Netflix, Brad Pitt, LVMH help catapult Formula One into ‘podium’ position in business
Global Grand Prix boss Stefano Domenicali has overseen big revenue and profit increases in the sport. Investors, including Australia’s Caledonia, are betting on more financial upside for racing’s glamorous circuit.
The man behind the $US26bn ($41bn) sports business giant that is Formula One says the global series deserves its place on the “podium” of top sports in the world.
All thanks to a combination of Netflix, luxury giant LVMH, lego, an upcoming movie starring Brad Pitt, and drivers like Lewis Hamilton, Max Verstappen and Oscar Piastri that have catapulted Formula One to its best ever financial position.
Stefano Domenicali, the president and chief executive of Formula One, oversees a business that had $US3.6bn revenue in 2024 and announced adjusted operating income before depreciation and amortisation of $US774m.
The circuit starts with the Australian Grand Prix on Sunday, and last year 6.5 million spectators attended the 24 races that were watched by 1.6 billion cumulative television viewers and about 97m social media followers.
All of which is significantly more than when Domenicali, an Italian former Lamborghini executive and Ferrari racing team principal, took over as Formula One boss at the beginning of 2021. Revenue that year was about $US2.14bn and operating profit reached $US92m.
In an interview with The Australian at the Albert Park track in Melbourne, Domenicali just stops short of saying Formula One is now the world’s biggest sport. But only just.
“If you look at the magnitude of what we are doing, and because we are on every year, all around the world, I would say, as a worldwide sport, … and I want to be respectful to everyone … we are on the podium for sure,” Domenicali says, intimating that Formula One has at least a top three position.
“If you take American sports, it’s a different dimension but they are not in other parts of the world, it is the same for some Australian sports. Then there is soccer, and that is huge but their world championship (the World Cup) is every four years. So in terms of who we are, I think we are really at the top end.”
The Netflix documentary series Drive to Survive – which features in the top 10 watched programs in 39 countries – has been credited for a significant part of the sport’s resurgence.
Domenicali says the series has “definitely been a key factor on engagement with fans” and helped increase the number of younger viewers and females watching the sport. There is also the upcoming action movie F1 starring Brad Pitt as a veteran racer, slated for release in June.
“These are all huge steps in growing the sport, and I think it is about being open minded. That is the difference in how we were doing things only a few years ago,” Domenicali says.
The increased popularity has helped Formula One sign key deals like a new 10-year sponsorship with luxury brands giant LVMH worth an estimated $100m annually – Domenicali calls it a “big responsibility” to strike a deal with a company that will “push us hard” – and toy brand Lego, as well as extending a partnership with Crypto.com through to 2030 and a new deal with global lottery operator Allwyn.
“If you look back four years ago, we didn’t have so many sponsors,” Domenicali says. “In terms of quantity it is fair to say that we need to work on the quality of the brand we have now and the positions we have with global partners, regional partners, official partners and so on.”
Sponsorship is about 18.6 per cent of Formula One’s annual revenue, with fees from race promoters contributing about 29 per cent and media rights fees almost 33 per cent.
Investors in Formula One stock, listed on the Nasdaq, have called the business “virtually recession-proof” with long-term regular and reliable contracted income, with upside in all three categories.
The stock has market capitalisation of $US26bn and is up 20 per cent in 12 months, though has fallen about 9 per cent since January 1 amid a wider market slide. Liberty Media paid about $US4.4bn for a controlling stake in Formula One in 2017.
One of its bigger investors is Sydney-based investment house Caledonia, headed by co-chief investment officers Will Vicars and Mike Messara, which has about $400m worth of Liberty Media shares.
In a recent note to investors seen by The Australian, Vicars and Messara predicted a 25 per cent compound annual growth rate for Formula One’s pre-tax earnings through to 2027 and further good prospects due to a series of new deal renewals.
“The LVMH deal raises the bar substantially higher for what it means and costs to be an elite commercial partner in Formula One. Recent entrants to the second tier, Santander and Nestle, are paying equivalent values to that of top-tier sponsors in the past,” said Vicars and Messara.
“We think Formula One is now seen as a blue-chip asset in the eyes of commercial partners globally and expect to see meaningful sponsorship contributions for years to come.”
There are now several Australian billionaires and companies sponsoring Formula One teams, including Laurence Escalante at Ferrari, Atlassian at Williams, Ed Craven’s Stake and Kick Sauber team and ASX-listed Airtasker with the Visa Cash App Racing Bulls (owned by Red Bull) team.
Such is the popularity of the sport with Australian technology bosses that a whatsapp group featuring Airwallex boss Jack Zhang and his fellow billionaire Mike Cannon-Brookes of Atlassian, plus Airtasker founder and chief executive Tim Fung and Bruce Buchanan of Rokt (a Red Bull sponsor), has been set up to discuss all things racing.
Fung says his sponsorship deal was in part driven by finding a global alternative to advertising on Google and Facebook and dealing with the rise of artificial intelligence.
“As AI has come to the fire, there’s so much pressure on a lot of these digital performance marketing channels like Google. Google used to be the go-to place to advertise but now that game has completely changed,” Fung says
“Brands are looking more and more towards being able to tell their own story, rather than relying on Google. And so I think that’s also another part of why F1 is so exciting, because it’s a way to build your own brand and talk to consumers directly, rather than having to pay Google and Meta a tax every time you know you want to talk to people.”
Domenicali says there is still plenty of room for increases in its deal values.
“When I came in five years ago, people were saying well where can you go and where is the next step, is one stream of revenue already at the top.
“But you have to be creative and the attention that we generate now is even bigger than before so the only limit is our creativity, being professional and listening to the market.
“We need to be strong in Australia. We need to be strong in the Far East. We need to be strong in Europe, in the Middle East, everywhere around the world, so the potential growth of different kinds of things are there.”
Two key growth areas are increasing the value of the money race promoters pay to host the events, and media broadcasting rights. Melbourne’s contract for its Grand Prix, paid by the Victorian government, runs through to 2037 under a deal signed in 2022. It is estimated the deal – which is not disclosed, though the state government covers a $100m shortfall annually – was struck at between 1.5 and 2 times the previous contract value.
Domenicali says 24 races annually is enough, as is 11 teams that will compete from next year onwards with the addition of Cadillac, but mentions Africa as a potential new race host. Demand is such, and fees are increasing so rapidly, that countries such as Belgium are renewing their deals but for multi-year rotations.
“Formula One will have almost 10 renewals [by 2027], each of which presents an opportunity to harvest the scarcity value of hosting an F1 race in an effort to maximise promotional value,” the Caledonia client note said.
Vicars and Messara said those upcoming renewals also bode well for new broadcast rights deals. The biggest contract Domenicali will negotiate this year is in the US, where current rights holder ESPN pays an estimated $US90m annually for a deal ending this year.
Streaming giant Netflix is rumoured to be vying to replace ESPN, which reportedly will not seek a renewal, as is NBC. Domenicali says: “We have been happy with ESPN because they have done a good job. But there are other players around the table now. So we will tackle that in the next couple of months, and we will have to understand what is the best choice for us in terms of monetisation and reach [of viewers]. There is a balance of being prudent or aggressive, and so it will depend on which angle you will take.”
Some estimates have the new US deal being worth at least $US150m annually, while Formula One also has its own F1TV streaming service available in some countries. It has about $US125m in annual revenue.
As for Sunday’s Melbourne race, a diplomatic Domenicali also says it is on his “podium” in terms of his favourite races.
“There is a great vibe here. Hopefully we will have another record crowd (beating last year’s 452,000 attendance) and you can see the quality and quantity of what we are doing here now.”
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