In Formula One history, 150 teams have entered the sport and just 10 remain. The perception may be that most of this was in yesteryear yet in the five seasons prior to Liberty Media acquiring the rights to F1, three teams disappeared and two others were sold because of financial difficulties.
In the past five seasons only Force India was forced into administration and this was a phoenix from the ashes pre-prepaid deal which saw the Racing Point team emerge immediately and solvent.
Liberty’s radical new F1 business model
The financials in Formula One have radically changed in the past few seasons and much of due to Liberty Media’s approach to running the sport.
Bernie Ecclestone’s model was to retain F1 as an ‘exclusivity’ club which would drive the highest price from Sponsor’s and promoters alike, yet for Liberty it appears the model is ‘the more the merrier’.
Since the commissioning of Drive to Survive interest in the US has rocketed in Formula One with viewing figures through the roof.
In the 18-49 age demographic Formula One eclipsed NASCAR in 2022 for the first time ever. Last season’s race in Austin saw the TV audience peak at 1.6m the third-largest viewership on record for the US Grand Prix.
US attendances and Tv audiences grow rapidly
The inaugural Miami GP had a record breaking 2.6m tune in and the event sold out in less than an hour.
Over the course of the year, US audiences were up 29% on 2021 though prior to the early conclusion of the drivers’ championship this had hovered around 35% according to blackbookmotorsport.com.
Under the governance of Liberty Media the number of US based sponsors has grown 50% in just five years and across the teams in 2022 there were 150 such sponsors.
Each of the teams has benefitted from Liberty’s new approach as epitomised by Sauber. The Swiss based team struggled to find 10 partners in 2017 and now boasts no less than two named sponsors, Alfa Romeo and Stake and more than 41 other sponsors of which six are technology suppliers.
Red Bull can live “entirely” from sponsorship
Red Bull struck a 5 year deal with New York based company Oracle worth $100m a year as the teams title sponsor and Mercedes receives a similar amount from their name sponsor Petronus.
With rising revenues and capped expenditure F1 teams account are being revolutionised. Since the advent of the cost cap Mercedes annual accounts show a 400% rise in profit from $20m to $80m
Red Bull’s commercial director, Nick Stoker recently claimed in the Sports’ Business Journal that the team will soon become the first in F1 to live entirely from sponsorship income.
The next set of annual accounts is expected to reveal that just 3 Formula One teams do not spend up to the cost cap limit and the benefits from this more level playing field should be evident in the coming years.
F1 now more “fan focused”
At the 2022 US GP, Zak Brown of McLaren commented, “We’re in the best state I’ve ever seen [F1] in because of how hot the sport now is. I think it’s also because the sport is now more ‘famous’ and fan focused.”
The McLaren hospitality facility was packed throughout the three day weekend according to Brown.
“You could say it’s more corporate friendly because of how Liberty have positioned the sport versus Bernie [Ecclestone], who did an awesome job getting it to where it is.”
Liberty have FIA drive on sustainability to thank
Yet its potentially the FIA’s position on sustainability that has given Liberty its big opportunity which was a barrier to the corporate world prior to the new “net zero” targets for 2030.
“I think there was a risk [companies would turn on F1] but I think the sport has collectively jumped on it,” Brown said. “If we were seen as big emissions violators, the corporate world would leave, saying, ‘It’s just not sustainable’.
However, between hybrids and the biofuels coming [in 2026] we’re seen as leaders in sustainability, not just doing less bad.
The sport is headed in that direction.”
So why the concern over new F1 teams?
The fact that sport scar racing is 3 years ahead of F1 on fully sustainable fuels appears to be lost on Brown.
With Red Bull on the brink of self sufficiency through their sponsorship programme – even before counting the awards of prize money – it is questionable as to why the bigger teams are so against new F1 competitors.
Much is said by the likes of Horner and Wolff about the effect new teams would have on the current less well off competitors.
Given there’s only so much car on which to place sponsorship stickers and Red Bull’s rude state of health, maybe the dilution fund of $200m should go to the teams yet to reach the budget cap spending limit.
READ MORE: Perez reveals change of feelings since arrival of Ricciardo
