A brave new world for F1
Less than 48 hours after Liberty Media completed its purchase of Formula One the different style of the sport’s new leadership has become apparent. The triumvirate of Chase Carey, Ross Brawn and Sean Bratches has been participating in interviews with key international media, part of a well defined strategy aimed at outlining their vision for the sport.
In short, it appears that we are in for a complete root and branch overhaul of how Formula One is run. This comes as no surprise, for Liberty Media has had the opportunity to spend months speaking with stakeholders, understanding the strengths and weakness of the business. It has been able to bring its considerable in-house capabilities to bear, while seeking the advice of industry experts, Ross Brawn being key among them.
As Ecclestone’s direct replacement the views of Chairman and CEO Chase Carey will naturally secure plenty of airtime, as will the input of the highly respected Brawn who has the unenviable task of somehow bridging the gap that often exists between Formula One and the FIA. The sporting and technical governance has been out of step with commercial reality for some time.
For the business, however, the interview with CNN’s Amanda Davies given by commercial boss Sean Bratches gave a glimpse into the aspects most likely to affect the economic stability of the sport and its future growth. At a time when the approach taken by the sport’s previous owners posed an existential threat to the smaller teams and historic races, this could not be more critical.
The strategy implemented by Mr Bratches will directly impact on the bottom line for teams, circuit promoters, sponsors and media companies. Ultimately this means making the sport work harder for its fans; the race goers and media audiences without whom there would not be a business worth the USD$8bn valuation. The recent decline in audiences can be partly blamed on a move away from free-to-air broadcasting, but waning interest even among motor sport fans is clear to see.
The four point plan outlined by Mr Bratches deserves comment, since it was well rehearsed and forms a key message to the commercial market place on Day 1. Or rather E-Day +2.
The first concerned the Brand, and by that he doesn’t mean the logo and brand identity, although it is doubtful that the lacklustre ‘F1’ logo will survive in its current guise. It’s amazing how few people even see the 1 formed by the black F and the red go-faster stripes. A new brand identity may well form part of the shift, bringing Formula One the kind of recognition and gravitas more often associated with the Olympic Rings or football World Cup.
What will be critical is energising the Formula One brand and articulating what it stands for; its values, the proposition, and what will make it appealing to fans, sponsors, media and event promoters. In other words making it as attractive as possible to all the customers.
The good governance and stewardship of the sport is an important element which has had a question mark over it for some time. Few can argue that this has not eroded value. The cumulative effect of legal cases and scandals, real or otherwise, factual or implied, have taken their toll. In the post-2008 corporate climate, with large companies and businesses facing close scrutiny in terms of decision making, company Directors have to be more careful than ever in choosing who they partner with and how it will be perceived. The corporate ethos of Formula One needs to be clearly communicated, easily understood, and overwhelmingly positive. In this respect Mr Bratches has a real opportunity since, given the appalling narrative around FIFA and the IOC in recent times, Formula One could emerge as one global sport with a uniquely clean bill of health as regards its governance.
The second point relates to the digitalisation of the sport, and in this regard Mr Bratches said that the way in which Formula One is packaged for its fans needs to be ‘re-imagined’. This is a slightly clunky term, but essentially means that in today’s fast-changing media landscape the new owners of Formula One have the chance to tear up the rulebook and start again.
This is exciting, for it means that across the diverse media platforms now available Formula One can begin the process of engaging with fans as never before. Bernie Ecclestone allegedly complained that the problem with social media is that it is inherently difficult to monetise. In other words he couldn’t charge Twitter, Facebook or Snapchat a TV-rights style fee, so it just didn’t make sense. A phenomenal deal maker, Bernie’s blind spot was in recognising the degree to which the multi-channel social media world can drive broadcast audiences and provide direct-to-customer access for sponsors. This will change. A data driven sport, Formula One is ideally placed to harness the opportunity afforded by social media, and the connectivity of the cars, drivers and teams.
Of particular interest to Formula One will be Generation Z – those born between the mid 1990’s and early 2000’s – which includes those who might be described in Ecclestonian as ‘non-Rolex-buying’. This younger audience has not been switched on to Formula One in the way of past generations. It consumes its media on a device rather than through a TV set, puts off car-buying until later, is concerned about the environment, interacts on-line and loves eSports. Formula One cannot afford to ignore them, for the teenager of today is the mainstream consumer of tomorrow. Even in the rarified world of Rolex a teenager is a future customer, and using Formula One to position a brand as being an aspirational purchase in the years ahead is no bad thing. Consider that the average age of a Ferrari owner in America may be 47, but in China it’s 32. The 20 year old who came to the inaugural Chinese Grand Prix in Shanghai in 2004 may well be ordering his or her Ferrari 488 today. And they probably own a Rolex.
One of the key sentences in Mr Bratches’ interview was when he described the importance of working with Formula One’s sponsors to activate digital media in a way that has not been done before. This will be music to the ears of sponsors and their media agencies around the world. It will certainly help attract new partners. Sponsorship has long-since stopped being a purely transactional relationship where you pay a certain amount of dollars for a fixed menu of benefits; it is far more than that. Brands such as Heineken, Red Bull, Mercedes Benz, Shell and Martini have vast, untapped resources when it comes to using digital platforms, and the unhealthy restrictions placed upon them in the past have hindered growth. Ring-fencing F1’s core intellectual property from its corporate customers never made much sense.
This brings us to the third pillar of Mr Bratches’ strategy, namely his approach to working with Formula One’s commercial partners; the teams, race promoters, sponsors and rights holders to whom he pledged a more ‘democratic’ approach. This was a rather skilfully chosen word, for the sport has just gone through regime change and the statues of the dictator are being metaphorically toppled. If the Formula One Group can work collaboratively with its key stakeholders in the teams, Grand Prix venues and commercial partners, there is a very real opportunity to accelerate the sport’s growth. This is undoubtedly one of the aspects Mr Carey referred to when he mentioned that, in Liberty’s opinion, Formula One has been allowed to stagnate in recent years.
The final piece of the jigsaw – final only because everything that comes before has to focus on this particular target – is creating a better race experience for spectators and media audiences. Much has been made of Liberty’s wish to make each Formula One like a Super Bowl, and in this regard the aim is to ensure that a Grand Prix becomes a must-watch, must-attend experience. Sean Bratches will work closely with Ross Brawn to deliver this element, for the future development of the regulations will have a key role to play in making the racing exciting, compelling and commercially attractive. This will include addressing key aspects such as the noise and risk. Safety is all important, but there is a balancing act to be achieved in managing the reality of the risk versus the perception.
In these matters they are beholden to the FIA, the governing body, and where some key negotiations – hopefully not battles – need to take place. There is a consensus that annual regulation changes do little to improve the racing, often driving up costs and causing confusion for the spectating public. The hybrid-engine rules were an example of regulations being changed without sufficient consideration being given to the cost to privateer teams, the unintended consequences of a single manufacturer running away with the ball, and one of the foundation stones of the Formula One experience – the noise – being pulled away.
There is much to be done, but at least we have a general sense of where the gentlemen now running Formula One would like to take us. Who knows, but perhaps in 2017 this is one leadership team which can start to make Formula One great again.