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Two years ago when it was announced that UK F1 coverage would be split between the free-to-air BBC and subscription service Sky from 2012 there was widespread uproar. It was the first deal of this kind in a major market and fans led the tirade of anger because, for the first time, they had to pay to see all races and qualifying sessions live. However, behind the scenes, it also made the teams take stock of the implications. An article in the Guardian by Pitpass' business editor Christian Sylt reveals that the teams still have their eyes on it.
According to F1's industry monitor Formula Money, which is published by Sylt, the teams receive over £580m annually from sponsorship. The blockbuster rates that they charge are driven by exposure to as wide an audience as possible on television. F1's races attract a total of around 3.4m spectators annually but this number is dwarfed by the audience which watches on TV. It came to over half a billion viewers last year which makes F1 the world's most-watched annual sporting event. The only sting in the tail is that the total audience decreased last year and the switch to subscription services was partly to blame.
Sylt reveals that, according to F1's latest annual broadcast report, audiences in the UK fell by 3.8m to 28.6m despite Sky setting up a dedicated F1 channel. It could be a sign of things to come as a deal was signed on Thursday to move F1 to subscription-only coverage in France on the Canal+ channel from this year. It follows the signing of new contracts last year which split F1 coverage between subscription and free-to-air in Italy and the Netherlands. There may be more to come as the prospectus for the £6.4bn flotation of F1, which was put on hold last year, confirmed that the sport's boss Bernie Ecclestone "will explore additional pay television opportunities."
Lotus team principal Eric Boullier says that if the trend becomes global then the teams may need to adjust the sponsorship rates they charge.
"We obviously present TV viewers figures to our sponsors, as the current F1 business model has developed thanks to Bernie's strategy to go free-to-air," says Boullier adding "we do monitor the new strategy to go to pay TV. It may increase the fan profile and 'educated' audience but we may have to review our sponsorship figures if the tendency becomes global."
According to Formula Money, sponsorship comprises 42% of team budgets on average and the lower the viewer numbers, the lower the rates they are able to command. However, it isn't all bad news for the teams. For the first time, this year they will receive 63% of F1's total profits as prize money, meaning that they also benefit from increasing TV rights values. The deal with the BBC and Sky is an Ecclestone masterstroke as it is understood to be worth £64.5m ($100m) annually - a 25% boost on the price of the previous free-to-air-only coverage.
Boullier acknowledges the significance of this boost and since the trend is at an early stage there isn't cause for concern. However, he says that the teams will monitor it and will have to work out how to balance a possible decrease in sponsorship with an increase in prize money. This is no bad thing.
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