Formula One's television audience has reversed by 40 million following a spectacular U-Turn in the way it measures the number of viewers watching its races.
Official figures released by F1 last year revealed that it had 390 million viewers in 2016 but a press release distributed by the series yesterday claimed that it was actually far lower. Instead of saying that F1 had 390 million viewers in 2016 the press release claimed that there were at most 352.3 million and “there was not a decrease in this specific number” the following year.
In summary, although F1 said last year that it had 390 million viewers in 2016 it has now reduced this figure by at least 40 million. As this revised figure isn’t higher than the one for 2017 F1 can claim that there hasn’t been a year-on-year drop in its audience. This sounds positive but the revised audience figure may well send shivers down the spines of F1 team bosses.
That is because sponsorship rates tend to be proportionate to the number of viewers on TV and last year the teams were selling space on their cars on the strength of the 390 million audience figure which was released by F1 in the most official of sources.
F1 is listed on the Nasdaq with the ticker FWONK and page A-3 of this filing that it made with the Securities and Exchange Commission (SEC), states that “in 2016, Formula 1 had a cumulative live television audience of approximately 390 million unique global viewers.”
This was reflected in F1’s 2016 Global Media Report which referred to its “Global Audience figure of 390 million viewers” and added that the series “reached 390 million viewers in 2016.” As this author revealed in a report for Britain’s Independent newspaper last year, the 2016 total was down by 10 million driven by a move to Pay TV. So why would F1 want to reduce the audience further the following year?
The first point to make is that the number of viewers is not front and center in F1’s press release. Instead, it gushes that the top four markets “ranked by absolute figures - all registered positive growth and that “the number of users of Formula 1’s social media platforms also grew significantly during 2017.”
However, this couldn’t hide the change to the overall picture. Although F1 said its audience came to 390 million in 2016 the figure was 37.7 million lower the following year yet the press release claimed “there was not a decrease in this specific number.” That sends out a good signal and it is referring to the number of unique viewers - anyone who watched at least 15 non-consecutive minutes of F1 in the year. Someone who watched 15 minutes of F1 is counted only once and so is someone who watched 15 hours. F1 said there were 390 million of these viewers in 2016 but just 352.3 million last year. So how is that not a decrease?
Tellingly the Liberty filing and F1’s 2016 Global Media Report describe the audience figure as being “global” whereas yesterday’s press release does not say the same about 2017. It is understood that the 2016 figure was calculated using data from just 10 markets which was then extrapolated to give a total for the 200 territories worldwide.
In contrast, data from 63 markets was used to derive the 2017 figure of 352.3 million. If this measurement system was applied retrospectively to 2016 it would yield a similar total which is why the press release states that “there was not a decrease in this specific number.” So the change in measurement system has the positive outcome that the 2017 audience did not decrease on the previous year but it also reduced the 2016 figure by at least 37.7 million.
All of these numbers come from an independent company which collects the audience data and as more markets are used under the new measurement system it is believed to be more accurate. This seems to be the driving force behind introducing it but it remains to be seen why it wasn’t changed in previous years.
Regardless, the unit being measured – the number of unique viewers – is still the same and this makes an annual comparison possible. It came to 390 million in 2016 which is 37.7 million more than last year. In fact, as the table below shows, it was the biggest fall since the audience reversed from 500 million in 2012 to 450 million the following year.
However, although the unit being measured has not changed, the way it is calculated has. One consequence of this is that the reason behind the year-on-year difference in 2017 is now unclear.
It is unknown whether there would have been a decrease if the measurement system from 2016 had been used and this could hide the effect of viewers turning off due to the increase in Pay TV broadcasters.
Whilst it is not clear whether this fuelled a decline there is no doubt that F1 is on track for more broadcasts being hidden behind a pay-wall. Coverage is split between free-to-air and Pay TV in major markets such as Germany, Italy and Britain where the country’s Channel 4 network only got the live rights to 10 races last year whilst subscription service Sky Sports showed every session live.
Sky will become the exclusive broadcaster of F1 in Britain from next year in a deal estimated to be worth $150 million annually. Pay TV broadcasters are prepared to outbid their free-to-air rivals for F1 as it fuels subscriber numbers. However, they tend to have smaller audiences than broadcasters which don’t charge to watch and this can dent the teams’ income from sponsors. As F1’s revised audience figure is lower than its predecessor this compounds the problem and it comes at an already-tense time for the series.
F1’s contracts with the teams expire in just three years and its biggest names have signalled that they could bring the chequered flag down on their time in the series. Ferrari and Mercedes have voiced concerns about Liberty’s plans to cut the combined $150 million in prize money bonuses they receive every year and to introduce a budget cap which would level the playing field and prevent them from spending to gain an advantage.
In November Ferrari’s chairman Sergio Marchionne said “if we change the sandbox to the point where it becomes an unrecognisable sandbox, I don’t want to play any more.” He added that he would have no concerns about being the boss who steers Ferrari out of F1 after 67 years and would feel “like a million bucks because I’ll be working on an alternative strategy to try and replace it. More rational one, too.”
It was echoed by Mercedes’ boss Toto Wolff who has been one of the most outspoken team bosses against Liberty. He has been very blunt about the fact that Liberty’s plans could put the brakes on Mercedes’ F1 campaign. “Such a scenario is quite conceivable. Just as it is for Ferrari,” said Wolff in November. “F1 must remain the pinnacle of technology and the best competition, and if you dilute this message with standard specifications and false situations that penalise the best and help the weakest, I think that’s not our DNA.”
Liberty has already caused consternation by boosting F1’s spending which has led to lower profits and a reduction of the teams’ prize money. As Forbes revealed it reversed by $41 million to $650 million in the first nine months of 2017.
The shock reduction of the TV audience won’t help matters, especially as the press release states that “there was not a decrease in this specific number”. Although it may seem like a contradiction it isn’t. If the new measurement system is applied retrospectively to the 2016 data it shows the total audience being flat the following year rather than being sharply down when the comparing the results derived by the old and new methods.
Although this apparent contradiction has been unravelled here it could be lost on some in the industry who may simply assume that it is an error in F1’s favor. It isn’t helped by the fact that just last month F1 distributed a press release about Grand Prix attendance which was so riddled with errors that it needed to be restated.
As Forbes revealed, the restated release contradicts with data from the event organizers with F1 claiming that the year-on-year increase in attendance at the 2017 Azerbaijan Grand Prix alone was more than four times higher than the race hosts said.
It remains to be seen what fuelled the decision to include this contradictory attendance data but it seems that a desire for increased accuracy was the driving force behind the new system for measuring the TV audience. If so it could be highly ironic as this laudable aim has the potential to send F1’s sponsorship market skidding off track.
