When Lewis Hamilton first came to F1 racing in 2007, he had a 14-inch collar size. Today, that collar size is approximately 18-inch. In a sport where bodies go from 300kph to a standstill in mere moments, G-forces are so high that drivers need to train their neck muscles to insane levels. In fact, Fernando Alonso has a fan-favorite party trick – he can crush a walnut between the side of his head and shoulder!
F1 is an excruciating sport for drivers. Over the 90+ minutes of racing, each driver sweats over 3kg body weight, withstands constant temperatures of over 55 degrees Celcius, and loses an average of 40% brain function by the end. In fact, drivers are so weak by the end of the race that there are rules about how heavy the trophies can be!
Why do the drivers keep subjecting themselves to such inhuman conditions every weekend? Is it the passion for the sport? Is it the promise of everlasting glory? Or is it the money?
Sports Are a Business
Sports generate incredible amounts of passion, in the athletes and in the fans. And they generate money too. Every team, every organizer, and every sports league (at some level) is doing what they do for the revenues. But most fans and spectators don’t think of business when they think of sports. Even so, sports are serious business. The global sports market has a value of somewhere between $500 to 600 billion.
MBA schools, obviously, have recognized this business side. They have not only analyzed sports for parallels to the world of business but also understood the fact that sports themselves are a business. Case in point, the HEC MBA Tournament is hosted by HEC Paris every year. By organizing the tournament, students learn the intricacies of hosting a sports event where 15 leading international B-schools participate.
The Beginning of F1 Racing
Automobile racing began as soon as the internal combustion engine came into existence in the 1880s. The first true race was reportedly held in 1895 from Paris to Bordeaux and back. It covered a distance of 1178km with cars going at an average speed of 24.15kph.
F1 itself has its roots in the Grand Prix races from the 1920s and 1930s. It officially began in 1950 when the definition for the single-seat racing event was put in place. But mostly, the event was less a business than a racing festival.
The incredible rise of the sport is credited to Bernie Ecclestone, a British business tycoon who turned F1 into a stable business operation. He took over the operation in the 1970s. As such, he was commonly described in journalism as ‘F1 Supremo’.
He brought in the money and safety which have trickled down into all levels of motor racing. With cars now hitting speeds of 370kph, taking pit stops under two seconds, and the sport itself having a turnover of $4 billion annually and employing over 50,000 people in 30 countries, F1 has become the pinnacle of prestige, glamour, technology, and speed.
But, by the time the sport reached 2016, the sheen was somewhat fading away. The 2010 and 2015 F1 global fan surveys had revealed significant dissatisfactions in the fan base.
Formula One essentially had an image and a reach problem. There was no direct relationship with fans and third-party digital services were siphoning off fan attention rapidly.
The small team essentially ran F1 as a 68-year-old start-up. It was mostly focused on securing media rights and promoters while ignoring digital, marketing, communications, strategy, research, and fans. It was ironic that the most technologically advanced sport in the world was stubbornly out of touch with the digital world. In short Formula One had a big problem with its marketing strategy.
I’m not interested in tweeting, Facebook and whatever this nonsense is. I’d rather get to the 70-year-old guy who’s got plenty of cash. So, there’s no point trying to reach these kids because they won’t buy any of the products here and if marketers are aiming at this audience, then maybe they should advertise with Disney.Bernie Ecclestone once famously said in an interview
F1 was clearly failing to enter the 21st century.
It was time for a change. And that came in the form of Liberty Media taking overall commercial operations in 2017. Since the company came from a media background, it treated F1 as a media rather than a sports problem.
The new owners asked Chase Carey to lead the organization. Through his 30-year career in media, Carey had been COO of Fox, Inc., CEO of DirectTV, president and COO of News Corporation, and, most recently, former vice-chairman of 21st Century Fox. At that time the organization also had no formal marketing, promotion, sponsorship, or research departments.
And in media, it is all about the eyeballs. Liberty Media took F1 from a perceived billionaire’s playspace to an accessible ultra-competitive entertainment event dominated by performance and data.
Data First Marketing Strategy of Formula One
Liberty Media leveraged the insane amount of data that F1 holds to tell new off-track stories and generate fan engagement. This data is not just already present content in the form of video and data points from the previous six decades of F1 racing, but also over 1.1 million data points each F1 car pushes out per second through 300 sensors!
While earlier this data was being used by the teams to make better cars and improve strategy, it could now be used by fans to understand the races better. Using this treasure trove of data allowed F1 to bring better content to the hardcore fans.
F1 partnered with AWS to use this data to create a better fan experience, enabling them to analyze race strategy, compare competitors, and interpret car/driver performance in real-time. For the hardcore F1 fan, this means there are a lot more points to discuss in that debate of Verstappen vs Hamilton. (Full disclosure: The author is a Red Bull Racing fan.)
Further, this incredible power of data brings in previously never thought about avenues for fan engagement. Imagine racing with your PS/Xbox in real-time while a race is going on!
There’s something fascinating about people being under pressure and being forcedJames Allen, the president of Motorsport Network, who had covered F1 as a journalist for 30 years
to make decisions.
Modern Marketing Strategy of Formula One
Despite the seemingly simple surface-level assumption that the best car and the best driver with the best strategy wins, F1 is not a self-evident sport. Watching the race can be confusing even with all the stats and commentary shooting off the screen. Terms like ‘chequered flag’ and ‘aerodynamics’ might be common, but ‘downforce’, ‘hot lap’, or ‘apex’ might leave people scratching their heads.
To solidify the casual viewers into regular fans, F1 utilized forms of digital outreach that not only kept the fans entertained, but also educated them about the intricacies of the sport.
There was a concerted effort to connect with younger fans and build a strong digital presence. It started with simple things like YouTube videos delving into the drivers’ personalities, behind-the-scenes action, and listicles.
Further, to address the problem of fans’ disconnectedness, F1 released campaigns with unique viewpoints to target potential fans. Engineered Insanity, F1’s first campaign after Liberty Media took over, showed what F1 feels like from the driver’s seat by putting fans at the heart of the action. The second campaign Man vs Machine paid tribute to all the engineering teams that make the cutting-edge technology of F1 possible.
Add to this a mix of F1 podcasts, F1 apps, and F1TV, a one of its kind over-the-top streaming platform. And fans can tune into F1 content wherever, whenever, and however, they want.
The biggest change in the marketing strategy of Formula One from the Ecclestone era to Liberty Media’s approach is, that all fans are treated with respect and given equal importance. There is a difference between a customer and a fan, and that is passion. Liberty Media understands that passion, especially in sports, ultimately drives sales.
Audiences want to watch an exciting sport, but they also want it to feel relevant to their lives and issues that matter to them. Until recently, drivers were not allowed to be on social media or to interact with fans outside of approved avenues. But now, the opening up of social media has given fans a window into the worlds of their favorite drivers and teams. This gives fans a chance to see their driving heroes as real people instead of just rich dudes in fast cars.
A shining example of these efforts to generate passion for the sport is the Netflix series F1: Drive to Survive. It focuses on behind-the-scenes action and driver/team rivalries as much as on-track racing. And in a very short time, it has become not only an indispensable part of the F1 ecosystem but has also added a whole new horde of fans.
These efforts have also allowed important current issues to be a part of the F1 discussion. For example Hamilton’s stand on racial injustice, We Race As One to acknowledge the global fight against COVID, or the commitment to have a net-zero carbon footprint by 2030. In the modern world, values matter as much as the product, and F1 is embracing the new world with aplomb.
How does F1 make money?
By the start of 2019, Formula 1 had four revenue-generating business units, with each having its own P&L:
- Annual Fee from Race Promoters: Race promoters (typically circuit owners or automotive clubs) pay Formula 1 an annual fee averaging $30 Million. While promoters were responsible for providing the necessary infrastructure, they kept the revenue generated from ticket sales and local sponsorships. Promotions accounted for 30% of revenues in 2019.
- Fee from Broadcasters: Broadcasters like ESPN take the license from F1 to show F1 events on TV and other platforms. Broadcasting accounted for 38% of revenues in 2019.
- Advertising and Sponsorships: F1 generated revenues by selling trackside advertising and race sponsorship packages to companies. Off-late companies are less caring about branding and more demanding of data of their customers. This stream accounted for 15% revenues in 2019.
- Others: The Paddock Club, the official exclusive VIP hospitality for every Formula One Grand Prix, and F1 TV Pro service accounted for the remainder 17% revenue.
In the last few years, Formula One has come a long way, especially with its marketing strategy. The sport has increased TV and digital viewership and added a significant number of fans in critical demographics. 61% of new fans are under the age of 35 and 25% are between 16-24 years of age.
There were many ways in which fans could engage with the sport beyond watching races on TV or attending them live. The content was becoming more portable and personalized. These fans will potentially support the sport for decades to come.
Liberty Media understood that in F1 they have the best technology, the best engineers, and one of the most innovative sports in the world. The only thing missing was the connection with the fans. And as F1’s ex-commercial boss Sean Bratches said in a 2018 interview, “We are myopically focused on serving the Formula 1 fan.”
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