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Why Is Formula One Re-signing With ESPN, and What Does That Mean for the Sport in the U.S.?

Last week, F1 and ESPN reportedly agreed to a new rights deal that will pay F1 between $75 million and $90 million per year over the next three years. John Ourand of ‘Sports Business Journal’ joined ‘The Ringer F1 Show’ to explain the deal and why F1 chose it over other offers.

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Last Friday, John Ourand and Adam Stern of Sports Business Journal reported that Formula One and ESPN have agreed to a new TV rights deal that will run through the 2025 season and cost ESPN somewhere between $75 million and $90 million per year. This week, Ourand joined The Ringer F1 Show to discuss the details of the deal, why F1 chose to re-sign with ESPN versus some of the other outlets that bid, and how this will affect the sport in the long term.

This transcript has been edited and condensed for clarity.

Kevin Clark: The news over the past week is that F1 re-signed with ESPN for three years, between $75 million and $90 million per year. This is a huge increase. Two deals ago, ESPN did not pay anything for this. They did not pay a rights fee, and then that was adjusted. ESPN paid a little more to F1, but then there was a massive increase for this one.

Let’s start at the top, John. Take me through this negotiation process, which played out with the background that Netflix has created superstars out of F1 drivers. I was on Bryan Curtis[’s podcast] a couple of weeks ago, and he said, “Explain this. Explain this whole thing.” And I said, “Well basically, Americans love superstars, and Netflix has delivered to F1 the greatest superstar generator, maybe, in modern sports,” as far as going from zero to 100 with some of these guys like Daniel Ricciardo.

Obviously, Lewis Hamilton was already famous and all that, but it is a gift to the TV world that Netflix has done this. But that all played out with the American TV rights. Take me through kind of the ticktock of what happened the last couple of years, John.

John Ourand: First of all, the deal is not done yet. They have a handshake agreement. Nothing’s been actually announced. It could all blow up based on this interview right here. [Laughs.] But they have a handshake deal, and F1 has told Amazon and NBC that they’re not getting it. So, it is certainly happening, but it still is a couple days away or a week away from being official.

As you said, ESPN went from paying nothing, and it was a way for F1 to sort of just get into the U.S. market and get … they were with NBC earlier, but get in with ESPN in the market. And then ESPN paid, I think it was $5 million a year.

They started negotiating again. ESPN was expecting a pretty big rights increase, probably to $30 million, $40 million a year from $5 million a year. And it looked like it was going to happen for certain. In fact, I do a predictions column every December, and it was one of my easier predictions: They’re going to renew. It’s going to have a big rights fee increase.

F1, they saw the market for live sports in the U.S. is going crazy. They compared themselves really with European soccer leagues. And they saw the rights that European soccer leagues were getting primarily from ESPN+ and Paramount+ and all these streaming services. And they were like, “$40 [million] is not going to cut it. We’re looking for upwards of like $75 million per year.” And when they said that, ESPN blanched.

[F1] went into the market, and they got Comcast. NBC, I thought originally that when they left NBC, there were some hurt feelings there. They said some things publicly about NBC. And they didn’t seem to like each other. But Comcast owns Sky Sports, and they own NBC and all the cable channels, USA Network. They got engaged in a big way. Amazon came in, they got engaged in a big way.

ESPN saw that. And it’s more than actually, you mentioned the superstars—I think that does, of course, have something to do with it. But F1 has really been strategic about getting into the U.S. market in terms of the races in Austin, Vegas, Miami. They also have time-zone races that work really well down in Brazil, up in Montreal. And so, all of a sudden, it’s no longer just this little weekend morning programming. It’s going to hit at times that are going to be really helpful to ABC and ESPN as well, or just to anybody else there. That also helped really push this forward as much as all the work that F1 has done in terms of trying to create superstars.

Clark: One of the things you reported was that Amazon’s bid was higher. I guess there’s two ways to look at this. Is that F1 wanting to be on ESPN and ABC when it’s the big races, when they’re in North America? Montreal got that treatment even a couple weeks ago. Is it that?

Or is it ESPN? The report was ESPN’s going to hire somebody or take someone they currently employ and have them travel to all the races and do hits from that. Is it just the exposure thing? Is it F1 getting promised some shoulder programming and some additional traction in that way? Why did they take a lesser bid, John?

Ourand: I just had David Levy on my pod, and he used to run Turner Networks, the head of Turner Broadcasting. And he pointed out that, at one point, he bid a lot more for one of the NFL’s packages, and the NFL said, “No, we don’t want it to go to cable. We’re going to keep it on broadcast.” The old BCS, the college football playoff, it used to be on Fox, on broadcast.

Clark: It was awful. It was awful on Fox. I love Fox. I love Fox as doing NFL, whatever. Those couple years with BCS on Fox, I did not enjoy.

Ourand: I still have David Hill in my ear saying, “Got to show the bands. You got to show the bands.” In the middle of a pass play, they’d almost go to the crowd because of the color. It was great TV there.

But in order to convince the BCS to come off of Fox, ESPN had to outbid Fox by [$100 million] because they’re giving up a whole lot of reach to go to cable—at the time, this was I think in 2007 or ’08 … and it wasn’t as big as broadcast. So cable had to pay more. That’s what we’re seeing right now with streaming.

Amazon, it knew it would have to pay more than ESPN. … In fact, on the pod I asked Levy what he thought Amazon could have possibly paid to get it. Amazon was in at right around $100 million, I was told, per year, and the winning bid was $75-90 [million]. Levy suggested it would have to be around $200 [million]. They would have to pay that much more just because F1 is growing. They’re getting races in the U.S. Do they want to get relegated to strictly a streaming service? It’s not good for the overall growth. And then you have, on top of it all, the advertising and sponsorships that they sell. That matters.