F1 Signs $100 Million Sponsorship and Data Rights Pact, To Develop In-Race Betting Platform

F1

Formula One has announced a 5-year $100 million+ sponsorship and data rights deal with Interregional Sports Group (ISG) that will enable the development of a live in-race betting platform. The deal gives the sports marketing agency the ability “to sublicense betting partnership rights around the world”; rights packages said to include regionalized on-screen promotion, trackside signage and exposure across F1’s digital and social properties – where the promotion of sports gambling is legal (i.e. not all 21 race locations). Sponsors will not be permitted to offer odds within ads that run during grands prix. ISG will use Sportradar to create betting markets and provide its “integrity” monitoring services.

Howie Long-Short: The $100 million figure makes “the cost of acquisition per player very high”, leading some to believe ISG is using F1 as an entree to sports bettors hoping they’ll gamble on other sports. They’d better, the $100 million fee ISG will pay up front is more than the company’s annual revenue.

F1 teams are expected to split $921 million in ’18 prize money, which would be $45 million less than they received in ’16; despite an increase in the number of races. That’s because F1 teams split 68% of the circuit’s underlying profits and costs have increased significantly (think: rebranding, new headquarters, eSports) since the Liberty Media acquisition. The $921 million figure may represent a best-case scenario. F1 is facing the difficult decision to re-brand againcompensate 3M or engage in a costly legal battle with the manufacturing company over its new logo; though, that decision may not be made anytime soon. The European Union Intellectual Property Office (at the request of both sides) recently delayed the start of the adversarial part of the negotiations by 22 months (a “cooling off” period).

Rising costs (+$27 million) and declining revenues (-$31 million to $585 million) drove F1 operating income down a staggering -69% (to just $14 million) during the most recent quarter. FWONK shares closed at $37.59 on Thursday, up nearly 10% from when the company reported in early August.

Fan Marino: The deal comes at a time when the involvement of gaming companies in sports (around world, not U.S.) is being scrutinized more than ever before. Italy and Australia have already implemented bans/restrictions on betting advertisements during live sporting events and there is now talk similar bylaws could be set in the U.K., F1’s most lucrative broadcast market.

On Wednesday, Tom Watson, Deputy Leader of the Labour Party, called for a ban on all gambling advertisements during live sporting events, to address what he’s tabbed “a public health emergency” (gambling ads rose an estimated 600% between ’07 and ‘13). Watson’s plan also calls for a tax on gaming operators (1% of gross gambling yield), money that would be used to offset a portion of the recovery efforts and a prohibition on the use of credit cards to pay down bets.

One U.K. gaming operator, Sky Bet (TSG), is on record supporting the levy, but vehemently opposes a “blanket ban” on advertising and credit card payments saying those initiatives could push gaming companies to drop their license in the UK (as in theory, it would become a less appealing market); leaving gamblers vulnerable to “disreputable operators.” Good luck selling that, the odds of Sky Bet closing its U.K. division are infinitely long.

Did you know? 60% of clubs within England’s top 2 divisions (9/20 in EPL, 17/24 in Championship) have a gaming company represented on their kit. The Labour Party previously called for all to put an end to those sponsorship agreements, threatening legislative action should they fail to comply.

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Author: John Wall Street

At the intersection of sports & finance.

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