F1 – OpenAxis

Racing Ahead: How The Popularity Of F1 Rebounded Globally

2005 was very similar to the way 2021 ended with Lewis Hamilton losing out on the world title for the first time in 4 years. Michael Schumacher had won five driver’s world championships on the bounce and Ferrari had won 6 constructor titles in a row. F1 had become predictable and boring. In 2005 and 2006, the legendary German was dethroned by Fernando Alonso in a fast Renault car and some rule changes designed to stop Ferrari in its tracks. It was an end of an era, but it was a time when F1 should’ve adapted but didn’t.

Schumacher was by far the biggest brand in F1. He drove for the most famous and loved team in the history of the sport – Ferrari. F1 was a machine in the mid-2000s and its popularity was spiking when in late 2006 Schumacher decided to retire. A decade and a half later Lewis Hamilton would statistically overtake his feats but F1’s popularity through his career has been in decline. The emergence of a Netflix documentary series, a young prodigy in Max Verstappen who many believed would put an end to the Englishman’s dominance has changed things.

In 2007 — F1 was treated to one of the greatest championship battles of all time. There were not 2 but 3 drivers in the mix for the crown. The battle went down to the wire to the last race of the season . It was the year Lewis Hamilton announced his arrival when he took on the world champion Alonso. But in the end, Kimi Raikkonen and Ferrari prevailed. Raikkonen had replaced Schumacher took an unlikely win by a point. 2008 there was another titanic fight — this time it was Massa’s Ferrari and Hamilton in the McLaren. They went down to the wire, but Hamilton fortuitously prevailed. This year F1 had 600 million unique viewers, a number that has since not been achieved. F1 never embraced social media as its CEO Bernie Ecclestone was against it and would remain so till he was in charge till 2016.

2009 was when the tide started turning against the sport. Ferrari and McLaren, the two icons of the sport, were nowhere in the mix. Alonso was struggling in the Renault. Brawn GP came from the ashes of Honda’s F1 project to propel Jensen Button to a world title. This team by 2010 would become the very same Mercedes team with whom Hamilton would become a world-beater. There was the rise of another power — Red Bull which had an Schumacher acolyte in a young Sebastian Vettel who made Button sweat for his only world title in 2009, but in 2010, he trounced the entire grid 4 years in a row. In this period F1’s growth of unique viewers dropped from 527 million to 450 million uniques between 2010-2013. But the overall viewership figures were growing still, even in India.

In 2010 the eponymous Senna documentary was released by Asif Kapadia in 2010. It chronicled the story of Aryton Senna who had passed away during a crash in May 1994 at Imola. He is still considered the greatest F1 driver of all time and F1’s star was given another fillip.

That year — Alonso who was now at Ferrari heartbreakingly lost out to Vettel in a cliffhanger. By 2011 the race in India was getting off the ground at the Buddh International Circuit in Greater Noida. Things were looking good, but people didn’t show much love to the brash dominance of Vettel and the Red Bull team. People were still rooting for Ferrari and Alonso who pulled miracles in a slow car till 2013 coming P2 three times in a 5-year tenure at Maranello.

Come 2014, Mercedes had nailed the new turbo hybrid V6 engine and its advantage was immense. Mercedes and its driver line-up of Lewis Hamilton and Nico Rosberg were different gravy. The 2014 season was a battle between the two — and Hamilton won out. Vettel had also joined Ferrari as a 4-time world champion. But in his 5-year tenure, especially in 2017 and 2018 when he had a car to match Hamilton and Mercedes, he faltered. In 2015, Red Bull fast-tracked a racing prodigy called Max Verstappen to its junior team Toro Rosso and then in 2016 elevated him to the main team where he won his first race becoming the youngest Grand Prix winner in history.

By 2017, F1 was also now under the control of Liberty Media which acquired the commercial rights from Ecclestone. It opened up social media for the sport. Before Liberty Media, drivers were not allowed to post on social media any content from the races and generally F1 till 2016 as a sport had no digital presence. Under Liberty Media, F1 even closed a deal with Netflix for a series called Drive to Survive (DTS). The first season debuted in 2019 chronicling the 2018 season but it didn’t feature Ferrari and Mercedes as the teams opted out of it only to change their mind for the next seasons.

DTS has been the single biggest catalyst for the rise of F1 in the US which had hit a stinging blow in 2005 thanks to a fascicle USGP at the legendary Indianapolis track. Even the return of the US GP at in Austin didn’t do much to improve things as F1 was mostly a one-man, one team show — Hamilton and Mercedes. Under Liberty Media in 2023, the US will have three races.

DTS showed the inner struggles and rivalries of the drivers. The audience saw the human side of the sport for the first time as mostly it was regarded as something highly technical and boring to watch. By the end of 2020, the cumulative average was 87.1 million viewers per race and overall the figure was at 1.5 billion ( not unique ) across a 17 race season which had 4 fewer races thanks to the pandemic. The overall figures of 1.9 billion in 2019 were higher though but it was social media that had 99% growth impressively. In India alone, F1 had 31.1 million viewers. That year the Italian GP had 112 million viewers — it was the race in which Charles Leclerc for Ferrari beat out Hamilton to win at its home — outlining how important its success is to F1 globally.

From a peak of 600 million uniques in 2008, the year Hamilton won his maiden title, these numbers had plunged to 352.3 million in 2017 when Hamilton won his fourth title in 2017 which was the first year of Liberty’s takeover of F1.

Aside from Drive To Survive and opening up social media, Liberty Media put in several measures to improve the reach of F1 which resulted in that number catapulting to 490.2 million uniques in 2018. These numbers have stayed relatively steady since — at 471 million uniques in 2019, 433 uniques in 2020 and 445 million last year. A big part of the digital push was the development of the F1.com website, the F1 app and also a series of podcasts like Beyond the Grid, F1 Nation which propelled the digital growth of F1 further. Now, there is a focus towards E-sports as well thanks to the pandemic.

This growth continued with 1.55 billion viewers at the end of the 2021 season, but this was a year Ferrari wasn’t in play for the world title hence the TV numbers of the audience were lower than in 2019 despite having one more race. The season finale at Abu Dhabi where Verstappen beat Hamilton to the world had only 108 million viewers was still lower than when Leclerc won for Ferrari in 2019 at Monza.

ESPN reported that the first race of the 2022 season that was won by Leclerc and featured Ferrari’s first 1-2 since the 2019 Singapore GP was the highest viewed F1 race since 1995 in the US. And with Ferrari having a competitive car, the rise of young Max Verstappen and the popularity of drivers like Carlos Sainz Jr, Lewis Hamilton, Charles Leclerc and George Russell, F1 is set to have its best year ever — both globally and in India.

Sahil Mohan Gupta is a technology and automotive journalist with more than a decade of experience specializing in the field of artificial intelligence, consumer electronics and semiconductors. Currently, he works with a multitude of publications across domains. He is consulting technology editor at carandbike.com and also leads F1 coverage for the website. Alongside, he is the India editor of TechAdvisor UK and contributing tech editor for CNBCTV18.com and GQ India.

Picture Credits: Wikipedia

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Has Mercedes Slowed Down F1 Revenue Growth?

If you are unfamiliar with F1, here is a primer with all the full forms you need that will help you! Note that all $ values are in USD. (Cover Image Credits: Mercedes-AMG)

The FIA Formula One World Championship has been a temple to technology, speed, and most importantly, money, since its inception in 1950. It has been badly hit by the Covid-19 pandemic with the turnover from the WCC falling from $2.02 billion in 2019 to $1.14 billion in 2020 However, the sport’s problems with money cannot be attributed solely to the pandemic. F1 has lost 129 million viewers since 2008, resulting in sponsors losing their incentive to use F1 as a way to advertise. What is it about the sport that has led to this loss – and what implications does it hold for its future?

Sponsorships are one of the primary sources of revenue teams and the FOG, which makes viewership incredibly important. Constructors like Mercedes rarely realise a profit, instead using the sport to advertise their road cars. Due to the public nature of the sport, F1 has a very high level of technological transparency and it is difficult to hide and patent innovation in the field. The cars tend to co-evolve according to specifications described by the FIA (English: International Automobile Federation) as the diffusion of knowledge occurs through observation. To prevent the stagnation of the sport in old technology, the FIA signs the Concorde Agreement with the FOG and the constructors every 6 years or so to lay the foundation for technical development. The agreement creates a cycle in which some teams are able to develop better technologies in years subsequent to signing the agreement while other teams catch up before the next agreement. However, a crucial flaw was exposed in 2013 which (re)introduced the era of the 1.6-litre V6 turbocharged hybrid engines put in place in an effort to be sustainable (Motor racing! Sustainable! Ha!). Mercedes developed a ‘monster’ of an engine that was so powerful that it left the other cars unable to offer any competition.

Many fans have emphasized that one of the worst problems F1 faces is the lack of competitiveness on the track. The uncertainty of outcome (UoO) theory was put forth by Rottenberg in 1956, and it propounds that, ceteris paribus, the demand to watch a sport is directly proportional to the uncertainty of the outcome of the sport. Other academics have related this principle to F1 citing that a balance between the level of performance or a ‘competitive balance’ must be maintained between teams to maintain the uncertainty of outcome.

Several empirical studies have concluded the significance of technical specifications of each car, funding from sponsors and investors, the drivers, the crews, and the suppliers as some factors that contribute to the outcome of the championship. When these factors interact to create a balance in the performance of cars across the grid, a competitive balance is achieved. A lack of competitive balance tends to make races boring and predictable and discourages viewers from buying tickets, watching races, or doing anything that generates revenue for F1. The teams earn revenue from sponsors, investors, and Formula One Management (FOM) payments, and the FOM in turn, earns from GP ticket sales, hosting fees, broadcasting fees and more sponsors. Consequently, Budzinski and Feddersen outline three kinds of competitive balance that I find relevant to these revenue streams.

The first of these is the competition within each GP as it is important for the sale of tickets and track sponsorships. As fan surveys show, tracks like Sochi are unpopular with audiences due to the high predictability of the races. As per UoO, this negatively affects the sale of tickets and per race viewership. The second involves competition within a season, which can affect the average viewership and cause sponsors to drop out due to reasons cited before. This impacts sponsorship payments to the FOM and subsequently, the payout teams receive from the FOM at the end of the season. The third kind of competition, that which exists over seasons, largely influences the number of viewers of the sport, as a new viewer is only enticed to begin watching a sport when it is entertaining, and it is entertaining only when there is an uncertainty of outcome. For example, a viewer that has seen or heard of Mercedes dominate F1 for six years is unlikely to expect something different to happen in the seventh, discouraging them from watching the season at all.

The question remains, what exactly is causing the gap in performance? Many attribute it to the gap in budgets as some teams receive bonuses from the FOM that are not directly related to their performance in the championship, making their funding considerably bigger. To address the same, budget caps of $175 million and $145 million have been placed on the development of technology in 2021 and 2022 respectively.

Considering the budget cap and assuming a utopian clean slate, we can say that the factors influencing the championship would be driver ability and any differences caused by technological innovation. However, a clean slate is an assumption one cannot afford to make. In 2013, Mercedes started with the best car on the grid, a good crew, good drivers, and good suppliers, which gave them good results. Before the next season started, they were able to build on their already dominant car while other teams struggled to catch up. Their good results attracted sponsors and investors who funded R&D and allowed them to hire better crew and better suppliers who were more willing to associate with a successful team. This propelled them forward and helped them produce even better results.

Conversely Williams Racing and Haas F1 had a string of bad seasons due to poor cost management and developmental barriers, which caused a struggle to find good drivers and sponsors. This is clear with Haas making a bizarre move by employing Nikita Mazepin, an arguably average F2 driver. The struggle to find a good sponsor is evident when one learns that Uralkali, Haas’ new title sponsor, just happens to be owned by parent company Uralchem in which Dmitry Mazepin, Nikita’s father, has a majority stake.

Positive feedback loops keep old and rich teams dominant while causing poorer and newer teams to toe the line of bankruptcy as the benefits of good results and the damage of bad results accrue over time. So the task at hand for the FIA is not to ensure the equal distribution of opportunities to develop new technologies – regulations and policy already do that – but to ensure that the gap between the teams does not get wider.

The Mercedes dominance has revealed shortcomings of F1 regulations that threaten to topple the sports’ promise of being the frontline of innovation as well as the financial foundation that it is built on. As the competitive balance between teams reduces and the uncertainty of outcome decreases, F1 stands to lose its major sources of revenue and audience, which is already steadily decreasing. By placing budget caps and testing restrictions (see picture) on teams, measures have been undertaken to ensure that this does not happen, but only the upcoming seasons will tell whether or not it has been effective.

Kavya Satish is a second-year Economics and Finance student at Ashoka University.

We publish all articles under a Creative Commons Attribution-Noderivatives license. This means any news organisation, blog, website, newspaper or newsletter can republish our pieces for free, provided they attribute the original source (OpenAxis).