Last week shares in Formula One made some of their greatest gains so far this year. On Tuesday alone they accelerated 3% on the release of analysis by banking giant Morgan Stanley which forecast that F1's revenue from television will grow by £132.4m ($186.9 m) this year.
However, a report for Forbes by Christian Sylt has now cast doubt on this as one of Morgan Stanley's own sources suggests that the growth should actually be 42.4% lower.
According to Morgan Stanley the £132.4m growth this year will be F1's biggest increase in broadcasting revenue between 2013 and 2020 and almost half of it comes from four key deals.
Starting at the top, Morgan Stanley reckons that in Spain Movistar, the Pay TV broadcaster owned by telcoms firm Telefonica, will pay an estimated £26.5m (€30m) more in 2018 whilst the fee from German free-to-air channel RTL will rise by £17.6m (€20m). But that's not all.
Morgan Stanley also says £7.9m (€9m) will also come in from a Pay TV broadcaster in Germany this year with a free-to-air channel paying £4.2m ($6m) in Latin America.
These four new deals allegedly come to a total of £56.2m which equates to 42.4% of the increase in broadcasting revenue forecast by Morgan Stanley. The big question is whether reality will actually reflect the forecast.
If you think this outlook sounds a little too rosy you're not alone. Fernando Alonso has had some of the worst seasons of his career in recent years and finished 15th overall in 2017. Fellow countryman Carlos Sainz Jr didn't do much better and only finished six places higher in the standings. Hardly ideal conditions for F1 to extract a 44.8% higher broadcasting fee from Movistar as Morgan Stanley claims it did.
Then there's Germany. Interest in F1 there has reversed so much there that it only hosts a race every other year. Despite this, Morgan Stanley says that F1 has managed to get 44% more money from RTL. And how about that £7.9m from a Pay TV broadcaster in Germany? Morgan Stanley doesn't say what the channel is and there is good reason for this: there isn't one.
Morgan Stanley's table states that £7.9m (€9m) will come from a Pay TV broadcaster in Germany even though there is no deal in place. F1 was broadcast by Pay TV channel Sky Deutschland in Germany last year but according to this article in industry publication SportBusiness the channel has turned its back on the sport.
It means that a new Pay TV deal in Germany would probably have to be with a new broadcaster which would need to plan it into its scheduling and arrange a team to present it. Given that there are just seven weeks until the start of the season this sounds like fantasy.
The same goes for Latin America. Morgan Stanley admits there is no free-to-air contract in place there as it refers to an "Unknown FTA" broadcaster even though it says it will pay F1 a £4.2m fee this year.
Interestingly, SportBusiness is one of the sources of Morgan Stanley's table of forecast broadcast fees and a quick flick through some of its articles reveals some startling contradictions with the bank's conclusions.
In January SportBusiness reported that "Telefonica's new three-year deal, from 2018 to 2020, will be worth about €65m ($77.8m) per year. This is roughly the same fee the telco paid in its previous two-year deal." It is far from the £26.5m (€30m) increase to £85.6m (€97m) that was forecast by Morgan Stanley, even though it lists SportBusiness amongst its sources.
SportBusiness says there are two good reasons for the fee staying flat. "First, the lack of competition for the rights from broadcasters. Second, the lack of success of Spanish drivers in recent times. Sainz and Alonso finished ninth and 15th respectively in the 2017 driver standings. Interest in F1 in Spain is heavily dictated by the performance of local drivers."
However, this is just the beginning. On 19 January SportBusiness reported that in Germany "pay-television rights will not be sold in the new cycle" whereas Morgan Stanley claims they will generate £7.9m.
Even more worryingly, SportBusiness reported that "RTL has renewed its free-to-air rights deal for three years, from 2018 to 2020, for slightly less than $50m (€41.8m) per year." It is far from the £17.6m (€20m) increase to £57.3m (€65m) that Morgan Stanley forecast and is actually less than the bank had it down for in 2017, let alone 2018.
SportBusiness concludes that "the value of Formula One media rights in Germany will fall from 2018 onward following a flat renewal with RTL and the decision to not sell pay-television rights... The financial outcome is not a bad one for F1, considering – like in its deal in Spain – there was little broadcaster competition for the rights."
To recap, this all comes from one of the outlets which Morgan Stanley lists as a source for its data. It raises questions over the forecasts for £7.9m of Pay TV revenue from Germany, £4.2m of free-to-air revenue from Latin America, the £17.6m increase in free-to-air revenue in Germany and the £26.5m increase in Spain. All in all, the amount in doubt comes to £56.2m which is 42.4% of the £132.4m increase forecast for 2018.
The first page of the Morgan Stanley analysis states that "press reports suggest F1 revenue could benefit from new TV contracts" and the list of sources for the table of forecast fees only shows press outlets. However, the author of the Morgan Stanley analysis told Forbes that in fact, another source was used.
"Not every estimate on that sheet is from sportsbusiness, some are our own," said Ben Swinburne, managing director and head of media Research at Morgan Stanley. "These are our estimates, based on a variety of analysis and press reports." This is interesting as some of the tables do indeed list "Morgan Stanley Research" as a source, but the one which shows the forecast broadcast fees does not. Its footnote simply says "Source: Forbes, Financial Times, Reuters, Sport Business, F1.com, Autosport, Sports Pro Media, TV Tonight, Mumbrella, Telecom Paper, sportcal, Sports Business Daily."
Accordingly, if some of the estimates in the table are from Morgan Stanley's research, as Swinburne says, then the list of sources is inaccurate as this isn't mentioned. To anyone reading the table it appears that all of the figures come from external sources but Swinburne says this isn't actually the case.
The sources are of paramount importance because SportBusiness is listed as one of them and it casts doubt over almost half of the forecast growth. What's more, SportBusiness provides compelling and entirely logical reasons for the fees being far lower than Morgan Stanley suggested.
Nevertheless, it didn't stop the shares surging last week which added around £188m ($265.5m) to F1's value.
The news came at just the right time as only one week earlier F1 revealed that its revenue crashed in 2017 by more than in any other year over the past decade as Pitpass reported.
Although the Morgan Stanley analysis fuelled a share buying spree, investors should be aware that there are no guarantees. The analysis makes it clear that one of the risks is still "broadcast contracts renewed under less favorable terms".
It adds that "slower than expected adoption of the company's upcoming digital platform efforts could impact growth expectations." This refers to F1's much-hyped streaming service which launches this year and will beam races direct to subscribers over the internet.
Despite the hype, Morgan Stanley says that it is "not a near-term revenue driver but important long-term." It forecasts that only 104,000 users will subscribe this year at an estimated monthly cost of £5.66 ($7.99) giving F1 just £5.3m ($7.5m) of revenue. According to Morgan Stanley it will take seven years for the number of subscribers to top 1 million.
We will know long before then whether its forecasts of broadcasting revenue are anywhere close to the mark. The first checkpoint comes just next month. If Germany and Latin America haven't secured Pay TV and free-to-air deals respectively by then it will prove that Morgan Stanley's forecast is at least £12.1m too high.
The clock is ticking.