Formula 1: Speeding towards esports success?
Coronavirus has put a halt to the current Formula 1 season. However, within days of postponing/cancelling Grand Prix races, Formula 1 innovated to offer 'Virtual Grand Prix' races to its fans. How did they achieve this? Will this esports success be long-lasting?
Background
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[1].
Figure #1–Unique F1 TV Viewership[2][3]
Enter Coronavirus
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[4]. 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[5].
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[6]. 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[7]
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[8]. 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[9].
Leveraging Existing Capabilities
Esports Expertise
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[10]. 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[11]. In that way, esports is serving as a stepping stone to attract younger audiences to F1.
Steaming Infrastructure
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[12]. Over the past few weeks, F1 streamed the virtual Grand Prix races through F1TV, alongside other platforms like Twitch and YouTube.
Game Software
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[13]. 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’[14]. ‘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[15]
Game Hardware
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)[16]. When coronavirus hit, F1 were able to supply cockpits to those racing.
Figure #4–Racing Cockpit[17]
Generalizable Lessons
- 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)
Conclusion
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).
Word Count: 991
References
[1] 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
[2] 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
[3] Sam Carp. SportsPro. Jan 2020. “F1 global TV audience reaches 1.9bn but unique viewership falls 3.9%”. Retrieved from: https://www.sportspromedia.com/news/f1-tv-ratings-2019-digital-social-media-figures
[4] Formula1.com. “F1 and coronavirus FAQ: Everything you need to know”. Retrieved from: https://www.formula1.com/en/latest/article.f1-and-coronavirus-faq-everything-you-need-to-know.6TwjCsP5iARqiIEci9lZFi.html
[5] Adam Cooper. Autosport. Apr 2020. “Formula 1 organisation furloughs staff and issues pay cuts”. Retrieved from: https://www.autosport.com/f1/news/148931/f1-organisation-furloughs-staff-and-issues-pay-cuts
[6] Ed Dixon. SportsPro. Mar 2020. “F1’s inaugural virtual Grand Prix draws 3.2m online viewers”. Retrieved from: https://www.sportspromedia.com/news/f1-virtual-bahrain-grand-prix-online-viewers-streaming-esports-julian-tan
[7] YouTube. “Chinese Virtual Grand Prix Highlights with Thibaut Courtois and Alex Albon”. Retrieved from: https://www.youtube.com/watch?v=29XP4Q_jUwM&t=
[8] Callum McCarthy. SportBusiness. Apr 2020. “Formula One’s virtual grands prix are a silver lining during dark times”. Retrieved from: https://www.sportbusiness.com/2020/04/f1s-virtual-grands-prix-are-a-silver-lining-during-dark-times/
[9] Formula1.com. Mar 2020. “Formula 1 launches Virtual Grand Prix Series to replace postponed races”. Retrieved from: https://www.formula1.com/en/latest/article.formula-1-launches-virtual-grand-prix-series-to-replace-postponed-races.1znLAbPzBbCQPj1IDMeiOi.html
[10] F1 Esports Series. Apr 2019. “Formula 1 New Balance Esports Series To Kick Off Its Third Season”. Retrieved from: https://f1esports.com/news/formula-1-new-balance-esports-series-to-kick-off-its-third-season/
[11] Formula1.com. Dec 2019. “2019 F1 Esports Series records largest-ever audience”. Retrieved from: https://www.formula1.com/en/latest/article.2019-f1-esports-series-records-largest-ever-audience.4G12AoLCpCBi3B5p8tQ3xQ.html
[12] Logan Bradley. SportTechie. Mar 2018. “Formula 1, Tata Communications Launch OTT Platform F1 TV”. Retrieved from: https://www.sporttechie.com/formula-1-launches-ott-platform-f1-tv-collaboration-tata-communications/
[13] Codemasters. Oct 2019. “Codemasters extends F1 partnership”. Retrieved from: https://www.codemasters.com/codemasters-extends-formula-1-partnership/
[14] 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/
[15] Metacritic. “Video Game Reviews”. Retrieved from: https://www.metacritic.com/game
[16] Andrew Evans. gtplanet. Jul 2018. “Fanatec Becomes Official F1 Partner, Equipment Supplier for Fanzone and F1 Esports Series”. Retrieved from: https://www.gtplanet.net/fanatec-becomes-official-f1-partner-equipment-supplier-for-fanzone-and-f1-esports-series/
[17] Kate Walker. New York Times. Nov 2017. “F1 Turns Its Attention to Esports and Its Younger Fans”. Retrieved from: https://www.nytimes.com/2017/11/24/sports/autoracing/f1-esports-racing.html
Thanks for the interesting read Colm! I like how they’ve not only addressed the immediate issues arising because of Covid but are also aiming to reach a wider audience than earlier. However, I wonder what you think about how they can compete with other eSports, especially the much more popular ones. For starters, the current leading tournaments offer prize money well into the millions – the winner of The International (DotA championship) gets more than the winner of Wimbledon! (source: https://www.statista.com/statistics/517940/leading-esports-tournamets-worldwide-by-prize-pool/) Next, the most popular games are playable with just a computer and some on multiple platforms (like PUBG). I imagine it will be hard to compete with these when equipment like the steering wheel etc. are almost essential for virtual races! Finally, my view of F1 is that it is almost the engineering and performance of the cars in the real world as much as it is about the skill of the driver. I am skeptical if viewers can be made to believe that the simulation/eSports versions will provide as much insight into the mechanical engineering aspects!
Interesting first point! I don’t think F1 esports will ever be able to achieve the popularity of the tournaments that you mentioned. But I still believe there is a place for F1 in specialized esports – particularly as it has a physical version (i.e., physical races) in contrast to PUBG and DoTA. If your a teenager interested in car racing of any kind, then this would be the perfect esport for you.
I really like your point around the allure of the mechanical engineering. I don’t think virtual races will ever be able to replicate this. But perhaps they can try to build elements of this into the game over time – i.e., allow for very intricate customization of in-game vehicles – which could help satisfy more technical fans. This may take a number of years of game iteration to fully achieve though!
P.S. – the prize money in the tournaments you linked have made me question my career choices
Thanks for a great read Colm! I was very happy to see your post Formula 1 given that I’m an avid fan who was devastated by the postponed season start this year. I applaud the way Formula 1 reacted to the pandemic by doubling down on E-Races with notable drivers such as Charles Leclerc, which maintained fans engaged and generated positive media mentions for the sport. However, same as you, I’m of the opinion that the E-Sports interest will die off post COVID given that it’ll never replace the risk and emotion that racing conveys in real life. The temporary pivot was super innovative though!
Very well-written and insightful post! It is interesting to think how this pivot was possible thanks to a digital initiative (F1 video game) that was already existing and so provided the tool to temporary self-disrupt the business model. What would be interesting to explore more is how sponsors and advertisers reacted to this choice i.e. whether they were perfectly OK to keep their deals even with virtual audiences or if they wanted to adjust deals in any specific ways. In fact, while viewership may have stayed high (it’d be interesting to compare also vs. real-life races, to understand if/how much viewership declined), the interesting thing to analyze is whether audience composition is the same (this is the most important criteria for sponsors and overall advertisers, after the numbers on reach). Curious to see if this new set up actually will have a post COVID-19 future too!
Thanks for your comment! To your point around sponsors/advertisers – F1 gave access to the virtual races at no cost to their existing sponsors and advertisers, which seems to have at least satisfied these groups at least in the short-term. I do wonder what will happen later in the year if more physical races don’t go ahead – i.e., will sponsors/advertisers grow restless? It guess it will depend on what ROI they get on virtual races. I saw your post on NASCAR, it looks like they followed a similar strategy to F1 with their sponsors/advertisers!
Good point around the audience sizes. Per Figure 1 in the article, if there are c.470M TV viewers per year for F1 and 22 Grand Prix races, then that implies that each race gets c.20M viewers on average. So the numbers they’ve seen of c.5-6M viewers are good, but still can’t match the physical races! But, of course, if the physical races are rescheduled for later this year – then the esports numbers would be incremental.
Thanks for an interesting read Colm. I think that given their options, Formula 1 did a great job in pushing for E-races. It seems like a good way to try to keep the season relevant while the lock-downs continue. The sport and the teams can at least get some media attention from assets that cant be laid-off, like the drivers. It will be interesting to see if the young demographic joining the E-races will actually follow the sport after covid-19, I am not very optimistic. Seems like the network effects are low. It feels like it goes the other way – because you are into the sport, you will play the video game.