Following a rather odd conversation on The Formula 1 Blog with Anonymous, it is becoming increasingly clear that a breakdown of what it would take for Sky to break even is necessary. This is, after all, the main reason why the attempt to transfer the UK rights from free-to-air to pay-TV is likely to have medium-term consequences on non-UK F1 fans. It's a bit rough-and-ready because of the timing, but I will happily tidy up anything that you think needs tidying later.

Wimbledon never fails to get full crowds even though few people in Britain follow tennis otherwise. Silverstone never failed to get full crowds even in years where British F1 figures fell like a stone due to Schumacher dominating. You'd be surprised at how low an audience conversion is needed to fill a stadium, so saying that test cricket grounds are still full doesn't say anything about what's going on with the TV side of things. Attending a cricket match is a special occasion. It does not mean that watching cricket is still bread-and-butter to people. The BARB statistics do not lie and they say that Sky struggles to get a seventh of the audience Radio 4 Longwave does for cricket matches, and that both combined are far lower than cricket got before Sky took over. The numbers end up working for the sport largely because Sky can afford more, but that is reliant on capping the level sports can charge it. That works financially for sports that seriously undervalued themselves (primarily by only considering the BBC pre-Sky, which of course can't run adverts to offset its expenses) but F1 hasn't done that since 1981...

I suppose if one calls 234,000 rugby viewers (2008 League World Cup) with Sky compared to over 2.6 million for the previous version* pre-Sky a success, then rugby might be considered a success. From Sky's perspective, it's a relatively successful sport because the low sanctioning fees means it can make quite a bit from the deal; from the perspective of a rational outsider surveying the effects on the sport's support base, it is a disaster.

The more one looks at the effects of Sky getting involved in sport, the worse it looks for sport. If a sport wants to go from being a majority sport to a minor one, going the pay route's a pretty effective way of doing it. That's been demonstrated time and again.


Advertising is of course part of Sky's arsenal when paying for things. However, Bernie fees are not the only costs it faces, and F1 isn't football. It costs £10 m per year to produce F1 the BBC 2011 way and to do all the extra features Sky has said it'll do, it will need to spend even more than that. ITV couldn't get that much from sponsorship when it had F1 in boom time, so given that Sky isn't having in-race advertising and is operating in a recession, it'll struggle to even meet its production costs through advertising, let alone start tackling marketing, satellite rearrangement fees (yes, making a new channel costs money) and the Bernie fee (which is now four times higher for Sky than the BBC's production fee was). 

Even so, my original calculation of a million new customers being needed assumed, optimistically, that the non-Bernie fees would be entirely covered by advertising. (Before the amount Sky paid was announced, I tended to say "between 0.5 and 0.88 million" when commenting on the internet; I was bargaining on Sky doing some sort of cost calculation prior to purchase). The £40 m from subscriptions prior to F1's arrival has to be ignored on the grounds that they'll have bought other contracts with them. These naturally must be maintained, with the possible exception of programs that directly clash with F1 programming. Other sports may not be as expensive as F1 but they do have acquisition and production fees. Instead, the calculation has to be done from base.

There are two ways of getting Sky F1 - one using the HD pack and the other using Sky Sports. The Entertainment pack cost (common to both routes) has to be ignored because the channels on the pack are funded by it, along with all their programming. Much like the BBC, each Sky channel is funded separately. Terra Nova, for example, is not a free show. Even through the HD route, the HD money is not free because all the programming on Sky has to be converted to HD. If Entertainment and Sports are priced in relation to their values to Sky, then only half the HD top-up can be assumed to be available for F1.

Let's assume that the only sport that the people are interested in is F1 and that HD buyers don't buy any other packages (if we don't, again, the figures look even worse for Sky, as that person's subscription fee would then need to be shared among however many additional contracts corresponded to that individual's customised viewing habits). The cost of Sky Sports 1 and 2 on top of that package is £20 and this is the maximum amount Sky can take in per customer per month with regard to F1. HD, once the half for Entertainment package upgrading is removed, only contributes £6.125 per customer. Only new-to-Sky customers can be assumed to be taking the package for the full 12 months, so only the 7 months where Sky has an exclusive race can be safely counted for Sky's revenue (let's assume for now that Bahrain goes ahead).

I am also going to assume that everyone who watches F1 is a singleton who never has the TV on when entertaining and doesn't have lodgers or other unrelated co-residents similar sneakily "borrowing" a chair during races. Otherwise, each viewer is only contributing part of the subscription payment. I'm also assuming none of these people are bar, pub or club owners because then every patron of the bar/pub/club is contributing towards the subscription.

Remember that the Bernie escalator ensures that prices go up at least 10% every year (that fee quoted for Sky's acquisition will be the first-year price; Bernie rules ensure it goes up and up after that). The £40 m initial annual price becomes £77.95 m by the end of the contract Sky has. If that sounds high, the fee the BBC paid went from £25 m to £40 m a year from one end of its contract to the other (projected but never reached due to renegotiation) end; if it hadn't it probably wouldn't have needed to let F1 go. That's compounding for you.

At the moment, 30% of Sky customers are on HD (therefore using the cheap route) and 70% on SD (therefore would need the expensive route). Being optimistic and assuming this proportion does not move any further towards HD despite more HD subscribers being in Sky's overall business plan, Sky needs 0.95 million new subscribers (rounds up to 1 million to the nearest 100,000 subscribers) that didn't care for any Sky-carried sport bar F1. To break even. Compounding means it doesn't have to get them all immediately - a 2012 figure of 0.53 million is enough for that specific year - but Sky's sales definitely aren't going up by the 10% per year needed simply to keep up with Bernie (they only increased by 3% per year for the last 2 years - it's pretty consistent at the moment). 

Even 0.53 million is over twice as many viewers than Sky gets for any part of its non-football programming. It is unlikely Sky will get the figures it needs because past and present data demonstrates it. This is before considering that every assumption I've just detailed here - advertising revenue, house occupancy, HD, caring about other Sky sports, Bahrain, the extent of Bernie escalator - is more likely to go against Sky than in its favour with regard to making F1 pay, and therefore require even more people to sign.

(For the curious, on the assumptions made in this item, it would take 2.08 m cumulative new customers for Sky to be able to justify taking all 20 races in the first year of the next broadcasting contract of 2018, assuming the minimum number of new customers were signed up as needed to let it break even in each previous year, that no additional fee was made for exclusivity and assuming Sky merely wished to break even with F1 due to its high profile).

Japan F1 is mostly free Fuji TV. There is a pay option (Next) but it gets 1/6 of the audience the free version does (helped by the fact the same provider on the same platform shows the free and pay options - not the case in the UK). Brazil is primarily covered by GloboTV, which is free-to-air and easily beats the pay option for popularity. Italy and Germany used to have pay TV options (through Sky) but they've folded due to lack of interest. Some other countries with smaller audiences have pay-only, and their audiences went through the floor. This has left some channels dropping F1 altogether and others putting it on progressively higher-cost options. That's what always happens with pay TV concerning sports that were previously shown just fine on free-to-air**. The audiences shrink and so the pay TV provider has to rely on cheap rates to keep the option alive. Here's a hint: Bernie will never, ever, provide cheap rates.

So why are the likes of rugby and cricket succeeding despite their TV mistakes? Because other avenues of revenue exploded in the last decade or two. Sponsorship, once quite rare for a series, has become huge money, especially for drinks companies who would struggle to advertise in certain international markets through the standard methods. Ticket prices skyrocketed, turning the weekly patronage of a favourite sport to an occasional treat for the poor without turning away the rich (in fact, with more focus on rich clients as seen in the past decade, the rich are pouring in as they spy networking and hob-nobbing opportunities). The sponsorship alone accounts for why there's more money in disability swimming than ever despite it having no media profile worthy of the name and free tickets to nearly all events. The latter is why the Paddock Club in F1 is worth over 10% of the total income of F1 despite serving a maximum of 5000 people per race.

After all is calculated, Sky's chances of making F1 break even are remote. The chances of Sky keeping a sport that doesn't break even is even remoter. The chances of Bernie finding anyone willing to pay more than Sky pay him now in those circumstances is nil. That means Britain's fees will drop. It's not clear who'd pick up the rights then - it depends who has most to spare at that moment out of the not-recently-"burned" parties. What is clear is that it would cause a domino effect. Other countries would see that pay TV does not work and be able to call Bernie's bluff by not engaging in bidding wars with such channels. It would mean the prices paid by channels would fall through the floor. So would F1's revenues.

F1 would have to either seriously tighten its belt (and hope it's no longer up to the neck in debt) or die.

Quite how not want F1 to kill itself counts as "not loving F1", as Anonymous alleged, remains a mystery.  

* - In case you're wondering, rugby union suffered even worse. The Heineken Cup final, for example went from 9 million in 2005 to below 185,000 in 2007. The only reason it's still on Sky is because the Heineken Cup charges much, much less for its tournament broadcast rights than Bernie does and the BBC is currently trying to sell sports rights rather than buy them.

** - Football, in case you're wondering, was not shown fine free-to-air before Sky got the rights; the BBC could typically only show one match a day - and hardly ever in primetime - due to broadcasting balance requirements, whereas Sky was able to show multiple ones, at any time of day, almost immediately. Being able to see twice as many matches means twice as many people are going to be interested, so it matters less if no single match gets much in the way of viewing figures compared to free-to-air - the sheer number of matches viewable through the multi-channel, more specialised pay TV system meant that many small parts became a bigger sum than the BBC could achieve. Also, people can't advertise on the BBC, so when Britain's favourite sport went to the advertisable platform, advertisers naturally paid top dollar to be associated with the sport. Football is, economically speaking, pay TV's one big sporting success.

This entry has taken me some time to figure out how to write. Something's been bugging me about recent F1, primarily since the Turkish Grand Prix. However, it was only when Duncan Stephen wrote his item on why he was finding 2011-spec F1 not to his taste that I figured out how to write my own objections to what's been going on. My first reaction to the piece was:

Hurrah! Somebody doesn't think that the current F1 is a) the bee's knees or b) only ruined by excess overtaking.

For me the proximate problem (i.e. the one that's directly causing me dissatisfaction with F1) is meaningless overtaking. In Turkey in particular, the method of generation of overtaking caused lots of zero-sum exchanges - lots of passes but most of them were never going to affect anything in a month of Sundays. They were just going to get re-passed later in the corner sequence or else in the DRS zone the following lap.

DRS foreshortens the process of passing even when it's producing a reasonable net increase of overtaking. This makes it less skilful and also less significant in the context of a race. Those comparing Turkey 2011 to Japan 2005 have forgotten, among other things, that many of the overtaking moves in the latter took laps to set up. Yes, it was normal for cars to be innately 1-2 seconds faster or slower than each other that year, making things difficult enough for complaints, but that still shows planning and skill were important.

If pressing buttons is the new hot skill for F1, why aren't all the F1 drivers being sent on evening typing courses? Why aren't fit typists with clean driving licences being considered for F1 testing roles over the heads of those who have toiled in F3 and GP2?

Besides all that, DRS should never have been experimented with in a race weekend. It should have been tested properly prior to use, and then implemented equally and effectively in all races.

Despite the emphasis on changes to the racing, qualifying has now become the be- and end-all of F1. The only reason it's not become the only non-accidental deciding factor is because many teams haven't worked out it's merely a question of getting your single lap per session faster than those around you. It's no longer possible to waste tyres doing two runs. If you're first into the first corner, DRS means you'll be able to pull out a big lead and protect your tyres as you will while everyone battles behind you. I felt like kicking Lewis Hamilton and Jenson Button when they did their little duel at the start; by focusing on each other they lost time to Sebastian Vettel and wore out their tyres, which made it impossible for either to do anything about the race leader.

That's right, to get exciting racing for the lead in this system you need a team to qualify both its drivers right behind the lead one (without the pole-sitter's team-mate or any other team being in between) and then execute firm team orders on lap 1 to stop them from attempting to race each other. The "no. 2" would be tasked with staying 1.1 seconds ahead of 4th place and then keeping a consistent pace to remain 1.1 seconds ahead of 4th place, preserving the invisible barrier. "Good" thing systematic team orders are permitted this year, else every race win would be unsalvageable.

If you're not a potential race winner, qualifying is still vital and still has to be done as a single-lap run for each of the three sessions. This would be one set of tyres for Q1 and Q2 and then a second set for whichever session is believed to be the final one. If you get through to Q3 when it wasn't expected, simply sit out the session to preserve your strategy. This is because if you can't look after your tyres, the best strategy is to have as many new ones as possible. If you can do that, it's irrelevant whether you can pass the people around you (with gimmicks or not) because you'll probably gain a pit stop on them - especially if your car is relatively kind to tyres like the Sauber is). Even if you don't, you'll gain considerable amounts of time and flexibility.

It's bizarre that the strategies dictated by fragile tyres and ease of DRS-based tactics mean that the act of passing - DRS-based or otherwise - is almost irrelevant to the results.

The trick is to evenly space out all tyre changes according to when your car will need them, which should be quite straightforward to determine based upon performance in the first stint. It doesn't even need anyone to bother doing a pre-race equation - it's simply a question of chucking tyres at a car when it needs them. Pit strategy outside the options a car may deny has now got so little relevance that the discretionary laps can be deployed whenever the team wishes. All the strategy divergence is down to two factors: a) due to the tyre philosophy being new, different cars treat them very differently and b) many teams do not appear to have figured out what's going on yet, so haven't even taken the obvious step of going single-lap each session up to this point.

So we now have the single-lap qualifying some people have called for. It's not improving the racing - it's taken it away. Duncan Stephen has called it "one step away from fixing the result". I wish I could be so reserved on the matter. As far as I can see, it is fixing the result to whoever happens to be the fastest one-run driver/car combination in qualifying, and for most of the top 10, stupidity and extreme tyre wear permitting, they are fixed in the positions in which they qualified.

KERS doesn't seem to do anything to help the sport - it just seems to be something tagged on to keep the stupider elements of the environmental movement a little more content. It's in F1 in a form that will never be utilised on the road (road KERS will be a very gentle addition for all accelerations, not a big boost done occasionally), delivering power in a way that makes overtaking more difficult (which may be protecting us from even worse problems with DRS) and with a lack of freedom which places it firmly in "gimmick" rather than the "feature" it is about to become in sportscar racing. That it's not facing a campaign for removal at this time shows just how much of a problem DRS presents.

One of the things which worries me - and I think it's one of the things that's made it difficult for me to blog - is that so many people don't seem to see the medium-sized picture let alone the big one. They see lots of passing, lots of energy, lots of confusion - and start cheering. They do not see that it's causing very predictable strategies, very predictable results and a very samey feel to races. Energy and confusion might have got many into the sport but if it had kept being those things at the expense of everything else - especially the surprise element - they'd have stopped watching within a season because there'd be nothing to grip them with. If I wanted to know the winner 24 hours before the race and the result of a race for most of the field on lap 15, I'd put on a season review DVD. At least then there'd be decent camera direction...

Sport is a form of entertainment. If done properly, it will be entertaining whether or not the "show" is considered (the "show" only affects how many people get entertained and the length of the entertaining). The decade-long trend towards considering "show" over "sport" is nearly complete. But F1 is not reality TV. Reality TV tropes do not necessarily work for sports such as F1, even with extreme tweaking. The cost is that F1 will soon be unable to be called the pinnacle of motor sport, on the grounds that it will not be a sport at all. The sport needs urgent attention in order to save it, to take away the worst of the gimmicks. That way it might be possible to see how to get the enjoyment of racing to run clear again.

Though I'll let the powers-that-be tweak the "show" enough to get a competent TV direction system and crew. The current one hasn't worked since FOM took over the job and 2011 is exposing their weaknesses so much. It's even more frustrating to be watching a predictable race when perfectly competent commentators, used to having at least vaguely usable images to commentate from, find themselves clueless to things you figured out 30 laps before because you, unlike them, could see the little ticker-tape running across the bottom of the screen...