The pay TV vs free-to-air conflict at the heart of modern F1

Formula 1's gripping title contest between Lewis Hamilton and Max Verstappen has already proved to be a big hit with fans – as a number of countries are seeing a boom in TV audience figures.

The pay TV vs free-to-air conflict at the heart of modern F1

As F1 heads to its blue riband event in Monaco, which has regularly been one of the most watched races on TV over recent years (not last season because it didn't take place), all the indications are for another bumper audience.

But the prospect of F1 delivering its closest championship battle for years has again reopened the debate about whether or not the sport is losing out by not being on free-to-air in as many markets as possible.

Speaking recently about F1 being so much on pay-TV, world champion Lewis Hamilton said: "I do understand for the people that can't afford to have paid TV or Sky or whatever it is. But it is the way of the world today and there is not a lot we can do about it."

The issue of the pros and cons of free-to-air versus pay-TV is not a new one though, and has divided UK fans in particular ever since Sky first broadcast F1 in 2012.

For much of the time, the argument has focused simply on whether the price of the fall in TV audiences for live broadcasts is worth the extra cash that pay TV channels can offer.

But, the reality is that the threats and opportunities offered by pay TV are far more nuanced that just those headline numbers from a Sunday afternoon.

The extra benefits of pay TV

Simon Lazenby, Sky TV, on the grid prior to the start

Simon Lazenby, Sky TV, on the grid prior to the start

Photo by: Mark Sutton / Motorsport Images

It is widely accepted that F1's TV audience figures reached their peak in 2008 when there was a tally of 600 million unique viewers that year.

A gradual shift to pay TV channels has seen numbers steadily fall away, with it drifting down from 490 million in 2018, to 471 million in 2019 and 433 million in 2020 – but last year was impacted by COVID-19 and a shorter calendar.

But while globally the trend has been clear, some markets are doing well. The USA has delivered record figures this year, and even in 2020, with races exclusively in Europe and the Gulf region (so not on American timezones), there was a growth of 1%.

There is no argument that F1 would have bigger audiences overall if it went back to being completely free-to-air.

But would a switch and better headline viewership figures actually be of overall benefit to the sport?

It's something that F1's director of media rights Ian Holmes is especially sceptical of.

While he acknowledges that free-to-air television will always bring more viewers than something broadcast at the same time on pay TV, actually understanding what is best overall for the sport is a much more complicated thing to appreciate.

There are other factors – like committed blanket coverage, and the tremendous marketing that networks like Sky do to promote their F1 coverage – that all add up to boosting the sport's overall exposure

"There's no point in comparing live free with live paid," he says. "What we have found, and this is not just the case with Sky because you could equally say it with someone like Canal+ in France, quite a mature pay television platform, is the amount of marketing that they put behind their premium rights, and how they push out their content. It goes over and above their live ratios and so on.

"We got more exposure than ever before the season even started when we first did that Sky deal. I remember driving around and seeing massive billboards everywhere. We never had that before.

"It's more than just: what is the television audience? It is how are they going to get behind the sport? How are they going to market the sport? How much time can they give to the sport?

"And ultimately, you have got to look at that over the case of a season.

"If you start with a snapshot [audience comparison] of a live race then of course it's going to be less. But it's how will that audience grow and develop over the course of the season?

"It is somewhat more nuanced than are you free or are you pay? I mean, let's face it, other than the quadrennial events such as the Olympics, the World Cup, and the European [football] championship, there's almost no blue chip sport on free to air television. And there's a reason for that."

Different markets

Lewis Hamilton, Mercedes W12, Max Verstappen, Red Bull Racing RB16B, Valtteri Bottas, Mercedes W12, Charles Leclerc, Ferrari SF21, and the rest of the field away at the start

Lewis Hamilton, Mercedes W12, Max Verstappen, Red Bull Racing RB16B, Valtteri Bottas, Mercedes W12, Charles Leclerc, Ferrari SF21, and the rest of the field away at the start

Photo by: Jerry Andre / Motorsport Images

For F1, having a full-on presence on a committed platform like Sky, which can offer round the clock coverage and a level of exposure not possible on many free-to-air channels, brings clear benefits, for teams, sponsors and fans that go beyond the financial impact of a deal that is worth around more than £1 billion over its six years.

But, that's not to say that F1 is obsessed with just seeking out the highest-paying platform in each country. When it does deals, it wants to ensure that what it has in place works for the sport beyond just the bottom line.

Sure, a pay TV deal will deliver an audience hit over free-to-air when it comes to Sunday afternoon's live TV figures, but it's that impact as a whole over the course of a season that matters.

And, in some markets, the pay TV hit would be too big so changing platforms would not be good for F1. Therefore, it is better to remain on free-to-air.

"We might take a different position in a developing market than in a developed market," explains Holmes.

"We might take a different position somewhere like Singapore, and India, where one is tiny and one is absolutely massive."

Beyond that too, deals must weigh up an extra package of digital content, and of course whether or not F1's own F1TV platform can be offered as an add-on for that country's viewers.

Digital content

Karun Chandhok, Sky TV, Jenson Button, Sky Sports F1, and Simon Lazenby, Sky TV, on their socially distanced platform

Karun Chandhok, Sky TV, Jenson Button, Sky Sports F1, and Simon Lazenby, Sky TV, on their socially distanced platform

Photo by: Mark Sutton / Motorsport Images

These days too, you cannot just judge the appeal of a sport purely from its live TV audience figures.

Television eyeballs are only one metric that gauges a sport's popularity – and F1 fans have never been more engaged with the sport and had access to as much content as they do now.

Where once Bernie Ecclestone poured scorn on anyone suggesting F1 should be giving away free content on social media, under Liberty Media's reign there has been a complete opposite change of approach.

An aggressive push on platforms like Facebook, Twitter, Instagram, and TikTok, has helped F1 become the second-fastest growing sporting league in the world – albeit coming from a low base as it has been playing catch-up.

With nearly five billion video views in total last year across the internet, teams, drivers and sponsors are getting more views than ever before.

And rather than the social media output being viewed as a negative in potentially giving fans an excuse not to subscribe to a pay TV channel, F1's view is that it is actually beneficial in drawing a different audience is.

"There's plenty of evidence that suggests that the content that we or anyone else pushes out complements the rights that our key broadcast partners pay for," says Holmes.

"There's all these marketing expressions about the top of the funnel and all that, but it's absolutely essential. And there is a portion of people, and people talk about the younger demographic but it doesn't have to be them, that are not going to sit and watch the race anyway.

"So you're not taking eyeballs away from whoever happens to have the live race. But what you might be doing is converting them. I think everyone recognises the value in that."

Germany and Brazil impact

Lewis Hamilton, Mercedes AMG F1 W10 leads Max Verstappen, Red Bull Racing RB15, Sebastian Vettel, Ferrari SF90 and Alexander Albon, Red Bull RB15 at the restart

Lewis Hamilton, Mercedes AMG F1 W10 leads Max Verstappen, Red Bull Racing RB15, Sebastian Vettel, Ferrari SF90 and Alexander Albon, Red Bull RB15 at the restart

Photo by: Andy Hone / Motorsport Images

This year has, however, has marked two significant changes in F1's TV picture, with the huge markets of Germany and Brazil moving channels.

Both examples show why just looking at Sunday afternoon race viewing figures does not provide the perfect insights in the pros and cons of the switches.

In Germany, free-to-air RTL is no longer broadcasting every race live and instead will show just four events, with Sky showing all sessions live.

The end of the RTL deal was a big thing for Germany, but Holmes says the reality of declining advertising revenue for free-to-air broadcasters meant it no longer made financial sense to continue.

"What we've seen over the course of the last nine years or so with our RTL renewals reflects where free to air commercial television is in the world of paying for rights," he said. "With each renewal, the rights went down.

"They are a business, and they can't sell their advertising for the numbers that they used to be able to. With advertising, while the actual pot is probably the same, it now gets spent in different areas and good old digital mops up an increasingly large share of that."

F1 also had confidence that the German market was ready for a move to Pay-tv, with Sky Germany's penetration in the market having improved.

So that while it accepts the German live TV figures will be well down at those events RTL does not show, extra content being shown as part of the F1 deal on Sky Sports News, plus ARD and ZDF, should balance things out in terms of F1's exposure over a whole season.

In Brazil, F1 switched from long-time partner Globo to smaller free-to-air network Bandeirantes. It made no sense to go to a pay TV channel there.

"Brazil was a market that was too important from a size point of view for us to consider even a partial pay television," says Holmes.

"And what Bandeirantes don't have in terms of just market share compared to Globo, their appetite for the rights was very significant.

"Globo only has one channel, so to actually get on there with all those telenovelas, which deliver enormous audiences, was super hard.

"Bandeirantes will give us a much, much broader commitment to broadcast every single race and qualifying session throughout the year. Globo haven't shown an event from the Americas, other than the Brazilian one, live for years.

"For all the qualifying sessions, they showed between two and four minutes normally in another show. So now we have every single race and qualifying session, live on free to air television on Bandeirantes.

"Bandeirantes own BandSports, so they will show all of the practice sessions, and they'll show F2 and F3, which is also important.

"And then also to hopefully super serve the F1 fan, we can release F1TV in the market. It hadn't been in the market before that

"In a market that size that's not going to sort of significantly change the overall exposure, but it does provide an additional viewing opportunity for the avid fan.

"So factoring in Germany and Brazil being so populous, they'll definitely drag the figures a little, but whether they depress it in such a way that we're [globally] below last year, I'm not so sure. The indications everywhere else are really good."

Greater acceptance

Daniel Ricciardo, McLaren MCL35M, Nicholas Latifi, Williams FW43B, Mick Schumacher, Haas VF-21, and Nikita Mazepin, Haas VF-21, chase the pack at the start

Daniel Ricciardo, McLaren MCL35M, Nicholas Latifi, Williams FW43B, Mick Schumacher, Haas VF-21, and Nikita Mazepin, Haas VF-21, chase the pack at the start

Photo by: Zak Mauger / Motorsport Images

One important thing to understand is that the TV business market – and most especially attitudes from consumers about paid for content – has changed dramatically in recent years.

Whereas once, fans were in uproar about there being any F1 content not on free-to-air, the huge popularity of Netflix's Drive to Survive series on (paywalled) shows that content does not have to be free to be successful.

The greater willingness of people to pay for quality content, especially as pay TV channels demand ever greater exclusivity, appears to have triggered positive momentum behind Sky's audience figures in the UK.

When Channel 4 was last broadcasting races regularly live in 2018, it was drawing in around 2 million viewers per race, with Sky getting less than one million.

This year's season opener in Bahrain, Sky delivered its biggest ever TV figure up until that point – with an average of 1.98 million watching the race and a peak of 2.23 million.

There are signs of growth too in key markets. Last year, F1 boasted a 43% growth in China, 28% in the Netherlands and 71% in Russia.

Changing times

Martin Brundle of Sky TV commentates on Lando Norris, McLaren MCL35M

Martin Brundle of Sky TV commentates on Lando Norris, McLaren MCL35M

Photo by: Mark Sutton / Motorsport Images

But just as F1's car development never stands still, so too does its TV business model constantly change.

In a decade, it's hard to say if we will all be watching F1 on Sky, Amazon, Netflix, YouTube, F1TV, on websites like Autosport or even OTT platforms like Motorsport.tv.

In fact, we could even be watching it on something that does not even exist right now.

But one thing remains true: Top line sport is perfect for live television, and with that attraction comes television networks willing to pay top dollar. That in itself is a huge boost for F1's long-term health.

Asked how he saw the TV business world panning out over the next decade, Holmes said: "I see a scenario where sport is still blue chip content.

"A lot of value is in the live experience. And there's not a lot else out there, that requires that live experience. So it's sort of Premium Plus. People will therefore seek it out, and therefore it's going to retain value.

"So what's most important I think for us, is that we make sure our content is as good as it can be. And by that I mean there's the on-track content that other people far cleverer than I kind of oversee – which is good regulations, how the cars are built and the competitive nature of racing."

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