Formula 1 (“F1”) can trace its roots back to European motor racing in the 1920s/30s. Millions of fans now watch the 22 annual Grand Prix races, where cars reach average speeds of c.185 mph. The sport is managed by the ‘Formula 1 Group’ (also referred to as “F1” in this post). Even before coronavirus, F1 has been facing a crisis: since 2008, viewership has declined significantly – despite a recent uptick (see Figure #1). Younger generations view F1 as boring and predictable – and those <25 years old represent only 14% of viewers.
Figure #1–Unique F1 TV Viewership
Coronavirus has further compounded the issues facing F1. They have yet to hold a Grand Prix in 2020 and have cancelled (e.g., Monaco Grand Prix) or postponed (e.g., Chinese Grand Prix) the first 10 races of the season. F1 announced they hope to hold c.15 races later in 2020 (vs. a total scheduled of 22) – but this could be reduced if the situation persists. This is worrisome for F1, given the majority of their revenue comes from track, broadcast and advertising fees. As a result, F1 have furloughed >50% of staff.
A Silver Lining?
Since mid-March, F1 has attempted to fill its content void by hosting ‘Virtual Grand Prix’ in lieu of those postponed/cancelled (see Figure #2 for Chinese Grand Prix highlights). The first, the ‘Virtual Bahrain Grand Prix’, was pulled together in five days and held on March 22nd. It attracted 3.2M online viewers across platforms. It was also aired by traditional TV broadcasters, including the UK’s Sky Sports – attracting c.2M TV viewers. The rights were given for free to appease current broadcast partners. Current F1 drivers such as Charles LeClerc took part, alongside several celebrities.
Figure #2–Chinese Grand Prix Highlights
The Bahrain race experienced some technical issues – with several drivers having a delayed start due to connection latency. Fans also criticized the applied assisted settings (e.g., traction control), which sought to level the playing-field between experienced gamers and professional drivers not used to a virtual setting. Since this race, F1 has largely ironed out these issues. Throughout April they have kept up a rhythm: replacing Grand Prix races with a virtual Grand Prix – and for weekends without a race, hosting virtual exhibition races for fans to race against F1 drivers.
Leveraging Existing Capabilities
F1 actually launched its esports program in late 2017, which coincided with the appointment of current CEO Chase Carey in early 2017. To execute, F1 has partnered with Gfinity – who manages tournament operations and production. Alongside this, F1 built out a new internal esports team to manage commercial development.
Since 2017, F1 has run three ‘Esports Pro Series’ – with the latest boasting a $500K prize pool. The 2019 series drew an audience of 5.8M, a 76% improvement vs. the previous year. These viewers had a promising age profile, with 79% <34 years old. In that way, esports is serving as a stepping stone to attract younger audiences to F1.
F1 launched an over-the-top (‘OTT’) streaming platform in 2018: F1TV. This platform gives subscribers access to live races, alongside race recordings and documentaries. To build F1TV, F1 partnered with Tata Communications, who provided ongoing technical support. Over the past few weeks, F1 streamed the virtual Grand Prix races through F1TV, alongside other platforms like Twitch and YouTube.
F1 used the ‘F1 2019’ video game for its virtual races, which it created in collaboration with developer Codemasters. F1 and Codemasters have produced a F1 game each year since 2009. This annual iteration allowed for incremental improvements in game quality each year – with the exception of 2014/2015 (see Figure 3). The ‘F1 2019’ game has won a series of awards: including TIGA ‘Best Racing Game’. ‘F1 2019’ was well positioned to act as the platform for virtual Grand Prix, as it was the highest quality and most realistic version yet.
Figure #3–Game Reviews
A hardware ecosystem has also been built around the game. Players can purchase third-party steering wheels and driving chairs to emulate a ‘cockpit’. More formally, F1 partnered with manufacturer Fanatec to supply cockpits for drivers to use at esports events (see Figure #4). When coronavirus hit, F1 were able to supply cockpits to those racing.
Figure #4–Racing Cockpit
- Invest for the future: In many ways, esports was a perfect hedge against race disruptions. By investing in its esports capabilities/infrastructure, F1 was well positioned to pivot and deliver content virtually. Organizations should invest early in virtual content delivery, particularly those who are ‘undiversified’ – i.e., where disruption to physical operations can have a significant impact on performance
- Iterate quickly: F1 used iteration to continuously improve its F1 video game – releasing a new, improved version to fans annually. It also iterated quickly over the past weeks, especially after technical issues with the Bahrain race. Organizations should use digital channels to launch MVPs quickly, before listening to feedback to improve future iterations
- Partner well: F1 has used partnerships to effectively scale esports (e.g., Gfinity for esports production). By outsourcing these capabilities, F1 gained speed, allowing them to launch an esports offering quickly. Organizations should selectively partner to build digital expertise, especially where there is limited risk of vertical integration by partners (as with F1)
F1 has deliberately innovated its business model to deliver virtual content to fans. The speed of this pivot was impressive – and was made possible by their existing digital capabilities/infrastructure.
Will the interest in virtual races last after the pandemic ends? I believe it will. Virtual races won’t replace physical, but they can be a complement (e.g., for weekends with no Grand Prix) – especially as the realism of the software/hardware improves. Virtual races could become F1’s new growth engine, helping to retain existing viewers and bring in the ever-elusive younger demographic.
Coronavirus has provided the perfect test platform for racing esports – and it appears it’s around to stay. For those still intrigued, tune into the Dutch Virtual Grand Prix at 1pm EST on Sunday, May 3rd (see here).
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 Christian, Sylt. Forbes. Jan 2019. “F1 Reveals That Just 14% Of Its Viewers Are Under 25”. Retrieved from: https://www.forbes.com/sites/csylt/2019/01/13/f1-reveals-that-just-14-of-its-viewers-are-under-25/#6ffdf49f6d5c
 Statista. “Number of TV viewers of formula One (F1) racing worldwide from 2008 to 2018”. Retrieved from: https://www.statista.com/statistics/480129/cable-or-broadcast-tv-networks-formula-one-f1-racing-watched-within-the-last-12-months-usa
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 Codemasters. Nov 2019. “F1 2019 wins Best Racing Game at the TIGA Games Industry Awards 2019”. Retrieved from: https://www.codemasters.com/f1-2019-wins-best-racing-game-at-the-tiga-games-industry-awards-2019/
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