3 minute read
Country ZEST & Style Summer 2024 Edition
MODERN FINANCE The King’s Circuit
By Philip Dudley
Has Netflix won the streaming wars with 270 million subscribers? I think the answer is a definitive yes because Disney Plus is a remote second at 150 million, with several others vying for an even more distant third.
While Disney has a deep content library, Netflix has continued to innovate in generating subscriber growth. Take the case of Formula 1 racing.
There are real economics behind the growth of F1 and Netflix has certainly lent a hand. In fact, some attribute F1’s meteoric rise in popularity, eepcially in the U.S., solely to the series “Drive to Survive.” F1 has been around for a long time and historically has been a European sport until Liberty Media acquired the franchise in 2017 for $4.4 billion, setting in motion a rebranding and revitalization of the sport on a global scale.
So what makes the F1 ecosystem tick? It has a strong governing body, ensuring driver safety and enforcing the rules and regulations of Formula One Group, the entity controlled by Liberty Media.
Formula One Group negotiates contracts with race venues, secures broadcasting rights and manages sponsorships. All of these things are mute without the dynamic set of F1 teams competing on the track month after month across the globe in a 24-race series in 2024, the most ever. This ecosystem thrives on the combination of exciting venues, a few bad boy drivers and aggressive marketing and sponsorship.
Formula One Group makes money in several different ways. If a race circuit wants to host an F1 event, it must pay a premium for the privilege. The same is true for media broadcast rights and sponsorship, mainly because few sports have such a global reach. And now, enter Netflix.
When Liberty Media acquired the franchise in 2017, revenue was stagnating around $1.8 billion. In 2019, Netflix debuted “Drive to Survive” and revenue climbed north of $2 billion.
The series is now in its sixth season and still extremely popular. And revenue attributed to the F1 ecosystem has ballooned to $3.2 billion and is compounding at 25%-plus year-over-year with gross margins of 30%.
Revenue is shared with each team based on several factors. The highest grossing team is Red Bull at $140 million and lowest is Haas at $60 Million. Not too shabby, but the disparity also translates to performance on the track and ultimately the podium.
The path forward looks promising for Liberty Media’s investment in F1. They have injected excitement into the sport, and the partnership with Netflix has undoubtedly brought millions, if not tens of millions, of fans into the fold.
With the expansion to 24 races, there are many opportunities for fans to “live the experience” at each circuit, and sponsors are taking notice big time. Curious to experience the Yas Marina track in Abu Dhabi? You can bet thousands of F1 fans from far away places will offer a resounding yes, and be there.
