Formula One’s commercial chief Sean Bratches has hinted that the company will pursue more pay TV broadcast deals and will rely on its redeveloped digital assets to achieve the kind of audience reach which free-to-air partnerships would otherwise offer.
New owner Liberty Media has vowed to overhaul Formula One’s dated commercial model with digital, sponsorship and broadcast revenues all being a major focus of the sport’s redevelopment.
While growing Formula One’s mass audience appeal is a major focus of the new era, the dichotomy of increased revenue on offer form pay TV deals verses the smaller audience which they offer in comparison to free-to-air alternatives is proving to be a difficult balancing act for the businesses bosses.
Speaking to Motorsport.com, Sean Bratches said: “I think it a dynamic that many sporting organisations are looking at – more so than not, organisations are finding themselves on pay [TV] because that is where the money is.”
Formula One has saw its viewing audiences decline in several key territories and a major factor attributed to the downturn has been the transition from free-to-air broadcasts to pay TV deals, such as changes in the UK which saw the sport move from the BBC to Sky Sports.
Broadcast revenue accounts for around 35% of the business’s income, however the profit from such partnerships can be dented by lower sponsorship revenue with many brands being deterred by the lower audience reach.
Sponsorship revenue for the teams has been decreasing for years, in 2015 it amounted to $750m, down from $950m three years before.
Bratches admitted that the revenue from pay TV networks was “difficult to ignore” and suggested that the sport would look to pursue such partnerships going forward.
“You have to look at it on a territory by territory basis,” said Bratches. “There are some marketplaces where the pay to free-to-air penetration is extremely high. The economic benefits are there, and it makes it a little bit easier to make that move.
His comments follow on from similar remarks made by Liberty Media boss, Greg Maffei who recently promised to significantly increase the television revenue from US broadcasters when its current deal expires at the end of the year.
Bratches pointed out that Liberty Media is in a position where it is trying to “build the brand and increase the number of sponsors who are investing” in the sport and so would still need to consider free-to-air alternatives.
“I think there are ways to have an opportunity to create a free-to-air package that acts as a barker for the sport to create a brand awareness to a broad population.
He added: “To have a combination of both is an appropriate mix going forward. We will make that decision on a territory by territory basis.”
When asked about Sky holding the exclusive broadcast rights to the sport from 2019, Bratches maintained that Formula One’s own digital properties would help convince sponsors that it still yields a valuable reach.
“We are in the process right now of re-imagining our entire portfolio of digital assets from web, Apps, to social, to OTT – and we really look at that as an opportunity to engage with fans on a very broad basis and really navigate fans around our eco system, in and outside a grand prix weekend.
“We are not looking at fan engagement from any one specific platform, we are looking at it holistically. And with the advent of digital and broadband and interconnectivity, and the adoption of digital, we think that is a big opportunity to complement and augment markets where we do tend to go a little bit more in the pay direction.”
With only one grand prix weekend under its belt, Liberty Media has yet to illustrate the full scale of its vision, however John Allert, chief marketing officer of McLaren Technology Group, has revealed that teams are already seeing the benefit of the new owners.