The U.S. Grand Prix was held in Texas for the fourth consecutive year, but will Formula One stop there?
High octane, beautiful, luxurious, death-defying. Formula One is a shot of ecstasy for the eyes and ears. Its teams, Ferrari, Mercedes, and BMW to name a few, epitomize opulence. This is the sport for big spenders, risk-takers, and record-breakers. And the world… craves it.
This weekend, F1 rolled into Austin, Texas, for its fourth annual U.S. Grand Prix.
“Man plus Machine equals the American Dream.” I like to imagine this commercial was shown to the heads of F1 in an attempt to expand further in the U.S. But does F1 need to expand its already booming business?
F1’s revenue has been growing steadily over the last few years — from $1.5 billion in 2011 to 1.8 billion in 2014 (the latest accounts made available by F1). F1, with its 500 million viewers per year, is the most watched sport on the planet. The racing giant has attracted millions in premier sponsorship from notable companies such as Ferrari, Vodafone, and Marlboro. A 2010 estimate had corporate sponsorship at $723 million.
F1 is a prestige-driven enterprise that charges mammoth sanctioning fees to countries it has little to no foothold in yet. Case in point, Malaysia paid $67 million to host an F1 race in 2013; Monaco paid a grand total of $0. The beauty of the F1 obligation is that hosts are charged 10% interest per year to cover the cost of inflation. Singapore, the tiny island nation located directly south of Malaysia, who signed on in 2007, now welcomes over $80 million of revenue in its tourism industry.
So F1 is immensely profitable, yet outrageously expensive if there is not a large following in a country, and the U.S. doesn’t need any additional help when it comes to its tourism industry. Why should the U.S., or F1 for that matter, expand beyond its lone race in Austin?
As NASCAR Viewership Has Declined, F1 Viewership Has Risen
“NASCAR stopped providing attendance estimates after 2012. Negative headlines about the sport’s health have blossomed since attendance began to fall, and the crowds have only shrunk since. And ratings show not as many are watching the sport on television, either.” (USA TODAY)
Fox Sports, which owns the rights to televise NASCAR, reported that ratings were down from 2015 in seven of eight races, and according to USA TODAY, ratings in four of those races were the lowest since 2001.
Attendance has not fared any better in that same time.
“International Speedway Corp. and Speedway Motorsports Inc. — the publicly owned corporations that operate 20 of the Cup series’ 23 tracks — have seen attendance revenue fall… ISC’s attendance revenue is down 49% from its highest point, in 2007; SMI’s is down 46% from its peak, in 2008.” (USA TODAY)
Forbes reported in early 2015 that in 2011, the average attendance of a NASCAR event was 182,000 people, while 2012 saw an average of 140,000 fans. The three main deterrents appear to be that costs of attendance have risen, the fan experience is different, and there is a lack of a consistent structure.
When NBC acquired the rights to broadcast F1 in the U.S. in 2013, President of Programming Jon Miller described it as, ”taking it a bet.” But since the first race was televised that year, viewership has risen 58% (535,000 on average per each race).
If F1 continues to grow in popularity in the U.S., it will be in large part due to Liberty Media’s acquisition of F1 earlier this year. The media company acquired an initial 18.7% stake in F1 from controlling shareholder CVC Capital Partners for an estimated $8 billion. Speaking at the Goldman Sachs Communacopia investment conference in New York last year, President and CEO of Liberty Media Greg Maffei laid out the company’s aspirations for growth of F1 in the States.
“Less than one percent of revenues are from digital,” he said. “(F1) really (has) no organized digital effort. I think there’s a lot of things that can be done around gaming, VR (virtual reality) and AR (augmented reality).” (Reuters)
In short, augment the fan experience and fan interaction, and promote F1 racing in the U.S. through any means other than racing. Attendees of the U.S. Grand Prix were treated to a free concert after the race by none other than Taylor Swift.
F1 has taken to Twitter to promote the numerous celebrities who have flocked to Texas to experience F1. Gerard Butler is a “Big Fan,” and Venus Williams, Rose Salazar, and Christoph Waltz came out “in force” to Texas.
As New York Times writer Julie Creswell outlined in her 2008 article, “Nothing Sells Like Celebrity,” the impact of celebrities on sales is huge.
The influx of F1 into the U.S. translates to an increased opportunity for popular brands such as Rolex, Visa, AT&T, etc. to advertise to the millions of prospective F1 consumers in the U.S. market. Fans can expect an increase in the promotion and coverage of F1 races around the world. As a truly global sport, F1 can sell the appeal of the sun-kissed coasts of Rio to the bustling streets of the mega-city Jakarta.
Whether F1 ever hits at the hearts of the millions of Americans who still cling to NASCAR or devote entire Sundays to watching the NFL is still a burning question. But expect to see a growth in F1 media coverage, advertisement, and growth in American racer development in F1 over the coming years.
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