Last week’s British Grand Prix was one for the books: a healthy mix of intrigue, race strategy, and an Alfa Romeo crash that instantly became the talk of social media.
The race culminated with a victory for Ferrari, but the real winner was Formula 1. The British Grand Prix comes on the heels of its massive new media rights deal.
The sport has become equal parts soap opera and professional race circuit. The palace intrigue around the sport’s larger-than-life characters and the continued glamorization of the lifestyle surrounding them has left fans begging for more. Broadcasters are catching on to the fact that owning a slice of the F1 pie is likely to put cash in their pockets.
ESPN saw the potential and pounced.
In June, Sports Business Journal reported that F1 had agreed in principle to extend its U.S. broadcasting deal with ESPN for three years.
The F1 hype extends to entertainment, too. Recently, several high-profile media projects have been greenlit as streamers look to take advantage of the “F1 moment.”
Apple has an F1 movie starring Brad Pitt and a Lewis Hamilton documentary on the docket, while Disney
-backed Hulu recently inked a deal for a new half-hour, scripted series in partnership with McLaren racer Daniel Ricciardo.
If the Netflix
series “Drive to Survive” is the springboard that vaulted the sport into the national consciousness, its offshoots and imitators are only further revving up the sport’s popularity.
Not bad for a promotion that went from abject failure in 2016 to a global phenomenon in 2022.
How We Got Here
Six years ago, worldwide viewership for the sport was down by 110 million from its 500 million peak in 2012 — a significant loss in value for the sport.
In 2012, CVC sold $1.6 billion of F1 shares to funds managed by Waddell & Reed Investment Management and Ivy Investment Management, valuing them at ~$9 billion. Four years later, F1 was looking for another capital injection.
Liberty Media acquired F1 — in full — for $8 billion, an approximate 11% discount from the 2012 valuation. Losing value like that is difficult to do with an asset as unique as a professional sports league.
In order to inject some much-needed branding into the sport, Liberty Media launched a targeted plan in the United States to drum up interest. The company introduced several initiatives around marketing, including but not limited to a docuseries by the name of “Drive to Survive.”
The initial season aired in 2019 and featured all 20 drivers across the 10 teams. The results according to WorldBuilders:
40% increase in F1 viewership in the U.S.
7 of the 10 most-watched races ever
The most-attended three-day F1 event ever — 400,000 at the U.S. Grand Prix in Austin
Content has been a key driving force (pun intended) for growth. The upcoming Hulu and Apple
projects will only continue to build out the incredible flywheel of content.
Media rights buyers like Disney — via ESPN — have seen that opportunity for growth. Even more attractive: rights-holders can benefit from content they’re not even responsible for producing.
The more money Apple spends on producing big-budget racing movies, the more eyeballs can be brought into the racing ecosystem — and to ESPN’s new media property.
The New Deal
F1’s renewed three-year deal with ESPN is reportedly in the $75-$90 million annual range, up from $5 million per year from the current agreement.
While the figure might seem low compared to the NBA’s $2.6 billion annual pact with Turner and ESPN — or the $2.6 billion the latter paid for “Monday Night Football” alone — the deal represents a stepwise increase in the previous value.
Assuming the high end of the ESPN deal is $90 million, that’s an 18x increase in value.
According to SBJ, Amazon
also submitted bids, with Amazon rumored to have offered $100 million annually. Ultimately, the decision to stick with ESPN at a lower valuation likely boils down to their existing relationship.
Since 2018, F1 has seen a steady increase in average viewership per race in the U.S. — from half a million in 2018 to almost 1.5 million in the 2022 circuit.
2018: 547,722 viewers
2019: 672,000 viewers
2020: 608,000 viewers
2021: 934,000 viewers
2022: 1,400,000 viewers
The 47% increase from 2021 alone has helped spur F1’s financial success. According to the most recent filings, Formula One Group generated $360 million in revenue during Q1 2022, a 100% increase from the same period in 2021.
And when compared to other “up and coming” sports properties, F1 has the edge when it comes to viewership. Take for example the recent MLS deal with Apple, which will see MLS make $2.5 billion for the 10-year life of the contract. When it comes to total viewership, F1 races trounce MLS matches.
According to F1 analyst Vincenzo Landino, MLS matches typically top out at 500,000 viewers.
The 2021 average for ESPN broadcast matches was just under 280,000.
Formula 1, on the other hand, averaged 934,000 viewers on ESPN for the 2021 season.
There is one part of the deal that still requires some consideration: As it currently stands, F1 races are commercial-free. In order to capitalize on the deal, ESPN will likely move some of the races over to its subscription product, ESPN+.
The F1 deal could act as an elegant Trojan Horse to bring customers onto the platform — and all it will cost…is an annual $90 million.
Passing on the Playbook
For F1, the past few years have played out like a Harvard Business School case study on content marketing and branding. New sports looking to build staying power can use the F1 playbook to build an unstoppable brand.
Take the Premier Lacrosse League, which just signed a four-year media rights deal with ESPN to air games exclusively across ABC, ESPN, ESPN2, and ESPN+ starting after the 2022 season.
While a new rights deal is a huge win for the PLL, the league has yet to prove financial staying power. In order to prove financial viability, the league is going to need more eyeballs. One way to accomplish this goal: original content.
The eight-team PLL recently released a documentary chronicling the Rabil brothers’ journey in co-founding and building a professional sports league from scratch. The league is looking to build the narrative of its origin story through media.
The film, produced in conjunction with LeBron James and Maverick Carter’s Uninterrupted, demonstrates something that F1 has learned all too well: actively building creative content and narratives around your biggest stars is essential to drawing in fans.
Read the original article on FrontOfficeSports.com.
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