the BBC (or the ITV product) did.

Of course, there is multiple reasons beyond FOM why we have the BBC and Sky deal, we must not forget that the BBC went to Sky and that is how the deal came about (they could have gone to Channel 4, but Channel 4 could not commit to 2012). The other options for BBC would have been to try and reduce the rights or exit the contract, the problem with that is that they would have got a quite significant money penalty as a result.

In any case, that is an aside. The deal happened, at a reported £60 million (although this is disputed in some quarters), and the end result was a significant viewership drop (again, disputed). Those who read my ratings pieces last year that I was more often than not reporting viewership drops despite the championship race being exciting. The first thought is that a ratings drop is not good. As a fan, I want Formula 1 to be accessible to everyone and not hidden away on channel 406. If the ratings are going down as a result of the deal, then why is the deal being replicated across Europe?

Money. There is a balance here between the amount of viewers and the amount of money, and the balance needs to be correct and stable. The problem is that teams’ are money hungry, quite understandably because that is what makes them go racing. If the money disappears, then you don’t go racing, it is that simple. What interests me here is the sponsorship money. Logically, a lower audience equals less sponsorship money. Right? So less sponsorship money equals less money for the teams. And less money for the teams equals teams struggling financially. Which means that the gap has to be plugged from somewhere. Which is where the TV rights deals that run far more into eight figures than ever before come in and offsets the problem and brings teams back into the green. The worldwide recession will not have helped, either.

That is at least my theory. I won’t claim to be right, but everything in Formula 1 is intrinsically linked: TV deals, circuit contracts, even down to the revised driver deals that forced Timo Glock out of Marussia. It is quite a frightening prospect when there are more pay drivers’ on the grid than ever before. But unfortunately, it looks like for some teams’ in the field, that this season will be a fight for survival. Will all 11 teams survive 2013? I don’t think so. As much as I don’t like it, nor approve of it, the teams’ have got into the mindset as a result of the recession where the audience at home is an afterthought. Deliberately? I don’t know. To me, at the moment, it feels like Formula 1 is walking a thin tightrope. If a team does collapse this year, I fear that a domino effect might start. And who knows where that domino will end…

Hyberbole? Partially, I suspect so. But time and time, Formula 1 is told ‘reduce costs, reduce costs’. Time and time again, the teams’ disagree which leads to a ‘breakaway’ suggestion. It is about time Formula 1 teams are all on the same page and head in the right direction for the sake of this sport. Will they? We shall see.

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4 thoughts on “Chasing the money, but not the viewers

  1. In Finland live-F1 went to pay-tv channel in 2007 with highlights of the races on free-tv late that night. At least in the UK half the races can still be seen live on free tv.

  2. The problem is the teams, or to be more precise 4 or 5 of them, they spend such vast amounts of money trying to perfect the ideal wing mirror, that they all run at a loss, so they demand that FOM give them ever increasing amounts of money, and this money has to come from somewhere.

    The teams, (not all of them, the ones struggling to find sponsors due to the massive drop in TV viewers will be left out), will receive up to $100,000,000 more under the new Concorde than under the last, and more crucially they now have minimum payment clauses in place. The top 3 teams will get an extra 7.5% on top, and Ferrari will get an extra 5% on top of that.

    Now if the teams would accept a Cost Ceiling they’d make a profit, wouldn’t need excessive handouts, F1 wouldn’t have to be hidden behind pay walls, and even sanctioning costs could be capped … But while the teams spend colossal amounts refining things that the viewers couldn’t care less about, F1 will have to look for more lucrative TV deals and higher paying races to fund the teams excesses.

    … And yes, it would help if investment bankers weren’t involved in F1, another thing the teams passed on, the opportunity to hold equity in F1.

  3. An interesting point about the balance of viewing figures against sponsorship revenue.

    I suspect this is going to be a cyclic operation, where free viewing will be opened up again once pay TV becomes a hindrance to sponsorship income. Then return to pay TV once viewership as improved again and sponsors are happy they’re getting value for money. I think the big concern here for the UK (or any country in a similar position) is if F1 goes out solely on Sky, because without free access to potential new fans, interest and enthusiasts will dramatically drop.

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