Netflix Eyes US F1 Broadcast Rights in Shifting Strategy

Netflix is reportedly considering its first foray into live sports broadcast, with rumours emerging that the streaming giant has plans to acquire the US broadcast rights to the 2023 Formula One World Championship.

This venture into the world of live sports would mark a significant shift in Netflix’s content strategy. Although, a change of direction may be just what the company needs to maintain subscriber engagement, encourage increased spend per user and arrest any subscriber attrition in the USA.

The US F1 broadcast rights are currently held by Disney-owned ESPN, with the contract set to expire at the end of the 2022 season. ESPN’s initial bid for next season currently stands at $70million, however this has not yet been accepted and Formula One values the rights at over$100million. Yet, these figures are tiny in comparison with more well-established US sports leagues, with MLB rights totalling almost $500 million per year and NFL broadcast rights totalling around $10billion per year across five network broadcasters. F1’s owner, Liberty Media, which also owns 81% of radio station SiriusXM, 35% of live Nation Entertainment and the Atlanta Braves NFL team, reported in 2021 that media rights accounted for 40% of its total $2.14billion revenue worldwide.

Not only is F1 a much more attractive prospect in the US now compared with 2017, but there are also more platforms competing for the rights. Beyond the obvious contenders Disney/ESPN and Netflix, also joining the fray is sports broadcast up-and-comer Amazon Prime Video, which has notably been increasing its sports coverage in Tennis and soccer in a number of countries. Alongside these is former rights-holder NBC Universal, who may also look to fold F1 into its subscription streaming service Peacock.

Although Netflix could incorporate a sports package into one of its existing tiers (most likely the premium tier), this could be an opportunity for the service to market sports add ons as a new way to generate revenue by creating an additional tier such as Premium + Sport. Although Netflix’s tiers have remained relatively consistent in recent years, we know the service is already contemplating launching a cheaper ad-supported tier akin to Hulu in the midst of the cost-of-living crisis and US consumer saturation, so the addition of other experimental packages would not be wholly unexpected.

Another important consideration is the possible benefits to Formula One of having Netflix as a distribution partner. In the US, Netflix garnered 69m subscribers by year end 2021, and is taken by well over half of all US households. Not only is this a sizeable addressable market, but also skews slightly towards a younger, more tech savvy audience - the exact demographic that F1 is trying to attract. We also cannot ignore the impact that Netflix’s Drive To Survive series has had in reinvigorating interest in F1 since its launch in March 2019, and the massive level of engagement it garnered throughout the pandemic, with season 4 achieving Netflix Top Ten status in 56 countries in 2022. Therefore, F1’s choice of partner may not be solely reliant on who offers the most, but who provides the best fit to help raise the profile of the sport in the USA, which would in turn help drive additional sponsorship revenue (which generated $342m globally in 2021).

US F1 viewership has been on the rise in recent years, supported in part by the increased exposure afforded the sport by Netflix, reaching an average of 934k US viewers per race in 2021, with the 2021 US Grand Prix attracting 1.2 million viewers. Compare this with 2019, where average viewership reached 672k, versus 554k in 2018 (the last year that NBC broadcast the season), highlighting the rapid incline in US interest, with engagement expected to only increase moving forward, as additional US races in Miami (launched 2022) and Las Vegas (launching 2023) are added to the calendar.

A major hurdle to US engagement with F1 in the past has been a lack of local, homegrown talent to cheer on. The last active US F1 driver was Scott Speed back in 2007, though the US can boast one World Champion in Mario Andretti. This is changing however, with one active team already operating in the topflight of motorsport, Haas, and another, Andretti Racing, potentially lining up on the grid as early as 2024. In terms of drivers, a new crop of emerging talent is expected to drive fan support in the coming years, with Logan Sergeant making a name for himself in F2, Juan Manuel Correa and Kaylen Frederick both competing in F3, and Chloe Chambers taking part in the inaugural W-series season.

By riding this early wave of F1 support boiling up in the US and leveraging the increased exposure the sport is sure to receive in years to come with three US based races on the calendar, F1 may prove to be a solid testing ground for Netflix in offering other live sports, as it looks to broaden its content offering.

About the author

Morris Garrard

Morris Garrard is a Lead Market Analyst at Futuresource Consulting, working within the Professional Displays team.