The expansion of Formula 1 in the USA is in motion, now it needs an American star driver
Lewis Hamilton from Great Britain drives the (44) Mercedes AMG Petronas F1 Team Mercedes WO9 and leads Max Verstappen from the Netherlands who drives the (33) Aston Martin Red Bull Racing RB14 TAG Heuer during the Formula 1 Grand Prix of Great Britain in Silverstone drives on track July 8th 2018 in Northampton, England.
Charles Coates | Getty Images
After around five years of effort by its owner Liberty Media, Formula 1 finally landed a new racing venue in the USA.
Formula 1 will be racing in the Miami market for the next decade after securing a venue and funding. With the move, the US strategy of the parent company Liberty Media is taking shape.
“Now things are coming together,” said Chris Lencheski, chairman of private equity consultancy Phenicia.
“It’s going to be huge for the series, especially here in the US,” added legendary motorsport driver Michael Andretti.
F1 agreed to a 10-year deal to bring a second race to the US last weekend. The financial details of the deal haven’t been released, but motorsport insiders estimate that F1 has been billed between $ 17 million and $ 20 million a year under the pact. The Miami Grand Prix will take part in the US Grand Prix in Austin and bring a total of four races to North America, while the F1 also drives in Canada and Mexico.
“The US is an important growth market for us and we are very encouraged by our growing reach in the US, which will be further supported by this exciting second race,” said new F1 CEO Stefano Domenicali in a statement.
Lencheski credited former F1 CEO Chase Carey “through” before stepping down and taking on the title of non-executive chairman. He added that Liberty Media would benefit as the race gives access to a significant South Florida market that favors top F1 automakers like Ferrari and Aston Martin.
But the next step in the US game of F1 could be significant.
“When I’m the CEO of Formula 1, I’ll do everything I can to get an American driver on the seat and be successful,” added Lencheski.
F1 could use some help in the US
Lencheski was CEO of the sports and entertainment marketing company SKI & Company before selling the agency in 2008. The company formulated F1 sponsorship.
He said Formula 1 can be effectively marketed in the US. A local rider would be vital in a sport that is shaped by nationalism as they race around the world.
There are currently no American drivers in F1. Michael Andretti’s father, Mario Andretti, is the most successful American driver to dominate F1 and win the championship in 1978.
And Gene Haas’ F1 team is the only American team in F1 but has no American drivers, which US drivers noticed a long time ago.
Pole position qualifier Lewis Hamilton from Great Britain and the Mercedes GP watch in Parc Ferme during qualifying before the F1 Grand Prix of Emilia Romagna at Autodromo Enzo and Dino Ferrari on April 17, 2021 in Imola, Italy.
Mario Renzi | Formula 1 | Getty Images
Born in Britain, Lewis Hamilton is the most popular driver in F1. But Hamilton is 36 years old and the retirement chatter has started. He only signed a one-year contract to drive for Mercedes, which further fueled speculation about his future.
“I don’t feel like I’m finished, but only in the next eight months will I find out whether I’m ready to quit or not. Personally, I don’t think so, but you never know,” Hamilton told F1 Website.
As Hamilton neared the end, Lencheski nominated American IndyCar driver Colton Herta as the driver who could convert and thrive in F1 as a future star.
“He has already proven that he can win in IndyCar,” said Lencheski. “He won the Formula 1 circuit in Austin. He trained in Europe and is the right age.”
The Andrettis agreed.
Mario Andretti said on Kyle Petty’s show: “As a young lad his father sent him to Europe, he drove Formula 3 and on the one hand he knows most of the tracks there and he is trained. He has shown in his rookie season in IndyCar, and he won some premium races like (in Austin) … hit two of the best Indy deals. Throughout the race he held back Will Power and Scott Dixon. This is a kid I’d love to see take a break there because back to the US colors – Formula 1 is, in a sense, like the Olympics. “
Colton Herta waits on the prize booth after winning the IndyCar series auto race at the Mid-Ohio Sports Car Course on Sunday, September 13, 2020 in Lexington, Ohio.
Phil long | AP
Michael drove in the F1 world championship in 1993. He also commended F1 for building on its brand of streaming series to educate and generate new fans in the US
“I think Liberty did a lot of good things with the F1 series, including the Netflix show,” said Andretti. “That worked wonders for Formula 1 and people understood better what it was all about.”
Tracking the F1 share
Liberty, which also owns the Atlanta Braves, bought F1 for $ 4.4 billion in 2016 and gained access to a global fan base of over 400 million. It trades F1 as a tracking stock under the ticker “FWONA” on the Nasdaq. Tracking stocks are used by companies to track the success of a particular line of business in their portfolio.
With attendance restricted due to the pandemic, F1 revenue declined from $ 523 million to $ 485 million in 2020, according to the fourth quarter earnings report. Greg Maffei, Liberty CEO, also tied F1 stock to a $ 575 million special purpose vehicle that was looking for businesses, including digital media real estate, to go public.
An important key figure in the report: an average of 87.4 million viewers are counted per race. It’s a global statistic as the F1 has struggled in the US market over the years. F1 didn’t race in the US from 2008 to 2011 before returning with the US Grand Prix in 2012 after a track was built in Austin. Part of Carey’s mission was to build in the US market. So add Miami and let the media market grow.
ESPN returned to its lineup for F1 in 2018, paying the organization a rights fee, despite Comcast’s Sky Group and F1 producing the races. It’s slowly growing on the front of the audience.
At the start of the 2021 series, the Bahrain Grand Prix, an average of 879,000 viewers tuned into the network’s ESPN2 channel on April 4. The second race in Italy drew an average of 905,000 spectators, according to ESPN. Before the pandemic, F1 reached an average of 671,000 viewers on ESPN channels in 2019, up from 554,000 in 2018.
F1 could also be trying to expand on the media side, and Amazon could be in the game, according to the Financial Times.
But the future of F1 in Austin’s Circuit of the America is questionable. The deal expires after the 2021 season. The track was sold out in the 2019 race, missed 2020 due to the pandemic and is expected to take place in October this year. This is part of a 23 race schedule.
Should it stay in Texas and thrive in Florida, Lencheski predicted further US expansion.
“If they bring an event to Las Vegas or the Pacific Northwest, it’ll sell out there too,” he said.
F1 did not provide an officer for this item following a CNBC request.
Teammate Mercedes AMG Petronas motorsport driver Valtteri Bottas (77) from Finland pours champagne on the head of Mercedes AMG Petronas motorsport driver Lewis Hamilton (44) from Great Britain after winning the FIA Formula 1 after the 2019 F1 US Grand Prix race – Circuit of America 2019 World Cup on November 3, 2019 in Austin, Texas.
Ken Murray | Icon Sportswire | Getty Images
The F1 could become more competitive
However, it is unclear whether the world’s leading motorsport company will benefit from the US market. Michael Andretti said the newly installed salary cap would help balance the sport.
F1 has introduced a new cost cap system that limits the teams’ expenses. Think of it like the National Football League or National Basketball Association’s salary cap. For the 2021 season, it’s $ 145 million that fluctuates according to the year. Therefore, if the field is even, the teams of bigger brand cars can no longer spend to win.
Michael Andretti, who is himself part of a SPAC, Andretti Acquisition Corp., and targets the automotive industry, likes the cost cap system and believes that smaller teams will benefit from it.
“They know how to deal with a smaller budget so they don’t have to downsize while the bigger teams have to learn how to downsize,” he said. “It will be pretty interesting to see what happens a few years later. I really think the competition is getting a lot better.”
“You should be very optimistic about your future,” added Michael, “especially here in the US.”
Disclosure: Comcast is the parent company of NBCUniversal.