Heading into 2018, there is genuine optimism that the on-track action will be compelling enough to prevent off-track turbulence detracting from Formula 1’s essence - its sporting offering.
Daniel Bailey
Daniel Bailey is Co-Founder and Chief Commercial Officer of MPA Commercial and MPA Creative; a bespoke marketing agency which works with brands and rights holders to effectively leverage motorsport as a business and marketing platform.
A big year for Formula 1
22nd March 2018, 10:04

There’s little doubt this is going to be a big year for Formula 1. The sport is into the second year of Liberty Media ownership and its F1 group, led by CEO Chase Carey, Sean Bratches (commercial MD) and Ross Brawn (sporting MD), is certain to keep putting its stamp on one of the world’s most valuable sporting properties.

Liberty made clear its intent to transform the marketing of the sport last year, and immediately set about freeing up social media coverage, while fostering a less aggressive, more open and collaborative atmosphere between teams, media, and governing body the FIA.

It spent an estimated £12 million ($16.8 million) on a spectacular ‘F1 Live’ event in central London, just before the British Grand Prix, while the US GP received a build-up the like of which F1 had never seen before, courtesy of Michael ‘Let’s Get Ready to Rumble’ Buffer. Then, at the Abu Dhabi season finale, came a new logo launch – all part of a grand plan to give Formula 1 a fresh face for a post-Ecclestone era.

That newly youthful, energised and inclusive spirit has rolled into 2018 – and then some: Liberty has ambitious plans to host four major ‘F1 Fan Festivals’ this season, in Shanghai, Marseilles, Berlin and Miami, specifically to promote the Grands Prix in China, France, Germany and the USA. Add to that a bright and bold rolling media campaign that seeks to promote key values such as ‘excitement’ and ‘engineered insanity’ and it’s clear that Formula 1 is being promoted like never before.

All this goodwill might sound a little too good to be true and perhaps it is, for beneath this utopian veneer, Liberty faces considerable challenges in managing deep-seated and long-running tensions that fester within its world-famous sport.

Levelling the F1 playing field – the off-track challenge

Chief among them - as always in F1 - is money and the delicate issue of ‘who gets what’. During the Ecclestone era, teams received income on the basis partly of performance, but also under a far less transparent ‘mates’ rates’ arrangement, whereby those teams who’d been around the longest (or whose owners had helped Ecclestone to his position of unrivalled control) were rewarded for their past loyalty. Equitable and transparent it was not, and Liberty is in the process of trying to replace these archaic revenue structures with something that would be more familiar to any MBA graduate or business executive.

Trouble is, some of the cosy past arrangements - for example the financial and sporting privileges enjoyed by Ferrari, the only team to have competed in the sport since its birth in 1950 - are rather coveted by their recipients. Others, such as latterly dominant Mercedes, or Red Bull, who thrashed their opponents between 2010 and 2013, have also enjoyed financially advantageous returns. While they would argue that the rewards are commensurate with the massive investments they made to become leading teams, the result is that the hugely-funded ‘big three’ have become even wealthier (and therefore better able to invest for future success), while their less blessed rivals have been left trailing in their wake.

There’s nothing new in being ‘unfair’ or rewarding the best players most generously. The problem lies in the scale of disparity between those teams funding themselves to win and those for whom simple survival is as much of a concern as on-track performance.

At one extreme, Mercedes, who build their own engine and chassis, have 1500 staff and an annual budget of around $500 million. Ferrari’s numbers are similar, while Red Bull, who buy their engines from Renault, still operate on a budget of around $300 million.

The gulf to a team like Force India, who last year finished fourth in the teams’ championship with a customer Mercedes engine, is vast

The gulf to a team like Force India, who last year finished fourth in the teams’ championship with a customer Mercedes engine, is vast. Their annual budget of approximately $100 million has to cover an engine bill of circa $15 million per year, while also supporting a staff of just over 400.

Fellow independent midfielders, Williams, will this year run two drivers - Lance Stroll and Sergey Sirotkin - who between them contribute around $40 million to the team’s coffers. While that’s a welcome boost for Williams’ bank balance, their drivers’ inexperience will compromise performance.

It’s disparities such as this that Liberty is currently wrestling with, in protracted behind-the-scenes negotiations, and it faces fierce opposition to any suggestion that there might be less cash on offer. Ferrari and Mercedes, F1’s most valuable and high-profile teams, are working in tandem to ensure they get the best possible deals from Liberty as a future financial model is sketched out. Ferrari have made no secret that quitting the sport entirely is an option if they don’t get what they want. Mercedes are less belligerent - at least in public - but their long-term participation is not guaranteed and it’s surely no coincidence that they will join the vastly less costly Formula E championship in 2019.

Liberty, therefore, must weigh the value of these blue-chip competitors to Formula 1 against the need for a financial restructuring that ensures that competing in the series remains viable for those less blessed. The sensitivity of these commercial matters is so acute that they’re surely bound to erupt during the year.

Mid-grid teams, in particular, endure huge pressures as they scrap for championship points and sponsor investment, in the pursuit of the cash that will translate into greater on-track performance. In 2018, we can expect the off-track ‘competition’ to be as fierce as ever.

Harnessing the lessons of Formula 1 for the real world

Increasingly, therefore, teams are framing Formula 1 involvement as an exclusive and prestigious business-to-business networking environment as well as being one that provides a technology-led marketing platform. The likes of Williams Advanced Engineering and McLaren Applied Technology – both sister companies to their racing teams – are harnessing the skills, advanced engineering savvy and the competitive drive of racing activity to generate remarkable tales of technological and commercial brilliance for partner products and services. The challenge of trying to succeed in the world’s most technologically advanced sport provides the perfect laboratory in which to fast-track real-world products, such as air-traffic control software or Formula E battery technology.

Long gone are the days of F1 being the last refuge for ‘fags ’n’ booze’ advertising.

Heading into 2018, there is genuine optimism that the on-track action will be compelling enough to prevent off-track turbulence detracting from Formula 1’s essence - its sporting offering.

For starters there’s the unprecedented prospect of two four-time world champions going head-to-head for a fifth title. Sebastian Vettel and Lewis Hamilton will lead the charge for Ferrari and Mercedes and there’s huge pride and honour at stake for the prize of being ‘first to five’. Should either man win this year’s title, as seems inevitable, they’d join Juan Manuel Fangio as a five-times champ, with only Michael Schumacher’s record of seven world titles surpassing their achievements.

All the ingredients, then, have been assembled for a classic. And as the teams head to Melbourne for the opening round of a 21-stop, 39-week global odyssey, there is one thing of which Formula 1 can be certain: when the audience numbers are counted at the end of 2018, F1’s unique cocktail of skill, speed, technology, personality, power and politics will once again have delivered the world’s largest annual sporting series to an adoring audience of fans around the globe.