F1 Experiencing Significant U.S. Viewership Growth, Operating Income Declines -69%


Formula One returned to ESPN (ABC and ESPN2 also have races) this season following a 2-decade absence from the network and the racing circuit is experiencing significant viewership growth; particularly impressive, considering F1’s audience increased +70% over the proceeding 5 years. April’s Bahrain Grand Prix saw an average of 683,000 viewers tune in, making it the largest U.S. cable audience for an F1 race since ’12; while May’s Monaco Grand Prix recorded 809,000 viewers, the largest audience to watch an F1 race on cable-television since 1995. The encore presentation on ABC drew another 2.1 million viewers, reflecting a +40 YoY increase on the live and tape-delayed broadcast audience figures. It’s worth mentioning that ESPN is running a simulcast of Sky’s F1 broadcast coverage.

Howie Long-Short: F1 teams are expected to split $921 million in ’18 prize money, which would be $45 million less than they received in ’16; despite an increase in the number of races. That’s because F1 teams split 68% of the circuit’s underlying profits, and costs have increased significantly (think: rebranding, new headquarters, eSports) since the Liberty Media acquisition. The $921 million figure may represent a best-case scenario. F1 is facing the difficult decision to re-brand again, compensate 3M or engage in a costly legal battle with the manufacturing company over its new logo.

Rising costs (+$27 million) and declining revenues (-$31 million to $585 million) drove F1 operating income down a staggering -69% (to just $14 million) during the most recent quarter. FWONK shares closed at $35.15 on Friday 8.17.

Fan Marino: When Liberty Media took over Formula One in January ’17, it touted the “enormous” opportunity to add sponsors “in the short term.” Well, nearly 2 years later that prediction has yet to come to fruition. In fact, the racing circuit grew sponsorship dollars less last year (+$11 million) than any time in the past decade; reporting just $273 million in sponsorship revenue.

The circuit lost marquee sponsors Allianz and UBS in ‘17 and has yet to replace them, but annual escalators in existing pacts have prevented sponsorship income from declining in ‘18. For those wondering, the most notable deal F1 has signed this year was with Amazon Web Services; the agreement includes both traditional sponsorship and technology services that will enable the circuit to build out its digital capabilities.

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