Formula 1 & The ESPN Curse

In 2023, Major League Soccer left ESPN for a 10-year $2.5 billion deal with Apple TV. The agreement was a boon to MLS’s financials, but it may have been the biggest misstep the league has ever made.

Between 2022 on ESPN and 2025 on Apple TV, viewership dropped from 343,000 viewers per match to 120,000 per match. Attendance has dropped 5.9% from a year ago to 21,838 per game.

TV has always been the top of the funnel for sports fans. It’s where kids learn to love sports, and it’s where lifetime fans find their favorite team night after night. Closing the gates to fans reduces the addressable market, even when it comes with a big check.

For decades, ESPN has been the biggest top-of-funnel channel for sports. It’s ubiquitous among sports fans, and it’s made MLS, the UFC, the NBA, college football, and even the NFL more popular. Leagues want to have deals with ESPN not only because of its reach to show sports, but also its ability to promote sports through constant daytime programming.

That’s why this week’s decision by Formula 1 to leave ESPN for Apple TV is so puzzling. F1 is taking somewhere around $140 million per year for the next five years from Apple, significantly more than the ~$90 million that ESPN offered. But if the cost is 2/3 of your fans, like it was for MLS, is the deal worth it?

More on that in a moment.

The markets overall were essentially flat ahead of a big earnings week.

The Asymmetric Portfolio had a rough week as Hims & Hers fell 16% on Friday. The next few weeks will determine how the portfolio ends the year, so I’ll be covering that a lot over the next few weeks.

In Case You Missed It

Here’s some of the content I put out this week.

• The Bright Future for Hims & Hers: After adding testosterone and menopause products, Hims & Hers’ growth prospects are looking up.

• MGM Resorts Gets Focused: MGM backed out of New York and got good news about online gaming.

• Spotify & Netflix Take on YouTube: Video podcasts are coming to Netflix in an effort to take on YouTube’s growth.

Scale in Sports

One of the reasons streaming sports is so interesting to me as an investor is that the strategic dynamics are predictable. If we go back to the smiling curve again, companies that win the most subscribers will generate the most revenue, which will allow them to buy the best content, which will attract more customers and allow for higher prices…and so on.

Winners win, and being second or third in streaming sports may make you irrelevant.

That’s why I like ESPN’s position with the A Package with the NBA, the most NFL games, and arguably the best college football slate of games.

If you’re a sports fan of the biggest sports in the U.S., you have to have ESPN.

Riding ESPN’s Coattails

Other sports get to ride on ESPN’s coattails. The NHL and golf are perfect examples, sitting alongside the NFL and getting coverage from ESPN’s programs before and after events.

F1 got the same treatment over the past seven years.

Sure, Drive to Survive was popular.

But there’s no chance F1 would be as popular as it is in the U.S. without ESPN. And now, the series is going with Apple TV and a viewership that is supposedly 45 million users strong, but lacks a coherent reason for subscribing to the service. “They make cool stuff” seems to be the best argument for Apple TV.

But MLS is the cautionary tale here.

Two-thirds of viewers were casual enough that they wouldn’t follow soccer from ESPN to Apple TV.

Appointment Viewing

And maybe that’s where F1 has this right. F1 races aren’t casual. They’re on at 4:00 a.m. in the U.S. frequently.

It’s appointment viewing.

And viewers will follow F1 wherever it goes.

That’s the theory.

I think F1 viewership will drop off just like it did with MLS, but F1 is taking the check and running.

Now the question for ESPN, and Disney $DIS ( ▲ 0.72% ) more broadly, is around whether or not losing niche sports like the UFC and F1 are going to hurt the business over the next few years. They’ve decided to go all-in on the NFL and college football because those are the biggest games in town.

I thought F1 was a perfect niche to sit next to those games.

But F1 saw its draw differently and thinks it can grow without ESPN.

Will the ESPN curse follow F1 the way it followed MLS?

I think it will, which will show others how strong ESPN’s pull is in media. Eventually, aggregating sports demand will make ESPN the Netflix of sports.

Disclaimer: Asymmetric Investing provides analysis and research but DOES NOT provide individual financial advice. Travis Hoium may have a position in some of the stocks mentioned. All content is for informational purposes only. Asymmetric Investing is not a registered investment, legal, or tax advisor, or a broker/dealer. Trading any asset involves risk and could result in significant capital losses. Please do your research before acquiring stocks.