F1 CEO Chase Carey and the group’s owner Liberty Media have reiterated their conviction that the world of premium sports is still moving away from FTA towards pay TV at the same time as migrating from traditional broadcast to streaming. For Liberty Media, this means putting its weight behind the F1 TV streaming service and working hard to iron out the technical problems it has suffered from so far.

F1 is facing a conundrum shared by other premium sports, which is to strike the optimum balance between revenue generating pay services and the greater audience reach achieved by putting at least some races on FTA. Sports that go too far towards revenue generation risk cutting too many fans off from broadcasting and ultimately shrinking the audience reservoir from which future paid subscribers would be recruited.

This can be a greater risk for second line sports that were not quite as popular in the first place, with some evidence this happened for example in the UK with cricket. While cricket is booming in India, especially the shorter 20/20 version of the game, its popularity has declined somewhat in the UK ever since test matches and many other major events left FTA to become exclusively broadcast by Sky after around 2005. It is notable that Sky made coverage of the recent one-day World Cup Final between England and New Zealand available FTA, even though this would seem to diminish the value for its paying subscribers as well as for potential advertisers during the event. Sky calculated this would provide positive PR but more importantly stoke interest in the sport and perhaps entice some new fans to take out a subscription to a package including the cricket.

F1 is aware of this dilemma, having seen its global TV audience fall consistently at a rate of around 1.5% to 2% per year over the last decade. The audience is down 18.3% to 490.2 million viewers over the last 11 years, almost certainly as a result of the move from FTA to traditional pay TV even before the streaming service was launched. Putting the races behind a paywall drives down the number of viewers while boosting revenues for F1, at least for a time.

It is fair to say that F1 has not deliberately kicked out FTA broadcasters since they are free to bid for rights. It is just that pay TV operators can invariably outbid FTA broadcasters because they have already been enriched with subscription fees from other sports. The writing was on the wall for FTA F1 coverage as soon as Liberty Media’s $4.6 billion takeover of F1 was completed in January 2017.

Although F1 is not willing to continue with FTA live coverage if that means sacrificing revenues, it has been experimenting with other ways of sustaining greater audience interest beyond its pay subscribers, albeit with results so far that are at best mixed. In the UK it handed live rights for races exclusively to Sky Sports but allowed FTA commercial broadcaster Channel 4 to have a highlights package. The theory was that showing delayed highlights during the evening at peak viewing time would draw in new fans who would not necessarily want to watch the race at often inconvenient times depending on the time zone difference. But this has not been successful so far, with the UK F1 audience slashed by an average 533,000 viewers per race on FTA. Yet in December 2018 F1’s global research director Matt Roberts had claimed the sport would benefit from the highlights being shown in the UK at prime time later in the day rather than the early afternoon slot that the live races had the previous year.

Meanwhile in a sub plot, F1 TV streaming coverage has been plagued by technical problems which have not helped with subscriber recruitment, including glitches during transmissions and also wider failure to deliver on promised enhancements, such as ability for viewers to select different camera angles. These may well be just teething troubles at a time F1 and its global technology partner for infrastructure and transmission Tata Communications are investing heavily in advanced features, including Augmented Reality (AR) as well as wearable devices in the cars to monitor the drivers’ actions and also heart rate. There is also development of data analytics capabilities designed to help casual or newly recruited fans understand and enjoy some of the more arcane statistical aspects of the races and sport.

But these technical problems are an embarrassment for Liberty Media, F1 and especially Tata Communications, which nonetheless continues to trumpet its involvement with the sport. For example it boasts of enabling the first OTT broadcast of a live F1 race with no lag between the TV and app feed in 2015. But that was before scaling up to commercial volumes.

Meanwhile it is worth noting that subscriptions are not the only source of income associated with premium sports streaming and that advertising offers either an alternative or at least complementary revenue stream. Live sports lends itself well to advertising because ads can slot naturally into breaks during events without annoying viewers as they do when inserted pre roll, or mid roll into on demand content. That is why Netflix has studiously eschewed advertising so far.

Among dedicated sports streamers moving into advertising is Perform Group’s DAZN, launched in Austria, Germany, Japan, and Switzerland in August 2016, followed by Canada in 2017, the USA and Italy in 2018, then Spain and Brazil in 2019. DAZN introduced advertising in March 2019, aiming to exploit its customer data and expanding global reach to offer some attractive addressable targets for major brands. Initially the newly formed DAZN Media set up to exploit advertising is working with a select group of advertisers, including Volkswagen, online betting firm bwin Interactive Entertainment and German brewer Krombacher, planning to air the first commercials late in 2019.