How did you get into Formula 1?

Well there’s this Netflix show…

In 2018, Formula 1 entered into an arrangement with Netflix that allowed ‘backstage’ access to the 2018 Formula 1 season to produce a 10-episode original series for streaming on their platform. After a three-year extension of the agreement, the sport has experienced a 77% growth in viewership from fans in the 16-35 year-old age bracket over the past 12 months, and a 200% increase in merchandise sales revenue since 2017. The CEO of Formula 1 racing team, McLaren Racing, noted in September 2021 that more than 50 million people have viewed the popular Netflix series. With other sporting organisations such as the Association of Tennis and the Professional Golf Association (PGA) entering into similar agreements with over-the-top streaming services (or OTTs) in early 2022, it appears this is a winning formula for sports to reach a broader market and expand their fan base.

In this article, we explore the commercial benefits and key legal considerations for these partnerships.

The increased drama and backstage access makes a sporting docuseries a more organic and effective promotional strategy than traditional forms of marketing.  Sports docuseries may prove to be useful for sporting associations in future as an effective tool to generate a passive income stream, increase fan engagement and become a means of entry and exposure to new geographical and demographical markets.

Legally, aside from agreeing standard commercial terms, the agreements that govern these kinds of productions need to address a broad range of legal issues, including the following:

1. ownership and use of intellectual property rights – in addition to addressing ownership and cross-licensing of IP rights, including  copyright, that arises out of the production, there is significant third party IP, such as sponsors’ brands, that will appear in captured footage.  Parties should ensure there are appropriate licences in place for use of third party rights;
2. creative control – in the production phase, the level of access allowed by camera crews is clear and there is a right of refusal to allow access for certain matters e.g. governance related decisions;
3. final approval rights – as a promotional activity, it is important for brand owners to retain control over their reputation and there should be a clear procedure for approval of the final product prior to publication;
4. reputational damage / morality clauses – with consumers having greater reputational sensitivities and ESG-related expectations, there should be robust clauses that address issues that could cause reputational damage e.g. in relation to criminal or geo-political matters, and a clear position on the termination rights of the respective parties in these circumstances; and
5. force majeure – with increasingly unpredictable global events preventing the performance of contractual obligations e.g. re-scheduling of sporting events or using amended formats due to COVID-19, there should be a clear procedure for renegotiating obligations and ultimately termination rights.

As streaming services are increasingly being used for consumption of content and sporting entertainment, the docuseries format is a highly effective and lucrative promotional strategy, and businesses should be mindful of the above considerations.