F1’s sale heralds a new era
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.”