F1 vs WEC…where’s the ‘buzz’?

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Ultimately, how much is enough? Formula 1 is running on very large budgets and costs have spiraled out of control. The regulatory body, FIA, has become feckless in their ability to politically sway the sport to a healthier path and the commercial rights owners seem focused on their investment earnings rather than F1’s future—short term versus long term.

Many years ago, Bernie Ecclestone recognized that F1 was an untapped market and was seriously in need of solidification and marketing. He brilliantly created a group and acquired the commercial rights for the series and along with his friend, Max Mosley of the FIA, he took the series to heights never dreamed of. It was nothing short of brilliant.

In a sense, Ecclestone was creating the mouth of the beast that fed the body. The bigger the body got, the more the mouth had to cram down its throat in order to sustain the ecosystem. Teams merely spent all the money they received through prize offerings via the commercial rights revenues and when they reached $300 million dollar budgets, the mouth had to ask more and more from broadcasters and the venues as sanctioning fees in order to supplement the TV revenue to continue feeding the system.

Many of the venues couldn’t afford the sanctioning fees and this left F1 seeking new venues that would pay the enormous fee which meant leaving Europe and heading east. All the while, the commercial rights owners, CVC Capital, have been enjoying approximately 50% of F1’s reported $1.5 billion each year with little signs of reinvestment in the sport in order to secure its future or creating a compelling sport for younger generations.

Some argue that F1 needs to get on social media in order to really reverse its fortunes with younger fans but that’s insulting younger fans isn’t it? If all F1 had to do to appeal to the next generation was open a Twitter account, how pathetic do these people think the younger generation is? Surely they have more discerning sensibilities than just glomming on to a sport due to a Twitter account? I think this underestimates the younger generation and overestimates the effectiveness of social media.

JMI’s Zak Brown is a delightful fellow. We’ve interviewed him a few times and I have a lot of time for the marketing maven. As a man who represents many of F1’s sponsors, he’s uniquely positioned to know what the current appeal of the sport is and how enticing it may be to sponsors. Brown told Reuters:

“The potential for the sport is untapped. I think it needs, as an industry, to be much better marketed. It’s not where it needs to be,” Brown said.

“The budgets are out of control. And that then forces the whole eco-system of the sport to be financially strained…the expense of the sport is out of balance with the commercial value of the sport. Budgets now are $200-300-400 million. It’s nuts.”

“We don’t need $400 million budgets. And if we don’t need $400 million budgets, we don’t need the same size of sanctioning fees which are putting tracks out of business, which then means we don’t need to charge the consumers as much.”

Zak has a good point but I’d also add that sponsor appeal isn’t the comprehensive solution it may have been when it represented a large percentage of a team’s budget (that’s not revelatory, Zak knows this all too well). These days, the FOM prize money is the real lifeblood of the teams and sponsor investment may represent 20-50% of the teams overall structure depending on the size of the team and its budget. This leaves a majority of the income dependent on the prize money from FOM.

Big teams have gamed the system. They have bipartite agreements with FOM and have increased their budgets to deliver a performance that guarantees a certain level of efficacy on track to ensure a return of the prize money to sustain the entire operation. The only danger is when you are a smaller team and don’t score enough points to keep your balancing act afloat or you are a bigger team that misses the mark and now can’t support your massive budget because your cars aren’t scoring enough points to ensure an offset of expenses through FOM prize money levels.

AUTOSPORT’s Edd Straw had a nice piece about the World Endurance Championship (WEC) and argued that we shouldn’t use the success and great racing that series is producing as a bludgeoning weapon to expose F1’s foibles. I agree with Edd and have a lot of respect for his position here. He argues that the races are too long and complex and while the WEC is the hipster sport of choice, it will never garner the kinds of viewers F1 currently has.

That may be true but as an American, I can recall the appeal of endurance racing back in the late 60’s for the hip crowd. The weekend at Watkins Glen was not just a race but a destination of fun and it coincided with America’s love of the European Sports car. There was an authentic appeal to it and this went for F1 as well as endurance racing back in the day. It was a weekend event for the young, not just a 6-hour race that no one had the patience to watch. Back then, Racing=youth.

The WEC races are more affordable and a bigger value for the money. I get an entire weekend of racing—and really good racing with epic battles between marques—for a fraction of the price of an F1 race. This is an event, not just a race and the WEC would do well to create that atmosphere as would F1.

What you don’t get in WEC is the incredible sound, speed, names, technology, pit access and glamor of Formul…oh, actually you do get more sound, speed, names, technology, pit access and glamor in WEC these days. I’m not using WEC to beat F1 to death with, I’m simply juxtaposing the two, Edd, and from my armchair, it seems F1 could at least use WEC as a case study on what does and doesn’t work. What’s appealing about it? Where can F1 mold it’s offerings to capitalize on the effective parts of the WEC weekend experience?

Yes, they are two different racing series but I suspect there are lessons each could learn from the other. The cold reality might be that F1 is the one the series that never really experienced the approximate global 30% reduction or correction in market position that most of the manufacturers and industries faced from 2008 onward.

For teams with big budgets, that’s nearly $100 million in overall budget reduction and from F1’s standpoint, it is over $400 million in reduction. Before you get excited about that, you have to hand it to Mr. Ecclestone for preventing the massive market correction that nearly all industries endured. F1, on the other hand, simply went east and found ways to keep its revenue growing in a time when everyone else’s was waning…except Apple of course but they don’t make an F1 car or sponsor a team.

F1 could take Mr. Brown’s comments to heart and it would do well to consider it. It could be time to self-correct and better to manage your own correction than allow market force volatility to do it for you. The fact is, you have to get back to the affordable weekend event for attendees and the competitive, good racing for TV viewers. You have to really increase your TV coverage package and reshape it into a first class broadcast replete with a multi-screen experience that ties race weekend data and video along with news, information, audio, and insight.

If it were me, I would have a complete broadcast package across all forms of media planned and programmed for every race that included a level of insight and information that fans can access no matter what platform they are using. Not just live tweeting, mind you, as that has run its course and is a bit like taking your watch off your wrist and telling you what time it is. No, this is a completely new approach and package. But then I don’t work for F1 do I? It’s the product, not the people that need looking in to as Brown said:

“What I’m seeing is…attendance is down, TV ratings are down, car count (the number on the starting grid) is struggling. So your key performance indicators are all on a downward trajectory right now,” he said.

“Every single client we had that was up for renewal has renewed. Every client we have that is in Formula One, is happy they are in Formula One.

“But even though the sport is massive, marketers do like things that are hot and buzzy. And right now Formula One doesn’t have the buzz it’s historically had. I think it can come back but they need to work on the product.”

You know…He’s right, but then that Mr. Brown is a very sharp guy.

Hat Tip: Reuters and AUTOSPORT

 

 

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DRS_Matt

My issue with WEC is the same as the issue with WRC: Its 6-24 hours long, full of rich guys and has-beens, and all the noise and big corporate names in the world could make me watch anything more than a highlights video ripped to youtube. As i said in the “French revolution” story, manufacturer involvement is a double edged sword. Sure WEC is full of big names like audi and toyota, but we’ve all seen how they can as more influential than the governing bodies, and dont mind taking their ball and going home at the drop of a… Read more »

Glenn

I think WEC has become far more interesting of late due to the level of innovation allowed, especially with the different approaches to hybrid engines and power units, and the fact that somehow they are competing as close equals on the track. Forgive me the fact I have not done my research to know what those units cost to develop relative to the current F1 engines, or arguably whether they’re more or less road-relevant. Is that any real commercial incentive anyway (Nascar)? But to your point about what happened in F1 after the 2008 economic downturn; several manufacturers did pull… Read more »

B52RockLobster

Does anyone have concrete numbers on WEC’s viewership/”buzz-iness” vs. F1? I’m not convinced. I’m a huge motorsport fan and I can’t bring myself to watch a WEC race. Every year I get excited for Le Mans, but then I tune in and realize it’s hours of no in-class passing, cars crashing due to the large speed difference between classes, and cars losing due to attrition, not race craft. By the time the race is coming to a close, there’s usually a car 3 laps ahead of everyone else that has a sure win unless something breaks. An over simplification to… Read more »

Matt B

I think asking F1 to look at WEC is the wrong direction. F1 should look at MLB…MLB Advanced Media to be exact. MLBAM became profitable within 36 months, and was estimated to earn north of $200 million last year. (For those not in the know, MLBAM provides all of the online streaming for MLB as well as other major events including boxing and March Madness.) F1 shouldn’t try to reinvent the wheel here; leverage a strong partner like MLBAM and provide a high quality streaming service to an audience that very much parallels the MLB audience: people who love the… Read more »

Negative Camber

It’s a good point, Matt. I am wondering if, however, those who don’t watch now due to it having move off of Free-to-air TV in the UK and other countries would pay $100 for an app or online sub. Maybe they would, just wondering.

Matt B

I would suggest that again F1 look at MLBAM and provide a tiered offering. Maybe an intro price would get you replay-only, then raceday, then “all weekend” (p1,2, qual, race), then the top tier would be an “All Access” offering, allowing you to get all features. Heck they could even price the mobile app separately. NFL, for example, offers a (great, IMO) service for $50/year that gets you a replay of every game with all commercials, timeouts, and otherwise non-game-action removed. You could watch all 16 games in 8 hours. I could easily see offers ranging from $20/year up to… Read more »

Negative Camber

Good news, I just ran a post about James Allen’s story regarding F1 and streaming. :)

DRS_Matt

$100 a year is crazy. Remember lots of people make less than 20 grand a year. If they care about audience numbers as opposed to revenue, and the audience is balking at the cost of cable, i dont see how an expensive app solves that situation.

Negative Camber

A lot of people make more than that too. Depends on how you measure F1’s demographics and core audience.

João Jorge

Why do i follow WEC races and not F1?

Simple.
WEC is free to air in my country.
F1 is not.

Since i have no money to pay a 40 € monthly fee i go without F1 or go online and try to find some crappy feed from SkyF1.

DRS_Matt

You really should follow f1 its pretty great. Just steal the videos like everyone else without cable

Tom Firth

Late to the debate, sorry!

One question, How is the WEC ever the Hipster sport of choice?

geeyore

“actually you do get more sound, speed, names, technology, pit access and glamor in WEC these days” Agree. I’m not doing any F1 events this year – even the $450 grandstand ticket leaves one feeling cattle corralled and pick-pocketed. The MGU-H makes the F1 cars sound horrible – every other interim race sounds better – and even the AMG safety and medical cars now sound more awesome than F1 hybrids! Thus, I already have air tickets for Fuji 6 Hour. Gate tickets (not yet up for sale) will probably be $100 for 3 days or $200 with pit walk. And… Read more »

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