← Business Daily
Business Daily
Formula 1’s new business model
00:17:42
It's trying to appeal to a younger fan base and break into the lucrative US market
Loading summary
Transcript72 lines
- [00:00]
GiveWell Advertiser
This BBC podcast is supported by ads outside the uk.
- [00:06]
When you give to a nonprofit, how do you measure success? Many focus on low overhead. But what about real impact on people's lives? For 18 years, GiveWell has researched the highest impact giving opportunities. Over 150,000 donors have confidently used GiveWell, saving 300,000 lives and improving millions more. Make a tax deductible donation@givewell.org first time donors can have their donation matched to up to $100 while funds last. Select podcast and more or less at checkout.
- [00:36]
Ryan
Hey, let's talk about your expense report.
- [00:39]
Expense Report Employee
I didn't submit an expense report.
- [00:40]
Ryan
You will. Custom saddles and dog training services are not within policy.
- [00:44]
Expense Report Employee
What are you talking about?
- [00:45]
Ryan
SAP Concur uses advanced AI to audit and automatically detect out of policy expenses. It's the breakthrough I needed to focus more on our future.
- [00:53]
Expense Report Employee
These are my future expenses.
- [00:55]
Emily Prazer
Yes.
- [00:55]
Ryan
And self defense classes are out of policy.
- [00:58]
Emily Prazer
I'll need self defense classes.
- [00:59]
Odoo Advertiser
You will?
- [01:00]
Expense Report Employee
For what?
- [01:00]
Ryan
It's a big dog.
- [01:02]
Expense Report Employee
SAP Concur helps your business move forward faster. Learn more@concur.com.
- [01:10]
Victoria Turner
Hello and welcome to Business Daily from the BBC World Service with me, Victoria Turner. Formula one, the elite motor racing competition is always on the hunt for new fans. In the past few years, it's cracked the US Sports market and expanded its global reach.
- [01:27]
Liam Parker
We want to continue to grow in the US we have 52 million fans now in the US that is a very great opportunity for us to continue to grow there.
- [01:35]
Victoria Turner
The championship is not just a racing series now, it's a global brand. Revenues have never been higher, but could the sport be pricing out some of its core fans?
- [01:47]
Elizabeth Blackstock
They can't afford the tickets, they can't afford the hotel prices. And there were so many people I spoke to who were like, well, I would have loved to come, but I can't afford hundreds and thousands of dollars.
- [01:58]
Victoria Turner
The changing economics of F1 that's in Business Daily from the BBC.
- [02:12]
Formula 1 is one of the richest parts sports in the world. But even the biggest of brands need to adapt to the times for F1. Younger audiences have traditionally been out of reach, but now the sport has formed global partnerships with household names like Netflix, Louis Vuitton and even Lego. And there's been an F1 movie this year starring Oscar winners Brad Pitt and Javier Bardem.
- [02:37]
Expense Report Employee
I'm offering you an open seat in Formula one, the only place you could.
- [02:42]
Victoria Turner
Say if you win, you are the.
- [02:46]
Expense Report Employee
Absolute best.
- [02:50]
In the world.
- [02:53]
Victoria Turner
Annual revenue rose to $3.4 billion last year, marking its fourth year of growth in a row. But for a sport that has a global calendar spanning from Brazil to China, it's only recently cracked. North America finally being able to compete with the dominant sport sports stateside like NFL, baseball and basketball.
- [03:16]
GiveWell Advertiser
The Circuit of the Americas hosts us for the 13th time. Nestled just outside Austin, this over 5.5km circuit is one of the most spectacular on the calendar.
- [03:27]
Victoria Turner
A few years ago, cracking the American market seemed something out of reach when former boss Bernie Ecclestone was at the helm. There was a race at the Circuit of the Americas in Texas, but it wasn't enough to bring in the crowds that F1 wanted. But when American Liberty Media Corporation took over in 2017, it had a bold plan for the sport to become a dominant presence in the usa. The group added a new track, the Miami Grand Prix in 2022, followed by Las Vegas a year later. American motorsports journalist Elizabeth Blackstock has been following these developments.
- [04:07]
Elizabeth Blackstock
It's incredible how much F1 has changed here in the States. The growth has been phenomenal. Speaking from like hard numbers, though, there's been a really significant increase in the fan base. Formula One said in 2024 that the US fan base is up to 45 million people. In 2018, right after Liberty Media acquired F1, that number was somewhere closer to 34 million.
- [04:32]
Victoria Turner
And what do you think was the main factor in terms of growth? A lot of people mention this drive to survive. Do you think that's the case?
- [04:40]
Elizabeth Blackstock
Absolutely. We couldn't have drive to survive without Liberty Media acquiring F1. And their whole goal as an American company was, you know, see how much we can make this sport grow, particularly within the United States. Drive to survive was kind of this perfect storm, I guess, that really came into the fore where here in these states, you might know what Formula one was, but it was still very kind of niche. Drive to survive introduced people to these drivers, to see their personalities, introduced people to the world of F1, the glamour that comes with this sport. There's more of a recognition of what Formula one is and that it is different from nascar, that it is different from what we offer in the United States with our traditional motorsport series. And I think people just kind of fell in love with it because it's really cool, it's aspirational, it's fun, and it is a thing that you can participate in in the United States, but it feels special because it doesn't happen here every weekend.
- [05:39]
Victoria Turner
TV deals are central to Formula One's success with US fans. With media rights making up about a third of the sport's total revenue. A deal was signed recently with Apple TV giving the streamer the rights to broadcast the sport for the next five years. Estimated to be worth $750 million. And another major part of F1's revenue is sponsorship. Brands have always been key to the sport. From Marlborough lights in the 1980s to Red Bull now, sponsorship makes up around 18% of F1's annual revenue. David Coulthard, one of Britain's most successful F1 drivers, was there when the major changes took place from the early 90s to today.
- [06:24]
Expense Report Employee
I guess a lot of the marketeers within the teams were concerned because there was a sort of gravy train of funding that came from cigarette companies, as they were slowly restricted in their areas of where they could advertise. There was no magazine advertising anymore as such, there was no television advertising. So sport became their one outlet. And clearly there were still some restrictions in places like UK and, and France where they couldn't run the official branding, but the actual emblem became so strong that it didn't really matter. And then that all came to a halt. But for me as a driver, I just was focused on trying to get the best lap out of the race car. And that was my responsibility. The responsibility of the marketeers and the sort of leaders of the teams like Rohan Dennis, was to find those next opportunities. And no one could deny the global reach of the sport, no one could deny its credentials in terms of technology and finding solutions to problems that will help us all in mobility in the future. So I don't think it was as big a speed bump that maybe was predicted because funding, just as one door closed, another door opened. The fact that I'd spent a lot of my life as a Formula one driver going to events, especially during that cigarette period, because they had ample money to, you know, to activate and to take the Grand Prix cars to places where the public were and to try and encourage them to choose their brand over others. When I retired, I still retained some brand contracts, so I was still going to events, and many of them were very good, but there was a few that you went, this could be done better. So I initially was looking to see if the existing business. I was involved in a television production business called Whisper tv, along with Jake Humphrey, Sunil Patel. So I was initially looking to add another string to that bow. And we were in a sort of growth period, and it proved that that would have been a distraction from the core of what we do there. And that led me to Guy Horner, who had TBA and TBA has been around for a number, a number of years. And that's when we decided and agreed to form Velocity and we'd focus on motorsports events. And one of our early clients was Liberty. When they took over Formula One from Ben Eccleston, we did London Live and Trafalgar Square, including getting all the teams there to come along and sort of launch a rebrand of Formula One for an F1 driver.
- [09:00]
Victoria Turner
How much money roughly do they have to bring to a team? Is it a lot to do with their own personal sponsorship? How does that work?
- [09:07]
Expense Report Employee
Well, there isn't any set formula in as much that talent usually shines at an early stage. You know, an early indication of talent would be in karting. It's not the be all and end all because karting is sort of building those memory blocks of competition and strategy in your mind. And if the talent continues to shine, they'll be scooped up by a team, put on a driver development program and it will be funded all the way to the point where they become Grand Prix drivers. Others will pay their way through not only karting, but every level of car racing to the point where they can then pay to be part of a Formula one team as a reserve or test driver. And then if the talent continues to show itself, then they may well become a full time Grand Prix driver. We're talking millions of pounds to go from karting to the point where you could be a reserve in Formula One. Some people will pay millions of pounds, others will not pay a penny because the, you know, the family will get them on the road in karting and there'll be few thousand pounds involved in that. And then they'll get scooped up by a team who wants success. So the classic expression of cream rising to the top, there's not many exceptional drivers have fallen by the wayside. There's many good ones because they didn't have the funding. But in elite sports, I guess like an elite business, good is to a penny. You're looking for exceptional.
- [10:32]
Victoria Turner
Emily Prazer is the chief Commercial officer at Formula One. It's her job to keep brand partners engaged.
- [10:40]
Emily Prazer
Formula One is an incredibly nimble rights holder, which means that we can be very, very creative and adjust our proposition depending on who we're talking to. What you might sell to a financial services company isn't necessarily what we would do with the likes of KitKat. And so when we've gone through all of this, we've been very, very thoughtful about how we can adjust what we're selling, make sure that it's Very, very bespoke. And you'll see that whilst we have traditional assets, we're also starting to develop what we're doing around more creative assets from a sponsorship perspective. So Lego is probably the best and most well known example in terms of this calendar year. Rather than just, you know, putting LEGO branding all over a track, we've integrated them incredibly authentically. And so we looked at the, you know, Miami drivers parade opportunity, which was phenomenally positive for everybody. We just get very thoughtful ultimately in how we want to show up, how we want to approach it and how we, you know, make sure we're telling those brand stories and how we use those brands to therefore tell our stories. And so when you're partnering with the likes of dhl, they can very much talk about the complexity and the logistics of our sport, which is obviously phenomenal. We're one of the only global sports that travels to 24 countries annually. Again, very different types of conversations that we're having with them versus McDonald's in Latin America, who are doing a lot for us around engaging with the more younger demographic.
- [12:04]
Victoria Turner
You're listening to Business Daily on the BBC World Service.
- [12:10]
Odoo Advertiser
Running a business is hard enough, so why make it harder? With a dozen different apps that don't talk to each other. One for sales, another for inventory, a separate one for accounting. Before you know it, you are drowning in software. Instead of growing your business, this is where Odoo comes in. Odoo is the only business software you'll ever need. It's an all in one fully integrated platform that handles everything, CRM, accounting, inventory, e commerce, HR and more. No more app overload, no more juggling logins. Just one seamless system that makes work easier. And the best part, Odoo replaces multiple expensive platforms for a fraction of the cost. It's built to grow with your business whether you are just starting out or already scaling up. Plus, it's easy to use, customizable and designed to streamline every process so you can focus on what really matters running your business. Thousands of businesses have made the switch, so why not you try Odoo for free@odoo.com that's o d o o dot com.
- [13:12]
Ryan
Hey Ryan, that was a fast trip. It was like you teleported.
- [13:15]
Expense Report Employee
Yeah, just got in. I'll get all my expenses logged, I promise.
- [13:17]
Ryan
Oh no, you're okay. SAP Concur uses advanced AI so you're expensive. Expense report will practically write itself. Quite the breakthrough. It's like we've been teleported into the future. All right, so Just curious. Would you give us written permission to convert your matter into energy patterns and reassemble you at, say, random travel destinations?
- [13:33]
Expense Report Employee
Margaret, are you building a teleporter?
- [13:36]
Ryan
No.
- [13:37]
Emily Prazer
Yes.
- [13:37]
Expense Report Employee
SAP concur. Helps your business move forward faster. Learn more@concur.com.
- [13:44]
Victoria Turner
I'm Victoria Turner, and today I'm looking at the changing economics of Formula One. The US isn't the only place NEF1 sights. South Africa had a long association with the sport, but it's been more than 30 years since there was a race there. Could that change? Well, South Africa is among the countries bidding to be included in the calendar in 2027. And racing in the African continent has been welcomed by the drivers themselves, including McLaren's Lando Norris Ferrari, Charles Leclerc, and Red Bull's Max Verstappen.
- [14:18]
Liam Parker
I would like to race in Africa. I mean, there are so many opportunities and still things, of course, that we need to improve on, and we are.
- [14:25]
Expense Report Employee
Very excited to be on that road.
- [14:26]
GiveWell Advertiser
I would love to. I think it's one of the only continent that we don't actually do on the race calendar.
- [14:33]
Expense Report Employee
One of the few continents that we don't do.
- [14:35]
GiveWell Advertiser
And I would love to be able to race one day here.
- [14:38]
Expense Report Employee
I would love. I don't mind where we race, honestly, but as drivers and we're always excited.
- [14:42]
GiveWell Advertiser
To race in new places with new.
- [14:44]
Expense Report Employee
Fans and introduce our sport to new audiences.
- [14:49]
Victoria Turner
With more countries wanting to host a gp, ticket prices at other races have been an issue. Last year, there was a decline in the fourth quarter, where F1 made $1.1 billion compared to 1.2 the previous year. One of the factors was the last Vegas Grand Prix, which was criticized over high ticket prices. Here's Elizabeth Blackstock again.
- [15:13]
Elizabeth Blackstock
I definitely had a lot of kind of critiques, especially these first two years of Vegas. It's not really even catering to a fan. It's kind of catering to folks who want to be seen at an event. I have talked to so many American fans, and that is the thing that keeps them from that race. They can't afford the tickets. They can't afford the hotel prices, even the locals. I, you know, try to make sure that I speak to as many people in the area of those races as possible. And there were so many people I spoke to who were like, well, I would have loved to come. You know, I want to see what this is about, but I can't afford hundreds and thousands of dollars, you know, to bring my son out. He loves cars, but, you know, this is too much money or this, you know, the timing's not great. You know, there's this fear of, like, we're not going to, you know, get our money's worth for it. And I think that's the big overriding issue we have in the States right now.
- [16:08]
Victoria Turner
Ticket prices have been an issue in the States, and this is something that Formula One are trying to rectify. As F1's Emily Prazer explains, we've been.
- [16:19]
Emily Prazer
On sale since early, well, January, February of this year. We just changed the model. Honestly, what people don't realize about this race is that we had to procure grandstand to go on sale in 2023 without really knowing. And so, like any event, things take a little bit of time to balance out. So we've taken the learnings from previous years. We now know what the product offering that sells is and what people want to buy, and so we're trending positively.
- [16:45]
Victoria Turner
What are the future plans for the F1 business model? From a commercial aspect, there's been reports that maybe the gambling sector might be a viable option.
- [16:54]
Emily Prazer
We've been looking into betting very early stages of review. We can't keep up with volume of the likes of tennis, golf, Premier League, football. And so what the opportunity is is something that we're massively researching, but it's not something that we want to jump two feet into, completely uneducated. And so it's something that we want to massively take our time over, make sure, however we look at this, it's for the best interests of engagement and fandom and not do something that we will regret. So we're very, very considered as an organization. We want to make sure that we understand the local regulations. Again, it's a very different conversation when you travel to 24 different places and the rules and how you can do this are challenging. And so taking our time to really look at what that could be. But in terms of kind of future growth opportunity, you know, we're seeing unprecedented growth in our hospitality business. We have new partnerships with the likes of Soho House and Lewis Hamilton to bring private members clubs to Formula one tracks, more lifestyle events to Formula one tracks. We have a partnership with Gordon Ramsay. He owns the F1 garage concept, which has been very successful over the past year and we'll continue to grow that. So not only are we growing in kind of the commercial partnership space, but if you look at what we're doing around other areas of the business, you'll see significant growth, but all feeding into this lifestyle proposition.
- [18:11]
Victoria Turner
So the betting sector could be another viable option to the F1 business model. But let's leave the final word to Liam Parker, F1's chief communications and corporate relations officer. Who knows there's still more they can do.
- [18:25]
Liam Parker
A few years ago, we had teams being sold for a pound going out of business. We now see valuations of teams of 2 billion, 3 billion, 4 billion. The revenues the sport is generating, the stability, the investment, we want to see that fan base expand. You know, we're at 826 million fans that we would count as fans. We want to see that number go up. We want to make sure our TV audience continues to be there, but at the same time, we need to be thinking around the corner and making sure that we've got platforms that serve fans that don't always watch linear TV. We want to continue to grow in the US. We have 52 million fans now in the US, but also there are markets like China and India. We have a race in China, we don't have a race in India. But there are places around the world where we don't necessarily need to have a race where we can grow because there is a potential fan base. So I think overall, where we want to be is the opportunities for the future. We've got to have a great racing series. The racing for next year and the years beyond needs to be tight and competitive. But we have huge opportunities to grow the fan base, to grow across different platforms and to expand our reach into those markets. And seeing people walking around shopping centres with McLaren hats on. I'd love to be in Sao Paulo and fly to somewhere in New York and somewhere in Sydney and all around the world in different places and see that replicated. We're incredibly proud of the growth we've seen over the last few years, but none of us here take it for granted.
- [19:45]
Victoria Turner
So will the landscape constantly changing. Formula One as a business could look very different a few years from now. But one thing that won't change is the desire for sports fans to see competitive racing out on track. That's all from Business Daily on the BBC World Service, produced and presented by me, Victoria Turner. You can listen to more episodes wherever you get your BBC podcasts.
- [20:31]
Odoo Advertiser
And Doug, here we have the Limu Emu in its natural habitat, helping people.
- [20:36]
Expense Report Employee
Customize their car insurance and save hundreds with Liberty Mutual. Fascinating.
- [20:43]
Odoo Advertiser
It's accompanied by his natural ally, Doug.
- [20:46]
Expense Report Employee
Uh, Limu is that guy with the binoculars watching us.
- [20:49]
Odoo Advertiser
Cut the camera. They see us.
- [20:51]
GiveWell Advertiser
Only pay for what you need@libertymutual.com. liberty.
- [20:54]
Expense Report Employee
Liberty. Liberty.
- [20:55]
GiveWell Advertiser
Liberty Savings. Very underwritten by Liberty Mutual Insurance company and affiliates excludes Massachusetts.