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Insight: Sky takes Formula 1 TV behind exclusive paywall in UK

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Insight: Sky takes Formula 1 TV behind exclusive paywall in UK
Mar 24, 2016, 12:26 AM

Sky has swooped to close a deal for exclusive live rights to F1 for six years from 2019 onwards, meaning British F1 fans will only be able to watch...

Sky has swooped to close a deal for exclusive live rights to F1 for six years from 2019 onwards, meaning British F1 fans will only be able to watch live Grands Prix behind a paywall from that point.

The move will align the UK with France and Spain, which has a similar situation at present. It is likely that other European countries will follow in due course, as F1 Management and CVC prioritise income from broadcasters over mass audience numbers.

The TV audience for F1 is still around 60% based in Europe, but few terrestrial broadcasters have the budget or appetite for an exclusive F1 deal. RTL in Germany is one of the few exceptions. It recently extended its deal for two more years, despite declining audience numbers in Germany.

The timing of the Sky UK deal is interesting on a number of levels; Channel 4 has just begun a three year contract to show half the races live on free to air TV. Their experience of the sport is set to be short lived.

Under its new deal, Sky is required to make the highlights and the live coverage of the British Grand Prix at Silverstone free to view. There is some debate about what Free to Air will mean by 2019, with various digital terrestrial platforms. It is launching a new Sports Mix channel, which is free to Sky subscribers and this content may feature on there.

But it may also sub-licence the highlights and Silverstone race to a terrestrial, like Channel 4 or ITV. That is the model in the UK for the Premier League, which has a weekly FTA highlights programme on BBC TV.

It would be valuable to the sport to continue to have a shop window on a mass market FTA platform, even from Sky's point of view, to attract new viewers.

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The audience for F1 in the UK, once it moves exclusively behind a paywall, will be interesting to monitor. It should settle at somewhere around 1 to 1.5 million. Last year live coverage of the US Grand Prix championship decider, live on Sky Sports 1 and Sky Sports F1, attracted a combined average audience of 1 million, with a peak of 1.2m. As a reference, BBC 1's live audience for the Hungarian GP was watched by an average 3.9m with a peak of 5m. When Lewis Hamilton won the 2008 world championship the title decider in Brazil on ITV was watched by 9m average and peaked at over 12m.

No details have been given on the online rights in the deal; during the lifetime of this new deal the TV landscape will change significantly and many consumers will be looking to stream the races on smart TVs or mobile devices. No doubt that is covered in the new deal and will present a new opportunity for growth for both the broadcaster and the sport.

One clue as to the possible future direction came last year, when FOM and Tata Communications, its connectivity partner, did a proof of concept with an OTT (over the top) service. An OTT video feed has the potential to open a new world

of immersive and engaging experience for the fans, where they have a greater control over their race experience by

being able to select what they want to watch.

When BBC TV pulled out of its contract (which was due to run to 2018) at the end of last season, theoretically Sky had first refusal on the rights. But Ecclestone struck a deal with Channel 4, keeping F1 on free to air TV for three more years. It is understood that the F1 teams lobbied for a continued terrestrial TV footprint at least until that point.

Sky has leveraged its position to secure F1 for six years from 2019. It is partially a defensive move, which keeps its main rival BT Sport out of F1 until 2024 at least. BT Sport has already taken the Champions League from Sky and drove up the price on the Premier League football rights up to £5bn at the last round of bidding.

Sky has scaled back on costs at Grands Prix, with a travelling crew less than half as numerous as when they came in back in 2012. They have pooled facilities with Sky Italia and Sky Germany, such as cameramen and edit resources as they look to save costs. Against that backdrop, the rights move is clearly a strategy to close out BT Sport.

The Sky deal comes in a week when the network has increased prices to consumers, meaning that for the first time a UK family household with two Sky+ HD boxes, Multiscreen and the Variety Sport package, which is necessary to watch the Sky F1 channel, will have to pay £83.80 a month, which crosses the key psychological price point of £1,000 a year. On Sky's sales website, a search for the cheapest single box package to receive the F1 channel, come out at £47.50 a month, which is £570 a year or £27 per Grand Prix.

This new F1 deal also goes well beyond the end of the current bilateral agreements with F1 teams, which run to 2020.
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