There are two sides to Formula 1. First, the sport itself – one that ensures that our favourite teams and drivers line up on the grid at newer venues every fortnight. Second, the business – one that helps the sport and teams fund their highly expensive racing activities. Of course, both sides are tremendously fascinating and make Formula 1 the billion-dollar entity it is.
As fans, our core focus and exposure is towards the sport. So when one says that Formula 1 has been on sale for quite some time now, it would be hard to believe. In fact, there have been several attempts in the recent past, including an abandoned attempt to make the sport public by listing it on the Singapore Stock Exchange.
However, it has now been announced that US-based Liberty Media Group has paid a whopping $8 billion or thereabouts to buy a 35.3 percent and controlling stake in the sport and business of Formula 1. While the sporting aspect of F1 might not be highly lucrative at the moment (with a single team, Mercedes, dominating since 2014), the business aspect of the sport certainly is. The sport’s business numbers are extremely strong and promising for the future and it does seem that Liberty Media, who will rename themselves to ‘Formula One Group’, have made a wise move. That they’ve retained Bernie Ecclestone as Formula 1’s CEO is wiser.
Will Bernie Ecclestone’s role and powers in the sport decrease? The new owners have asked him to stay on as CEO for the next three years, a time they believe should be sufficient for a handover of over a 40-year-old business of trusted relationships, ruthless negotiations and brand building.
While the sale has made its existing owners (CVC Partners, Bernie Ecclestone and others) richer, what’s in it for the fans? Will we finally see a more competitive Formula 1, one where more teams are competing for top honours? Will we see more races, and would that mean lesser races in Europe? Will Formula 1 market itself better in newer territories? Would we have more digital content? While most questions might not have answers just yet, the overarching feeling is that the sale could mean a better Formula 1 for fans and even the teams.
In their post-sale disclosures, the Liberty Media group listed promotion and marketing of Formula 1 as a sport and brand, distribution of content (especially in digital), sponsorship and evolution of the race calendar as their key points. This would mean that Formula 1 could be expected to well and truly embrace the digital platforms, one that Ecclestone refused to recognise the potential of and use effectively, to increase their reach and better monetisation opportunities. The increase in reach could interest more sponsors and that would increase investments and marketing opportunities for the sport.
Traditionally, Formula 1’s sponsorship contracts have relied on TV coverage for visibility over most other media. But with the growing might of the digital medium, will a sound digital distribution and monetisation plan increase the sponsorship scope for the sport and the franchise teams too? Out of the 21 races this season, only nine have title sponsors.
The Liberty Media Group also owns Atlanta Braves, a Major League Baseball team. The media business of league (MLB Advanced Media that focuses content, steaming and OTT services) is projected to reach revenues of approx. $1.2 billion – an amount that is almost the same as the income of Formula 1. There’s little doubt that apart from the contracted $9.3 billion revenue from Formula 1 over the next ten years, the new owners will be keen to tap the sport’s yet-to-be exploited media potential.
For fans, there’s a hint that the already overstretched calendar of 21 races could see a further expansion in the US and Asian markets. In the past, such an expansion would see iconic European circuits make way for newer but less popular circuits in newer territories. The new owners have promised to keep the European races as a foundation to their expansion strategy while exploring a whole new generation of fans in new markets. Hopefully Spa, Suzuka, Monza and other iconic races won't go off the annual calendar.
For teams, there might be an opportunity to buy into the sport. This would be yet another, and very important first for the sport. It is known that Ferrari is the only team that holds a small stake in Formula 1, but if other franchise teams are given the opportunity to do so, it’ll only mean better for the business of the sport and the teams. The other public fact is that, barring the manufacturer teams and Red Bull Racing whose core businesses lie outside of Formula 1, the privater teams have struggled to establish themselves as a ‘business’ despite spending decades in the sport. Case in point – Sauber. If the teams are allowed to own a stake in the profitable business of Formula 1 over and above their annual earnings, there’s possibility for them to attract more investments and sponsors.