Now that the United States Grand Prix is over, lets talk about Formula One streaming. It’s a topic that has been discussed by fans for many years now and it’s finally getting discussed by the people that run the sport. But there’s one big factor that will dictate the project’s success or failure.
Before the United States Grand Prix, it was confirmed by F1’s commercial chief Sean Bratches that the sport would be overhauling its digital marketing strategies to create an online streaming service for Formula One in 2018. The streaming service will be in-house, meaning that the sport isn’t going to partner with an existing streaming giant lie Netflix or Amazon.
The news that there will be an online streaming service for Formula One doesn’t really come as a big shock. In fact, it was virtually guaranteed when Liberty Media took over a controlling interest in the sport. It was pretty clearly the main reason why NBC opted not to renew their Formula One broadcasting rights.
While it all sounds great, there are some huge downsides, especially for the fans from the United Kingdom. The biggest downside is that the streaming service won’t be available in areas that already have an exclusive broadcaster. For example, Sky holds the exclusive rights to Formula One in the United Kingdom until 2024, so it’s going to be a while until UK fans will get to enjoy the new service. Sadly, this is unavoidable for Liberty Media, given the estimated large price tag for the deal and the legal valid legal agreement. It’s not really their fault, given that the deal was signed under the previous owners.
Another big setback could be the quality of the stream. The choice not to partner with an existing service means a lot of up-front development costs for the sport. This could cause them to cut corners on selecting commentators in order to save money.
And then of course there is the quality of the streaming platform itself that is a concern. The reason I consider this a concern is because of the video platform on the official Formula One website. I have watched tons of videos on their website and I absolutely hate their video player. I find that it freezes, even on a good system and internet connection and find the inability to control the quality of the video infuriating. I’m hoping that the streaming platform will be better.
But now lets talk about the elephant in the room: the cost. This is the single largest factor when predicting the success or failure of this project. No other factor would drive people away quicker than another overpriced Formula One subscription.
If you look at a pay service like Sky, you should expect to pay around £20 for just the Sky Sports F1 channel, on top of the minimum £20 for the base Sky TV service required to view Sky Sports F1. That’s £40 per month. This translates to a little less than $50 US or a little more than $65 Canadian. I can get a cable package with over 75 channels for the same price per month.
You could also get a Sky Sports day pass for £7 per day, which would equal £147 ($195 US or $245 Canadian) to watch all of the races.
Hiding Formula One races behind paywalls has been a huge topic for discussion recently and there are lots of people wishing that Formula One would switch to a free-to-air service.
The first point I’d like to make about an F1 streaming service is that you can’t charge monthly for it. A monthly fee for Formula One would incredibly stupid because you have some months like October with four races and other months like June or May with just two races. The value for your monthly fee varies depending on the month.
The much better option is a fee per race. This way the casual fan can watch a few races that they want to watch without having to commit to watching an entire month of races, some of which may be broadcast during bizarre times at night in your location. And it’s very important that any F1 streaming service is accessible for casual fans, since that will lead to more conversions into hardcore fans. After all, I highly doubt that you were a hardcore F1 fan right off of the bat. You more likely saw a few races and were drawn in.
That’s part of the reason that an F1 streaming service should have a free trial system. It’s the easiest way to get new fans with no monetary risk for the fan. It’s also a good way to let skeptical F1 fans try out the streaming service before they decide to buy it.
But now it’s time for the big question: what should the F1 streaming service cost? To find out this, we have to look at what the current broadcasters spend for their rights. Sky has thrown around some insane value of £1billion for their six year deal, but I find this value extremely hard to believe. In fact, I value the Sky deal at between £350m and £500m.
Since I question the accuracy of the Sky deal value, I’m going to use the far more realistic evaluation for the Channel 4 deal. This deal was for 10 races per season, valued at £35m per season. That’s £3.5m per race. If we assume that 1 million people watch a race, which is a reasonable ask considering an average of 2.42 million people watch the race on Sunday.
With that math, each customer would need to pay £3.50 for the Formula One rights holders to make the same amount of money that Channel 4 pays per race. That’s only assuming that 1 million people watch the race just on Sunday. If Formula One is able to produce a successful streaming service, they can easily win over well over 1 million people per race. They rights holders could easily charge just £2.99 per race (under $4 US or $5 Canadian) and people would be perfectly happy.
That would be the equivalent of £63 ($85 US or $105 Canadian) per season for all of the races. That’s nearly a third of the cost that you would have to pay if you were watching the races with the day pass option and a lot less than what you would pay to be a regular Sky customer.
And there are lots of people that will still argue that Formula One should be free to watch, which I can agree with to a certain extent. I agree that Formula One is a very popular sport and that it should be incredibly easy to monetize a free Formula One stream with ads. At the same time though, I would have no problem paying a little money to watch good coverage of Formula One.
For example, I find the Sky Sports F1 coverage a lot better than the NBC coverage or Channel 4 coverage. It’s not necessarily because it’s a pay channel, but having a little more cash to burn does legitimately help the broadcasters to provide better coverage.
Oh, and I know that there are some of you who are saying “when you did the math above, you only factored in the cost of the rights for one broadcaster. Formula One has lots of broadcasters and they all pay rights, so Formula One is actually making a lot more money per race than just £3.5m.” You’re right. Formula One does rake in a lot of money from various broadcasters. A whole lot more than just £3.5m. But you are forgetting that traditional sports broadcasting will still happen.
There will still be broadcast companies that buy the rights to Formula One and broadcast it on TV. That’s not going anywhere. And with Formula One on the rapid road to recovery, the cost of broadcasting rights certainly aren’t going down anytime soon.
The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of any other agency, organization, employer or company. Assumptions made in any analysis contained within this article are not reflective of the position of any entity other than the author.
