F1’s sale her­alds a new era

F1 Racing - - INSIDER -

Mas­sive changes are in the off­ing as the ven­ture cap­i­tal­ists who con­trol For­mula 1 pre­pare to sell up

F1 is to have new own­ers after US group Lib­erty Me­dia Cor­po­ra­tion agreed to buy a con­trol­ling stake in a deal that val­ues the sport at $8bn. Lib­erty will take a 35 per cent share­hold­ing after com­plet­ing on 7 Septem­ber 2016 an ini­tial pur­chase of 18.7 per cent.

They have ap­pointed US me­dia ex­ec­u­tive Chase Carey, a long-time as­so­ciate of Ru­pert Mur­doch, as chair­man. Bernie Ec­cle­stone will re­main as CEO, and is­sued a state­ment say­ing “Lib­erty will work along­side For­mula One Man­age­ment to drive the next phase of growth”.

CVC, who have con­trolled F1 since 2005, will stay on board once the deal is com­pleted but with a re­duced share­hold­ing of 24.7 per cent, mak­ing them F1’s sec­ond largest share­holder.

Ec­cle­stone told Reuters that he had been asked to stay on for three years, but the deal is likely to sig­nal the be­gin­ning of the end of his 40-year ten­ure as the sport’s com­mer­cial driv­ing force. Sources close to Lib­erty say their pre­ferred modus operandi is to in­vest be­fore prof­it­ing at a later stage. This is at odds with Ec­cle­stone’s well-worn ap­proach of de­mand­ing huge sums of money up front and ex­pect­ing the busi­nesses who are pay­ing him to in­vest in their as­set.

Carey said Lib­erty wanted to ‘ex­pand the sport in places like the Amer­i­cas and Asia’. New races in both the US and Latin Amer­ica are likely to re­quire F1’s new own­ers to make an in­vest­ment up front, since Ec­cle­stone has strug­gled to find in­vestors will­ing to pay his fees and take on the huge fi­nan­cial task of cre­at­ing a new race.

Also, in con­trast to the re­cent trend un­der Ec­cle­stone of a di­min­ish­ing num­ber of races in Europe, Carey said: “The es­tab­lished mar­kets – the home and foun­da­tion of For­mula 1 is Europe in par­tic­u­lar – are of crit­i­cal im­por­tance. Build­ing the sport in Europe, build­ing on that foun­da­tion, has got to be sec­ond to none.”

Lib­erty’s vi­sion for F1’s fu­ture was con­tained in a pre­sen­ta­tion given on the an­nounce­ment of the deal, in which they said they want to: in­crease the pro­mo­tion and mar­ket­ing of F1 as a sport and brand; en­hance dis­tri­bu­tion of con­tent, es­pe­cially dig­i­tally; es­tab­lish a broader range of com­mer­cial part­ners, in­clud­ing spon­sor­ship; evolve the race cal­en­dar, ‘with po­ten­tial for ad­di­tional races’; and lever­age their ex­per­tise in live events and dig­i­tal mon­eti­sa­tion.

A num­ber of those am­bi­tions con­trast with the way F1 has been run by Ec­cle­stone. Many have been crit­i­cal of his lack of pro­mo­tion of the sport and his fail­ure to em­brace the pos­si­bil­i­ties of the in­ter­net and so­cial me­dia. Carey, who claims he saw F1 as a low-risk in­vest­ment be­cause of the guar­an­teed in­come streams from TV deals and race con­tracts, said Lib­erty wanted to ‘take F1 to the next level’.

“We were par­tic­u­larly at­tracted to F1 by the di­verse rev­enue driv­ers and low-risk busi­ness models,” he said. “There are es­sen­tially three core rev­enue buck­ets in the busi­ness: race pro­mo­tion, broad­cast­ing and ad­ver­tis­ing, and spon­sor­ship – each with sig­nif­i­cant growth po­ten­tial as we go for­ward. For­mula 1 is a key player in the high-growth mar­ket for live, pre­mium sports rights. There is an in­creas­ing de­mand from broad­cast­ers, ad­ver­tis­ers and spon­sors who want ac­cess to F1’s mass global live au­di­ences and at­trac­tive de­mo­graph­ics.”

The teams will also have a greater role in the sport, with the op­por­tu­nity to in­vest in F1’s hold­ing com­pany. Lib­erty said: “Cer­tain teams have al­ready ex­pressed an in­ter­est in in­vest­ing after com­ple­tion of the ac­qui­si­tion.”

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