OCTOBER 21, 2006
An experiment in Finland
Formula 1 pay-per-view television was not a great success back in the late 1990s but it seems that the Formula One group may be moving back in that direction as the convergence of television and the Internet threatens to disrupt the traditional income of the sport.
The arrival of free video-sharing websites, such as Youtube.com, has created new problems for rights-holders as anyone can post movie and TV clips. These websites feature hundreds, if not thousands, of F1 clips, the rights to which belong to Formula One Administration. Legal action is difficult, however, as the websites are basically collectives and have no revenues. The purchase of Youtube.com by Google in recent days for $1.65bn might offer an opportunity for legal action but, at the same time, that would be time-consuming and expensive business that would not ultimately solve the problem as other websites may pop up to replace Youtube.com. The answer is probably to do a deal with Google to allow Youtube.com to feature a number of F1 clips in exchange for a set payment each year. Google would offset the costs by selling advertising to the fans. This will give FOA some revenue from the Web, give fans access to what they want and ought to dissuade smaller websites from trying to compete.
This is just the tip of the iceberg as traditional TV revenues are likely to erode further as convergence allows pirate operations to put race coverage on the Web free of charge. The only way that Formula One can fight this is to offer the same service free of charge with the licensee making money from advertising to pay fees to FOA. At the same time, in order to safeguard other income, there is likely to be a move towards pay-per-view for live coverage, perhaps with premium content which is not seen on the free services. This may be restricted in some markets because of clauses in the Concorde Agreement that dictate that broadcasts must be free-to-air.
It is interesting to note that the Finnish TV station MTV3, which has been owned since last year by Sweden's Bonnier Group, a media company run by the family of the late F1 driver Jo Bonnier, is to switch a portion of its programming to pay-per-view in 2007, with the launch of MTV3 MAXI - a digital channel which will show the races live. The regular MTV3 channel will still show the Grands Prix but they will be delayed by several hours.
This is causing some discontent in Finland where one million of the country's 5.2m people tune in to watch each race. The TV station believes that with Kimi Raikkonen in a Ferrari and Heikki Kovalainen in a Renault Finnish fans will be willing to pay.
The danger is that the move will drive people away from the sport.
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