Sports are, contrary to one of the popular running gags on the GP Rejects Discord, alive and well – at the very least financially. Most major sports have expanded their schedules to provide more sports content to the various media partners around the globe, increasing revenues across the board. Some of the deals signed by sports promoters and broadcasters are simply mind-boggling and if one looks at the various contract values, the rights to cover the most popular professional sports are worth more than some countries. To pick one example, the NBA is looking for $75 billion in their 2025 media deal. That is more than the gross domestic product of countries like Cameroon, Lithuania or Uruguay in 2021.
With those facts in mind, it should not come as any surprise that Liberty Media are also looking to expand their earnings by adding more races to the Formula 1 calendar. The planned calendar for this year included 24 Grands Prix before the situation in China forced the Formula 1 calendar to once again go without one of the author’s favourite venues. With more races offering more options to charge additional hosting venues, it is surely in the best interest of the sport’s commercial development to expand the calendar continuously, right?. The teams have indicated that they have a breaking point, but currently it has not been reached. Even then, Liberty Media has been rather generous in protecting the commercial rights of the teams with the anti-dilution fee and active opposition to grid expansion. Therefore, it stands to reason that the teams would grumble about an extension of the calendar beyond said “breaking point”, but would still very much go along with it.
However, in this column, the author will explain why mid- and long-term, it would be in the best interest of Liberty Media to do a harsh u-turn both in comparison to their own previously established approach and the developments across the sporting world and limit the number of races drastically – returning Formula 1 to a 15 to 17-race calendar as seen in the days before the mid-00s.
The author wishes to clarify that this column is exclusively focused on the economics of sports as an entertainment product and will not feature sportive arguments unless they play into or emphasise the business argument. The author would have the option to bring pure sports arguments such as stat inflation, however, those are subjective experiences different fans have different opinions on (and very few people actually stop following a sport because of those particular things). Because of that any irrelevant subjective fan feelings that will not affect the bottom line will be responded to with a line from the only song of The Flying Lizards the author has ever heard: “Your love gives me such a thrill, but your love won’t pay my bills – I want money (that’s what I want).”
In the end, there are two essential arguments. One is a business strategy well known to the modern video game/electronics industry: artificial scarcity. More races do, in general, result in more hosting fees. However, if you limit the number of Grands Prix, you can push the individual venues to the maximum of their spending ability. This leaves a realistic chance of getting the same or even more money out of 15 or 16 venues than you get out of 24 venues where some tracks have rather generous deals on account of their historical significance to the sport. According to Dieter Rencken, Liberty Media earned around $700 million on hosting fees alone in 2022. If you add another 50 million dollars to that sum and split it across fifteen races, the average hosting fee would be around 50 million dollars per year. Azerbaijan, Bahrain, China, Hungary, Qatar, Russia, Saudi Arabia and the United Arab Emirates are, according to the same source, all either already paying that much or more or are within 10 million of the aforementioned figure.
Of course, this approach has three risks. The least important one, from a financial standpoint, is alienating fans by removing classic tracks which cannot keep up the payments and/or just do not fit with current Formula 1 anymore. However, as has been established, very few fans stop watching a motorsport just because their favourite track did not make the calendar. The second one is the fact that this approach requires associating even more with the kind of dictators that are willing to spend a premium of tax money on Formula 1 prestige projects. Given as already one well-paying Grand Prix was lost to international sanctions last season and even venues that are safe from those very sanctions draw Western condemnation, there is always risk in doing business with the less reputable regimes of this world. However, the risk of those same governments is covered by the fact that there will be a very long line of potential buyers to fill their slot, possibly even at the same price. Regimes rise and fall and for as long as there is political failure, there will be politicians willing to spend the money to mask these failures – or politicians who genuinely believe the heavy investment in a Formula 1 race is worth it to stimulate the nation’s economy. Either will do just fine for Liberty Media, really, and it is not like they will hesitate to do business with shadier governments anyway. With the artificial scarcity, it would even be an option to filter potential calendar slots to account for political risks, whereas a larger calendar invariably requires taking on “all” comers and requires short-term cancellations on account of short-term changes which is not a particularly appealing prospect for broadcasting partners who like their TV schedules predictable. The final problem is that a shorter calendar makes it harder to add events where the value is not in the hosting fee itself, but as a marketing tool to break into new markets or stay connected to important established markets. The Miami Grand Prix is one of the prime examples of such an event. However, this can be accounted for with other solutions, such as pre-season testing (which has gotten online streaming coverage and is currently actively paid for by the Bahrain government), free-TV coverage or special marketing events which would be generated by the generous time in between most Grands Prix.
The lower number of races would also serve to increase the earnings of Formula One through economies of scale. Fewer races, even when paired with promotional endeavours in countries not currently on the calendar, would mean lower logistics costs (increasing the interest of logistics companies to actively haul Formula 1 across the planet for free, as it would decrease the marketing expense with such an agreement) and lower costs for the Formula 1 teams, which would justify a lower budget cap and – adjusted for that – lower prize money. Obviously, there is a limit to how much that can be (ab)used as teams would want their share of the profit regardless, but it would still create a benefit. Furthermore a shorter calendar would mean more scheduling flexibility. Outside of the practical applications, this also has a greenwashing benefit. In an age where corporate marketing wants to emphasise the pretense of caring, to the point that Formula 1 claims to have been carbon neutral since 1997, flying from the Middle East to Australia to the Caucasus to Florida to Southern Europe in the span of one-and-a-half months is nonsense that could easily be avoided with shorter calendars.
The final major argument is indeed a sportive one, as it affects the bottom line as well. For this point, the author needs to point out something obvious: the best car(s) will inevitably win the most races. Larger calendars mean more wins for the best car(s). While dynasties are the lifeblood of any sport and essential tools for attracting audiences and creating rich histories to use in promotional material, these dynasties only have value if they are challenged – this can either be intra-team conflict of the Alain Prost vs. Ayrton Senna/Nico Rosberg vs. Sir Lewis Hamilton variant or other teams coming to take the big dog down a peg.
Unfortunately, the second part has become relatively rare in the recent history of Formula 1. For the purposes of this argument, the author will define a “close” season as one that is decided either on the last or second-to-last Grand Prix of the season. Since the 2008 season, no calendar had less than 17 races and only three have had less than 19. In fact, with the sole exception of the Covid-affected 2020 season, no season has had less than 21 races since 2018. Of the fourteen seasons that have already been decided since 2008, seven have gone down to at least the second-to-last race and six were decided in the season finale. Since it looks rather likely at the time of writing that Max Verstappen will lock up his third consecutive world championship before the second Las Vegas Grand Prix (sorry, Liberty Media, but the ChampCar World Series did it first in their last season), this translates to 46.7% of Formula 1 seasons in the last 15 years being decided with more than two weekends to spare. Given as almost every Formula 1 team throughout history has found intra-team wars extremely exhausting for all parties, it is just not a safe bet to count on dominant teams keeping two equally competent drivers around for a long time. If we exclude intra-team battles, the aforementioned 15-year percentage of close seasons shrinks to 33.3% (and even that number is generous given as 2009 really was mostly an intra-team fight).
To find a 15-year stretch of equal lack of spice in the late championship fight, you have to go back to the time from 1965-1980. During that period, you are also looking at seven out of fifteen, i.e. 46.7%, of all seasons being decided with less than two races to spare (six out of fifteen (40.0%) when removing intra-team title fights). This period was also one of significant calendar expansion as many non-championship races found themselves being thrust into championship relevance. Plus, even in that period Formula 1 had multiple back-to-back close seasons, something current Formula 1 has not had happen since the 2006-2010 period.
Of course there are a number of reasons beyond the larger “sample sizes” for the reduction of closer seasons. Increased reliability, the massive differences in adoption of the hybrid turbos, Formula 1’s reduced ability and willingness to run in lottery-esque weather conditions, easier overtaking paired with an increased willingness to neutralise races are just a few of those reasons. Still, the fact remains that larger calendars mean a lot more options for a team, even if the dominance it enjoys is not actually that large (contrary to Sir Lewis Hamilton’s whining, neither the RB18 nor the RB19 are even in the conversation for the most dominant Formula 1 car of all time), to offset bad weekends. As we have established, most title-contending teams eventually drift towards a #1 driver-#2 driver dynamic, this also reduces the chances of the inferior number two driver to profit off mishaps by the number one driver and reduces their already-low viability as contenders. To give an example, Sergio Pérez’s distance to Max Verstappen in the 2022 championship standings almost tripled in the second half of the season (57 points after the 11th Grand Prix of the season, 149 after the 22nd Grand Prix).
However, the question is: why is the increase in dominant seasons a problem? Outside of the aforementioned fact that domination looks less impressive if not challenged, there are commercial problems that go well beyond the possible loss of legacy points. The first one is the most obvious: audience disinterest. While the hardcore audience will watch late-season races where there is little to play for at the business end of the grid, casual audiences will focus their attention on other sports. In particular in the American market, the white whale of Formula 1 as a whole and Liberty Media in particular, late-season races have to contend with the playoff push in the juggernaut NFL, the World Series of Baseball and the playoffs of Major League Soccer. Given that the author found only news about the 2021 race’s audience while trying to find information on the ratings of the 2022 Abu Dhabi Grand Prix, it stands to reason that casual interest – and thus TV ratings – were a lot higher for the former than the latter. Given the tremendous fees required to host all races, media partners will not be happy airing “pointless” races and thus it is in the interest of the sport to reduce those.
Furthermore, the right to host the Formula 1 season finale is expensive even by the standards of hosting a Grand Prix to begin with. Abu Dhabi was one of the aforementioned venues stated to pay 40 million+ for their Grand Prix, their slot as the last race of the season surely playing into that number. With that in mind, the realisation that they rarely get to reap the fruits of their calendar slot by actually seeing the world championship decided on their soil will be brought up when that contract is up for re-negotiation in the late 20s. Superstars of Formula 1 do not retire anywhere near often enough for the privilege of hosting their farewell races to make up for a lack of championship relevance to those events.
Now, the obvious counter to these arguments will be to point towards the current earnings through the longer season and just find ways to make the championship exciting for all 2X races. Some of the measures undertaken, such as the development limitations on the top teams and the introduction of the desperately-needed budget cap, are pointing towards Liberty Media trying to achieve this goal. However, there are two problems. Firstly, given their desire to have less “pointless” sessions in a Grand Prix weekend and the need to reward their gimmicks to spice up a weekend with championship points – this season alone the #F1Sprint combine to give out more championship points as the cancelled 23rd Grand Prix would have – they are undermining themselves in that endeavour. The second is that fans eventually will come to reject artificial parity and thus the short-term gains will result in long-term losses.
Motorsport alone has one major prominent example of this happening in the last decade, but before that it serves to remind ourselves of the pushback against the double points finale in 2014 to show that this mindset is very much present in Formula 1 audiences as well. Now to the famous example: the NASCAR Playoffs/Chase for the Cup. As we all know, NASCAR saw a number of seasons decided before the season finale and responded by introducing a mid-season reset to increase interest in the final races of the year in themselves and compete with the aforementioned NFL and MLB deciders. While at first, the format resulted in exciting racing to the wire, the inevitable problems of artificial parity (unworthy champions making the sport look bad, people playing the system resulting in “unnatural” competitive behaviour etc.) and the trend of modern sports to always add more mentioned in the opening paragraph caused a number of issues. Individual races were robbed of value, both in the sportive sense and the commercial one, as many events are now seen as either killing time before the playoffs or eliminating the “no-hoper” playoff competitors of whom a few can crawl even way beyond their lowly station (Ryan Newman in 2014 comes to mind).
All of this, along with a number of other missteps, resulted in NASCAR being in a major ratings crisis in the United States. While the US ratings of the 2023 Bahrain Grand Prix were down in comparison to 2022, NASCAR is currently at a historical ratings low as the Las Vegas event held on the same day experienced a rating drop by over 10%, a process that has been ongoing for the last few years. In particular the very races that are supposed to determine the champion get hit the worst by the reduced ratings. Of course, a lot of it is down to people in the US cutting cords, competition through the aforementioned other US sports, and the general loss of car culture in a world ravaged by climate change and economic struggles, but to deny the negative effect of artificial parity on sports rating is, at this point, wilful blindness.
Certainly, all sports must evolve and they inevitably will, but trying to fictionally create closeness and equality where none exists will always backfire. Given the nature of Formula 1 as a constructor-oriented sport, there will always be stronger and weaker teams. While more and more standardised parts can (and, from an economic viewpoint, should) be introduced, any attempt to make Formula 1 something that even approximates a spec series will face severe backlash from the sport’s most established teams. Liberty Media, if they persist with their current course, will eventually feel the temptation in the upcoming years to follow NASCAR’s footsteps and alter the championship format for more excitement in the final races of the season. Since, as previously explained, it would be foolish to try to alter the championship format that has served Formula 1 very well. Therefore the best way to make individual races mean more is to reduce the number of races.
The number of races in a season affects the competitive development within a season to – generally – create tighter championship battles and, unlike many other ways, is not altering the sport itself to create fake equality. While the reduced number of races does indeed rely on chaos to add spice to the championship battle, this is not artificial for one simple reason: an individual motorsport race is an inherently chaotic thing. Technical issues, the weather, the other competitors on the track and the influence they have on how the entire event shakes out (caution periods are called whether the leader or the last-placed driver crashes) are all factors that combine to alter the way a race develops. This is an inherent trait of motorsport, one that its audience accepts and to a point embraces. The year-long points-based championship serves to bring order to the chaos and limiting the size of the championship will provide ample opportunities for close seasons without actively crippling the better teams, devaluing the races that came before the season-deciding Grands Prix or forcing fans to settle for undeserving champions.
In a world where the saying “less is more” has been forgotten by all but the designers asked to oversimplify corporate logos and by food manufacturers redesigning their packaging (as in: less food for the customer is more profit for the manufacturer), Liberty Media are well served to remember it. They ought to remember the inherent nature of Formula 1 and the lessons of NASCAR’s failures before they fundamentally alter their sport in a way that leaves it off worse and, more importantly, devalues their investment.
Sources: Autosport, CNBC, GPFans, motorsport.com, PlanetF1, RaceFans, Racing News 365, StatsF1, World Bank
Image source: Mercedes-Benz, pxfuel, Renault SAS
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