The legal issues facing Liberty Media’s new “over-the-top” proposals for streaming Formula 1
When Liberty Media completed its acquisition of Formula 1 (F1) in January 2017, it did so with a new approach to the presentation of motor racing and its brand, and in particular how it should be broadcast. In recent years, the sport’s business model has been acknowledged to be somewhat antiquated, and industry analysts have called for an update for the on-demand digital era.1 Liberty Media, majority-owned by American billionaire John Malone, holds a diverse array of interests in the media, communications and entertainment sectors, and as such the new owner seems well placed to deliver the update F1 requires.
Central to this transformation of F1 as a media and entertainment brand appears to be "F1 TV", an "over the top" (OTT) live Grand Prix subscription service set to be launched at the Spanish Grand Prix this May. Playmaker Media is to act as systems integrator for the service, working with iStreamPlanet and Tata Communications2 to deliver exclusive access to all 20 driver on-board cameras and other features for multi-level personalisation, e.g. languages. Consumers will, in short, be able to stream a wide range of content (e.g. press conferences, interviews, practice sessions and hundreds of hours of past highlights), as well as decide how and when (e.g. using multiple devices) they will do so.3
This article examines Liberty Media’s OTT proposals for F1 and the legal issues it is likely to encounter, namely:
Piracy and lack of control of content
F1’s new OTT service and the legal issues it is likely to encounter
There appears to be an overarching philosophy of empowering the consumer to generate his/her unique immersive experience, and such a service will sit as an OTT media service for a niche segment (F1 sports fans) in a growing marketplace, with Netflix and Apple TV considered dominant players. With OTT increasingly being seen as the dominant form of media for a variety of content,4 especially amongst millennials, F1 naturally sees it as central to an attempt to rejuvenate the sport’s image. Indeed, to complement a push to change perceptions of the sport, especially amongst social-media consuming young people, there is the multi-year F1-Snapchat promotion deal.5 Furthermore, Christina Aguilera is to headline the Azerbaijan Grand Prix this year6; and the new owner’s distribution deal with ESPN is part of a broader effort to penetrate better the US market.7
In conjunction with this, Liberty and the FIA have proposed to the teams a "five-point plan" to overhaul the rules of the sport post-2020, with an apparent aim of making the cars more raceable and improving overtaking. Clearly, this is acknowledges that the success of the new OTT service will also depend on how entertaining the action on the track actually is, with more overtaking and racing manoeuvres being deemed desirable. The five key areas are revenues, governance, sporting and technical regulations, power units and costs. Although aerodynamics, suspension and engines will remain areas of development and differentiation between cars, there will be a move towards more standard parts as well as the introduction of a spending cap between teams. Both Mercedes and Ferrari (in contrast to the rest of the field) are currently taking issue with this, Ferrari threatening to quit the sport if “acceptable solutions” cannot be found to the push towards a standardisation which leaves less scope for competition between teams in technology and know-how.8
The YouTube and Netflix revolutions, although differing in the way they disrupt internet video streaming and television broadcasting respectively, both represent a media distribution practice allowing the content provider to deliver content directly to the consumer through the internet, bypassing telecommunications, cable or broadcast television and other traditional distributors. This is what "OTT" refers to. Whereas F1 TV will not necessarily be disrupting any captured marketplace, it will nevertheless be an OTT service with myriad potential benefits, including interactive opportunities such as betting, voting and rewinding, and less cited opportunities such as the ability to capture valuable data about which particular moments of the race viewers watched most or watched again.
Nevertheless, certain legal issues accompany such benefits, each of which merits appropriate consideration.
Piracy and lack of control of content
Given the international fan base of F1, Liberty will be keen to keep control of how their content is disseminated through F1 TV. Whilst acts of piracy, such as the illegal ripping/copying of digital content, will be something Liberty will be keen to minimise, a more widespread danger perhaps is F1 losing control of its content on the internet. The rapid rise of mass usage of social media, across the developed and developing worlds, including embedded players and viral videos, means that F1 should recognise the risk of people lifting content from an F1 TV service and placing it on various video platforms, thereby undermining the notion of F1 TV being a service offered for a monthly payment by the end-user of $8 to $12 (the proposed price).9 Another chapter has opened in the history of pirated content in the UK: the recent rise of digital TV boxes which allow users to illegally stream content, which has caught legislators on the back foot.10 So F1 must look to protect its service via digital rights management measures and video content protection, such as restricting access across devices, watermarking streams and selectable output controls which guard against consumer recordings.
A particular problem an OTT service directly owned and operated by F1 might encounter is that of rights clearance. Careful consideration must be given to whether or not F1 has permission to exploit certain works, particularly if it is to make past F1 races/content available to subscribers of the service.
The intellectual property rights relating to the content of the older races may be held by a variety of entities worldwide, or licensing arrangements may mean that certain entities hold exclusive distribution rights. It must be ascertained whether older licensing arrangements, for older content, entail restrictions on the type of format F1 TV ends up resembling.
OTT services, generally, provide new opportunities for advertisers; F1 TV represents a fairly unique opportunity to target F1 fans insofar as they subscribe to the service. There will also be a greater variety of options/types of advertising, with advertising before, during and after content viewing all possible. As alluded to above, there is also the opportunity for data collected about users to be used by F1 to provide individually-targeted advertisements, generating more lucrative advertising opportunities.
Nevertheless, advertisers face issues with OTT services because the latter may include a user ability to skip adverts; the paying users might have no appetite for advertisements in the first place. In the latter case, F1 might consider a split service, whereby premium prices can be paid to reduce the number of advertisements seen, providing revenue stability.
Broadcasters and other service providers are only required to comply with the broadcast regulations of the country of origin (for example, broadcasts out of the UK need only be compliant with Ofcom’s regulations and not for every jurisdiction where the signal may be received), following the Audiovisual Media Services (AVMS) Directive (Directive 2010/13/EU).11 However, the AVMS principles only apply to EU member states. Should F1 decide to make F1 TV globally accessible, it may therefore be necessary to restrict access based on the viewer’s location to comply with content restrictions and other local regulations. This will likely prove an expensive option.
Brexit is an issue here, as many non-domestic channels broadcast from the UK, under the country of origin principle, and the UK has clearly benefited. It is entirely probable that the broadcasting industry in the UK will lobby extensively for the government to negotiate a free trade agreement. Nonetheless, F1 TV would need to be prepared for any departures from the existing framework.
In the UK, anyone who uses a personal service to watch a live broadcast (whether on a television, PC or otherwise) must have a television licence. There is some debate about the position regarding catching up on programmes, e.g. in respect of watching only catch-up shows on iPlayer. Strictly speaking, using OTT services in such a way does not require a television licence, if live content is never watched. F1 would be prudent to incorporate up-to-date guidance to end-users within the OTT service, so as to keep up with current law, especially following the Department for Culture, Media and Sport’s latest BBC Charter Review. This reconsiders, and prompts modification of, the licence fee in light of modern viewing habits and the funding of the BBC.12
The effect of the AVMS Directive has been noted above. Data protection law, particularly following the new General Data Protection Regulation (GDPR) coming into effect on 25 May 2018,13 should also be held to be an important consideration. Here, processing data identifying individuals may come in the form of particular examples of manipulation of the "big data" F1 will gather on its subscribers. Whilst such data manipulation and analysis may prove highly valuable, both for F1 and third parties such as advertisers, F1 must ensure it is operating within the current legal framework. This means that data must be correct, minimised and processed legitimately (amongst other things) and the subscribers aware of their data protection rights, in particular the "right to be forgotten".
Creating a subscription package for the strongest F1 fans is clearly held to be a tremendously important opportunity by the new owners, but only a combined, multi-pronged, digital-focused approach will turn around perceptions of a sport which has lost one-third of its global audience since 2008. Whilst this viewership decline is consistent with that in certain other popular sports, it has been suggested that the move from free-to-air television to a subscription service has contributed to the decline.14 The introduction this May of an OTT service may be recognition that only a particular form of subscription service may suit the sport; one which leverages the unique imagery and spectacle of the historic sport whilst taking account of how content is currently being consumed, and most likely be consumed in the near future. Here, the legal issues outlined above represent both opportunities for, and threats to the success of, F1 TV.
Of course, the dangers of an OTT service offering by the content-creator itself can extend to traditional broadcasters/distributors pulling out due to their simply not wanting to compete. This was exactly what NBC did in respect of the US broadcasting of the sport last year, following the announcement of the F1 OTT service.15
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