With 2017 upon us and the official takeover of Liberty Media controlling stake in the commercial rights to Formula One, a new era is upon us. At a reported $8 billion sale to become the majority shareholder, the world renowned media and distribution company has made the biggest investment in history in to the sport. However, with budgets for teams at an all-time high, and the sport struggling to maintain its footing compared to the “glory days,” 2017 and beyond will prove an interest learning and proving ground for the sport. Here are several storylines to look for.
Formula One Without Bernie Ecclestone. Easily considered the most divisive figure in Formula One, depending on who you ask Bernie Ecclestone is either the reason the sport has achieved such a level of success, or the single person holding it back from it. Having held up the sport’s commercial interests since the 1970’s, it’s easy to argue that Ecclestone single-handedly transformed the sport through the 1980’s and 1990’s. Unifying the teams under one negotiable umbrella, Bernie shifted the power of the sport from the race promoters to the series officials and teams, capitalizing and developing television and media packages that at the time had not been properly utilized. Creating a multi-billion dollar property, both teams and series management have profited from the sport’s multi-decade growth, however in recent times the health of the sport has been questioned, oftentimes at the expense of Ecclestone’s increasing financial demands from all of the series partners. In other words, Ecclestone was ruthless, determined, and single-minded on growth through relentless licensing and rights processing. For 30+ years, no one has ever asked “who’s in charge here?” Can the same be said of Liberty Media, which is by nature more of a management company than the cult of an individual leader? Is the time right for a larger management approach? Motorsport has notoriously only prevailed with a single-handed, autocratic management. Time will tell how the current management will succeed.
Re-Visit Tradition or Part With It? Arguably the single largest criticism of Formula One today is the continued process of moving away from tradition. Gone are the days of racing in France, the British Grand Prix faces an uphill battle with a unique, balloon-oriented promotion contract, and these are the hallmark locations of both fans and suppliers. Meanwhile new events at venues like Azerbaijan continue to sprout up, relying largely on government money required to meet the enormous sanctioning fees. Purists and loyalists would argue the return to the roots of the sport are critical for the sport’s health, yet at an $8 billion investment, it’s clear the shareholders will need to make their money back somehow.
Access. To Have or Not to Have. One of the biggest challenges for Liberty will be the issue of access. Access applies to almost all means of media: broadcasting, social media, digital access, media rights, etc. The most continued commentary from nearly all of the fans is the lack of access… be it via relatively muted social media channels, to the challenges of on-site paddock access for fans, to extraordinary broadcast fees for television partners that make it unappealing for many key markets to show. Which is more important? Is it more important the fees get paid, or the fans are given access to build the fanbase? It’s not an easy solution, and many would argue the closed-off nature of the sport these days has not helped.
The Payout. The sport is nothing without its teams, right? The teams provide the product we see on track. While the current payouts for top teams continue to be high, the year-end payout agreements from team to team are very disproportionate, built on a combination of history in the sport and the previous year’s performance. While top teams can net hundreds of millions of dollars from their year-end payout, the bottom line is the commercial rights holders make the other half of that annual payout… in other words, billions of dollars. Again, which is more important. Continue to fund the teams, or pocket the profits for the shareholders? It’s not an easy answer, because at an $8 billion buyout, the shareholders have a right to expect a significant return, but at the same time without the teams, they have no product.
None of this will be answered by the first race, or event the first year, but 2017 should provide valuable insight in to the health of the sport.