Following the recent news that the Monaco Grand Prix has been cancelled in response to the Coronavirus pandemic, the potential for a truncated Formula One (F1) season is now a real possibility. However the impact that this will have on F1 in general and specifically with media and sponsorship partners could be profound, according to Sportcal, a GlobalData company.
“With multi-million dollar media rights partnerships in place, there is a prospect of greater financial damage on the horizon if sponsors pull back on their commitments,” warns Conrad Wiacek, Head of Analysis & Consulting at Sportcal.
“The UK deal with Sky TV is worth $1.4 billion alone, according to the GlobalData Sportcal Intelligence Centre,” he advises. “Should races be officially cancelled, it is not difficult to envisage broadcasters looking to recoup some of the revenue they have spent on rights fees in the short term, arguing that fees should reflect the final calendar delivery.”
“There will also be a downstream impact on sponsorship,” he adds. “With F1 partners committing $272 million as partners of the series, and a further $972 million committed to team sponsorships, the lack of any on-track action could see sponsors looking to terminate partnerships early – especially for those in sectors currently facing the brunt of the financial fallout from Covid-19 as they look to drastically cut costs and keep their businesses afloat. While the digital esports series could be an alternative means of fulfilling contractual obligations, this will only be a short-term solution for a series that is facing declining global audiences,” he concludes.
Separate findings from the 2019 F1 Audience report indicate that Formula One has seen a 3.9 per cent decline in unique viewers globally, with audiences falling to 471 million following the move in many territories from free to air to pay-TV. Yet, this iconic racing series is growing audiences in the US, Middle East and Asia and still remains highly attractive to sponsors worldwide, with companies spending an estimate of $1.2 billion annually on partnerships, according to Sportcal.
Sportcal’s The Business of Formula One 2020 report reveals that technology companies make up the majority of team sponsors across the grid, accounting for almost 20 per cent of all team partners – given their ability to aid and enhance performance. Moreover, automotive brands are unsurprisingly heavily involved, making up 17.6 per cent of all deals while clothing and accessories brands are the third most common sector sponsoring the sport, accounting for 13.5 per cent of all deals.
“While the sport of F1 cannot claim to have the audience it did back in the mid-90s, thanks to the sport going for the money provided by pay-TV as opposed to free-to-air, brands are still as keen as ever to partner with the premier motor racing series as they see value in associating with the top tier of motorsport,” suggests Wiacek.
Despite the decrease in viewers, the motorsport series still has a sizeable global audience, and this continues to grow across the Middle East and Asia.
“In 2019, both the US and China had a respective 7 per cent and 5 per cent increase of viewers according to F1’s annual viewership report,” notes Wiacek. “Highlighting the appeal to brands that through this partnership, there may be opportunities to reach strategic target markets.”
The return to prominence of some iconic teams such as McLaren, who with 41 individual partners is the most sponsored team in the paddock – ahead of Renault and Ferrari, who respectively have 32 and 28 individual team deals. McLaren still has no title sponsor, it has made a conscious decision to focus on developing multiple partnerships with brands who can either provide financial or technical support to aid its progress back to the front of the grid.
“While McLaren do not generate the same amount of revenue from their sponsors – $86.35 million according to GlobalData’s Sportcal Intelligence Center, compared to Ferrari who lead the way with $254.1 million thanks to their title sponsorship with Phillip Morris – they are well placed to lean on their partners to help them get back to winning ways,” he says.