At a reported $4.4 billion, the American-based Liberty Media has bought an 18.7% stake in to the holdings of Formula One, with an additional deal to close by Q1, 2017.
As a media-based group with ownership in Charter Communications, Sirius XM Radio, Live Nation Entertainment, and beyond, the message is very clear that Formula One remains a worldwide property with a lot of potential, and equally important many new opportunities to explore.
The fundamental question is, of course, why?
The month of May, most synonymous with the Indianapolis 500, has brought to light more than ever the question of open competition vs. cost containment.
The concept is simple. The more “open” a rule book is, the more “cost” is associated with developing and exploiting those rules. The more “closed” a rule book is, in theory, the less room for innovation and therefore less money spent in development and testing. It’s a basic concept that has existed ever since man started racing, but one that in recent years has gravitated more towards a closed rulebook and spec racing, moreso than an open set of diverse rules.
While this is prevalent throughout motorsport as a whole, perhaps the most evident is in the IndyCar series, and most notably the Indianapolis 500. Once considered the hub of innovative racing technologies: the birthplace of the turbine race engine, the development of modern aerodynamics, even the original home of the rear-view mirror, “Indy” has in recent years become much more of a “spec” series. With only two engine manufacturers filling the whole field, every car is fitted with an engine that has matching specification, a 2.2-liter turbocharged V-6, nearly identical chassis, with the only visible differences being minor bodywork differences between the two manufacturers.
The theory toward a very rigorous specification is two-fold: 1. Provide close competition across the field, and 2. Contain costs due to lack of innovation.
The internet and television are merging. Right? It’s something we’ve all heard for years, and of course there is absolutely a lot of truth in it.
Five years ago, Netflix was a service that mailed you DVD’s, Amazon was a place you purchased goods from, and Hulu was, at best, a place to catch old reruns.
In 2016, all three companies are legitimate web content providers. The success of a number of their respective programs has placed them as direct competitors to the premium cable companies of old, such as HBO, Showtime, and beyond. With companies like HBO and Showtime having to literally change their service and business model to accommodate “Smart” TV’s and streaming devices such as AppleTV and Amazon Fire, the argument that internet and television have merged has a clear legitimacy.
However, there remains one key area of television entertainment that still seems remains strong for the cable-loyal, live sports. While the ability to “binge watch” Netflix’s House of Cards or Amazon’s Transparent provides an unparalleled convenience and accessibility to its audience, live sports presents a unique animal.
For the sporting loyal, very rarely is the convenience of watching whenever-you-want a factor, if anything it’s the opposite. Loyal sports fans plan their schedule around their beloved team, rarely the other way around. In such, the ability to see live sports, on television, remains a true holdout in the evolving world of internet streaming, with the health of the NFL’s abundance of cable packages, the proof of that.
When long-time NASCAR Sprint Cup Series team Michael Waltrip Racing elected to shut their doors at the close of the 2015 season, long-time team investor and partial owner Rob Kauffman was one of the most vocal in the lack of “re-sale” value for any team looking to sell off assets.
It’s pretty simple math. Teams invest millions in to their race teams every year, but between the bulk of that money going in to labor, and with the team’s hard assets (cars, equipment, R&D tools) having a fast depreciation due to the non-stop evolution of technology, it’s easy for a team to have very little value even after multiple successful seasons.
Enter the recently announced “Charter” system.
A principal long established in Formula One, the idea is very simple, give a team a re-sellable, limited-access license to both participate in races and participate in key discussions with the series.
With 22 cars slated to start the GTD category of the upcoming Rolex 24 at Daytona, it’s fair to say the “bottom” category of IMSA’s WeatherTech SportsCar Championship is looking as healthy as ever.
After several years’ delay, in 2014 IMSA finally announced the adoption and 2016 implementation of the sought after “GT3” rules, a European standard of rules/homologation for many customer-based exotic GT cars. Until that point, “GT3” had quickly grown favor from many international racing series, including the Blancpain GT and Endurance Series, the top category of VLN, and here in the U.S. kicked off a recent resurgence for the Pirelli World Challenge.
With IMSA being one of the last holdouts, largely due to the existence of a few key marques that did not have GT3-compliant machinery, the presence of GT3 within the motorsport landscape is undeniable.
In the eyes of many, 2015 was an incredible years for professional motorsports. NASCAR received record ratings for their season finale, which saw a thrilling finish in which a legend retired and a driver took the title after missing several races due to injury. IndyCar saw a tremendous battle to the finish at both the Indy 500 and season finale, and sportscar racing saw some amazing triumphs from Porsche, Corvette, and beyond. Outside of convention, Global Rallycross continued to show its steady rise as one of motorsports’ most prominent and increasingly relevant forms to grab a new audience, and Formula E’s electric approach continues to show a strong, if small, foundation in the landscape.
However, the sport continues to face increasing challenges as both the business and advertising dynamic changes, here are the five questions facing the business of motorsport in 2016: