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Teams could veto UK Pay-TV only deal

NEWS STORY
16/12/2018

Plans to float F1 on the Singapore Stock Exchange in 2012 eventually came to nothing, but in the years that followed the prospectus issued ahead of the proposed float has revealed a number of revelations, issues and agreements previously only known to the teams, the FIA and the commercial rights holder.

It is the gift that keeps on giving.

Next year not only sees Silverstone host the British Grand Prix for the last time, unless a new deal can be agreed between the circuit's owners and Liberty Media, it also witnesses the sport move almost exclusively to pay-tv.

We say "almost" exclusively because the one exception, in the most ironic of circumstances, is the British Grand Prix, which must remain 'free-to-air' as one of the so-called 'crown jewels'.

The remaining races - together with all practice sessions and qualifying - will be shown exclusively live on Sky Sports, which has in turn agreed a deal with Channel 4 to show highlights of all races.

For various reasons, be it budget, a dislike of Sky, unavailability of Sky in their area or the refusal, on principle, to pay for coverage, a lot of British F1 fans are going to be left very, very unhappy.

Which is where the prospectus for that 2012 float comes in.

The Daily Express reports that buried deep within the prospectus, is the revelation that under the Team Agreements - the contracts which effectively bind the sport together - is a clause that sates that F1 is "not permitted to contract to broadcast Events by pay television only in a country with a significant audience if it would materially adversely affect audience reach in that country."

Though not number one in the Top 5 TV markets - an honour that, surprisingly, goes to Brazil - the UK is fifth, with 21.7 million viewers according to the 2016 Global Media Report.

With around 26% of the teams' revenue coming from sponsorship deals which rely on TV viewers seeing their names and logos on the cars and overalls of their heroes, a significant drop in viewing figures should hit the teams where it hurts most.

Over the five years to 2017, the increasing reliance on pay-tv deals led to the sport's global TV audience dropping by 21.7% to 352.3 million, and only last month, Chase Carey admitted that this year "television viewing on race day year-on-year is down 5%, however that is largely due to our move from free to Pay TV in Italy."

Don't shed too many tears for the teams however, because though audience figures have dropped, which has in turn impacted sponsorship revenue, the pay-tv broadcasters, flush with the cash provided by new subscribers, are increasingly upping their bids in terms of what they will pay for the privilege of hosting the sport.

In January, Morgan Stanley revealed that Sky Italia is paying a whopping 99m - up 53% on 2017 - while Sky Sports in the UK is to pay 120m from next season, which is also around double its current fee.

Interestingly, Bernie Ecclestone has admitted that in fact it was his threat to take F1 to BT Sports that caused Sky to almost double its bid.

So, while the Team Agreements give the teams the right to veto the deal, and publicly they will sympathise with those fans now effectively shut out or reduced to highlights, the fact is that broadcasting rights are the sport's second biggest revenue source, comprising 33.7% of the 1.4bn it made last year.

Bottom line, the higher the revenue, the greater the profit, which is absolutely hunk dory for the teams which receive 68% of F1's profit as prize money.

Over the five years to 2017 the teams' share rose 15.2% to 727m, despite falling TV audiences, and though they have the power to veto the move to exclusive coverage on pay-tv they won't, certainly not for now.

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1. Posted by TokyoAussie, 18/12/2018 3:52

"F1 is "not permitted to contract to broadcast Events by pay television only in a country with a significant audience if it would materially adversely affect audience reach in that country."

I think the key words in there are "audience reach." In Japan, the free-to-air coverage (delayed by anything from 3 hours to a day) and pay TV (live) were both provided by the same TV organisation (namely, FujiTV). A couple of years ago (if memory serves), Fuji dropped the free-to-air coverage completely. So F1 is a 100% pay-TV service now. But if you define "audience reach" as the ability of somebody to receive the signal, you could claim the reach has been unaffected; the satellite covers the entire country. But if you define it in terms of audience numbers, then Fuji would be in clear breach of that contract clause (assuming they knew about it).

The greed of FOM/CVC and now Liberty know little bounds."

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2. Posted by FQITW, 17/12/2018 12:10

"So what we need to happen is the cars to lose all their sponsorship stickers while TV companies’ pay the team’s bills.

OK.

Next is all the new young fans get on board and pay more money to Sky etc and so on to the teams. All good so far.

After awhile the new young fans get tired of F1 (it was all getting too complicated anyway –‘ it was doing my head in’) and look elsewhere for the ‘next thing’.

TV revenues fall as do profits shared amongst the teams who then start sweating (but only after an uncomfortable period of financial foreboding which they try to ignore). Call it that ‘sinking feeling’ if you like.

‘Go back to the sponsors for money’ say the teams - Simples.

‘No we won’t sponsor you as the viewing figures are too low’ say the sponsors ‘and your Pay wall excludes most of our customer base’.

OK then what about the original long term fans the teams ask?

Oh wait a minute
There aren’t any…..
"

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3. Posted by alvarezh3, 16/12/2018 17:03

"Hope this disclosure be reproduced (with due credit) on all general and automotive sports publications. Also on the sports sections of all the daily news papers around the world, so that the F1 team's sanctimonious hyprocrisy gets uncovered once and for all.
The F1 teams stand full of joy behind the curtains, while FOM gets all the blame for the TV pay walls.
"

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