Business of F1

Originally Published on
SummaryJun, 2018

Formula 1 is an iconic sport. From the fastest road course racing cars in the world to show stopping venues in every corner of the globe, F1 is a sport of drama, adrenaline and money. With the cars alone costing millions and the events costing even more, you can expect every race to be a spectacle to behold. Raconteur’s Business of F1 report will be running for 8 weeks covering everything from the one of a kind hospitality at the Marina Bay Street Circuit in Singapore to the top 10 brands in F1. Whether you’re interested in eSports, hospitality, digitalisation, Ferrari or broadcasting, this report is a collection of all the hot topics in F1

In this report

City street showcase spearheads F1’s evolution under Liberty

More than 100,000 people turned out to see Formula 1 return to London in last year’s F1 Live, one of the sport’s most successful marketing moves

The stars of Formula 1 may be used to racing in front of bumper crowds, but few could have predicted the interest and success of ‘F1 Live’ when the sport hit the streets of London last July.

More than 100,000 fans came to see F1’s first show-run in London for 13 years. The streets around Whitehall were closed off to allow cars to complete some spectacular demonstrations, while recording artists Bastille, Little Mix and the Kaiser Chiefs performed on stage in Trafalgar Square.

F1 Live London was announced with just two days’ notice in a bid to limit disruption, ease security concerns and also create a sudden buzz in the event. It drew in a bumper crowd – bigger than the attendance for some races – and stirred interest in F1 in the days leading up to the British Grand Prix.

This is all about giving our fans the opportunity to get closer to the teams, cars and drivers they love

“F1 Live London is the most striking example yet of Formula 1’s evolution this year,” F1 commercial boss Sean Bratches said. “We feel there is no better way to celebrate the exciting season we have had so far than to have this landmark event in London on the eve of the British Grand Prix.”

He added: “This is all about giving our fans the opportunity to get closer to the teams, cars and drivers they love.”

Since its takeover of F1 in January 2017, Liberty Media has been searching for ways to take the sport to new audiences and expand its reach beyond its traditional fan base. By staging F1 Live in the centre of London and making it free to attend, it became an event the whole city embraced.

Strategic partnership with key influencers also helped expand the reach beyond F1’s usual channels. Communications marketing firm Edelman estimated that F1 Live London enjoyed more than 17 million impressions across all platforms during the 24 hours after the event. F1 also staged a schools and innovation showcase as part of the event in order to teach young people about possible careers in science, technology, engineering and maths.

F1 Live was the largest non-race event in the 67-year history of the sport, sending out a clear signal about Liberty’s plans for the future. Grand ideas such as F1 Live London may have been difficult to pull off, but it was a quick way to take the sport beyond the confines of the grand prix circuit.

F1 Live London had the support of London Mayor Sadiq Khan, and the event stirred talk of a possible race being staged through the city’s streets. “Some hurdles we’ll have to overcome but there’s no reason at all why it can’t be beyond the wit of us to organise an F1 race in London in the future,” Khan told Sky Sports.

“We’re good at organising events safely. I’m reassured we can make everyone safe in London and we’re going to make sure events are successful,” Khan added.

We believe that this contact of F1 with the audience outside the racetrack is important

The success of the inaugural London event led Liberty to push on with plans to expand the F1 Live concept for 2018. Marseille, Shanghai, Berlin, Miami and Milan are known to be in contention to host events this year, tying in with the races in their respective countries.

“We believe that this contact of F1 with the audience outside the racetrack is important. It also carries our message to people we would not otherwise reach,” Bratches told Germany’s Auto Motor und Sport in January.

“F1 has been so exclusive over the years, that it was only accessible to interested people. The same applies to sponsors. There is a lot of interest from companies for these events that are not yet in F1,” Bratches added.

While F1 Live may well help to put the sport on the radar of potential fans, the event could also work in corporate terms by attracting new brands that ultimately become important partners for Formula 1.

Even for long-term fans of the sport, F1 Live marked a clear shift from the past. The exclusive nature of F1 may help build a luxury brand, but it also results in a certain level of disconnect. To bring 20 of the sport’s stars including world champions Fernando Alonso, Sebastian Vettel and Jenson Button to the heart of London for a fun, free day out did a huge amount to prove Bratches’ point about F1’s striking evolution.

In just one day, F1 managed to capture the attention of London. For brands and businesses looking to do the same all over the world, the series’ fresh approach appears to be an attractive proposition.

F1 sets its sights on new markets

Already at a bumper 21 events, F1 is keen to expand its race calendar further. But this could have a big impact on the sport’s travelling circus

As Formula 1 gears up for the start of the new season in Melbourne, Australia on March 25, the drivers and teams face a more challenging journey than ever.

A bumper schedule of 21 races will keep fans satisfied between March and the end of November, when the season finishes in Abu Dhabi, but it threatens to put huge pressure on those criss-crossing the globe going from one race to another.

Although races tend to be loosely bunched geographically to help the situation, their frequency presents a challenge. Teams face a particular squeeze this summer, with five races in six weeks through June and July – a consequence of fitting around the Fifa World Cup final weekend in Russia.

But F1 does not feel it has hit its limit on the calendar. Since completing its takeover of the sport in January 2017, Liberty Media has made clear it wants to expand the footprint of F1 in several new markets, typically by taking a race to the targeted countries. As many as 25 races are expected on future calendars. By comparison, there were only 17 grand prix races in 2009.

We have a long list of places that have expressed interest in hosting F1

Interest in hosting an F1 race is high. Countries such as Singapore, Azerbaijan and Abu Dhabi have made it a key part of their tourism push, creating a model that others are eager to follow.

“We have a long list of places that have expressed interest in hosting F1,” F1 chief executive Chase Carey said last year. “I guess I would say at this point we’re more in a listening mode and trying to understand the opportunity. We’ve probably got multiple places in every continent around the world. We’ve got a pretty full slate.”

One key area of focus for Liberty is the United States, a market that has traditionally proved difficult for F1 to crack. While a race has been staged in Austin, Texas since 2012, F1 is eager to make a bigger mark on the American sporting landscape, with New York, Las Vegas and Miami among the cities it is targeting – Miami being the most likely at the time of writing.

“Our expectation is to go to large cities and have races on more street circuits,” F1 commercial chief Sean Bratches said. “We are going to add street circuits. The majority will probably be traditional tracks. But our expectation is to try to go to city centres and activate large fan bases with our brand.”

More traditional events are also being considered besides additional American rounds. F1 is in talks with Copenhagen about a street race, and Hanoi is known to be eager to host the inaugural Vietnam Grand Prix in the near future. F1 is actively pursuing Buenos Aires, 20 years after it last visited Argentina.

We have reached the tipping point where we can no longer let our passion for the sport rule our heads

But while F1 looks outwards, there is a challenge for existing races to stay afloat. Most significantly, officials at Silverstone, the host circuit for the British Grand Prix, announced last summer that they would trigger a break clause in its contract after 2019 due to an escalating hosting fee agreed with F1’s previous management, led by Bernie Ecclestone.

“We have reached the tipping point where we can no longer let our passion for the sport rule our heads,” said John Grant, the chairman of the British Racing Drivers’ Club, which owns the circuit. “Put simply, it is no longer financially viable for us to deliver the British Grand Prix under the terms of our current contract.

Silverstone is not the only track feeling the pinch. Malaysia lost its F1 race after 18 years as a result of spiralling fees, while the sports minister of Azerbaijan called the contract for Baku’s grand prix “unacceptable” despite it only debuting on the calendar in 2016. Ecclestone himself admitted said year: “I charged [races] too much for what we provide.”

There is a tough balance for Liberty to strike as it looks to add more races to the calendar and boost F1 income via the hosting fees all circuits pay. In its end-of-year financial results, Liberty attributed part of its 1 per cent fall in revenue to the revised agreement with the Brazilian Grand Prix that saw a reduced fee accepted to keep the race on the calendar.

Promotion revenue accounted for 34.1 per cent of F1’s $1.784 billion revenue in 2017, making it a crucial source of income to the sport. The trade-off is even harder for teams to negotiate. More races would boost this revenue, which in turn would lead to bigger prize money for the teams on the grid. However, the pressure of more races would not only cause a greater logistical challenge, but it would also drive up costs, with some outfits believing they would need a second set of personnel for the race team to prevent burnout.

Not only are you doing 21 races, but all of us have a normal day job as well

Mercedes F1 boss Toto Wolff said: “Last year with 20 races and it was already very difficult for the organisation, so this is what I see as the limit. It is very difficult for the team because not only are you doing 21 races, but all of us have a normal day job as well. It is pretty stressful for the organisation and pretty stressful for the individuals.”

Additional races are a lucrative proposition, yet Liberty has to keep a number of stakeholders happy. Fans have favourite circuits and events they want to see succeed, but will they be sacrificed in favour of higher-paying races that could allow F1 to break into new markets?

F1 looks to the future with esports series

Formula 1 views gaming as a way to attract a younger generation of fans – and potential racers

Electronic sports is one of the fastest-growing entertainment industries, swelling to a value of almost $1 billion as it attracts a young demographic of fans. It an important area of focus for Formula 1, which is looking to capitalise on interest in virtual gaming and competition.

F1 had not stepped into the esports arena before Liberty Media’s takeover in January 2017. Fans looking to race together had to make do with unofficial leagues organised online, but that all changed last autumn when F1 launched its esports series.

The attraction to a broad and committed younger generation of F1 and esport fans is something that we are proud to support and nurture

Drivers were invited to take part in online qualifiers using the official F1 video game before the top 40 met in London for the live semi-finals. This was whittled down to 20 drivers for the live finals at the season-ending Abu Dhabi Grand Prix, where the races were broadcast online and given a full TV presentation similar to that of the real-life F1 events. The winning driver – 18-year-old Brendon Leigh, a kitchen manager from Reading – was awarded the trophy on the podium in Abu Dhabi just hours before the final grand prix of the season.

“The attraction to a broad and committed younger generation of F1 and esport fans is something that we are proud to support and nurture,” F1 commercial chief Sean Bratches said following the live final. “We look forward to establishing a season-long series in 2018.”

Liberty has been pushing to make F1 more attractive to a younger audience since its takeover, and esports offers a straightforward way to do that. A report from analytics provider Nielsen Sports found that the average age of esports fans is 26. And among those in its sample from the UK and Germany – two of F1’s most important markets – motorsports is the third most popular sport.

Nielsen reports that esports fans consume around 3.5 hours of digital/streaming content each week, and spend 4.5 hours watching videos online through websites such as YouTube. F1 recently launched its F1 TV platform, which looks to take the sport to a new, younger audience that would not watch the sport on mainstream TV. The crossover with the esports demographic makes it an obvious point of interest for F1.

I think there’s no doubt that F1 gaming, and specifically videos of it on YouTube, helps the real-life sport gain new followers

Enthusiasm for esports is also bringing fans to F1 who might not otherwise have tuned in. “I think there’s no doubt that F1 gaming, and specifically videos of it on YouTube, helps the real-life sport gain new followers,” said Aarav Amin, a leading F1 gaming content creator on YouTube whose videos have amassed more than 65 million views.

“From personal experience, I’ve seen comments from viewers countless times expressing how they’ve become new fans of the sport and are now obsessed with it thanks to watching my videos. These viewers are typically either teenagers or young adults, which is exactly the type of audience Liberty Media has been wanting to engage.”

Esports is also creating opportunities for drivers. Motorsport is traditionally a very expensive pastime, and young drivers require huge financial support to even get close to F1. As video games and simulations have improved, the gulf between the virtual and the real world has shrunk, giving gamers a chance to get a foot on the motorsport ladder.

The McLaren F1 team staged a ‘World’s Fastest Gamer’ competition last year to find a new simulator driver, testing gamers through a series of virtual and physical challenges. The event was won by Holland’s Rudy van Buren, who is now officially part of the McLaren team, working with race drivers Fernando Alonso and Stoffel Vandoorne to help develop the real-world F1 car.

Van Buren said: “Every boy that starts karting dreams about F1, and at a certain point that dream just vanishes. Now by winning World’s Fastest Gamer, I can relive that dream. It really was the toughest job interview I ever faced, but with such an incredible reward at the end of it.”

Van Buren and F1 esports winner Leigh were both given a berth in the ‘Race of Champions’ event in January that pits drivers from a variety of racing series in a head-to-head challenge. Leigh had never driven a real-life car until the week leading up to the showcase, but was able to get up to speed and underwent an intensive fitness regime similar to that of professional drivers, completing the transition from gamer to racer.

The esports effect on F1 is greater than simply offering a younger, previously untapped audience to the series. It is also makes motorsport more accessible and opens doors to aspiring racers.

Four-time world champion Lewis Hamilton is not convinced we will see future F1 drivers starting out in esports, but having come from a poorer background himself, he recognises the value of it and the opportunities it might create.

 I’ve got fans who are good at gaming but when they got into the car it isn’t the same

“It is quite incredible, the recent developments,” Hamilton said. “But do I think that will translate into a racing driver? Honestly, I don’t think you can ever be sure, but I doubt it. I’ve got fans who are good at gaming but when they got into the car it isn’t the same.

“It would be a far more feasible career for many because right now racing is so expensive and if [esports creates] an opportunity in the future, then that’s good for people that come from places that I came from. They can’t get that now. It is much harder for anyone from a council estate in Stevenage to get to F1 now – pretty much impossible because you need a lot of money.”

As F1 begins to map out its digital future, esports is going to be a key part of its plan – and it could have a significant impact both on and off-track.

F1 wants America to be its ‘Land of Liberty’

The US has traditionally been a tough market for F1 to crack, but it’s high on Liberty Media’s agenda

For Formula 1, the United States is a market filled with interested racing fans, as shown by the success of national auto racing leagues IndyCar and Nascar – yet taking a largely European sport stateside has proven more challenging.

F1’s roots in the United States date back to the formation of the world championship in 1950, but the sport struggled to find a permanent home through the 1980s and 1990s. A return at the Indianapolis Motor Speedway in 2000 ignited hope for a permanent foothold, only for the race to fall flat in 2006, when a tyre issue meant only six cars entered. The grand prix ultimately was dropped from the F1 calendar for 2008 due to the lack of interest.

But F1 is enjoying something of a revival in the US. The creation of the Circuit of The Americas in Austin, Texas gave F1 a permanent, purpose-built track to race on, as opposed to using modified venues for other racing series. The circuit welcomed almost 270,000 fans across the three-day race weekend last year, with headline concerts from Stevie Wonder and Justin Timberlake helping to make it the fourth-best attended F1 event of 2017.

Circuit of the Americas Austin Texas
Circuit of the Americas, Austin, Texas

The growth in American interest has been reflected in its TV viewership. The NBC Sports Group broadcast F1 in the United States between 2013 and 2017, offering an expanded broadcast package that aided a 65 per cent growth in the US TV audience.

Haas F1 Team made its debut in 2016, flying the flag as the first US team since 1986, with a base in Kannapolis, North Carolina

US interest has also come on the grid through a new team owned by American businessman Gene Haas. Haas F1 Team made its debut in 2016, flying the flag as the first US team since 1986, with a base in Kannapolis, North Carolina that works in tandem with workshops in the UK and Italy. It offered a team for American fans to get behind and cheer on.

Haas F1 team mechanics at Formula One
Haas F1 team mechanics at Formula One

But an American driver is still something F1 lacks. Alexander Rossi enjoyed a five-race stint with the backmarker Manor team at the end of 2015, briefly ending an eight-year spell without an American racing in F1, only for him to move on to IndyCar for the following year. The last American to win a world championship was Mario Andretti in 1978.

One boost for F1 in the United States has been the celebrity profile of drivers such as Lewis Hamilton, who has become a regular fixture on chat shows around the time of the grand prix each year. As well as being a four-time F1 champion, Hamilton has fostered an impressive profile outside of the sport. He is a figure that many Americans – even those without an interest in F1 – would recognise. Such personalities are key to F1’s growth in a market such as the United States; to have an American leading the charge both on and off-track would do wonders for the sport.

The building blocks are in place for Liberty to develop F1’s profile in the United States. Two of the three main bosses of the sport, Chase Carey and Sean Bratches, are American and have extensive experience in US sports. Liberty is pushing to add a second grand prix in a city location to capture the imagination of the American audience, with cities such as New York, Miami and Las Vegas being mooted as options.

It’s the largest and wealthiest sports market in the world

“I think the US has enjoyed a tremendous amount of growth,” said Zak Brown, the executive director of the McLaren F1 team, who comes from Los Angeles. “It’s the largest and wealthiest sports market in the world, and we’ve got a lot of room for improvement there. I think the Austin race has been fantastic, and I think [Liberty] are spending a lot of time on trying to find a second race there.

“I think they’re taking the right steps to make it more popular. It’s great to have a US team. Obviously would be great to have a US driver at some point, and I think we’ll get there, but it’ll take time.”

However, in these early days of Liberty’s F1 reign, the challenge it faces to make a splash in the US is not to be underestimated, according to Bobby Epstein, the chairman of the Circuit of The Americas racetrack.

The US could become the ‘Land of Liberty’ for F1’s new management – but it will not be an overnight success

“It’s fair to say they’re still figuring a lot of that out,” Epstein said of Liberty. “There’s a steep learning curve. What they’ve said very publicly is that they intend to grow the number of races and number of events, and one of those areas of focus is growing the support in the US. It’s a good long-term plan.”

The US could become the ‘Land of Liberty’ for F1’s new management – but it will not be an overnight success. It is going to be a long process that rests not solely on the success of one race, one team or one driver.

But should Liberty’s strategy to crack the United States prove successful, Formula 1 would finally have the foothold it has long craved – and one its former management could never fully realise.

Ferrari’s future in F1 comes into question

The team has threatened to quit, and the sport’s bosses must decide whether to bow to the manufacturer’s pressure or risk losing its most famous brand

Scuderia Ferrari has been Formula 1’s most recognisable brand for almost 70 years. Not only is it the sport’s oldest team, having debuted in 1950, it is also the most successful, winning 31 world championships.

But the future of Ferrari in F1 has come into question as the sport’s new owner, Liberty Media, works out how to accommodate the demands of its most important stakeholders. And they do not come much bigger than Ferrari.

Combined with other bonuses, means the team is guaranteed $100 million before the season has even started

Ferrari’s significance to F1 is such that at present it has an exclusive ‘long-standing team’ payment agreement, which, combined with other bonuses, means the team is guaranteed $100 million before the season has even started.

A revision of the prize money payout structure to teams is one of Liberty’s many planned areas of change for F1. These are set to come into force for the 2021 season, when the current commercial agreement with teams expires. This deal, known as the Concorde Agreement, was signed under F1’s previous management, led by Bernie Ecclestone, before Liberty’s takeover in January 2017.

Besides changing the way in which prize money is awarded, Liberty also plans to expand F1’s calendar to as many as 25 races, as well as overhauling the current engine specifications – the latter being a particular point of contention for Ferrari.

Ferrari’s F1 interests are overseen by Sergio Marchionne, Ferrari president and chairman of Fiat Chrysler Automobiles. Marchionne has made clear his uncertainty about Liberty’s planned direction, telling investors last November that Ferrari was “at odds in terms of the strategic development” with Liberty.

We see the sport in 2021 taking on a different air, which is going to force some decisions on the part of Ferrari

“We see the sport in 2021 taking on a different air, [which] is going to force some decisions on the part of Ferrari,” Marchionne said. “What I do know is that it is part of our DNA since the day we were born. It’s not as though we can define ourselves differently. But if we change the sandbox to the point where it becomes an unrecognisable sandbox, I don’t want to play any more.”

Sergio Marchionne, Ferrari president with Maurizio Arrivabene, team manager Ferrari at F1 Grand Prix of Italy
Sergio Marchionne, Ferrari president with Maurizio Arrivabene, team manager Ferrari at F1 Grand Prix of Italy, September 2017

Marchionne added that Ferrari quitting F1 would be “totally beneficial to the profit and loss”, and that the board would be “celebrating here until the cows come home”, such is its investment in the sport, which has not yielded a world title since 2008.

Ferrari has threatened to quit F1 on numerous occasions, often ahead of crunch talks over regulations or commercial agreements. But with F1 under new management, there can be no guarantee of Ferrari’s demands being accommodated, as was often the case under Ecclestone’s rule.

Ferrari are part of the DNA of F1 and we don’t want to lose that

Liberty F1 technical chief Ross Brawn told Sky Sports F1: “Ferrari are part of the DNA of F1 and we don’t want to lose that – but it has to be in the right circumstances. There are boundaries that we feel need to be correct for the sport, and hopefully they are boundaries that they can work in.

“We have to find solutions with Ferrari but it has to be around the right parameters. We can’t have a situation where we do anything a team wants, whether that is Ferrari, Mercedes, Renault etc. We can’t just run a sport on what a team wants,” Brawn added.

Liberty must strike a fine balance between the wishes of the manufacturers that pour millions into their F1 projects and the smaller teams on the grid. Red Bull team boss Christian Horner thinks F1 and its governing body, the FIA, should take a more authoritative stance instead of looking to appease all parties.

“It really needs alignment between the commercial rights holder [F1] and the governing body. As soon as they are on the same page it becomes irrelevant what the teams want,” Horner said.

“They need to align themselves and then present what they want the regulations to be, particularly as far as the power units are concerned. We’ve got interested parties sitting outside Formula 1 and, again, timing is crucial for them if they are looking at entering F1 in 2021,” he added.

With Aston Martin and Porsche heavily linked with a future F1 entry, regulations that do not appease Ferrari might not be a blow for the series in terms of manufacturer involvement. If anything, the right regulations could pave the way for more to join and boost the sport.

I’m afraid Ferrari could live without Formula 1 – not the other way around

But the loss of Ferrari remains F1’s greatest fear in the near future. The manufacturer is the sport’s most recognisable brand, as well as being the most popular worldwide. It adds value to F1, such is its intrinsic history with the sport, and Liberty would not lose it unless all viable alternatives had been explored.

For ex-F1 chief Ecclestone, the importance of keeping the ‘Prancing Horse’ on the grid cannot be understated. He told Germany’s Auto Motor und Sport: “I’m afraid Ferrari could live without Formula 1 – not the other way around.”

For all parties looking to boost F1’s future, it is a scenario they hope will never be truly explored.

The changing landscape of Formula 1 team sponsorship

After four years without a title sponsor and the loss of backing from Honda, McLaren faces a commercial challenge – but executive director Zak Brown feels up to the task

McLaren stands out as one of Formula 1’s most successful and biggest teams, winning a total of 20 world championships working with the likes of Ayrton Senna, Alain Prost and Lewis Hamilton.

But in recent years, its fortunes have taken a hit. The team has not won a race since the end of 2012 or even recorded a top-three finish since 2014. A new relationship with Japanese manufacturer Honda that started in 2015 was intended to restore the team to its former glory, only for the fraught partnership to end after just three years with McLaren second from bottom in the F1 standings.

The departure of Honda was agreed to secure a more competitive engine supply, yet it left a big hole in the team’s finances. Honda was understood to be injecting around $70 million per year into the McLaren team, and the loss of this, combined with a drop in prize money as a result of the lack of performance, meant McLaren entered the 2018 season facing an even greater task to balance the books.

Sponsorship has been a growing challenge for F1 teams

Sponsorship has been a growing challenge for F1 teams. Gone are the free-spending days of the 1990s and 2000s, when tobacco money resulted in big budgets. The ban on such advertising has meant a big squeeze on spending for teams.

McLaren raced with title sponsorship from Vodafone between 2007 and 2013 and, despite attempts to secure a replacement, it failed to find a company willing to pay the top rate. This prompted former team boss Ron Dennis to say that title sponsorship did not “exist anymore as a concept”.

Dennis left McLaren at the end of 2016, and the task of turning round the team’s fortunes was handed to Zak Brown. Brown was the founder and chief executive of Just Marketing International, the world’s largest motorsport marketing agency, making him the ideal candidate to boost the team’s commercial fortunes.

Brown remained a realist after Honda’s departure, admitting it was “not going to be easy” to make up the lost investment from the manufacturer. However, he was confident of filling the gap: “I’ve done it before. We’ve got a great commercial team, we restructured the commercial department, so it won’t be easy, but it’s possible,” he said.

Brown is encouraged that the market is ripe for bringing in fresh sponsors under F1’s new owner, Liberty Media: “I think the sport is in a great place to sell it. TV ratings are up, live attendances are up. The vibe in the pits is good. So I think the sport is in a good selling environment now.”

The off-season saw Brown work hard to bring new sponsors into McLaren, with several deals being announced. The most notable partnership was signed with technology giant Dell. Smaller agreements came courtesy of CNBC and Kimoa, the brand of McLaren driver Fernando Alonso, understood to partly compensate for a reduced contract fee.

Despite the agreements, McLaren still has no title sponsor – six of the 10 F1 teams do – and its new car for the 2018 season has a lot of blank space. But Brown is not worried about the financial outlook for the team.

“We don’t want a title sponsor per se,” he said. “What we would like is a principal partner, so title-level branding as everyone in here would think of it. But we want to retain our name McLaren, so we are not really interested in selling the name to the team.

“Sponsorship takes a long time to get. We brought on five new partners during the off-season, which is more than any other team, so I’m quite happy with our progress.

“It’ll take time. Obviously the more money we have brought in we can put into the racing team but we haven’t budgeted for [a title sponsor] this year, so we are on course financially.”

In the ever-changing landscape of F1 sponsorship, the typical sponsor agreement is becoming increasingly rare as more technical partnerships akin to the deal between McLaren and Dell emerge.

The deal will see McLaren harness Dell technical solutions across its organisation, including design and manufacturing, trackside operations, telemetry, safety-critical ecosystems and storage, and aspects outside of racing, including eSports, simulation, fan engagement and guest experience.

“McLaren’s agreement with Dell Technologies expands beyond the traditional sponsorship model,” Brown said. “We are like-minded organisations led by the key principles of technical innovation and human progress at the cutting edge of data-driven technology.”

He added: “F1 is a relentless environment, and partnering with Dell provides us with class-leading capabilities and support to drive invaluable efficiencies that will enable McLaren to perform at the highest possible level across our entire business operations.

“Dell is the perfect partner and our two brands share the same ethos, which will propel us towards our business objectives for 2018 and beyond.”

As F1’s sponsorship landscape continues to shift, more and more of these technical partnerships that reach beyond a commercial agreement are becoming commonplace. But as Brown recognises, there is still lots of work to be done to bring brands into F1 in the future.

Now teamed up with Renault, McLaren expects a boost in its on-track performance. Getting the ripple effect to reach its off-track fortunes will be the real challenge though.

Liberty gears up to go over the top with F1 TV

Formula 1 is about to take on traditional broadcasters with the launch of an in-house streaming service

Formula 1’s TV audience has declined steadily over the past decade, falling by about one third since 2008. However, after reporting a small increase in 2017, Liberty Media has big plans for F1 viewing options this year as it launches a new platform: F1 TV.

Since completing its $8 billion takeover of F1 in January 2017, Liberty Media has been working hard to overhaul the sport

Since completing its $8 billion takeover of F1 in January 2017, Liberty Media has been working hard to overhaul the sport and find areas for improvement. The introduction of an ‘over-the-top’ streaming service was high on its agenda, with plans for F1 TV being announced last month ahead of the new season.

A first for F1

F1 has never before offered an in-house streaming service, instead leaving its broadcasting partners across the world to arrange online viewing. However, Liberty wanted to serve fans with its own subscription service, putting plans at the heart of revised broadcast agreements in certain territories. In the United States, the NBC Sports Group chose not to sign a new F1 contract because it did not want to compete with the new platform, with the result that rival ESPN gained the rights on a multi-year deal at a reduced fee.

The full plans for F1 TV were confirmed by F1’s head of digital and new business, Frank Arthofer, at a press conference at the end of February in Barcelona. A two-tier service will be on offer: F1 TV Pro, which allows fans to stream every session of the grand prix season live via 24 different camera feeds, including on-board footage from every single driver; and F1 Access, a cheaper, more limited service that offers radio commentary, race highlights, live timing and data, but no live TV broadcasts.

F1 TV Pro will be available only in regions where broadcast agreements allow it, such as the United States, France and Germany. It will not be available in the UK, chiefly due to the existing contract with Sky Sports that runs until 2025.

“In the markets where we’ve carved these rights out, we’ve done so with full transparency in the context of our contract agreements, so it won’t be a surprise to any of our partners,” Arthofer said, announcing the arrival of a rival service to broadcasters that have paid millions for the rights to show Formula 1.

“This service gives fans a chance to engage more deeply with the sport and that’s a win for all of the stakeholders around it: sponsors, broadcast partners and the teams of Formula 1 itself.”

Competitive landscape

Asked if F1 TV would compete with the traditional subscription model for broadcasters, Arthofer stressed it was “very much not the case”, rather that it would complement traditional viewing options. For instance, a fan of a particular driver would be able to watch the race live on their television, and use F1 TV to view the same race purely from on-board that driver’s car.

It’s about delivering the really hardcore fans a better service than is currently available on the market

“I think there’s a role for both products,” Arthofer added. “This is what I would call the sort of very super-fan product. It’s about delivering the really hardcore fans a better service than is currently available on the market.”

The high cost of viewing F1 in Britain has made fans particularly interested in F1 TV, albeit that there are no plans to make it available to the UK market. Arthofer stressed F1 would work on geosecurity measures to prevent access to F1 TV via a virtual private network because it was “very important” to protect its broadcasting partners. However, this did not stop Sky slashing the price of access to its dedicated F1 channel from more than £300 to £150 for nine months, just one day after the announcement was made.

The new normal in sports broadcasting

F1’s shift to an over-the-top streaming service follows in the footsteps of other sports leagues and franchises. In the US, the National Basketball Association and the National Football League have offered successful packages to fans online in tandem with broadcast partners, making the two-year deal with ESPN a litmus test for how the two services will go hand in hand for F1.

“While this is quite new in Formula 1, this is not new to the world of sport,” Arthofer said. “I think there are a number of existing test cases out there that serve as a relevant example for us. But I think the US is a good market for us to explore and learn how successful we’ll be there.

“I think the world of online streaming is evolving so quickly that building a great product that’s very stable is a win. This is not lip service, it’s truly about delivering a great service for the fans this year.”

After so many years without changing its broadcast model, the challenge for F1 will be not only to make the new OTT service work, but also to reverse the decline in viewership. Offering directly to fans without forcing them to commit to a subscription service should prove popular, but with broadcast fees being a key source of F1 revenue, a fine balance needs to be struck.

We have around 500 million F1 fans in the world, about 5 per cent of the world’s population

While Arthofer was unwilling to set a fixed viewership target, the figures discussed were impressive.

“By our estimates we have around 500 million F1 fans in the world, about 5 per cent of the world’s population, which is quite a number,” he said. “If even, conservatively, 1 per cent of that customer base is a super-avid hardcore fan, that’s a five million addressable audience to sell that product to who would potentially be willing to pay the incremental fee to access what really is the best way to watch F1 in the market.”

If five million fans signed up to F1 Pro, priced at $100 per year, that would bring in additional revenue of $500 million – roughly equivalent to the value of F1’s current broadcast agreements combined. The potential is massive, and definitely attractive to teams, which would be in line for increased payouts were revenues to rise.

F1 TV launched on March 22 via desktop, three days before the start of the season in Australia.

The top 10 most famous brands in Formula 1

Formula 1’s global reach and big fan base make it a magnet for investment – but which are the sport’s best-known partners?
  1. Johnnie Walker

Diageo-owned Johnnie Walker first entered F1 in 2005 as a partner of the McLaren team, and expanded its involvement by becoming the sport’s official whisky brand in 2014. Johnnie Walker branding also features on the Force India team’s cars, but retains a strong message against not drinking and driving via its ‘Join the Pact’ scheme.

  1. Heineken

Formula 1 announced one of the biggest sponsorship agreements in motorsport history when it linked up with Dutch brewing giant Heineken in 2016, striking a deal worth a reported $200 million.

Heineken spells out a clear responsibility message: ‘when you drive, never drink’, as well as heavily promoting its alcohol-free beer at F1 races

Heineken enjoys title sponsorship for numerous F1 races and significant trackside branding throughout the season in a deal that runs until 2023. Like Johnnie Walker, Heineken spells out a clear responsibility message: ‘when you drive, never drink’, as well as heavily promoting its alcohol-free beer at F1 races.

  1. TAG Heuer

Swiss luxury watch brand TAG Heuer has a long-running history in F1, largely spent with the McLaren team. The company was first involved with F1 in the 1970s as Ferrari’s official timekeeping partner, but switched to McLaren in 1985 following its takeover by TAG and then-chairman Mansour Ojjeh’s arrival at the F1 team as an investor.The McLaren partnership ended for 2016, when TAG Heuer became a partner of Red Bull, which has rebranded its Renault engines under the watch company’s name.

  1. Rolex

Rolex has a long history in motorsport, but only became an official F1 timekeeping partner in 2013 after winning a race against TAG Heuer and Hublot for a 10-year deal worth an estimated $24 million a year.

Rolex advertising at formula 1

Rolex has enjoyed heavy trackside advertising at F1 races as a result of the partnership, as well as being the title sponsor for several events, including the British Grand Prix at Silverstone in 2017.

  1. Mobil 1

A brand of American multinational ExxonMobil, Mobil 1 has established itself as one of F1’s most recognisable brands through its supply of fuel and lubricants to teams. Mobil 1 enjoyed a 21-year-long technical partnership with McLaren that came to an end in 2017 when the brand teamed up with Red Bull. As well as being a key part of the team’s race operations on a grand prix weekend, Mobil 1 has also been able to use F1 as a laboratory for its products.

  1. Renault

Renault first entered F1 in 1977 with a factory racing team, introducing the turbo engine to F1 that would set the benchmark for the sport throughout the 1980s. Renault’s heyday came in the mid-2000s as it won back-to-back titles, but its works team has dipped in and out of F1, making a return in 2016 after four years away.

Renault F1

The company has remained ever-present in F1 by supplying engines to other teams, winning 10 titles as a partner with Williams, Benetton and, most recently, Red Bull. Renault is looking to use its F1 interests as a wider marketing tool, pouring significant resources into the operation jointly run out of the UK and France as it bids to emulate Mercedes and conquer the grand prix world.

  1. Shell

Shell’s partnership with Ferrari can be traced back to 1947, three years before the first F1 race was held. Ferrari’s first of 228 grand prix wins was taken with a car filled with Shell fuel and lubricants, setting the tone for one of the most successful combinations in F1 history.

Shell helped power Schumacher and Ferrari through the most dominant period in F1 history in the early 2000s

Despite a brief hiatus in the 1970s and 1980s, Ferrari and Shell linked up in 1996 on Michael Schumacher’s arrival at the team. Shell helped power Schumacher and Ferrari through the most dominant period in F1 history in the early 2000s, and it continues to play an integral role in the team’s on-track efforts. Shell ended its trackside F1 sponsorship deal in 2016 to focus more on its partnership with Ferrari.

  1. Mercedes

Mercedes may currently be F1’s most successful team, yet the time it has spent in the sport is shorter than that of rival manufacturers Renault, Honda and Ferrari. After powering Juan Manuel Fangio to consecutive F1 titles in 1954 and 1955, Mercedes quit F1 and did not return until 1994, and only then as an engine supplier to the McLaren team.

Lewis Hamilton Mercedes Formula 1

The McLaren-Mercedes combination ran towards the front of the F1 field for much of its 21-season stint, powering Lewis Hamilton to his maiden championship in 2008. Mercedes returned with its own team in 2010, which went on to take F1 by storm, once again led by Hamilton, and has taken 63 wins in the last four seasons. If any brand is the brand to beat in F1 right now, it is Mercedes.

  1. Red Bull

Red Bull has always thought outside the box when it comes to marketing, making itself much more than an energy drink – and no pursuit better reflects that than its F1 interests. Red Bull first entered F1 as a sponsor with Sauber in 1995, but bought the Jaguar team in a cut-price deal nine years later following Ford’s decision to pull the plug. After initially being the ‘fun’ F1 team that brought some vibrancy to the paddock, Red Bull proved it was looking for more than a good time as it became increasingly competitive, taking its first win in 2009 and first championship the following year.

Red Bull formula 1 racing in Kuala Lumpur

Sebastian Vettel enjoyed a four-year run at the top of the F1 world with Red Bull, and while the team has not won a championship since 2013, 20-year-old Max Verstappen aims to restore its former successes as its new leader.

  1. Ferrari

Ferrari Formula 1 race

Ferrari and F1 have enjoyed an intrinsic relationship dating back to the formation of the world championship in 1950, when the scarlet cars hit the grid for the inaugural grand prix. Seven decades later, Ferrari remains a considerable force in F1, having become the sport’s most successful team with more than 200 race wins, 16 drivers’ championships and 15 constructors’ titles.

Ferrari remains the biggest talking point in F1, holding an almost mythic status in the paddock

Despite varying levels of success on track in recent years, Ferrari remains the biggest talking point in F1, holding an almost mythic status in the paddock, which in turn elevates the sport’s image. It comes as little surprise that the prospect of Ferrari delivering on its threats to quit should it disagree with F1’s future direction has pundits pondering if the sport could survive without its most famous brand.