INSIDE STORY: F1 gearing up for a change of direction

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Change of ownership: Carey (l) with former F1 owner Bernie Ecclestone (r).

The times are finally changing in Formula One. For the last 40 years, Bernie Ecclestone has run the sport with an iron fist packed full of dollars. The evergreen 85-year-old is the archetypal hands-on supremo. Every deal is conducted under his watch. Everything is under his control.

“When an incident happens at a race, the normal refrain from what there is of a press office is to ask Bernie,” a seasoned F1 reporter told me. “Basically, it’s the equivalent of going to Sepp Blatter during the World Cup to get some answers.”

The marketing and sponsorship team are minuscule in relation to a company which has just been sold for $4 billion. Massive, long-term sponsorship deals with companies like Rolex, UBS and Heineken ensure the money keeps rolling in no matter. That’s why, in this social media, digitally driven world, it’s somewhat ironic that the most sophisticated, technological sport is lagging behind the times when it comes to fan engagement and multi-platform exposure.

That, however, is all about to change providing the deal is finally ratified by the FIA in the next few weeks once a conflict of interest involving the governing body is resolved.

Ecclestone cannot go on forever and following the buyout of CVC (F1’s investment company) by Colorado based Liberty Media, a new age is dawning. Incoming chairman, the wonderfully mustachioed Chase Casey, a TV sports expert who helped establish the Fox Sports network among many others, is set to lead the revolution alongside owner and businessman John Malone, dubbed the ‘Darth Vader of Wall Street’ such was the legendary ferocity of his deal making.

Both have an acute eye for sports business. Owning the Atlanta Braves baseball franchise has given them experience in the modern sporting environment and with the vast North American racing market yet to become engrossed with F1, the opportunity was too good to turn down.

All the tools are in place. A few much needed tweaks should see interest, and revenue, skyrocket in new thriving marketplaces. Ecclestone will stay on for at least three years – after all, he knows where all the skeletons are buried – though within a few seasons, it will come exclusively under American rule.

From a financial standpoint, the sport’s in fine hands. Liberty boasted a $248 million net profit with revenues totals reaching $4.8bn and thanks to a 34 per cent share of Live Nation, the events promoter which also owns Ticketmaster, you can expect the Grand Prix experience to get a makeover.

Virgin Media, a stake in Formula E, the electric race series, and Discovery Communications, who are the parent group of Eurosport, are also in their impressive portfolio.

Liberty were naturally delighted to see in the annual financials an eye watering $9.3bn of contracted revenue under long term contracts which are agreed until 2026 with staggered renewals. Around $250m was brought in by trackside advertising while a recent sponsorship deal with Heineken amounts to $150m over the next five years.

Individual fees from the 21 circuits hosting races have reached $80m while broadcasting rights amounted to $1.2bn in 2015. With so few race days, bidding wars have been welcomed with open wallets.

Ecclestone is no fool. F1’s overheads are kept low. They don’t own the tracks or the teams. They employ just over 350 staff with the largest outlay coming through prize money – a total which now stands at $900m. Team payments are variable ensuring a tremendously strong business model and cash flow conversion.

Revenues have increased 58 per cent from 2006, while viewing figures worldwide have broken 400 million. No wonder Bernie wasn’t too bothered about Facebook or Twitter. Yet fears earlier this year about a sharp drop in sponsorship – $750m down from $950m in 2013 – would not have gone unnoticed either.

A difficulty in controlling costs, especially when attempting to negotiating hosting prices saw flak fly Ecclestone’s way. Smaller teams finding funding difficult while TV viewers and ticket sales started to decline also added further headaches and steeled the resolve of finding new owners to push F1 forward. There is a solid base with much to work with.

But Carey will readily admit more can be achieved. The use of virtual-reality technology will smash the viewing experience wide open over the next five years. Yet with a full scale social media assault – amazingly F1 have only just opened a specialised department in London – their presence will be constant.

“CVC is a private equity group so their job is to buy, grow and sell and they have got a 10-year investment and F1 will go down as one of the best private equity investments ever, recognised globally as a fantastic return,” F1 marketing guru Zak Brown, who is being linked with a slot to work alongside the Liberty brains trust, told Sport360.

“Someone like Liberty has a forever horizon, they aren’t going to buy and sell, they will grow as is strategic to their business. For those who want to see long term growth, Liberty is a strategic buyer – they have a strategic filter on their decisions.

“There will be more growth.”

While Europe, Asia and the Middle East bring in huge numbers of fans and viewers, North America remains on the cusp of the party. The last four years have seen races staged successfully in Austin while plans to bring Lewis Hamilton and co to New York were scuppered under a mountain of red-tape.

The interest is there – Americans, especially in the midwest, have a need for speed – though NBC only bring in around 500,000 for F1. NASCAR and Indy Car also need a boost.

Some prominent American driving heroes would help – the last Grand Prix win for an American was Mario Andretti’s triumph in Holland in 1978. The introduction of the US based Haas F1 team has helped spike interest though more races in that part of the world are needed. Yet the Ecclestone model of demanding large fees for circuits to host races while leaving them to do their own marketing drives have caused problems with organisers.

“There will be more support for the local promoters and country in terms of marketing and promotion expense,” said Bobby Epstein who runs the Austin race and was recently named among the top 100 most influential people in F1.

“Right now that is all left up to the local track. A centralised marketing plan will help a lot. Now that has the chance of happening. They will recognise the value of a marketing budget. We are competing for people’s time but there is great interest in F1 in the US.

“You just have to offer fans a full range of entertainment. How can I make the whole day a phenomenal event? Taylor Swift is playing her only concert in 2016 for us.”

Various TV rights deals – the action is televised in 200 countries which means there’s around 150 agreements in place – have halted exposure. They are fully aware that the average American has no idea about how much preparation and high-tech advances help send the likes of Hamilton and Nico Rosberg out for the 21 races a year staged over five continents.

“If you want to be in North America more than they are at present, that might require some investment and take five to 10 years to pay off,” continued Brown, an industry veteran who remains close to Ecclestone.

“For the benefit of the sport it’s good that it’s gone from a financial to a strategic buyer. Chase is a global sports content media expert which is great because F1 is the world’s largest annual sport.

“He can grow via media and all the different distribution channels. It doesn’t need a rocket scientist to work out North America is the largest, richest sporting nation and so when you are looking at areas where F1 can go, naturally that area pops off the map.

“They know the market place very well so if there’s anyone who does have the contacts and influence to make things happen, it’s Liberty Media.”

Ecclestone has been on the verge of selling for years though the right buyer hasn’t come along – until now. Many within racing believe his lack of awareness about modern-day media and how to bring a new generation of followers through have held F1 back.

“I’d rather get to the 70-year-old guy who’s got plenty of cash,” he said in 2014. “Young kids will see the Rolex brand but are they going to buy one? They can’t afford it.”

Remarkable comments from a seriously old school businessman who’s seen little need in adapting his ways.

“He has built it, almost single handedly, and certainly been the person most responsible for building the largest annual sport,” enthused Brown. “It is so big he now needs additional support and he and Chase will compliment each other. There are exciting times ahead.”

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WATCH: Verstappen & Ricciardo play Sepak Takraw

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Photo Credit: Red Bull Content Pool

Ahead of the Malaysian Grand Prix, which concluded on Sunday, Red Bull Racing’s Daniel Ricciardo and Max Verstappen were introduced to the sport of Sepak Takraw.

The two Formula One drivers spent an afternoon learning to play Malaysia’s national sport at the iM4U Sentral arena in Puchong, Selangor.

The sport is best described as a hybrid of football and volleyball.

After warming up with a bit of keepy-uppy between themselves, the duo played a full match with the national team on either side of the net.


Team Ricciardo or Team Verstappen – who do you think emerged victorious?










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Inside Line: Will the FIA ban 'the shoey'?

Kunal Shah 3/10/2016
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Listen to the full podcast below.

Nico Rosberg is lucky that Mercedes built him a tank that went through the 2016 Malaysian Grand Prix undamaged. Rosberg was lucky on multiple other counts too, including that he had a clean getaway [Mercedes can’t take that for granted anymore] and the two VSC periods that helped him climb back up the order.

Daniel Ricciardo had a great result to win the race, but will drivers not want to be on the podium with Ricciardo though, given his love for the ‘shoey’? Mark Webber was smart, he threw away Ricciardo’s shoe – the other podium victims need to learn from him.

Given how much the FIA loves clamping down on everything that’s fun in F1, maybe they will ban the shoey on the podium too? A BIG thank you to Red Bull Racing for allowing Ricciardo and Verstappen to race fair and square.

Lewis Hamilton made the race interesting – not sure if it was thanks to his engine failure, post-race comments or both. Hamilton believes that ‘something or someone doesn’t want him to win this year’ – and he’s right. We tell you who this person in the Mercedes garage is, who has been mercilessly trying to keep Hamilton from winning.

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