F1 team bosses share their views on the growing interest from investors to be part of the sport and if the teams can actually make money on the business side.
While the big teams have had a stable run so far, the midfield teams have seen some changes in the last few years with new investors coming on board. Racing Point became Aston Martin, while Williams have brand new owners from America.
Even McLaren has got new shareholders, much like Mercedes and to go with it, we have seen Sauber become Alfa Romeo along with Toro Rosso becoming AlphaTauri and Renault to Alpine. After the announcement of a set budget cap, they have a set money to spend.
While it will take some years to reach a point where they will have a balance between the money they put and the returns they get. Some of F1 bosses actually see teams being worth ‘billions’ in the time to come, considering the interest from investors.
Here’s F1 chiefs like Toto Wolff, Zak Brown, Jost Capito and Guenther Steiner on the topic:
Wolff: “I think we are in a very good moment in time for F because the audiences are growing, the popularity of the sport has been increasing, we are slowly but surely tapping the Americas and Stefano, with Liberty, have been doing a tremendous job. So I can only speak for ourselves, we have grown our top line considerably. The cost cap has brought us a bottom line and that is how sports teams should be. It shouldn’t be a marketing exercise only and a cost centre. It should be a profit centre similar to what the US, American teams are and we are clearly there and I believe or I would very much hope that all the teams become profitable very soon and I think it is on the verge. You know what your costs are.
“You can’t spend more than 145 million dollars this year and going down. F1 in itself is so successful that based on the EBIT that is being distributed to the team a large chunk of that is covered by TV only, so it’s a very predictable exercise. Whoever buys a Formula 1 team today knows exactly to the dot what they need to spend in order to be competitive, because we wouldn’t be able to spend more, so that’s why it has become a very good business opportunity on my side.
“I wouldn’t sell a team. On the contrary, with Ineos coming in I bought an additional 3 per cent and I’m very happy about that. NBA teams, or NFL is something that I understand better, the valuations are a sheer result of the revenue and bottom line figures. You can say that these teams are valued with between five and six times their revenue or around 20 times EBITDA. With the cost cap we’re coming into a situation that there are real numbers. And teams are going to be valued upon the same kind of metrics like other sports teams.
“If the franchises are sustainable because they are limited, if the revenue stream is sustainable long-term – F1 is very attractive as a model because we sign sponsorship deals that are between three and 10 years. We sign race tracks and TV deals that are between five and 10 years. So as a business case itself it’s highly attractive because you can discount future cash flows easily and I think when we turn into profitability, you can apply the same valuation metrics as your peer group. It’s down to our own revenue and profits.”
Brown: “I think F1 has never been stronger. I think Liberty recognized, when they bought the sport, there was a lot of value to be created and I think we are seeing that now. The investors that are coming into the sport are serious people, that are sports investors and own significant businesses and if you look at the value of other sports franchises around the world, Formula 1 teams are undervalued and I think that is why you see people coming into it.
“So now would be a good time for a buyer to come in but there are probably not many sellers at this point, which creates a good dynamic to push up franchise value, so I think F1 is in a very good position. I think Formula 1 teams can definitely be worth billions. There’s a lot of sports franchises, NFL, MLB, NHL, Premier League, NBA etc that are worth billions. I think now that Liberty has come in and made the sport financially viable, financially sustainable, seeing rapid growth in countries wanting races – McLaren will be a profitable racing team in the not-too-distant future.
“Prior to the budget cap coming into place, I don’t think you could have said that because it was a sport where you had to spend as much as the biggest spender in the sport, so the franchise was more who can afford to lose the most. And that’s not a very attractive franchise model for a lot of people. So I think that fundamentally is changing. That’s why you’re seeing real sports investors like MSP and UBS [O’Connor, hedge fund] who invested in McLaren, who have a history in basketball, baseball so they have experience and success recognising when they think value creation is coming.
“If you look at the size and scale and importance of F1, compared to these other leagues, you kind of scratch your head and go, why are some of these teams worth more than McLaren, Mercedes or Red Bull? The answer historically has been because the sport consumes money but now that Liberty has changed that structure, that’s why you’re seeing real sports investors come in – and investors in general. I think we will be sitting here in three, four or five years seeing Formula 1 teams trade over a billion dollars – assuming anyone wants to sell.”
Capito: “I don’t know if there haven’t been better times because I haven’t been in F1 all the time, since Formula 1 exists, but I think when you look at the recent times, I think with the cost-cap situation, with the various races, with the new races, Formula 1 has a great opportunity and if they take to it right and the teams do it right, I think there is a good chance for the teams to be profitable in the future.
Steiner: “I think there is, in the history which I know, in which I was involved in racing, I think this is the best time and I would agree with Toto that if you do a good job here, the aim of our business should be to make a profit, that is why you do business and I think there was never a better time than now to do this and also the value of a team, there is never a higher value than now for a team.
“I see it positive and I would just say that Liberty Media, since they took over, they really pushed hard the business aspect because they know a profitable business is here to stay, because a business which is losing money after a while, I always say, you run out of money or you run out of passion, one of the two, so then you stop and then you get into this… the teams not being worth a lot of money but I think it’s a very good time, at the moment for all the teams.”
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