Barely a day goes by went I don’t see someone commenting on the need for Formula One to embrace social media. The latest coming Daimler CEO Dieter Zetsche
“F1 must instead embrace the digital world and develop interactive strategies”
There can be no denying Formula One Management, FOM, have taken a very cautious approach to social media, on the face of it this is born out of concern around damaging the cash cow that has been national broadcasting rights and the lack of clarity around how to monetise social media. Both concerns are valid. Social Media in its current form is great for increasing brand awareness, but Formula One is established. So how will social media improve Formula One as a product?
2015 has seen significant investment from FOM in improving content available through social media and developing a vehicle to deliver this content seen in the much improved F1 app. Charges exist around elements of the content available but a surprising amount of exclusive insight has been made available with no restrictions or charges.
This is just the start. The folk at FOM are a bunch of clever people, they haven’t let go of the challenge to monetise a social media following. Mindful of developments in other sports, they have identified a commercial opportunity. Rather than simply launching a service, in the true spirit of social media, they plan to make their followers believe they’ve devised the opportunity themselves. What is this opportunity? In race gambling. A long established gambling model in Football, Rugby, Horse Racing, In play gambling seems to be such a great fit for Formula One it’s amazing no one has thought about it already!
Working with Tata Communications FOM launched a fan competition earlier this year asking entrants to propose technical solutions to enable fans to make and communicate predictions on race outcomes during the race itself. The only element not called out in the project brief was suggesting fans ability to monetise successful predictions. Whilst the winning entries refer to awards for success in points, turning points money is not a huge step.
Armed with fan support FOM have potentially unlocked an entire new sector for the sport. FOM could integrate live odds into social media feed and develop gambling platform through their own service, or more likely demonstrate proof of concept and sell in race gambling rights to the highest bidder.
Imagine if Sky Sports Commentary included live odds available only through Sky Bet on events taking place during the race.
You may wonder what a fan could bet on during a race; the more appropriate question is what couldn’t they bet on, 1st pitstop for car 44, lap on which fastest lap would be set, the list is endless.
You may also wonder how the odds for such events would be calculated. Well the data is already in place, teams have predictive software running throughout a race weekend to optimise performance and results, the data collection used for this could adapted with minimal investment to develop live odds.
FOM have, through PayTV agreements, confirmed there is an audience prepared to pay for the sport. This audience is likely to have a high confidence around their appreciation for the sport and highly likely to be willing to put their money where their mouth is. Especially is there is a feeling of being able to outsmart the management!
So FOM use their social media platform to launch in race gambling. They prove the concept, sell the rights or allow teams to generate income through agreements with gambling sites (for a fee of course) and then what? Formula One Management move on, on to the next project to further add value to the product that is Formula One.
Disclaimer. Views expressed in this blog are my own. They represent a rational pragmatic view of a situation.
I’ll kick off with the headline. Red Bull Racing will enter the 2016 F1 season with a self-funded engine program supported by Ilmor. Now I realise this view flies in the face of 90% of what the team and media are reporting, but hear me out. Why wouldn’t they?
In 1997, Dietrich Mateschitz purchased a majority shareholding in the Sauber F1 team; this investment came only 3 years after Red Bull launched globally. Dietrich Mateschitz is a self-made billionaire who only a few years prior to his F1 involvement invested his entire life savings on buying a 49% share in Taiwanese Beverage Company bought to his attention by chance when travelling on business suffering with jetlag. It can be safe to say that the first significant investment Dietrich Mateschitz made with his new found wealth was into Formula One. The cynic could say it was simply because he saw the marketing potential of the sport for his brand; my personal belief is he has a passion for motorsport. Either way, passion and marketing potential do not disappear overnight. Walking away from the sport, I believe, is not an option.
Take a second to consider the success of Red Bull. This did not happen by mistake, the growth and development of the business has been carefully structured and strategically managed. This approach to business would not allow itself to be reliant on the goodwill of its peers to allow it to stay in the market. We cannot be expected to believe that Red Bull Racing truly expect Ferrari or Mercedes to supply them with engines, media coverage around these talks has been managed as a distraction technique. Something those with experience of Formula One Management will be well versed in.
The struggles Renault & Red Bull Racing have experienced in the hybrid era of the sport did not come as a surprise to the team. In 2013 the team, despite clinching their fourth consecutive constructor’s championship were making moves to streamline the operation. In the knowledge of a drop in competitiveness the team discontinued the contracts of a number of employees working on temporary contracts. With the knowledge that performances were unlikely to meet those of their competitors it could be argued that the team began considering the long term future of their relationship with Renault at this point already.
In the first half of the 2014 season the Red Bull Racing Renault relationship rapidly deteriorated. Before the first lap of the Melbourne GP Red Bull Technologies had already seemingly taken on some responsibility of engine development entering into an agreement with AVL, the world´s largest privately owned and independent company for the development of powertrain systems with internal combustion engines, to resolve immediate performance issues and use the company rolling road facilities. At this time there was a rumour Red Bull Technologies signed off investment in their own in house rolling road.
Later in 2014 Helmut Marko publically earmarked the Austrian GP as a milestone date by which time Red Bull Racing expected Renault to have resolved performance issues. There was no public statement around the consequence of failing to meeting this milestone, but it is my opinion that this was this point at which Red Bull Technologies green lit their engine development partnership evaluation between AVL and Ilmor. Renault, in my opinion, had full awareness of this project and the likely end point.
Moving further forward consultation between Red Bull Technologies, Renault and Ilmor was made public; the details of the agreement remained unclear, but Mario Illien (Ilmor co-founder) was present as a guest of Red Bull Racing at a number of races in 2014. It was stated that Mario Illen acted advisory capacity providing direction on possible development routes for the Renault power unit, earlier this year it was announced that Renault had elected not to take the development path outlined through the Ilmor partnership. In my opinion this represented Renault allowing a contractual option defined by Red Bull Technology to expire.
It is my belief that the ‘messy divorce’ between Red Bull Racing and Renault is around the Ilmor engine development program. The Ilmor program uses Renault developed technology as a baseline. Red Bull will argue they have been involved and invested in the development since the beginning and as such lay claim to the rights to the engine. Renault of course will disagree. This disagreement will be concluded through a financial settlement, and the basis for future Red Bull Racing engine supply will remain the original Renault power unit with development direction becoming Ilmor’s domain. The project may latterly be badged by another manufacturer.
When I have discussed this option in the past I have lambasted on two key points. Firstly, the time it take s to develop an engine, and secondly Red Bull can’t afford an engine program. I don’t see either of these arguments as valid. To support this I contacted a Cosworth representative some weeks ago to understand the time they believe it would take to develop a power unit compliant with current regulations, their response; 10 months. Red Bull Technologies and Ilmor by the start of preseason testing for the 2016 season may have had as much as 18 months (Since the 2014 Austrian GP), and will have been using an existing engine to base the concept on which would serve to further reduce the development time required. To address financing, how much do we believe it costs to develop an engine? If we consider Red Bull Racing have been awarded $200M in prize funds over the past two years alone, and have an extremely healthy sponsorship portfolio minimising the investment Red Bull have to make into their own racing team, despite operating as a private company and as such not reporting profits, we can be confident Red Bull is a highly profitable organisation. Red Bull has the money. It should also be noted the cost of engine development may not be paid up front. The cost of capital could be shared over future years performances, with FOM heritage payment assured Red Bull could borrow money against his assurance to fund an engine program if necessary. So in summary, they’ve had the time and they can afford it!
If Red Bull pulled out of F1 they face significant penalties from FOM and will be left with extensive racing infrastructure on their books. The cost of leaving the sport is greater the than the cost of a self-funded engine development route.
So, to 2016 and the prospects for Red Bull Racing & Toro Rosso, it is my view that the current ‘negotiations’ or lack thereof with Mercedes and Ferrari are somewhat of a front. Red Bull wants to position themselves as the injured party with no other option than a self-funded program. This will go some way to once again endear the team to fans of the sport. Success with the Ilmor project will not come overnight, but that is fine. The teams can spend 2-3 seasons as a capable mid field entrants, focusing on restoring their reputation as a fun team with the fans, whilst using their clout with FOM and the FIA to restore an emphasis on aerodynamics in future technical regulations. Success in Formula One is cyclical. Red Bull, despite what we see through the media appreciates this and remains fully committed to the sport.
Following the conclusion of a multi-year supply agreement, Manor Marussia F1 Team will race with Mercedes-Benz Hybrid power from the 2016 season onwards. Since the introduction of the new Power Unit generation in 2014, the Mercedes-Benz Hybrid has set the competitive benchmark in the sport, claiming to date a total of 27 wins and 2,208 world championship points.
Under the terms of the agreement, Manor Marussia F1 Team will be supplied with Mercedes-Benz Power Units by Mercedes AMG High Performance Powertrains (HPP) based in Brixworth, UK. The Power Unit will use Fluid Technology Solutions developed by PETRONAS, the technology partner of Mercedes-Benz. Under the agreement, Manor Marussia F1 Team will be supplied with current-year Power Units throughout the term.
John Booth, Team Principal, Manor Marussia F1 Team
“I am delighted to announce our new Power Unit partnership with Mercedes-Benz for the 2016 season and beyond. Although there were many factors governing our selection of an engine partner to help power us towards our long-term ambitions, ultimately the strength of the Mercedes-Benz package speaks for itself.
“2015 has been a rebuilding year in every aspect of our operation. Although we have not been able to make the incremental strides in competitiveness that the team has enjoyed in previous seasons, we have put in place a strong foundation from which to progress. Together with the potential we are seeing with our 2016 car in the wind tunnel, the Mercedes-Benz Power Unit will assist our return to aggressive performance development with effect from next season.
“I would like to take this opportunity to thank Scuderia Ferrari for their support for our team over the past two seasons. In 2014, together we shared in the momentous occasion of the team’s first points and in 2015 Ferrari supported us to a degree that was above and beyond the requirements of our partnership agreement. Quite simply, we could not have returned to the grid without them pushing extremely hard to support the MR03B, at the same time as focusing on their own 2015 package.
“I am also pleased to announce that we will resume our prior technical partnership with Williams Advanced Engineering, from whom we will receive the supply of transmission and suspension components. Combined with Mercedes-Benz Power Units, we are very excited about the strength of our new powertrain package and what it means for the long-term future of our team.”
Andy Cowell, Managing Director of Mercedes AMG HPP:
“It is a great pleasure to welcome the Manor Marussia F1 Team to our stable of customers at Mercedes AMG High Performance Powertrains. They are a team of real racers with great spirit and impressive determination to succeed. We enjoy strong relationships with all our customer teams, and take pride in delivering a standard of hardware and service that reflects the high standards that Mercedes-Benz stands for. Furthermore, this new agreement should enable us to keep our supply roster at three customer teams for 2016, which is our ideal level in terms of technical and logistical capacity. We will be targeting gains in both performance and reliability for the 2016 Power Unit and look forward to delivering those to our new customers at Manor Marussia F1 Team.”
Toto Wolff, Head of Mercedes-Benz Motorsport:
“Mercedes-Benz has a clear Formula One philosophy based around our works Silver Arrows team and supplying benchmark Power Units to independent customer teams. We believe this approach provides Formula One with greater strength in depth and ensures a deeper level of competitiveness throughout the field. In anticipation of Renault’s takeover of the Lotus F1 Team, we are pleased to announce Manor Marussia as a new customer of Mercedes-Benz. It is a tenacious team with a fantastic competitive spirit, and we are all excited to see what step forward they can make next year with their new car coupled with the Mercedes-Benz Hybrid Power Unit.”
Opinion – The widely expected Manor Mercedes Benz agreement has finally been confirmed, in what can only be described as a fantastic development for the team. It can be assumed that Manor will look to secure a Mercedes Development driver within their 2016 lineup. With Manor taking on an informal role of junior or development team for Mercedes Benz. The key message to take away from this announcement is that Manor will run current year power units for the term of the agreement, this is guaranteed to bring the team up the grid and will strengthen their position against the incoming Haas F1 Team. Supply of Manor from Mercedes Benz will take current production facilities to capacity effectively closing the door to possible additional team supply.
FIA Formula 2 Championship
Significant progress has been made in negotiations with the promoter of GP2 regarding the establishment of the final step in the FIA’s single-seater ladder; the FIA Formula 2 Championship.
Discussions remain ongoing with the intention of finalising an agreement.
Opinion: In amongst the F1 2016 calendar confirmation the FIA have publicly commented for the first time on progress around the progress of GP2 morphing into F2. GP2 organisers have commented on the prospect but in recent months talks appeared to have stalled. It’s fantastic to see logic being applied to the development of the FIA single seater ladder. It will be interesting to see the timing around the transition and the FIA drivers license points requirements to enter the series.
Over the last 24-hours, you may have noticed McLaren-Honda’s social channels sharing some rather unusual posts…
Introducing the #TurboHeroes campaign.
Join the mighty Turbo Heroes, McLaren-Honda’s Fernando Alonso and Jenson Button, as they battle the evil racer Exhaustus. Follow the thrilling journey across the globe in a tense battle to return mythical artefact – the Jade Dragon of Suzuka – to its spiritual home in Japan.
Turbo Heroes evokes the classic 8-bit gaming era of the 1980s with a series of innovative and unique gaming scenarios involving McLaren-Honda’s two racing heroes.
Opinion – Keen to move on from what must be one of the most challenging racing weekends in the history of the team, Mclaren have started the week well with the announcement of new sponsorship agreement with Chandon this morning, alongside kicking off this #TurboHeros campaign. This, hopefully first of many, films plays on the 80’s style games console memories, similar to the short film the team released prior to the car launch at the beginning of the year. The team successfully bring some much needed humour back to the sport in general and for themselves. These kind of Japanese themed campaigns will hopefully put to bed the continued rumours of unrest between Mclaren and Honda. They may also hint towards future additional Japanese partners….
The 10 Formula E teams will be limited to just two driver changes per car during season two.
Last season 30 drivers took part in the all-electric racing series, with some teams changing drivers multiple times. This season they will be limited to just two changes, and no changes will be permitted during the final three races of the season to avoid any potential conflict in the fight for the championship.
In the event of force majeure and the driver is unavailable for an unforeseen reason, a change of driver will be permitted at the discretion of the Stewards.
All drivers must also comply with the new e-Licence system, which is a mandatory requirement to participate in an FIA Formula E Championship event. As well as taking part in a specific FIA training session to cover the most important points of electrical safety, technical and sporting aspects of the series, drivers must have accumulated 20 points in the previous three seasons under the FIA points system used to qualify for an F1 Super Licence.
A driver judged by the FIA to have consistently demonstrated outstanding ability in single-seater formula cars, but with no opportunity to qualify under any of the requirements above, can still obtain an e-Licence.
Any driver change now has to be announced two weeks prior to the event.
Opinion – Limiting in season driver changes moves to further stabilise and bring credibility to Formula E. Regulations around driver changes are now aligned with that of Formula One. It should not go unnoticed that Formula E have also outlined regulations around new drivers having to accumulate points 20 over the past 3 seasons under the FIA driving experience points system. Presumably this rule will be applied only to drivers new to the series as many existing drivers would not qualify. For example, neither Amlin Andretti driver have accumulated sufficient points under the system to participate. Outside of super license holders Sam Bird is one of the few drivers in the series who would qualify to participate under these rules.
Formula E continue to lead the way in Social Media engagement with the announcement of a partnership with Little Dot Studios, a next generation broadcaster and producer, creating and distributing video content across YouTube, Facebook, Twitter, Snapchat and Periscope.
Founded by Andy Taylor and Selma Turajlic just over two years ago, Little Dot Studios has grown rapidly and now distributes video content on social platforms for over 60 producers, broadcasters and rights-holders worldwide. In August alone, Little Dot Studios amassed over 350 million views to its client’s content. Under the partnership, Little Dot Studios will distribute social videos including clips, highlights and compilations from each race, as well as unseen footage from the pitlane and behind the scenes. Little Dot Studios will also be on site at each race, producing original video content for each of the social platforms.
Opinion – In the spirit of continuous improvement Formula E continue exploit social media as a tool to bring the series to the public. It is impressive to see Formula E can make these forms of agreements alongside TV broadcasting deals with the likes of Eurosport, ITV, & Rai, a feet Formula One either have not attempted or have not been able to manage. In a period of growth and with a strategy of increasing brand awareness Formula E continue to make all the right noises. The challenge will come in attempting to monetize the sport in the future.
Renault have this morning confirmed signature on a letter of intent regarding the potential acquisition of the Lotus F1 team. At this time there has been no formal public response from the Lotus F1 Team of Gravity Motorsport, but it is likely this notification will lead to the sale of the team which should serve to resolve the immediate cash flow issues faced by the team.
In the short press release from Group Renault, a keen emphasis is placed on the long association Renault have with Formula One, it can be expected this history will place a significant role in the rebranding of the Enstone based team.
The announcement makes no reference to the relationship between Red Bull Racing and Renault, with the latter formally under supply agreement for 2016. Further news on this should be expected in the coming days and weeks. No mention has been made around the Power Unit the team will use in 2016, logically it can be assumed the team will run the Renault unit, despite agreements in place with Mercedes Benz. Renault have elected to focus power unit developments on the 2016 program rather than introducing upgrades through the token system in 2015, no doubt significant strides will be made in 2016 regarding performance and reliability.
Sponsors and Driver Line up developments will be of particular interest, with Renault likely to transfer Infiniti and Total Agreements from Red Bull Racing to the Renault team.
Pastor Maldonardo has been announced as a 2016 driver for the Lotus F1 team, the Venezuelan brings substantial national backing to team in the form of PDVSA branding. It will be interesting to see if the team which will act under a new legal entity maintain this contracted commitment.
Romain Grosjean is expected to announce his departure from the team on tomorrow moving to the newly formed Haas F1 team. Possible replacements include Esteban Ocon & Jolyon Palmer. It should also be noted with the possible departure of Red Bull Racing from the sport Daniel Riccardo, Daniil Kvyat, Max Verstappen and Carlos Sainz may also be seeking a seat in 2016.