Ferrari CEO Again Threatens F1 Exit, Implies Start of Competing Series

At the company’s annual Christmas meeting, Ferrari (RACE) CEO Sergio Marchionne reiterated that the team will be leaving F1 (FWONK) if Liberty Media execs institute plans to standardize parts and revise power plant rules. Marchionne said, “we are not interested in cars being the same, with simple and cheap engines like NASCAR. If they decide to make us all the same, we will go in 3 seconds”. Should the team decide to leave the sport, Marchionne indicated Ferrari would look to form an “alternative championship from 2020/2021.”

Howie Long-ShortFWONK fell 4.7% on Wednesday following Marchionne’s statement. Shares are down 12.3% over the last 30 days, a loss of nearly $1 billion in value. As for RACE, the company posted strong Q3 results with net profit +24% YOY (to $166 million). Now there are rumors circulating the company may be looking to increase production 12% (from ’16 numbers) by 2019, which should excite investors.

Fan Marino: Standardizing engines take away one of Ferrari’s biggest advantages, as one of the series’ biggest spenders. Any leveling of the racing field will have a direct negative impact on the team’s bottom line, in a sport where the winner’s pool was already cut 13% this (down to $273 million); so, it’s understandable why the team is opposed. Former F1 CEO Bernie Ecclestone certainly doesn’t think F1 should cater to Ferrari’s demands, saying, “democracy has no place in Formula 1”, adding this type of behavior is nothing new from the sport’s most famous team “if they don’t win there is usually panic.”

Ferrari Claims It Could Leave Formula 1, Start Its Own Series

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DIS’ Acquisition of Star Sports Draws International Attention

Disney’s (DIS) acquisition of Twenty-First Century Fox (FOXA) assets received attention within the domestic sports world for the 22 regional sports networks included in the deal, but on a global scale, it was the purchase of Star Sports that generated the most noise. Star recently acquired the rights to the Indian Premier League (IPL) through ’22, for $2.55 billion; a rapidly growing league with a television audience that grew 22% YOY. The network also owns the rights to 76% of national team matches, ICC events and a host of other fast growing sports within the country (hockey, badminton, F1); giving DIS a significant share of India’s sports television market. Star’s digital/mobile platform Hotstar, owns the valuable streaming rights to the IPL.

Howie Long-Short: The massive draw of the IPL made Sony Max (the previous rights holder) the most watched television channel in India during the tournament; so expect the annual 2 month competition to be an advertising and sponsorship boon for both Star and Hotstar, and ultimately DIS’ bottom line. The rights aren’t coming cheap though; Star Sports will pay nearly 3x the amount Sony (SNE) paid, for half the term period.

Fan Marino: F1 held the Indian Grand Prix from 2011-2014, before Bernie Ecclestone halted the race due to issues with government taxation; despite the track holding a contract that assures them rights to 2 more races. It appears as if the race could be coming back though under Liberty Media (FWONK) management. New F1 CEO Chase Carey said in September, “there are places around the world that present us with great opportunities to grow the sport over time and certainly a country like India with the success and the growth it has had in recent years, makes it an exciting opportunity down the road.”

Why IPL could be the golden goose of Disney-Fox’s massive $52.4 billion deal

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Formula One Undergoes Rebrand

Formula One (FWONK) is undergoing a corporate rebrand for the first time since 1993. The company is replacing its iconic “flying one” logo (see Fan Marino below) with a simplified version. The balance of the company rebrand will occur in March 2018, prior to opener in Australia, and will include; new graphics and production elements for the world feed, a new web platform and both live and on-demand OTT services. All marketing and business strategy will be focused on what the fans want (according to a Flamingo study); the race, the drivers and the rivalries. Fans initial response to the logo change has not been positive.

Howie Long-Short: Want to play F1 from within the telecom sector? Tata Communications (NSE: TATACOMM), the connectivity and hosting partner of the Formula One Group; repurposes, reformats and distributes content for OTT broadcasters (including: Vice Media & Red Bull Media House). TATACOMM also works with 7 F1 teams (including: Mercedes) on remote operations and technical support (i.e. capturing data, video feeds) at the track; enabling teams to run race simulation and create pit strategy. Note: FWONK is a tracking stock. F1’s commercial rights and other assets are owned by Liberty Media Corporation.

Fan Marino: Look at this logo. What do you see? A black F and a red 1 (made up of a bunch of lines to indicate speed), right? Nope. Focus your eyes on the negative space between the black F and red 1; you’ll see a white 1. Don’t feel bad, you weren’t the only one who didn’t notice this for the last 20+ years.

Exclusive: Inside Formula One’s Rebranding Strategy

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Ferrari Contemplates Exit from Formula One, Could Save $119 Million/Year

Ferrari (RACE) could be leaving Formula 1 (FWONK) at the expiration of their contract following the 2020 season. RACE, F1’s oldest team (67 seasons), opposes the organization’s plan to introduce a new version of its engine to the racing series and its intention to redistribute prize money beginning with the 2021 season. The introduction of a new engine will increase RACE’s expenses and a balancing of prize money would likely cost the company its guaranteed annual bonus payment ($94 million/year). Ferrari Chairman Sergio Marchionne has been quoted as saying an exit would be “totally beneficial” to Ferrari’s bottom line.

Howie Long-Short: There is a narrative that should RACE pull out of Formula 1, the company would see an increase of $119 million to its bottom line; the team’s annual deficit. I don’t believe the number is nearly that high. Marchionne has already said that if the company were to leave F1, it would join another racing circuit. Even if you believe F1 R&D is irrelevant to the development of Ferrari street road vehicles (and theoretically draw the expenditure down to $0), competing on another circuit is going to require some level of R&D capital. An exit from F1 may reduce the required spend, but it doesn’t eliminate line item.

Fan Marino: Red Bull team principal Christian Horner is calling Ferrari’s bluff saying, “they’ll bluster that they don’t need Formula One, but what other form of motor racing is going to give Ferrari the platform that Formula One does? I think when the music stops they’ll be there.” He may be right as to the latter, but Ferrari doesn’t need F1 as a marketing platform; and certainly, not like F1 needs Ferrari. As well-respected motorsport journalist Peter Windsor recently said “the key to everything in Formula 1 is keeping Ferrari happy and part of the programme. Without Ferrari, Formula 1 is just another motor racing championship”. In that scenario, Ferrari would form its own racing circuit (and likely not miss a beat).

Ferrari on track for £100m boost in profits if team leaves Formula 1

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Formula 1: Driven by Racing Hosting Fees

Formula 1 (FWONK) is considering the elimination of Friday practice sessions, a fiscal decision that would enable teams to compete in more races without an increase in hard costs. The addition of races would increase the teams’ annual prize fund ($985.5 million in ’16) and line FWONK shareholder pockets; as race hosting fees make up 36% of the corporation’s total revenue ($1.8 billion). The 2018 calendar has a record-tying 21 races scheduled; though more could be added as F1’s governance contract allows the organization to hold up to 25 races/year.

Howie Long-Short: Racing hosting fees make up a higher percentage of F1’s revenue than any other source; with just 33% of FWONK revenue coming from the racing organizations broadcast rights. That is a drastically different model than we are used to seeing here in America. The NFL generated more than $13 billion in revenue in 2016, with 70-75% coming from media rights deals. Just 15% ($2 billion) of the league’s total revenue came from ticket sales. FWONK wants to increase the number of races on the circuit because doing so, will move the needle for them.

Fan Marino: If Friday sessions are eliminated, it’s the fans who lose the most. While tickets to a Sunday race can cost $200+, a ticket for Friday’s event can be had for less than half.

As Formula One Seeks To Cut Costs, It Could Cancel Friday Practice Sessions

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ESPN HIRES KATIE NOLAN; BARSTOOL SPORTS’ BIG CAT & PFT COMMENTER TO GET LATE NIGHT SHOW

ESPN (DIS) has had an eventful week. The company finalized a distribution deal with Altice (ATUS); terms of which are particularly notable, as the deal represents the first of several renegotiations in a new round of carriage fee talks with pay-TV operators. On the content side of the business, the company announced a partnership with Cycle Media to create branded original programming and acquired the broadcast rights to Formula 1 racing (FWONA), beginning in 2018. As for talent, the company hired Katie Nolan, formally of “Garbage Time” on FS1 and confirmed reports of a new late-night show on ESPN2, hosted by Barstool Sports’ Big Cat & PFT Commenter.

Howie Long-Short: In the end, Altice caved. They agreed to pick up nearly every ESPN channel (including the SEC & ACC Networks), implement a rate increase for those channels and raise minimum household penetration thresholds. What choice did they really have? It’s not like they can afford to let subscribers walk. As for the FWONA deal, it’s noteworthy that the terms enable the racing organization to maintain OTT rights to their races.

Fan Marino: Nolan is a star that FS1 oddly wasn’t using. She’s got a great sense of humor, a sharp tongue and Sports Emmy to her name; a strong addition to the ESPN roster. For those not familiar with Big Cat & PFT Commenter, they are the hosts of Pardon my Take; a sports podcast that draws 2 million listeners/episode. You don’t have to be a fan of Barstool to like these guys. PFT is one of the funniest personalities in sports.

After a big week, ESPN is becoming cool again

FORMULA ONE INTRODUCES ESPORTS SERIES TO COINCIDE WITH ON TRACK CHAMPIONSHIP; F1 2017 VIDEO GAME RELEASED TO STRONG REVIEWS

Formula 1 (FWONK) is entering the esports arena, launching a gaming series with the help of esports operator Gfinity (LON: GFN). The series will focus on the new official F1 video game published by Codemasters; and will coincide with the on-track world championship. The inaugural season which will run from September-November, is Formula One Group’s latest attempt at embracing digital media (they also recently announced a partnership with SNAP). Qualification will begin in September and the series will culminate with a 20 person, 3 race event, at the F1 season finale in Abu Dhabi. The “esports World Champion” will receive automatic entry into the 2018 competition, passes to the 2018 Grand Prix and will become a character in the 2018 F1 video game.

Formula 1 Entering Esports Arena With Official Championships To Start In September

Howie Long-Short: F1 has been around since 1950 and has a fan base that attracts +/- 400 million TV viewers. In 10 years, esports has amassed an audience that saw 320 million people watch video games on television in 2016, with that number expected to rise past 400 million this year. Wise idea for F1 to try and attract real fans through the virtual world.

Fan Marino: From the gamers POV, F1 2017 is receiving strong reviews. A new “championship” game mode and series of vintage racers are new to this year’s edition.