Money is central to most sporting activities. Be it as a young racer aspiring to become the next Lewis Hamilton, or a Formula 1 team budgeting to make it through another season, finance is at the centre of it all.
Similarly, the commercial elements of the sport are critical to its long term prospects. With an estimated audience of 400 million globally, F1 has plenty of subscribers to utilise in the search for revenue. After all, the core aim of the commercial rights holder is to generate as much profit from the sport as possible.
Curiously, and as the sport’s new owners Liberty Media are in the process of uncovering, the previous occupants were not necessarily as adept in the art of maximising F1’s fiscal potential.
Corporate sponsors are essential to the success of a big business in generating revenue. These are the companies associating themselves directly with a brand, typically as a method of advertising.
Mercedes have a suite of corporate partners befitting of their recent success in the sport. For instance, Hugo Boss, Epson and Qualcomm are all partners obtained after the team’s 2014 campaign in which they were the dominant force. Success breeds partnerships as these companies are striving to maximise their airtime.
Worryingly, F1 has found itself in a position where it has a meagre five corporate partners, one of which is the tyre supplier Pirelli. Alongside the Italian firm is Rolex, DHL, Heineken and Emirates.
Compare this with NASCAR which, despite being a series exclusively based in the US, commands 43 corporate sponsors.
F1’s head of commercial operations Sean Bratches – one-third of the new triumvirate at the head of the sport – explained the shortfall. “There was no head of sponsorship at Formula 1 when I arrived, there was no head of media, no marketing people, no research people.
“We sit here today and we have five sponsors, Liverpool Football Club has over 30, Manchester United has over 90. I don’t think we’re going to get over 90, but there’s an opportunity to engage sponsors who are looking to activate their brands.”
Addressing this issue is something that Liberty will have high on the agenda. At a time when traditional race venues such as Silverstone are having to enact contractual break clauses on the basis that race fees are simply unsustainable, finding new revenue streams is essential.
Liberty has stated that they do not want to lose the British Grand Prix and are targeting a solution that suits both their commercial aspirations as well as the BRDC’s aims to make the event profitable and sustainable. All the while, fans are craving a reduction in ticket prices, required to make the sport more accessible.
If F1 commands more brands and Liberty can reach their financial targets by means of partnerships with global companies, they can then potentially work on more creative deals with race promoters to ensure the sustainability of the sport.
Previous commercial rights holders CVC were content with allowing Bernie Ecclestone to single-handedly govern the sport on their behalf. Liberty signalled for day one that they were to run the show themselves.
Naturally, this means that the sport is bound to become more profitable. To achieve this, however, Liberty know that they need to negotiate new partnerships, which can only be possible while fans are engaged in the show.
For those who have followed the sport through good times and bad, Bratches’ vision to entice more logos onto the press conference backdrop may seem a subtle change, but it can only be a good thing.
