16/07/2012
NEWS STORY
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By the end of this week the BBC will be half way through the first year of its deal which sees it sharing the coverage of Formula One in the UK with subscription service Sky Sports. The deal was announced a year ago to massive protests from fans as this year, for the first time in the modern history of F1, not all races are being broadcast in full on free-to-air TV in the UK. The BBC is showing half of the races live, with delayed highlights of the others, whilst Sky Sports is broadcasting all races, qualifying and practice sessions live. It costs £480 annually to subscribe to Sky which is the last thing fans needed in these tough economic times. The BBC braved a gigantic backlash and battened down its hatches. It has now come out just how much they had to gain from it.
An article in today's Telegraph by Pitpass' business editor Christian Sylt reveals that the BBC has saved £150m over the course of its deal with Sky which runs until the end of 2018.
Dominic Coles, the BBC news group's chief operating officer and the man directly responsible for the F1 deal, picked Sylt to give an exclusive 'state of the union' interview reflecting on nearly half a year of the new deal. "In terms of licence fees we have saved hundreds of millions of pounds over the whole period of the contract," he said. The saving is understood to come to £150m over the seven year lifespan of the deal and although the BBC has lost half of the live races its fee has reduced by more than 50% because Sky is paying comparatively more. "Our fee is down by three quarters," said Coles.
It had previously been thought that the BBC was paying £15m annually for the F1 rights under the new deal but Coles' revelation puts the figure at £7.1m. We know this because the three-quarter reduction in the fee under the new deal comes to £150m which means that the BBC is paying £50m over the seven years putting its annual payment at £7.1m.
The deal prevented the BBC from having to drop F1 completely despite facing 20% budget cuts. "The sharing deal delivered very significant savings over the period of the new contract, whilst keeping F1 available to audiences free to air, which was not guaranteed given the sport is not one of those protected by the listed events legislation. Indeed, it is quite possible the sport may have ended up exclusively on pay TV if we had not successfully negotiated the deal," says Coles.
The BBC's previous F1 deal was due to expire at the end of 2013 but this was severed prematurely due to the pressure on the BBC's budgets. Coles says that the BBC approached Sky about sharing and presented this option to F1's boss Bernie Ecclestone. At some stage another broadcaster must have somehow found out that the BBC wanted to change its agreement because Channel 4 also put in a bid last year and its proposal was circulated online. It remains to be seen whether Channel 4 was informed about this opportunity by the BBC, the F1 Group or Sky. Someone must have told the channel because it put in a bid two years before the contract was up.
Mr Coles says that although "it is disappointing that people who haven't got Sky have to endure highlights for half of the Grands Prix, actually nearly half of these races are very early morning which people didn't tend to watch until the highlights came on. So all in all our audiences have remained pretty robust."
Testimony to this, data from the BBC shows that the peak number of viewers watching at least 15 minutes of the first race of the season in Australia increased from 3.1m in 2011 to 3.2m this year. As the race takes place during the middle of the night in the UK more viewers usually watch the highlights anyway. The BBC suffered more when it began broadcasting live from the Chinese Grand Prix in April where the audience of people watching at least 15 minutes peaked at 4.1m which was 800,000 less than in 2011. The peak live audience fell by 1.9m to 4.2m for the Monaco Grand Prix in May but it had picked up by the last month's European Grand Prix, when its 5m peak was the same as in 2011.
Across the first eight Grands Prix this year, the BBC's total audience of viewers watching at least 15 minutes has fallen 20.5% to 20.2m which is understandable given that it lost half of the live races. In contrast, F1 has gained as it is understood that 5.5m watched at least 15 minutes of Sky's broadcasts of the first eight races and this offset the BBC's drop. In fact, the total audience for the race in Valencia was 8% up on 2011.
"Because of the more commercial nature of Formula One a balance between free to air and pay TV actually works," says Coles adding that "Sky brings in a different audience who wouldn't normally come to the BBC for sport and we deliver nearly our normal audience."
The strategy suits F1 particularly since a core of die-hard fans tend to watch every race live in full. The crashes and overtaking moves, which are condensed into the highlights, appeal to the casual viewers and although the BBC's total audience is down, the cost to licence fee payers has been significantly reduced. It is for this reason that the structure of the deal has proven popular in the current economic climate and a similar agreement was signed in Italy recently with more believed to be on the way.
Despite the huge sums paid for live rights Coles says that appetite for sports highlights is growing. "I've been negotiating the BBC's sports rights now for 10 years," he says adding "I used to say that if it's not live it's dead but actually Match of the Day this season has posted the largest audiences we have ever had with a total of around 7 million each weekend so we are growing our football highlights."
Ultimately, despite the positive outcome, Coles would still prefer not to be in the current situation and he says "clearly losing half of the live Grands Prix has been gut wrenching, but we are living in challenging economic times which often require hard choices and sacrifice."