It has been announced that Liberty Media will become the new owners of Formula One. Lights Out investigates who Liberty Media are, why they’ve acquired the sport and what the deal means for all involved.
WHO ARE LIBERTY MEDIA?
Liberty Media is a mass media corporation based in America. They are controlled by John C. Malone. Liberty paid $746 million straight away in cash, which I personally would have loved to see being handed over in small briefcases.
In the United Kingdom, Liberty Global owns Virgin Media, which has 5.2 million customers. It is unlikely that Virgin Media will acquire any rights to show F1 on any of their TV outlets as a result of the deal, as there is already a long term television rights deal in place with Sky.
When the deal is fully complete, Liberty Media will change its name to ‘Formula 1 Group’. They have bought Formula One for a total of $8 billion in what will become, by the end of March in 2017, the first majority ownership change since CVC took a majority stake in 2005. CVC will still be involved with the sport.
Liberty Media have acquired the sport because they see it as a safe business model, it is well established and thus is low risk. Carey outlines three potential ways of increasing revenue. He describes them as “three core revenue buckets in the business: race promotion, broadcasting and advertising, and sponsorship.”
It had been rumoured in recent months that Sky and Apple also put in bids to purchase F1.
HOW WILL LIBERTY MEDIA CHANGE FORMULA ONE?
Bernie Ecclestone will remain as CEO.
At 85 years old, Bernie Ecclestone will continue as the CEO of Formula One. Chase Carey will become the Chairman of Formula One.
Ecclestone has been quoted this week as saying that Liberty Media wish for him to stay for at least three years, which seems a logical amount of time for a handover period. His role will be much the same as it as present. He has said that he will “continue to do all the things I have previously done, negotiate with the circuits, television companies and people like that.”
Ecclestone, like him or not, has been involved in the sport for over fifty years, it would have been difficult to recover if he immediately departed. Bob Fernley concurred with this:
“It would have been a big mistake to see the end of Bernie, a big mistake. He needs to be a part of that [the takeover]. Clearly there has to be a transition, and regardless of our disagreements, you need Bernie to guide it through this process.”
Carey, aged 62, is the Executive Vice-Chairman of 21st Century Fox and is considered a safe pair of hands to lead the sport into a brave new era having previously helped launch the Fox Sports TV channel in 1994 when he was CEO of Fox.
Formula One will still be based in London.
Despite Carey and Liberty Media being based in America, Formula One will continue to be based in London. The corporation’s press release notes the importance of Europe to Formula One. Carey says that:
“I want to be clear that, certainly, 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. We do want to take advantage of the global footprint of this sport, we want to focus on it.”
“The opportunity is to grow and develop this sport for the benefit of the fans, teams, partners and our shareholders by increasing promotion and marketing of Formula 1 as a sport and brand.”
This is a marked change from CVC’s attitude. CVC seemed to reap the rewards of the sport without actively seeking the sport’s growth, whereas Liberty Media are looking to the sport’s growth as a way of increasing their revenue. This is a long term plan from Liberty Media, not a short-term money making exercise. We will take this list one by one.
Firstly the fans – it is encouraging that Liberty Media’s press release already has the fans of the sport as a key concern. The sport isn’t in a great time right now – the races are described as boring week in, week-out by a large number of fans. Exactly how the sport will develop for our benefit is yet to be seen, but hopefully it will not involve further additions which are as gimmicky as DRS or anything as ridiculous as Bernie’s sprinkler suggestion.
Secondly, the teams- given the recent complaints by Force India and Sauber to the European Union about the unjust handing out of prize money, the fact that Liberty Media have an interest in keeping the teams happy can only be a good thing. Liberty’s press release says that it will give teams “the opportunity to participate in the investment of Formula 1”. The discussion of how this will work will likely rumble on among all involved and we can expect plenty of news about it over the months to come.
The ‘partners and shareholders’ part will be discussed later.
“Enhancing the distribution of content, especially in digital – currently a very small percentage of revenue.”
Formula One has always been seen as a bit of a dinosaur when it comes to online content. Though F1 has become more active on Twitter and Facebook over the past two seasons, there is still plenty more that could be done. Consider IndyCar. They show practice and qualifying sessions for all of their races live on their website and, more recently, in Facebook live videos. Videos from the race are uploaded almost immediately after they happen – allowing for maximum potential of viral material. In Formula One, video content is typically posted days or weeks after the event. It would be simple to amend that with a more dedicated focus on social media.
“Evolving the race calendar.”
Just how much more can the race calendar grow? At twenty one rounds, the sport is already pushing the teams, and everyone else who travels to Grands Prix, to the limit. Though the corporation say they’re keen to grow in Europe, I wouldn’t be surprised to see a push for a second American round, in addition to Texas, to boost the profile of the sport in America.
Liberty Media do seem to have a genuine interest in making the sport more popular globally than ever before:
“In the longer term, markets like the US and key Asian markets are opportunities to develop. We’re not going to do that overnight. But there are huge audiences there. If we reach those fans using digital platforms and some of the tools that haven’t been exploited aggressively, we can build a whole new generation of fans in places that, historically, have been as significant a part of the Formula 1 fanbase.”
“Establishing a broader range of commercial partnerships, including sponsorships.”
Expanding the audience into new territories will come with commercial benefits. This all goes back to benefiting partners and shareholders of Formula One, but should also allow the teams access to more sponsors, and therefore more revenue, by exploiting new markets and having a broader selection of sponsors in their current markets.
“Leveraging Liberty’s expertise in live events and digital monitization to make our events bigger than ever.”
I am really hoping that ‘bigger’ here means in terms of audience rather than the show being more extravagant (put your sprinkler away, Bernie).
So, how do Liberty Media go about doing everything already mentioned? They make the sport more popular in more countries and bigger than ever before by making it more accessible worldwide. They get more people from all around the world watching online; watching pay-per-view content live and as it happens. The revenue from that will boost Liberty Media’s revenue, as well as that of F1 teams, should they invest in the sport.
But how can they achieve that? With an entirely new way to watch Formula One. As I’ve previously mentioned, how about an in-house app by FOM available for a small fee that would allow you to watch every race live so that the sport isn’t confined by the television rights in each country? Remember, television rights do not necessarily cover online rights; they are separate things.
Online coverage of sport events is the future, not television; and Liberty Media seem to realise this. Liberty are people with a colourful past in sports broadcasting who are not afraid to move with the times. It’s time for Formula One to evolve, and Liberty Media are the near-perfect partners to do that with.
You can read Liberty Media’s press release in full here: http://ir.libertymedia.com/releasedetail.cfm?ReleaseID=988264
Do you think the new deal will change Formula One for the better, or do you think it will have little or no impact? Let me know in the comments below!
Nicky Haldenby is a 24 year old Formula One blogger from Scarborough, England. Having grown up with F1 often on the TV on Sunday afternoons, Nicky has been following the sport avidly since 2006. He graduated from the University of Hull in 2015 with a First Class degree in English Language and Literature and founded the Lights Out F1 Blog in March 2016. Nicky also writes for Badger GP and can be heard regularly as a guest on the Last Lap Podcast.