How F1 teams went from £1 rejected to billion-dollar forecast

The arrival of Liberty marked a significant break from the past, replacing Bernie Ecclestone’s wheeler-dealer and profit-focused approach with a broader approach to growing the series.

Liberty Media CEO Greg Maffee, speaking at the Business of F1 forum organized by the Financial Times, made an interesting point to highlight the evolution of F1 over the past five years and Motorsport Network Late last month in Monaco.

“One measure that is a real success is the health of the teams,” Mafi said. “When we entered 2016, we made our first investment and closed the deal in 2017, after the 11th team, Manor, was sold into receivership for just £1.

“Today, I don’t think you can buy a team for less than £500m, maybe £700m? You can try, but I think it will be tough. It’s an amazing increase in value.”

Next to the apology on stage was F1 CEO and president Stefano Domenicali, who waved his hand upward at the suggested valuation. It may be tongue-in-cheek, but there was a serious point behind it: Realistically, you’d be talking beyond those figures if you seriously wanted to sell a team.

Last year, McLaren CEO Zac Brown predicted that in “three, four or five years’ time”, we would see “F1 teams trade”. [at] Over a billion dollars, assuming no one wants to sell. The fact that nobody wants to sell drives a premium.”

It is a challenge that anyone with a design to join the F1 grid must negotiate, as Andretti is currently exploring. A push to take over Sauber, which runs Alfa Romeo’s F1 operation, broke down at the end of last year, and now efforts to secure an 11th entry are stalling amid uncertainty about benefits from the rest of the grid And it appears, F1 itself.

But there are several key factors that have helped charge the valuation of F1 teams, even two years ago when Dorilton Capital acquired Williams For $150m – something that now seems like a bargain.

Alex Albon, Williams FW44

Alex Albon, Williams FW44

Photo by: Glenn Dunbar / motorsport images

F1’s budget cap

The introduction of F1’s budget cap is something that cannot be underestimated to not only help protect the value of teams, but push them upwards.

Introduced last year at $145m and since lowering to $140m for 2022, the budget cap is set to help level the playing field in F1 in the future, making the series more competitive and more Teams will get a chance to fight on the very front.

But it has also placed a limit on most of the costs involved in running an F1 team, meaning any potential buyer knows what they are getting into. There is no longer the kind of volatility that it had in previous years or the risk of turning F1 teams into a money pit.

“We can talk about prices, they can be high, but the cost is something you’ll definitely have,” Domenicali said. “So the only way to make sure the margin is big is to control what is spent. This was a huge milestone that has completely changed the vision of the game, and has given credibility to the system. .

“Sustainable business means teams can invest, all ecosystems can grow, and all the elements related to our world are now secure and financially sound. This means we can grow and we can become a bigger player.” You can think about the future.”

Sergio Perez, Red Bull Racing RB18

Sergio Perez, Red Bull Racing RB18

Photo by: Glenn Dunbar / motorsport images

The influx of sponsors and big technology

The tobacco era can widely be seen as the heyday for F1 sponsorship, a time when money poured into the chain and fostered many of its free-spending habits. But we are going through another bullish phase.

Big tech companies around the world are increasingly interested in the benefits F1 can provide, not only from a marketing standpoint, but also in helping them advance their innovations. Ahead of the new season, Red Bull named US tech giant Oracle as its new title partner, and also secured a lucrative cryptocurrency deal with Bybit, helping the sector accelerate F1 sponsorship across the grid.

Maffei claimed that the teams are now at a point where they have to turn sponsors away because “there is only so much room to put another logo on the car”.

“See how many of those cars now have a technology sponsor, if not multiple technology sponsors,” Maffei said.

“The increase in interest on a number of levels comes from people who really understand technology, and that has played a really big role in getting an understanding of that technology and how it drives interest in technology communities, Silicon Valley and the like. has grown.”

But Mafi also realized that the growing popularity of F1 and the wider audience it now attracts meant more consumer products were also eager to work with teams. “Our growing youth of fans has brought in consumer products and a whole bunch of other brands that find it appealing,” he said. “So it’s been fortunate to have all kinds of sponsor interest.”

Charles Leclerc, Ferrari greet fans

Charles Leclerc, Ferrari greet fans

Photo by: Mark Sutton / motorsport images

F1’s continuing rise in popularity

Netflix and . influence of drive to survive The growing popularity of F1 has been talked about extensively in recent years. Yet this success has been part of a broader strategy to give the series the means to open up more and connect with fans more.

The results have been astonishing. Conducted in conjunction with F1 fan survey Motorsport Network Last year, with a huge influx of female fans, F1’s fanbase was shown to be getting younger and more diverse. This has helped give the series a more well-rounded audience that could be tapped into better.

“We give credit to Netflix for opening up to a lot of people,” Mafi said. “But it’s fascinating how many of these people have come across it in different ways, like social media and gaming. You can go ahead and play lando norris And race the same track that Lando Norris does.

“Opening up the game, making it more engaging, yes, there’s definitely elements of exclusivity to it, but it’s these elements that all fans can touch.”

Williams’ commercial director James Bower felt that Liberty was “removing the ban on teams so they can directly engage fans and help build that fan base”. Williams recently hired former NFL SVP fan engagement to oversee his North American interests on a social and digital side. “We are really building our social channels, our content, and engagement with American fans,” he said. “We want to create more value for the brand, but also more value for our partners.”

The big picture that F1 and teams are looking towards connecting with fans is a great interest to their partners, again helping to advance values. TV figures are moving in a positive direction, especially in the United States, where ESPN continues to report record viewership for the race. In turn, this also helped raise larger fees for broadcast rights, again helping teams provide more revenue.

The jump in popularity is also reflected in the calendar, which is set to hit the current limit of 24 races with Qatar and Las Vegas next year. The demands of a growing calendar are known to all in the F1 paddock, raising big questions about its sustainability. But from a financial standpoint, it’s helping the chain bring in more revenue, resulting in the price being pushed upward.

Valtteri Bottas, Alfa Romeo C42

Valtteri Bottas, Alfa Romeo C42

Photo by: Alfa Romeo

The ‘closed shop’ nature of the F1 grid

As controversial as the debate on bringing an 11th team into F1 amid Andretti’s continued interest, the fact that the grid remains a ‘closed shop’ is a big factor driving valuations upward. .

The fact that no one can set up an F1 team helps boost the value of each berth on the grid, similar to other sports leagues where franchises are limited, such as in the NFL. If you want to join, you’ll need to purchase an existing outfit.

The $200m dilution fee required under the Concorde agreement now seems too low for any newcomer, with many team owners skeptical that the one-time payment would be enough to make up for the revenue that would be lost by gaining a smaller slice of the pie further. is growing.

As revenues rise, cost limits remain constant and margins theoretically get larger, things are set to move in only one direction. It should come as no surprise that no one on the current grid wants to give up what they have, nor does F1 want to compromise on them, saying it is a way for them to profit from the current boom”. Big reward”.

“They have invested in us, and that is why we believe that the community of teams should be respected,” Domenicali said.

“Today, having more teams is not a problem, because we have a list. Some of them are more vocal than others, but we have a lot of people or a lot of investors who want to be in Formula 1. But we have to Teams need to be protected. It’s actually another sign of a very healthy system.”

Stefano Domenicali, CEO of F1, Greg Maffei, CEO of Liberty Media, James Allen, President Motorsport Network

Stefano Domenicali, CEO of F1, Greg Maffei, CEO of Liberty Media, James Allen, President Motorsport Network

Photo by: Steven T/ motorsport images

What will the next five years of Liberty ownership look like?

The first five years for F1 under Liberty have seen some big changes. But looking at the next five years, it is determined to ensure that the current growth is not only sustained, but fully capitalised.

“We have the leverage of the leadership of the 72-year-old enterprise, so we think long-term and what it will do,” Maffei said.

“We have a lot of interest now, and we want to keep that interest growing more broadly. Doing things like going to Africa and thinking about sustainability are all we are thinking about that we are going to do this for the next five years. How to grow a 72-year franchise for one year, and then the next five years, and then the next five years?

“There’s a huge amount of momentum now. We want to capitalize on it not only financially, but for the growth of the game.”

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