Liberty Media (FWONK) has unveiled its plans to make Formula One more competitive, in time for the 2021 season (following expiration of the Concorde Agreement). The adoption of a team budget cap (+/- $150 million, would not include driver salaries), more equitable distribution of prize money (Ferrari will retain a bonus, albeit 60% less) and technical changes designed to make engines simpler, cheaper and louder were among the changes proposed (along with modifications to the sport’s governance and regulations). To increase overtaking, FWONK is working to reduce the impact of engineering technology; as the most powerful cars have been minimizing the impact of the driver. F1 Chairman Chase Carey indicated that the individual teams would have the ability to share their opinions on the proposed rule changes before any decisions are finalized.
Howie Long-Short: In early March, we noted that Liberty had introduced F1 TV; a subscription-based OTT service that will carry commercial-free live race streams (beginning with the start of 2018 season on March 25th), live video from 20 in-car driver cameras, coverage of qualifiers, practice footage, highlights and press conferences. F1’s head of digital and new business Frank Arthofer believes the platform can eventually generate $500 million in revenue (would boost company revenue +28% over ’17 results), crucial for a sport that has all but maxed out the traditional revenue streams (see: race hosting fees, ticket sales). I asked Octagon SVP (Global Media Rights Consulting Division) Dan Cohen if it would be feasible for F1TV to generate $500 million in revenue within 12 months of launching the platform?
Dan: I don’t think so. The U.S. market is still not in love with F1 and to generate the type of revenues they’re talking about (that must occur). They’re more than 12 months away from turning the casual U.S. sports fan into an F1 fan.
JWS: They tout 500 million fans worldwide. Do they really need the U.S. market?
Dan: They need the U.S. market if they want to provide a return on investment for Liberty.
Editor Note: We’ll have Part 1 of a wide-ranging interview with Dan, on everything from ESPN+ to the first global broadcaster of sports, in tomorrow’s newsletter.
Fan Marino: In December ’17, Ferrari CEO Sergio Marchionne indicated that his team would leave Formula One “in 3 seconds” at the expiration of their contract (2020), if “simple and cheap engines like NASCAR” became standardized; Marchionne even floated the idea of forming an “alternative championship” to start in 2020-2021. I’m calling his bluff. While Ferrari chose not to publicly respond to FWONK’s presentation, Mercedes said that many of the “ideas and proposals have been either overdue or necessary or good”; while McLaren has said it’s on board with Liberty’s fan-centric approach.
Aston Martin CEO Andy Palmer said, “the prospective changes support many of the requirements needed” for their company “to enter the sport as an engine supplier.” One suspects Aston Martin’s interest in entering the sport would be to raise the company profile ahead of a pending $7 billion IPO. While more than 90% of the luxury sports car maker is privately held (Kuwaiti investors + Italian PE firm), you can play Aston Martin via Daimler AG (DDAIF); which owns 5%.
Fun Fact: Mercedes driver Lewis Hamilton wears +/-$158 million worth of sponsorship logos (12 companies) on his fire suit. To put that number in perspective, Manchester City’s jersey sponsorship deals with Puma, Etihad and Nexen only total +/-$134 million.
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