New F1 sponsors alienated

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Zak Brown, who has been described as F1’s go-to-guy-for-big-time-sponsorship deals” believes F1 is in danger. Brown who is CEO of the world’s largest sports agency –JMI – believes urgent measures are required to revive Formula One’s economic opportunities.

The overall sponsorship economy… is very much down in Formula One. That’s a fact – just look at the cars,” Brown tells Reuters. He believes the lack of sponsors on the cars is evidence of this and also in stark contrast with how the cars looked in by gone times.

Even though all JMI’s current clients who sponsor F1 have re-signed up to their existing commitments, the trends in F1 are just too negative to attract new sponsors.

“What I’m seeing is…attendance is down, TV ratings are down, car count (the number on the starting grid) is struggling. So your key performance indicators are all on a downward trajectory right now,” says Brown.

Further, sponsors come into Formula One for one reason; to obtain access to the sport’s platform for them to advertise their wares in relevant global markets. Brown warns Ecclestone that his financial model that marginalises traditional European venues is exacerbating the problem.

“Losing Germany; I haven’t had anything other than disappointment from sponsors on that. With Italy there will be the same reaction”.

“Some of the new markets, Mexico, are fantastic. Some of the other markets that are new, less so.

“We are adding some good ones,” but Brown questions the value of other new venues in the pipeline. “There is speculation of a third race in the Middle East. How can you have three races there and none in Germany?

“I think the two they have are outstanding and contribute a lot to the sport but a third? I don’t think the market can support that.”

The F1 business model that sees traditional race promoters being charged ever greater hosting fees as the ‘new’ wealthy venues push up the price – is also reducing the numbers of fans attending Grand Prix weekends.

Another feature of the current commercial model for F1, is the extraction of bigger and bigger amounts from the broadcasting companies. This has seen a significant rise in pay-per-view channels being the only live broadcasts of a number of F1 racing weekends.

The core TV audience for F1 is in Europe and there less people are prepared to pay for subscription TV to watch the sport, so naturally eyeballs have been reducing.

This is clearly not what sponsors want.

Interestingly, Zak Brown chooses to attack the current budgets of the top Formula One teams. He argues if they are reduced then the promoters and TV broadcasting fees can be reduced.

This solution sounds like an Ecclestone suggestion, as it would reduce the amount of disbursements made to the teams by FOM. However, it fails to address the problem of the minimum amount of spend forced upon the teams to merely build a car and fund their operations to attend each of the annual events.

Not reported widely in the English media was a call made by FOM non-executive director – Luca di Montezemolo – for CVC to build a management team around Ecclestone and improve Formula One management.

“The owners have to invest, they must set clear priorities, and they need to engage a management team that is fully focused on new objectives.” Luca was speaking to German monthly ‘Manager Magazin’ last weekend.

The ex-Ferrari chairman is not calling for Bernie’s head, but says “he needs top people and experts for finance, marketing and the digital world.”

Zak Brown was asked last year whether he could see himself succeeding Ecclestone as the chief of F1. He told F1 Racing, “I’ve always been a fan of it – and in the business for most of my working life. So first and foremost I want to be a key influencer in the commercial side of F1 and all of motorsport.”

Brown’s comments will not go unnoticed by CVC’s Donald MacKenzie. Bernie claimed in Bahrain he was there to “kick ass,” but the days of this being the primary modus operandi by which the sport can be successfully managed, are clearly over.

Ecclestone is failing to get the job done because his commercial strategy has fallen into disrepute with the teams. Engaging individuals to work on the F1 business model who understand marketing like Zak Brown, can only improve the co-operation from the teams to find common objectives with the commercial rights owners to take Formula One forward once again.

15 responses to “New F1 sponsors alienated

  1. You know … since I started following it in ’91, the number of times I’ve heard that F1 is on the brink of destroying itself is only surpassed by the number of times I’ve heard “No, seriously, this time F1 really is destroying itself”.

    Must be cucumber time 🙂

    • Very true. If you watch any highlights of a race from say 2005 on Youtube the comments section is just filled with, “this is proper racing, they actually sound like racing cars back then,” bla bla bla.
      I imagine if Youtube was about in the early 90’s the exact same things would be being said about the 80’s.
      F1 is one of the most frustrating sports to follow as a fan. Nobody ever really has anything positive to say about it until new rules are brought in. Then, something that was utter sh!te three years ago is suddenly the pinnacle of motor racing and the best it’s ever been.
      A lot of F1 fans really need to take their heads for a sh!t and accept that if you want nostalgia and lack of change then this really isn’t the sport for you. There’s plenty of them out there, cricket, snooker, darts etc, to name a few.

  2. Zak Brown is a bit slow for a go-to guy. He’s not said anything new. Teams have been struggling for main sponsors for some time, viz Brawn and before them Honda. Moving live races to pay-per-view has killed interest in other sports, like boxing, cricket and golf. The greedy dwarf must be well aware he’s turned the screw too tight. He’s probably been told this, but he’s lining his nest for his not too bright daughters to live the life of Riley for the next 50 years.
    If the bottom falls out of F1, it’s Bernie aided and abetted by CVC, Mosley and Ferrari who are ultimately responsible.

  3. So f1 loses audience yet the 6 hours of spa WEC race reports 8000 people more than last year. ..

  4. Pricing and availability plus, honestly racing is better.

    Beyond that and not commented much upon in in this article though deffo part of the mix is that Bernie has lost his ability to kick ass with the strategy group. He is defeated by the top teams constantly shifting in terms of what they view their own best interest. Ferrari on engines is a nice example, they wanted V8’s till they were competitive, suddenly they’re perfectly happy with hybrids.

    FIA need to run the sport in it’s own best long term interest and strategy group keeps them from doing so as well, giving them the benefit of the doubt that they could do so.

    Anyway, all been said before, but still bears repeating.

    • There’s no way any sport should be run democratically. Nothing ever gets done and the rich just get richer. Just in the same way you can’t have an equity group running FOM, all that happens is corners get cut in the name of a few more dollars and Jules Bianchi ends up in a coma for the rest of his life.
      The only solution to this problem would be if tomorrow the world decided to get of money! Unfortunately you’d have to move to an alternative reality for that to ever occur.

  5. It would seem as there are multiple worlds of income out there. As there has been, but now the gulf between the well to do and the well off are gapped by a large measure. Those of us with interest and knowledge, but zero monies are left to, not give a shit anymore.

    I heard there were fight tickets going for $100,000.00. That is just insanity.

    Go ahead Rolex, I will never be in the market for or afford one anyway. Please, Santander, front Alonso all the backing you can. I will never renew my mortgage through you. Kaspersky is just plain scary.

    The world I live in, will not allow me to, not be a slave to it.

    • It is interesting that many companies like Rolex that made their names off selling exquisitely-constructed high-end products have moved into selling less expensive, “same kind” items, to those who can’t afford the top shelf version of what it is they produce. They continue to market themselves as “exclusive” makers of a product while seeking to further their brand’s reach through volume selling their cheaper items.

      Part of FOM’s conundrum is how to do this with F1… or at least give the appearance to the public of doing so.

      On this side of the pond, NASCAR has tried this by trading older, smaller race tracks for behemoth “speedways.” This switch, though, has proven to be misguided and is perceived as greedy by their core fans. And it is these fans, with the sport’s journalists bold enough to say so, who now lead a very public push-back against these 200K-seat monstrosities.

      By creating “Tilke-likes” in far-flung and politically contentious regions of the world, while at the same time failing to honor the courses that made the sport what it is, F1 has mimicked NASCAR – and F1 is paying for it.

      It should be noted that Major League Baseball has presided over a resurgence by remaining publicly conscious of its core teams and, in fair part to DOWNSIZING stadiums, making them more intimate for fans; creating a feeling of being in closer proximity to the players.

      F1 would be wise to pilfer some of MLB’s life-saving measures and adapt them to what should still be perceived as the world’s greatest motorsport.

    • @DudeTuna said: Go ahead Rolex, I will never be in the market for or afford one anyway.

      Don’t worry about the Rolex. Wear the same watch as some rich folk, Bill Gates, Chuck Feeney, Paul McCartney, and Warren Buffett. Yes, it’s a CASIO – resin case. The rich don’t get rich by throwing their money away.

  6. Bernie has always seemed to be more shrewd impresario than nuts and bolts business person. His Bahrain statement is a sign of this. Perhaps Brown should arrange a meeting with him and spell out the various climbs and falls in stock, graphically, as if F1 was just another corporate product sold in the shelves with other forms of motorsport as direct competitors.

    It appears BE perceives, albeit archaically, F1 as being a manifestation of autosport myth (which it was in previous incarnations), rather than what it is to too much of the entertainment-viewing public today, which is just another circus competing for a couple of their free time hours.

  7. TJ13 wrote, “Interestingly, Zak Brown chooses to attack the current budgets of the top Formula One teams… However, (he) fails to address the problem of the minimum amount of spend forced upon the teams to merely build a car and fund their operations to attend each of the annual events.”

    Here is what Zak Brown actually said:

    “The budgets are out of control.

    “And that then forces the whole eco-system of the sport to be financially strained…the expense of the sport is out of balance with the commercial value of the sport. Budgets now are $200-300-400 million. It’s nuts.

    “We don’t need $400 million budgets. And if we don’t need $400 million budgets, we don’t need the same size of sanctioning fees which are putting tracks out of business, which then means we don’t need to charge the consumers as much.”

    Zak is implying budgets under $200 million.

    Is the good Judge really arguing that we need $400 million dollar budgets for all 10 teams?

    • You can infer under $200m is what Zak is suggesting – its not what he says. In fact he chooses $400m as his ultimate point of reference when he elaborates. He re-iterated this number twice more.

      Also, what I said was this argument does nothing for the smaller teams who do not have even $100m – there are fixed costs to competing in F1. $30m for engines just to start….

      The point was fairly clear – budget caps alone do not address the necessary redistribution of funds to the teams in percentage terms.

      • Thank you for making your meaning more clear.

        In a nutshell, Zak told Reuters three points:
        * Budgets are too high – “…$200-300-400 million. It’s nuts.”

        * The next point is the choice of countries / venues is driven too much by sanction fees vs the consumer markets of the host country / venue.

        * Sponsorship is down. Marketing KPI (attendance, TV ratings, car count) are down. If work is done to bring those KPI back up, then sponsorship could grow.

        What I like about TJ13’s analysis here is how the Judge has nicely pointed out that Zak could be attractive to CVC, citing a prior interview, and LdM’s recent comments. Very well done! Also, Zak frames the issues from the CVC POV, as the good Judge highlighted.

        It would seem that driving down budgets, as well as making the series a better marketing tool for sponsors, would be two big improvements for the small budget teams hanging on by their fingernails. So I don’t understand the Judge’s point when he writes that Zak, “…fails to address the problem of the minimum amount of spend forced upon the teams…”

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