Before the pandemic, the accelerator of Formula 1 stood firm on revenue. The organization went from generating 1,780 million dollars in 2017 to 1,830 in 2018 and a record figure of 2,020 million in 2019; everything was going from strength to strength, until the coronavirus swerved that curve and in 2020 the figure fell to 1,150 million, almost half of what it had achieved in the previous year, according to Statista reports.
The pandemic translated into two seasons of limitations for the business with closed or reduced capacity and venues that were discharged. The context forced to reinvent the sources of income and that served to strengthen its industry, which reaches the 2022 season with more learnings and ready to return to the financial health it had before the Covid-19.
“The business is quite good, despite the fact that two years of health crisis have passed, which put an important test to seek, due to the lack of people, income from other sources. Despite this situation, the F1 it has stayed afloat, is a highly established product and brand, and already has an established fan base worldwide. These fans already longed for the possibility of being able to return to the racetracks, so the business as such is not compromised, because it continues to be a success and provide a show,” describes Jorge Badillo Nieto, consultant in sports marketing and communication, as well as a professor at the University Iberoamerican.
In these two years, the circuit exploited the series ‘Drive to survive’, broadcast on Netflix, as one of its great assets. Given the impossibility of filling the racetracks due to sanitary restrictions, the spectators arrived remotely and digitally: ESPN revealed that the average audience for each race in 2021 increased 53% compared to 2020 and 40% compared to 2019 (figures in the United States).
This documentary is part of its strategy to attract new generations, with which it seeks to preserve the business in the medium and long term. Since the Liberty Media group acquired Formula 1 in 2016, it also created the F1 Esports Series Official project and the Virtual Grands Prix in 2020, when the pandemic began. All of this generated a new fan base of 73 million people globally between March 2020 and March 2021, of which 77% were between the ages of 16 and 35, according to Nielsen research.
“Among the challenges it has at the organizational, brand and product levels is to continue exploring how to reach new audiences, consumers and fans and this is through generation Z, an audience that is interested in F1 because if we talk about millennials , generation X or the baby boomers, they are already part (of the market) perhaps by choice or inheritance, but the challenge is to seek to speak to new audiences through technology, through experiences on social platforms, through that language that these young people they already have very well rooted, which is none other than digital and screens. To the extent that F1 can captivate this generation, it will be a guaranteed success for the coming years and its economic recovery will be on the rise, not only for the current season but at least for the next four or five years ” , analyzes Badillo Nieto.
With Liberty Media at the helm, Formula 1 has rejuvenated its global image and the pandemic was a driver of that development, with the lockdown allowing 11 million views of its eSports series in 2020, up 98% compared to 2019, while the accumulated Virtual Grands Prix achieved 33 million viewers.
“Without inventing the black thread, one of its most important points is to be at the forefront with information and communication technologies to find new ways to carry its show. Leaving aside the face-to-face issue, the business model that F1 has been undertaking, for example by allying itself with transnationals or platforms such as Amazon and Netflix, tells us about the importance for the organization of constantly exploring new alternatives, trying to reach to new audiences but also do it capitalizing and generating income. As it continues to get involved with platforms, new business models will arrive in which F1 will gradually integrate, update and modernize”, highlights the sports marketing expert.
“Since the success of ‘Drive to Survive,’ its reach has expanded to a new generation and into new regions as well. They manage to recover the emotion of the times of (Ayrton) Senna and (Michael) Schumacher, and the competition is even better now”, adds Asli Pelit, a Sportico journalist specializing in business issues within Formula 1.
The capacity factor is also important to recover. The first Grand Prix of the 2022 season, to be held in Bahrain in 2019, welcomed 97,000 fans and set its own record. However, the organizers have revealed that for this year, already without restrictions due to covid-19, it is estimated that the figure will reach 100,000. In Australia, where the third Grand Prix will take place and which returns after having canceled in 2020 and 2021 due to sanitary conditions, a capacity of 130,000 is now expected, according to local media Sporting News.
The Mexico City Grand Prix, for example, returned in 2021 with a capacity of 100% allowed and after canceling the 2020 edition. It managed to gather 371,000 fans and became the second circuit with the highest influx of that season, only behind Austin, who mustered 400,000.
The phenomenon in Mexico also has to do with how Formula 1 has managed to attract more and more fans from different social strata, eradicating that idea of being an exclusive show for an elitist market, explains the professor at the Universidad Iberoamericana.
“Being an elitist sport can apparently reduce the number of possible consumers and therefore income would be affected, but one of the great successes of F1 is that despite having an average ticket price quite high, people identify with and follow this show a lot (…) Part of the success that F1 has as a product and brand, and part of the financial health that it can enjoy, is that it has been able to, being an elitist product, win over fans who are part of other socioeconomic levels and who are willing to save or go into debt in order to be part of that experience”.
Another Formula 1 asset is produced from the grid, as Max Verstappen’s drivers’ championship broke with a four-year hegemony of Lewis Hamilton and brought to the table a new face savoring success. Furthermore, although 18 of the 22 races in 2021 were won between those two drivers, there were also unexpected victories such as those by Esteban Ocon, Daniel Ricciardo and Sergio Pérez, which were echoed in markets such as Australia and Mexico.
“From the previous season and what is coming is an interesting generational change that can give continuity to the show of the last 10 years, with an alternation of pilots that makes a versatile show and that is not only concentrated in a single pilot like It happened in the time of Michael Schumacher and as in some periods with Hamilton. There is a generation of drivers in which titles and triumphs can be alternated and I think that is one of the most important assets that F1 has”, concludes Jorge Badillo Nieto.
For this 2022 season, Formula 1 aspires to, for the first time, complete 23 circuits, including the debut of the Miami Grand Prix on May 8 and having the return of the tracks in Australia, Canada, Japan and Singapore. As for the diversity of its grid, 14 countries from four continents will be represented by the drivers, Sergio Pérez being the only Latin American and with the unprecedented participation of a Chinese, with Guanyu Zhou, from the Alfa Romeo team.