F1 CEO Bernie
Ecclestone’s move to push more races behind a paywall "is
prompting concerns among team sponsors," according to Alex Duff of BLOOMBERG. Ecclestone is making deals with pay-TV broadcasters
including Sky in the U.K., Fox Sports in Australia and
Spain’s Telefonica SA "to sell exclusive rights to between half
and all of the 20 races, breaking from a decades-old model of
free-to-air television." The 84-year-old CEO is reaping a "double bubble" in
income for shareholders led by CVC Capital Partners Ltd. by
charging twice in each territory, although former Red Bull
Racing Head of Sponsorship Mark Gallagher said that "he risks driving away
sponsors for teams if audiences continue to decline." Gallagher said, "Formula One gets the chance to secure a ton of additional
revenue" but has to be careful not to alienate casual fans. He said the strategy "won’t please mass-market brands
like Santander." According to an internal F1 broadcast report, the cumulative audience for 19
races fell 5.6% to 425 million last year, "a third
straight annual drop." Ecclestone "is navigating a more complex media landscape
after pursuing so-called escalator contracts that rose 10
percent every year with free-to-air operators." Many of those
broadcasters "are seeing ratings decline as young people watch
less television and they aren’t willing to pay more every year
to screen Formula One." F1's net income from TV rights deals and race-hosting fees before tax, interest, depreciation and amortization declined 8% to $1.08B in '13 "after the series paid more prize money to teams." Zak Brown, CEO of Just Marketing Int'l, an auto-racing consultancy that advised Bacardi on its Martini brand’s return to F1 last year, said that some sponsors "are concerned that move to pay television may shrink audiences." Brown: "I have had a handful of comments from sponsors that they are concerned over the reduction in reach. No one questions the massive reach of Formula One but people are hung up on the trend line" (BLOOMBERG, 3/11).
