F1 Streaming Impacted $40 Million US Deal

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.”