F1 Is at an Inflection Point

Just as my obsession with relevance and economic security have often crowded out what’s really important — relationships — I’ve let my preoccupation with the election results crowd out the blessings in my life. God, I’m so fucking sick of politics. So … let’s talk about cars. Fast cars.

I’m in Vegas for Formula 1. Actually, the truth is, I’m not here for the race — It’s more a desperate attempt to avoid the inevitable melt into irrelevance, which I believe can be arrested  by extending my adolescence. Also, I love Vegas. The last race I went to was the inaugural Miami Grand Prix in 2022. It was a great time, despite F1 races being boring: here he comes, there he goes. And so on … and so on … and so on. 

The real fun is found far from the track. The vibe is money, tech, and glamour, a Super Bowl for the super rich. If Nascar is Android, F1 is iOS.

In Miami I went to a dinner party on the beach hosted by Carbone, a fabulous restaurant, right in the middle of a Covid flare up. Fab. U. Lous. Wyclef Jean played to 700 people crowded into a hot tent with no ventilation. I had two thoughts: “I’m getting COVID tonight” and “It’s worth it.” I was right on both counts.

Drive to Survive Rebrand

F1 has long had large and rabid fan bases in Europe and South America, but that enthusiasm didn’t land on U.S. shores until 2017, when Liberty Media bought a controlling interest in the league. Under new boss Greg Maffei, F1 took a big swing at America. Targeting young people, Maffei and the F1 Team built an iconic brand, in the most competitive market, in less than a decade. There were races with celebrities in attendance — Tom Cruise, LeBron James, Rihanna — new sponsorships, and an aggressive social media presence. 

However, Liberty’s gangster move was the Netflix docuseries Drive to Survive. Now in its sixth season, the show is rewriting the playbook re how sports leagues market themselves. It’s a behind-the-scenes look at “a lot of young, good-looking guys,” as Maffei once told CNBC, hard-charging billionaire team owners, and high-tech pit crews competing in a series of überluxe international locations. (F1 wasn’t the first to try this; the NFL’s Hard Knocks premiered on HBO back in 2001.)

By focusing on individuals and harnessing the power of storytelling, Drive to Survive used streaming to introduce U.S. viewers to drivers who were superstars overseas, among them Lewis Hamilton and Max Verstappen. It gave newbie (read: American) fans a compelling point of entry and became a fount of bingeable video that was easily shared, particularly on Instagram. There are accounts devoted to what Hamilton wears as he walks on red carpets. 

Tribal

Tribal rivalries, betrayal, greed, revenge — all the stuff humans are hardwired to love in a lustrous package every week. Champions muse about “having a target on my back.” Young guns talk about “being hungry.” Everybody obsesses about forces beyond their control. Shakespeare knew this turf pretty well — Marcus Aurelius would have felt at home. The song remains the same; the actual game being played is unimportant. 

The results: Liberty paid $4.6 billion for F1; it now has a market cap of about $22 billion. In 2023, F1 generated about $3.2 billion in revenue, up from $2.6 the year before, most of it from promotional deals with host cities, media rights, and team sponsorships. 

TV viewership has doubled since Liberty took over (though the U.S. audience pales beside those of the NFL and other big team sports, and it’s only a third of Nascar’s). In 2022, F1 signed a three-year deal with ESPN (up for renewal next year) worth $270 million. American TV viewership of this year’s Miami Grand Prix was 3.1 million, the largest ever for a U.S. race. Meanwhile, between 2017 and 2021 the average age of an F1 fan dropped from 36 to 32. About 40% of fans are now female. Earlier this year, Liberty announced it had bought a majority interest in MotoGP, which is to motorcycle racing what F1 is to autos. 

 

Owning a team (F1 has 10) used to be a money pit for a brand or a billionaire in the throes of a midlife crisis. Now teams are a legitimate asset class. Oracle is paying Red Bull $100 million to put its name on their car. Mercedes paid $176 million for its team in 2010; it’s now worth $1.5 billion. The Phoenix Suns and Chelsea FC were recently purchased for $4B and $5.3B, respectively.

No Joy in Sin City

So: Media, tech, increasing value, and Wyclef Jean. Everybody’s happy, right? Sort of. The mood in Vegas this year is subdued, a bit chastened even. For starters, the business face of all this success, Maffei, is out. His contract expires at the end of this year, and Liberty announced he’ll be leaving, to be replaced temporarily by Chairman John Malone. Malone is brighter than me, but that won’t stop me from making the following assertion: He retired/fired the wrong guy. 

Maffei has doubled Liberty’s shareholder value in the past 12 months and received comp averaging $25M per annum. David Zaslav has been paid an average of $115M for the last three years to destroy two-thirds of Warner Bros. Discovery’s shareholder value. 

Maffei says he’s ready for something new; Liberty thanked him and said 2024 made a fitting capstone to his brilliant tenure. Who knows what really happened? Liberty is also restructuring assets with spinoffs to tell a cleaner story. Maybe Maffei didn’t want to drive a smaller car, or didn’t want to deal with the Department of Justice’s antitrust investigation — it’s looking into F1’s rejection of a proposed new team from retired driver Michael Andretti. Maybe a sale of F1 is looming. (Liberty says it’s not.) Or none/all of the above. Whatever the reason, Maffei leaves a sport that, while still thriving, is at an inflection point. 

Pain Points

Last year’s much-hyped Vegas Grand Prix was something of a shit show: Race fans complained that prices were crazy and getting around the event was difficult; drivers complained about the track; casinos, bars, and restaurants complained about disruption. U.S. Grand Prix sites, with a few exceptions, don’t have the infrastructure that European and South American sites do. Courses, grandstands, and other structures tend to be ad hoc affairs. Fans watching at home have complained about glitchy streams on ESPN+ and other services.

Meanwhile, F1 still hasn’t completely shaken the funk of last season’s uncompetitive races, which wafted into 2024. Max Verstappen won so many — 7 of the first 10 this year — that a lot of bored fans tapped out, and TV viewership and social media engagement have sagged. It all feels very 1990, when Pete Sampras was so dominant, and boring, that people felt he’d ruined tennis. 

Seasoned race fans point out that periods of dominance by a hot driver have always been part of the sport (think Michael Schumacher), and it was just a matter of time until the other teams figured out how to take him on. Which seems to have happened recently: While Verstappen is a lock to win Driver of the Year for a fourth time, competition for the team championship has gotten much livelier.

Getting the Easy Stuff Wrong

The downturn, though, highlights two weaknesses. While F1’s marketing has been brilliant, it has had trouble providing: 1) a consistently great product (i.e., high excitement, competitive races) and; 2) a consistently great experience at an affordable price for fans who aren’t wealthy. F1 must balance its luxe, aspirational vibe with a simple fact: Most auto racing fans are not rich. 

A fan on a budget would have to spend at least $2,200 for a bare-bones Vegas Grand Prix weekend. Given last year’s fiasco, it’s not surprising that hotel prices are way off this year. 

The hardest things in business are pricing and compensation. F1 blew the pricing. Wimbledon’s Center Court has a capacity of 15,000, and seats there average $200. The seating capacity at F1 Vegas last year was 100,000, and grandstand tickets were $2,500. It may have set a record for the worst demand/elasticity forecasting of any event its size in history.

I’m not, as I said, into racing, so I don’t know what kind of rule or organizational changes F1 needs to make it harder for another Verstappen to dominate and kill viewership. A secret to the NFL’s success is a draft system that helps keep all teams somewhat competitive. In the last five years, 94% of NFL teams have appeared in the playoffs. Similarly, in an attempt to maintain some level of parity, F1 has implemented spending caps. 

Also, F1 would be well served to do more to foster young U.S. talent and produce a homegrown superstar. At this year’s Brazil Grand Prix, half of Argentina showed up to watch Argentine driver Franco Colapinto. American fans need someone they can get that excited about.

Harmonic Convergence 

Netflix could keep applying the Drive to Survive formula to new sports, going to teams and saying, “Pay us $100 million and we’ll do two seasons of what it means to play for the Boston Red Sox.” Or take a league in a second- or third-tier pro sport, say pickleball or lacrosse, to the next level at a lower price point. Magazine publishers do this — their most profitable businesses are custom jobs (e.g., that Four Seasons magazine in your hotel room).

What is definitely going to happen, though, is that sports teams are going to keep increasing in value, even though they’re shitty businesses in terms of cash flow. As long as the fastest-growing demographic group is billionaires, who tend to be at the age where the fear of death erupts, and leagues maintain monopoly power, we’re going to see a continued increase in the terminal value of teams. Most of them will lose money every year. Then, in a few years, they’ll sell at extraordinary multiples to the next generation of men in their sixties still trying to impress their dads. 

However well or badly F1 handles the bumps it’s hitting now, what it has done with Netflix may become the default sports media model. You’re going to start to see media businesses, celebrities, and streaming companies come together to build sports-entertainment enterprises. Imagine Tom Cruise and Disney not buying the Anaheim Ducks, but an entire league. 

Something More

There’s something more here. One in 7 men can’t name a single friend, and 1 in 4 can’t name a best friend. The Premier League, the NFL, and F1 give men license to bond and express emotions in a safe place. In addition, these events happen in the most wonderful venues ever constructed: not on a fucking screen. We are a social and emotional species, and being part of a collective watching people with speed, strength and alien-like instincts compete … puts us in the moment. 

I’ll be at F1 this weekend, and, for a few moments, I’ll be in that moment. Pardoned from the past, where my anger/depression won’t let me forgive myself, and distracted from the future, where I’m focused on garnering more relevance and money. I’ll be there, watching the collision of men, machines, technology, and culture. But, more than anything, I’ll just be there. 

Life is so rich,

P.S. Pod Save America’s Jon Favreau joined Jessica Tarlov and me on Raging Moderates this week to discuss the road ahead for Democrats. Listen and follow here on Apple or here on Spotify. (If you are still listening to Raging Moderates via the Prof G Pod, move on over to the dedicated Raging Moderates feed so you don’t miss this episode.)

P.P.S. Section’s CEO & COO also write a great weekly newsletter called Personal Math. This week’s post, about AI’s effects on our self-worth at work, is worth a read — and a subscription.

 

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