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F1 streaming killed off $40m US broadcasting deal

NEWS STORY
10/10/2018

The NBC Sports Network, which took over American coverage of F1 from SPEED in 2013, had a four-year deal in place with the intention being of seeking a five-year extension.

However, at the beginning of 2017, the fourth year of NBC's deal, Liberty Media famously bought F1 from its previous owners CVC.

Almost from the outset however, Liberty made it clear that one of its key plans for the sport moving forwards was live streaming, effectively cutting out the middleman broadcaster.

This was enough to cause NBC to have second thoughts about extending its deal.

"At the beginning of the fourth year we began having conversations about a five-year extension which would have seen a significant uptick in the fees we were paying," an NBC source tells Autoweek.

According to a report released earlier this year by Morgan Stanley, at the time NBC was paying $4m, confirming this, the source reveals "the deal was a five-year contract with a two-year option. If it had gone the full seven years it would have paid Formula 1 $40 million".

All-in-all, the new deal would have meant NBC paying around $5.7m annually, a 43% increase on the previous contract.

"We had basically come to a handshake on this deal," says the source, who reveals that when F1 was sold NBCSN extended its contract for one more year on similar terms to its original contract, with (previous owners) CVC confirming that new F1 supremo Chase Carey and commercial boss Sean Bratches would need to approve any subsequent deal.

"The long and short of it is that we still commenced conversations with Chase and Sean, and they basically wanted the same deal that we had put on the table but they also wanted to be able to create their own app which they would run at the same time that we were on the air.

"We are a television network and a television channel that relies on advertising," explains the source. "We would have been able to stream it as well, but they would have been able to sell it and what that meant is they could have gone to people who don't get our channel. They would have been able to go to people who don't get NBC or NBCSN and sell them the race. It would be a direct competitor, and we don't do that with anybody, from NASCAR to golf to hockey to the Olympics. Nobody. And you can't do that in the UK with Formula 1. So we said no."

As a result, a deal was agreed with ESPN - Bratches' previous employer - a deal, according to Morgan Stanley, which sees the broadcaster get F1 for free. Consequently, the sport has lost out on the $40m offered by NBC and indeed given F1 away for free to ESPN, which does at least allow F1 to stream races. (It has a choice?)

With Morgan Stanley predicting 10,000 subscribers in this first year at $100 a time, this would see $1m heading into the F1 coffers.

However, the service has not been without its issues.

Only yesterday, speaking at Vanity Fair's New Establishment Summit, Carey admitted the service had suffered "more glitches than we hoped for", the American subsequently describing 2018 as the "beta year" for his company's digital forays.

"For us, it is early days," he said. "We have an incredibly passionate group of fans. They can't get enough. They want much more than they're getting from the traditional broadcast experience."

Even without the glitches, which similarly caused F1 to have to relaunch an old version of its Live Timing App after an updated version proved a monumental disaster, the NBC source admits that Morgan Stanley's forecasts echo NBC's own findings.

"Formula 1's audience is older, it's wealthier and it is very sophisticated," says the source. "But while they love technology in Formula 1, they don't want to watch it on their phones or their iPads or their computers. They want to watch it on a big screen. The average age of a Formula 1 fan in the U.S. is 59 years old, and that viewer is not going out and buying apps, especially if he can watch it for free on ESPN."

Following the initial furore over ESPN's coverage, which saw ad breaks at random moments and no subsequent explanation of what had had happened in the race on rejoining, the broadcaster secured a sponsorship deal with Mothers Polish and now runs the races ad-free.

However, according to the NBC source, this has presented another problem.

"It has lost a lot of its commercial appeal by going commercial free," says the source. "We have people who used to buy advertising in Formula 1 from us, and they are now spending that money on NASCAR, IndyCar and a bunch of other motorsports programs that we have."

"Where the sport really benefited from NBC is when it would get promoted in things like Sunday Night Football and other NASCAR programming. We significantly raised the profile of Formula 1 in the United States by doing things like putting Lewis Hamilton and the Mercedes car live on 'The Today Show' in the run-up to the U.S. Grand Prix. We promoted it at the Super Bowl and the Olympics, which gave it a high-profile and high-prestige position."

This view is echoed by Bobby Epstein, boss of Circuit of the Americas, which will host next weekend's race at which Lewis Hamilton could secure his fifth title.

"NBC did an excellent job for sure and used their various properties to promote F1 and the United States Grand Prix. Certainly, I wish 'SportsCenter' would cover Formula 1, but they know their audience. From the promoter's point of view, I hope that ESPN will be able to influence ABC properties to put some of the drivers on talk shows ('Good Morning America' or 'Jimmy Kimmel Live!' for example).

"We don't get them on this continent very often, so we have to feature them when they are here. It would otherwise be a missed opportunity."

While ESPN has a two-year deal, NBC hasn't given up hope of securing a future deal.

"We love the property and we like the people we did business with. We never say never and we would have conversations with folks if the opportunity came along, but I can tell you definitively we wouldn't do the deal that they have on the table now."

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READERS COMMENTS

 

1. Posted by nickp, 13/10/2018 23:34

"when it came down to it they chose streaming over NBC In the end it hasn't worked out for F1 as it looks like they're only making $1 Million off of F1TV in the US Meanwhile ESPN got the rights for free "

Rating: Positive (2)     Rate comment: Positive | NegativeReport this comment

2. Posted by Chris Balfe (editor), 13/10/2018 8:10 (moderated by an Adminstrator, 13/10/2018 8:10)

"@ C5

Re: "Contrast that with the performance of Crisis-Crofty. A never ending concoction of blabber, yelling, and laughing at what I assume he thinks are witty comments or even jokes. An utter moron."

If there was a prize for comment of the year..."

Rating: Positive (2)     Rate comment: Positive | NegativeReport this comment

3. Posted by C5, 13/10/2018 0:18 (moderated by an Adminstrator, 13/10/2018 8:10)

"The NBC commentator team was the best thing about the F1 weekend by far! Entertaining and very insightful. Heck, they could even make the Friday practice worth watching!

Contrast that with the performance of Crisis-Crofty. A never ending concoction of blabber, yelling, and laughing at what I assume he thinks are witty comments or even jokes. An utter moron. The expert commentators, aren't bad for insight in the rare instances where they're able to get a word in. But they sure aren't entertaining.

I'm familiar with the broadcasts from a number of European broadcasters, and in my book the Speed/NBC team tower way above all of them in performance, far ahead of Ben Edwards/John Watson at Eurosport in the 90'es, and everyone else lagging far behind with Germany's RTL just ahead of the crowd. Yeah, the NBC ad breaks were long, but the recap and excellent commentary more than made up for it. The current Sky broadcast quality lumbers somewhere around Danish TV's "Formula Magnussen" commentary which, since chances are you're not familiar with it, is utterly atrocious to listen to.

In fact, the Four Amigos was really the primary reason we had a cable subscription in the first place. It's up for renewal now, and I really see little reason to renew it. We watched most of the last race with the sound completely off to get some relief from the noise that goes for commentary these days. And with the general on track performance and the Dutch kamikaze pilot's antics going barely unpunished race after race, its pretty clear the show isn't able to carry itself either.

I guess I should be happy saving a bundle and getting more weekend spare time. But the NBC team was, quite literally, often the highlight of our weekend, and I'd very much rather have liked to keep spend my time with they company. Alas, this is not to be, and everything is pointing towards us simply switching off. Pity.
"

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4. Posted by ClarkwasGod, 12/10/2018 21:18

"@ Ellwood Hammond - are you, by any chance an NBC employee? NBC had frequent, long advert breaks - look at my post below for my opinions of the commentators. "

Rating: Negative (-1)     Rate comment: Positive | NegativeReport this comment

5. Posted by NS Biker, 11/10/2018 23:38

"From an entirely North American perspective, what would the impact be if during the SuperBowl game, they cut to commercials and missed a couple of plays. Then resumed coverage as if nothing happened.
Why is it that this sort of thing is acceptable in F1 and other race series coverage. It isn't.
The advertisers get cursed (or worse) the viewers are ... lets just say, not pleased, and the network won't win any awards for coverage.
Yes, I get the concept that advertisers need to get exposure, but there must be a better way. I wouldn't mind it if they paused the live coverage, inserted the adds and then resumed where the cut-off occurred. Heck, I do that with the recorder anyway so the adds are essentially ineffective, apart form the aforementioned cursive comment.
If and when the streaming service shows up in our area (Wet Coast), I will be all over it and cut the cable connection. Till then it is record the races and watch (add free but interrupted) at a civilized morning hour."

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6. Posted by Mr. Thistlebottom, 11/10/2018 12:24

"From this U.S. viewer’s perspective, the Sky broadcast (after early bungling by ESPN) is far superior to anything that NBCSN or the now-defunct Speed Network ever provided. It is hard to top the commentary and analysis of active drivers like DiResta and Davidson, and former world champions like Rosberg, Button and Hill. David Croft’s play-by-play is head-spinning at times, yet amazingly accurate. And admittedly, it is amusing to hear his descriptions of the starts, in what must be the fastest speaking of English in the broadcast world. The U.S. outfits, by contrast, gave us Leigh Diffy and Steve Machett, who are masters of nothing but cliches; and poor David Hobbs, who was a fine driver in his day, I’m sure, but is far out of his depth in today’s F1 (although his occasional wry humor was a welcome break from the others’ bloviating). Will Buxton, the on the ground reporter, was adequate and I hope he finds a role in future F1 broadcasts in the states. In the meantime, I look forward to Sky’s excellent coverage for the remainder of its contract. "

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7. Posted by Ellwood Hammond, 11/10/2018 12:05

"The NBC coverage was brilliant, the big plus for F1 (apart from the $4M per year) was the extra attention the sport got from NBC's promotion of F1 in other sports broadcasts. Since NBC's departure F1 is now just a by-line in the US national news media.
Also the commentary by Hobbs, Diffey and Matchett was very informative,especially to a new audience and while the Euro tv feed is pretty good sometimes the Brit accents are hard to understand.
Hopefully NBC will get another shot."

Rating: Negative (-3)     Rate comment: Positive | NegativeReport this comment

8. Posted by TokyoAussie, 11/10/2018 4:43

"Am I missing something here? F1 rights in the USA were to be sold for only 40 million for 7 years? At 20 races per year, they were going to buy broadcast rights for just 285,000 per F1 event? That sounds dirt cheap. I thought TV rights were how FOM & now Liberty made its revenue. It seems that gouging each track and the paying public who turn up to watch make up for a lot more than I thought. F1 is in a bigger rut than I gave it credit for."

Rating: Positive (2)     Rate comment: Positive | NegativeReport this comment

9. Posted by Joop deBruin, 11/10/2018 4:05

"Tata is the kiss of death. Liberty blew it with their ultra cost provider approach.

Faaah-huck Tata!"

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10. Posted by NVexplorer, 10/10/2018 20:42 (moderated by an Adminstrator, 13/10/2018 8:10)

"Racing in any format - cars, motorcycles, airplanes - is becoming less relevant to the younger generations. As an American, I have watched the decline of attendance at Indycar, NASCAR, NHRA drag racing, US Superbike, etc... The attendees are indeed middle-aged, or older, and mostly male. I think that no matter what F1 attempts to do, their "product" faces a shrinking market.In order to survive, F1 has to stay relevant to the changing population characteristics. If F1 exclusively target their existing fan base, who are ageing, they will eventually have no audience. If they target the younger generations, who are inattentive to anything complicated or over 30 seconds long, the current fans will abandon F1, and F1 will eventually have no audience. Ergo, unless some incredibly brilliant marketing and production plan comes out of the dolts that are F1 management, F1 is doomed, eventually, only a matter of time. F1 are the worst enemy of F1, and always have been."

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11. Posted by ClarkwasGod, 10/10/2018 17:02 (moderated by an Adminstrator, 13/10/2018 8:10)

"Every cloud has a silver lining - in this case moving from David Hobbs (great in his time, but past his "sell-by" date), Steve Matchett (pompous-sounding mechanic pretending to be an engineer) and either Leigh Diffey or Bob Varsha - with frequent, long advert breaks to ESPN piggy-backing Sky's coverage: top class commentary team -NO advert breaks in Qually and the race. My only (minor) complaint is that they leave too soon after Qual and the race.
"

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12. Posted by mickl, 10/10/2018 17:00

"Wow. The forecasters must have plied these idiots with some massively inflated viewing numbers if Liberty expected to make $40m profit in 4yrs with the streaming service through subscriptions."

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