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Good Thursday Morning. Here’s the rundown of this week’s Sports Business Playbook:

• 📰 This Week’s Topic: SBP returns — coming to you from the great (soon to be white) North! We’re talking about the bull/bear case for F1’s new US media deal with Apple

• 🤯 “Whoa of the Week”: The NBA’s strong opening night numbers

• 💪 Weekly Reminders that Sports are Awesome: “Roundball Rock” and Inside the NBA return!

SBP Note: Hello friends! Great to be back after a two-month hiatus. Much has happened since August: Mrs. SBP and I moved to the Midwest, we bought a house, and we are hard launching into adulthood I suppose with a daily routine of household chores and lawn care.

I took some time away from writing due to the move and getting set up in our new home, and the timing feels right to come back to it now that we are settled. SBP will likely not be a weekly recurrence like it was for the past few years because life has gotten busy, but I’m excited to still provide quality, fun content that gets you smart and hopefully gives you a few laughs along the way on a recurring basis.

So, without further ado…

Hey team,

Apple and Formula 1 launched a successful blockbuster movie together earlier this year depicting a fictional F1 season, earning over $600 million globally at the box office and smashing several records.

Fear not if you missed it, though, because they’re now doing it IRL, as the racing circuit and tech giant announced a five-year media rights deal last week that will bring every F1 race to Apple TV for U.S. consumers beginning in 2026 (but you should still go watch the movie because it rules).

Apple is paying roughly $140 million per year — $700 million total contract value — for the racing rights, a 65% increase over the $85 million per year that ESPN was paying for the rights the last several years.

Apple TV will provide coverage of all Formula 1 events, including practice, qualifying and Sprint sessions, as part of the streamer’s existing $12.99 per month subscription. This differs from other exclusive sports rights Apple owns like Major League Soccer, where the games are a part of a package on top of Apple that costs extra. The F1 TV package, a $16.99/month standalone streaming service that viewers could watch if they did not have ESPN, will be rolled into Apple’s offering.

The deal makes a ton of sense for Apple, as they get to own all races end-to-end, create additional content, and can tap into the affluent fandom that follows F1 to sell their ecosystem of products.

But, it’s not all clean air in front of F1 for this decision. In this week’s SBP, we’re heading to the track and looking at the bull and bear case for F1’s tie-up with Apple.

Bull Case

Those who favor this deal believe F1 is in the middle of “j-curve” type ascent, and now is the time to capitalize.

F1 has been a rocket ship in the U.S. the last decade. When ESPN first took over the deal in 2018, F1 let them broadcast the races for free (literally).

Through Drive to Survive catching fire, more races in the U.S., greater marketing efforts by ESPN, and many other factors, the sport has caught on in the States, with this season’s races averaging a record 1.4 million viewers. As the sport has grown in popularity, so has ESPN’s payments to F1: it went from free to $5 million a few years ago and now the current ~$85 million.

This $140 million deal is a natural progression in F1’s ascent and is likely more than any cable or broadcast provider was going to pony up due to the ever-changing media environment and the fact that F1 races don’t allow traditional media outlets to sell as many commercials during the races.

The bet here is that Apple can help F1 offset the loss of casual fans by moving from cable to behind a paywall. There are reportedly 150 million iPhone users in the U.S., and Apple can market F1 to this captive audience through these channels. They already do this with MLS — sending push notifications to iPhone users, integrating content into its news app, etc. but F1 likely expects Apple to lean in much more than they have with MLS to get viewers invested in the races.

Plus, there is the potential for all of the ancillary content that will come out in partnership with Apple — i.e., a second F1 movie is reportedly already in development, and there is a world where F1 is doing sponsored content in Apple Music, being viewed via widgets on the Home screen of the iPhone, and there are F1 games in Apple Arcade.

Bear Case

Detractors will say this deal smacks of cashing out in search of short term profits.

F1 is a hot, highly coveted sports property that still has room to grow in the U.S., and they’re now running the risk of alienating their diehard fans by making them purchase another subscription while also losing the casual fans via the reach that comes with being on traditional cable broadcasting.

As the Entertainment Strategy Guy newsletter notes in a newsletter from 2024, “distribution matters” for a growing sports like this. Apple reportedly makes up only 0.35% of total U.S. TV/streaming viewership according to Nielsen, so these two themes are not in congruence.

And that’s before looking at the track record of Apple with its sports partners.

F1 is of course a better property than MLS, but the tech giant has not been successful in helping to elevate MLS globally, as most MLS matches are averaging just 120,000 viewers according to MLS commissioner Don Garber. Will additional marketing efforts for F1 yield similar paltry results?

So for all of this risk, one would expect a bigger paycheck to help ease the unease.

That does not appear to be the case, though, as Morgan Stanley notes that when combining U.S. media rights revenues with foregone F1 TV revenues, “the effective AAV and CAGR is roughly 1.1x and ~3%.”

SBP’s Case

This is obviously a mixed bag with merit on both sides, but put me in the slightly more bearish category for F1.

This deal is unequivocally a win for Apple, as they get to own all the content of one of the biggest global sports properties for less than 1% of their $3.9 trillion market cap.

It feels somewhat one-sided, though, as F1 is getting a short-term revenue win but is potentially short-changing the longer-term viability that can come from continuing to grow overall audience via reach the traditional networks provide.

Yes, cable is dying, but the number of sports fans who have cable and/or ESPN streaming is substantially larger than Apple TV, and F1 is still a niche sport by most measures here in the States.

It’s a tough position to be in if you’re F1 leadership given the ever-changing media landscape and the inherent challenge of less ad time. So, it’s understandable why they chose to get theirs now (“bird in the hand” as they say), but it’s much harder to regain momentum in today’s fragmented attention economy should the Apple deal not produce, and the U.S. market is too valuable to miss on.

My vote would have been locking in ESPN or another broadcast partner for three or so years at a modest uptick (for round numbers, let’s say $100 million/year) to continue to get traction here.

🤯 “Whoa” of the Week

Insane, mind-blowing things constantly happen in the sports business world. Here was my favorite of the past week.

1. The NBA’s opening night numbers gave the Association exactly what it wanted

💪 Weekly Reminder that Sports are Awesome

This newsletter is, of course, mostly centered on the business side of sports and the things that happen off the field. That being said, it’s important to remember why we fell in love with sports in the first place, though.

This section is meant to highlight the amazing things that happened in sports this week that serve as that reminder.

1. “Roundball Rock” is back!

2. Inside the NBA returns, and the opening is just phenomenal

Thanks for reading! Let me know what feedback you have.

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Until next time, sports fans!

-Alex