First off, a note of caution. Although Liberty Media has made the initial purchase that makes it F1’s controlling shareholder in a $4.4 billion deal, much of the payment has been made in the form of Liberty share capital. Only at the full completion of the deal, at a set time later this year, does it stick. In other words, at the time of writing it could yet fail to complete. In which case everything would revert to the way it was.
But assuming all goes through, the reason Liberty Media has bought a controlling interest in F1 from CVC is pretty obvious: it believes it can make a whole lot of money from it. Formula 1 already throws off around $500 million free cash per year for its owners and Liberty is confident it can develop the media revenue stream in particular to be vastly more profitable than anything CVC – a private equity company rather than a media conglomerate – could ever hope to achieve.
But that needn’t be mutually exclusive with improving the sport. Already Liberty is more engaged with the sport than CVC was; in its investor prospectus can be discerned the first vague outlines of its vision for the sport. In concentrating on media revenue growth and sponsorship development, the emphasis seems to be shifting away from squeezing ever more from race-hosting fees. Government subsidies around the world have contributed to expanding the sport’s global footprint, which is fine, but in the process it has set race-hosting fees at a level that has squeezed the more traditional venues dry and driven ticket prices up, making the sport ever less accessible live, which has surely played a critical part in the sport not engaging new generations. The loss of the French Grand Prix and the danger of the German, British, Italian, Belgian and American races following in its wake would signify the fabric of the sport being torn apart for nothing more than greed.
Concentrating on the maximum immediate revenue is the logical way for a private equity company – necessarily short- term in its outlook – to have operated. But if the perspective of Liberty, as an owner that wants to develop the business, is longer term then it may well be that a logical direction is a softer approach to promoters in the traditional venues in Europe – and also in Liberty’s homeland of the USA, which remains a vastly under-utilised market.
The initial comments of F1’s new executive chairman Chase Carey on this matter – in a Sky Sports interview – acknowledged this issue in a way CVC refused to in 11 years of ownership: “As a global sport there are opportunities, and we’re excited about the opportunity to grow the sport… in the Americas and Asia. [But] I want to be clear that the established markets that have been the home and foundation of Formula 1, with Europe in particular, are of critical importance. Building the sport in Europe, on that foundation, has to be second to none. We do want to continue to take advantage of the global footprint of this sport, and think there are those growth opportunities, and those markets in the US and Asia are ones for us to develop.”
Red Bull team principal Christian Horner spoke for pretty much everyone else in the paddock in his cautious optimism of the move when he said: “They are obviously part of a very serious group and I can’t believe a company like Liberty would buy into F1 at the value that it is rumoured to have invested without having a long-term game plan. Rather than having a venture capitalist or a financial institution buying into the sport, I think it’s far better that a company like Liberty has bought in and hopefully that will address some of the areas where we have previously been weak. I think for the US market it could be a great thing and the digital and social platforms could also be very interesting. I think we’ll wait to hear what their plans are in detail, but everything we have heard so far has been very positive.”
So before getting into the specifics of what the actual racing might be like in future, we have a broad vision of a sport that hopefully isn’t simply following the initial fee money, but rather is being led by the markets it sees as important, and only from that perspective maximising revenues. It gives hope for a sport that might be returned to more traditional values even as the way it is being consumed is revolutionised. Hopefully it will become a sport that is no longer diverted by the fast-buck imperative of the moment.
The effects upon the actual racing will likely be longer term and dependent upon who Liberty puts in charge as the ‘racing’ boss, what the vision of that is and how well researched the solutions are. For now the new deal is not yet confirmed, but it is surely better than the one we’ve had.