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Formula One round-up – New owners complete their first season and the trophies have been handed out

Posted on 21 March 2018. Source: Business Shapers

Formula One round-up – New owners complete their first season and the trophies have been handed out

As Liberty Media Corporation prepares for its second year behind the wheel of the Formula One Group – with the new season commencing in Melbourne this week – our Automotive Group takes a look at how the US media company has made its mark and what the year ahead may hold in store.

Liberty, no stranger to the business of sport with its interest in a Major League Baseball club, the Atlanta Braves, acquired the Formula One Group in January 2017 for US$8 billion. Throughout 2017, races were held in 20 different countries from Azerbaijan and Brazil, through to Monaco and Singapore. Organisers in host countries pay an average fee of around US$31 million to host a grand prix (GP) and are reliant on race revenues to be profitable.

With the endless commercial and marketing opportunities, it is easy to see why there is so much interest in the business of motorsport from various organisations, often with high profile backers – with many keen to get their hand on the coveted franchise. The sport was a profitable and constantly expanding business under Bernie Ecclestone’s leadership and Liberty believes that social media and technology are the key areas of growth for the business.

Five areas of focus for Liberty

  1. Perhaps the most obvious way to stamp its mark, Liberty unveiled a new Formula One logo at the last race of the season. The previous logo was first introduced 30 years ago, and featured at the corner of every televised race, racing programme and press materials. As is common when famous institutions change their logos, the new logo has received mixed reviews from the pit lane and fans. Furthermore, the logo ran into legal difficulties: it was reported earlier this year that 3M, the Post-It Note manufacturer, was claiming the new logo is too similar to its logo used for its Futuro sub-brand.
  2. Another notable change has been the opening up of the racing pit lanes and paddock club to cameras and the authorisation of such content to be posted on team and F1 media channels, thereby giving fans greater access to the previously VIP-only access areas. While the closed door and invitation-only nature of the pit lanes contributed to Formula One’s reputation of glitz and glamour, opening these areas up to fans via media content will only enhance the sport’s reach and popularity. After all, one highlight of the racing weekend is to see who’s who in the pit lane and paddock club – guests in 2017 included Bill Clinton, Naomi Campbell and Sir Mo Farrah.

    The opening up of the sport went further than access to the pit lanes. For the first time since the 1990s, a driver’s briefing was recorded and parts of it broadcasted online and via social media. The recording was from the Monaco GP and was released the following month at the Canadian GP. The short video was well received and provided fans with a rare insight into the minds of and relationships between the drivers away from the track, but was clearly different to a sponsored interview. The competitive nature and rivalries between the drivers were vividly apparent.
     
  3. It was reported that global motorsport sponsorship in 2017 reached US$5.75 billion. In recent years, high profile organisations such as Vodafone and Santander have left Formula One. The sport’s sponsors attract a particular demographic – previously tobacco companies and now alcoholic beverages and luxury brands. Broadening the appeal of the sport is beneficial to Liberty, the teams and its sponsors. Brands are attracted by the wide reach of the sport (around 400 million viewers around the world) and with the introduction of social media, younger audiences could be attracted to the sport and become future consumers of luxury brands.

    We understand that Liberty is exploring the possibility of the live streaming of Formula One through mediums such as Netflix, which could help to entice the younger audience. Looking forward, it seems that Liberty has recognised that betting and gaming companies have not historically been significant sponsors in Formula One. This could be an area of change, especially with Liberty’s interest in technology and apps.
     
  4. Whilst the focus in the past has been on emerging markets and shiny new purpose-built racing venues, it’s clear that Liberty is keen to focus on street races in cities on both sides of the Atlantic, no doubt picking up on Formula E’s success. In July 2017, a unique event was hosted in Central London which saw Formula One cars drive around Trafalgar Square. The sport is also keen to develop its US fan base through a street race in either Miami, Los Angeles or New York.
  5. For the first time in recent years, the Grand Prix Drivers’ Association (GPDA), the independent union for drivers, received 100% membership from Formula One drivers. This was perhaps due to the uncertain times as Liberty and the teams will soon begin negotiations for the bilateral contracts governing the team’s participation in F1 beyond 2020. Whilst the GPDA does not have a seat at the negotiating table, it is clear that Liberty is interested in what the drivers have to say as some of their suggestions regarding aerodynamics and tyres were implemented in 2017 and improved head protection will be introduced this year – with the new halo design.

Other changes afoot

On the technical side, it is clear that the objectives of the proposed rule changes from 2021 are to make the sport more competitive and increase the sport’s fan base. Key topics of discussion and negotiation include the distribution of prize money for the teams and costs caps – the larger teams favouring the current rules (unlimited budgets) and the smaller teams preferring a more level playing field. The possible changes in engine rules has already sparked interest from new manufacturers such as Aston Martin, which will be a team sponsor in the 2018 season.

The 2018 season will have a record-matching 21 races with three GP races in three weekends, a first in the sport’s history – testing the sport’s and team’s ability to not only transport the key components and resources, but their ability to work under increased pressure through the tight timetables. Liberty has stated an intention to bring a “Super Bowl style” weekend to each grand prix, turning each into a mini festival with events for the whole family rather than the long wait to the main racing events on each day. To broaden the sport’s appeal, promotional female models who previously lined the F1 grid before the start of the race will be replaced by “grid kids” – who will most likely be aspiring racers from junior divisions. Liberty’s decision follows similar moves by sports such as darts. All in all, it promises to be an interesting year ahead.

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