Ahead of the new Formula 1 season, Robin Fenwick, Founder & CEO, Right Formula, takes a look at motorsport sponsorship and asks if it's currently at a crossroads.
Looking back at the liveries of the cars at the first F1 race I attended in the early 2000’s shows just how far the industry has come. It was the Italian Grand Prix and I was working on Vodafone’s partnership with Scuderia Ferrari; I was amazed at the investments in F1 compared to other sports. Soon after, I moved to McLaren and quickly discovered that brands were investing up to $100m for what I would today describe as a very traditional form of sponsorship – principally providing awareness and customer entertainment opportunities.
So how were brands of that era making a return on investment?
Fast forward through the last two decades and the landscape has substantially changed. Not only have other forms of motorsport grown in stature, but there are thousands of sports and entertainment rightsholders outside of motorsport that are tempting brands to invest with them as an alternative – ultimately driving F1 prices down.
Understandably, and rightly in my view, brands are shifting to purpose-driven partnerships. That’s not to say partnerships were conducted in the wrong way before, far from it; rather, it’s that society has moved on and the commercial sponsorship landscape has changed with it. Take Sky and it’s hugely successful Sky Ocean Rescue partnership; or the #PassOnPlastic initiative with the Premier League; Kia Motors using its sponsorship of UEFA’s Europa League to donate unwanted boots and trainers to young children living in refugee camps; and Paddy Power’s #SaveOurShirt campaign to clean up football jerseys. There are many more examples.
While the sponsorship landscape is more competitive than before, appetite for F1 amongst global fans is at an all-time high. Race attendance is reaching approximately 200,000 fans per race and the cumulative global TV audience is just short of 2 billion. Even Netflix has commissioned a second series of its ‘Drive to Survive’ programme showing evidence of the ever-growing confluence of sport and entertainment. These are exciting times for F1.
Importantly too, the sport itself is changing – and for the better. The latest Concorde Agreement, signed by the FIA, all teams and the Formula One Group comes into effect in 2021. Key headlines include the introduction of a £175m cost cap and the ambition to go carbon neutral by 2030. FIA President Jean Todt described it as “a major change in how the pinnacle of motorsport will be run”. As a major plus for fans, both current and potential, these new regulations will, many believe, level out the playing field, making the sport an even more compelling proposition.
There are a number of other under-publicised positives too, that will help the sport remain current and authentic in a world where brands are trying to appeal to younger audiences. The experience at track, both in the exclusive VIP Paddock Club Hospitality and in the general F1 Fanzone, is host to new and innovative forms of music and entertainment activities that allow you to ‘get closer’ than ever before. F1 Esports and Fantasy F1 are just a couple of new initiatives that target the younger generation – Generation Z - and it’s working: 40% of fans today are under 35, which is a significant shift from the early 2000’s.
Regardless of what era a brand was involved in F1, one thing always rings true: successful sponsorships occur when brands and rightsholders approach it in the mindset of creating a true partnership. In today’s competitive sponsorship landscape, no longer does a one-size-fits-all approach work and brands are no longer able to view sponsorship as a ‘cash for access’ proposition; the sponsorship needs to positively, and tangibly, affect the business, commercially or otherwise.
With a financial cap in place, F1 will be capitalising on its entrepreneurial, ‘can do’ ethos to work with its partners to find constructive solutions and ways of working within the parameters of the cap. The sport utilises some of the smartest technologies and talent anywhere in the world, and so now more than ever is the time for partners and teams to share resources and intelligence which will benefit brands and rights holders. The opportunities lying in F1’s wake today are greater than they have ever been.
This line of thinking is nothing new. As part of its Advanced Technologies division, Williams worked with its partner Unilever to engage air-flow specialist engineers who collaboratively developed up to 70% more efficient supermarket refrigeration units. Williams are not alone in this. McLaren, through its Applied Technologies division, utilised its agreement with Deloitte to help the UK Air Traffic Service.
Liberty Media’s reign in F1 has been in place three years, and they continue to make progressive changes to their personnel and strategy that will take the sport on to even greater successes. That Liberty has not opted for overnight solutions to change the sport – like some have called for - is understandable and, in my view, absolutely the right approach, because, F1 is a complex sport and requires long term solutions.
And this is why consultancies such as ours exist: to help brands and rights holders alike achieve results efficiently and effectively by using genuine industry specialists to deliver positive and quantifiable business outcomes. Outcomes that deliver on a business’ objective.
With major rule changes coming in soon that will make the sport ever-more exciting, sponsorship rates in F1 at an all-time low and with barriers to entry (in F1) now removed, the opportunity for brands and rights holders to tailor rights and engage in truly meaningful partnerships is greater than it has ever been.
Think of it like house prices, would you rather invest at the peak of the market or when the market has dipped and you think you can get a great deal?
Now is the time to ignore the cynics – there has never been a better time to invest in F1.