The Formula One racing circuit will make its first-ever stop in Miami this weekend. Interest in (and around) the inaugural Crypto.com Miami Grand Prix is high. Some 240,000 fans are expected to attend the sold-out event, and TickPick reports the average purchase price for a three-day pass on the secondary marketplace is $1,790 (the most ever for an F1 race in the U.S.). It is unclear how many of the passes sold were trading hands for the first time.
Shareholders of F1 owner Liberty Media will not benefit from the strong gate receipts or vibrant secondary market (at least not in the short term). “Most of [the proceeds] accrue to the promoter because we have a fixed deal,” Liberty Media CEO Greg Maffei explained. But should the enthusiasm for the event translate into a strong television rating on Sunday afternoon, then, Maffei believes, it will “set the tone for a competitive bidding process on [the sport’s] U.S. rights,” which are up for renewal at the end of the year. Benchmark equity research analyst Matthew Harrigan says a meaningful increase in domestic rights revenue (ESPN is believed to be paying mid-to-high single-digit millions currently) has the potential to move the FWON stock price. “When you look at the consensus street forecasts, in general, [analysts] have adjusted OIBDA [across all revenue buckets] going up maybe $50, $60, $70 million a year for the next three years… So [a large increase in U.S. rights fees] is certainly not something that is being layered into the numbers.”
JWS’ Take: While this weekend marks F1’s first event in Miami, the global racing circuit is not new to the U.S. market. The sport has made an annual stop in Austin since 2012 (and raced in other cities prior to that). Last year’s race at Austin’s COTA drew around 400,000 fans over three days, setting a new attendance record in the process.
The success of that event was not unexpected—momentum had been building for it over the last couple of years. So F1 was certainly optimistic the U.S. would embrace a second race. But Maffei made it sound as if Miami is exceeding expectations. “This [race] is brand new, and for something to be birthed at such a level and such a volume of noise and interest is amazing.”
The CEO believes the demand for tickets is the result of several positive trends, including growing interest in the sport stateside (in part a byproduct of the Netflix series Drive to Survive) and an expected improvements in on-track racing product (see: more overtaking, competition between Ferrari and Red Bull). Miami’s reputation as a party city has also been a factor in attracting fans—including many attending their first F1 race.
High-end experiences at the Miami GP were sold for more money than at any other F1 race in history. But as Maffei noted, it is the promoter (in this case, Relevent Sports Group and Hard Rock Stadium) that prices the tickets and enjoys the benefits associated with a particularly strong buyers market.
Liberty Media has never promoted an F1 race. But that will change come 2023 when it adds a third U.S. stop—Las Vegas—to the schedule. “We’re actually going to be [promoting] that one ourselves,” Maffei said. Las Vegas’ proximity to Liberty’s Denver-area headquarters gave the company confidence it could manage the additional responsibilities.
The chief executive hopes the experience will provide the organization with a better understanding of that side of the business and create a new revenue opportunity. While F1 has not set pricing for the race yet, Maffei anticipates, “Las Vegas will be a very good market.”
In theory, Relevent Sport Group’s ability to command high prices would seem like a positive development for the sport. But one long-time racing insider who asked to remain anonymous says sky-high prices are “not sustainable” and could wind up “diluting” the South Florida fan base.
Maffei agrees that F1 does not want to be pricing fans out in a new market. But he is confident that there are enough race-related offerings to satisfy fans with varying budgets this weekend. “There are many tiers at which [fans] can participate, from watching on television all the way to the most expensive experiences. It’s not as if [the options are] only at that high level.”
The demand for this weekend’s event is unlikely to lead to more races in the U.S. Maffei said he truly believes “three is the healthy, expected maximum.” It’s worth noting Montreal also has a race.
But strong TV viewership (remember, the time zone is going to be favorable for U.S. fans) could be a boon to the sport as it continues to engage in U.S. media rights negotiations. “F1 is in a remarkably good position to get a high rating [on Sunday afternoon] and to monetize it through higher fees,” Harrigan said. “I’ve heard people say there is resistance to the $75 million [a year] type number. To me, that seems a little bit low,” particularly if F1 is willing to incorporate more interstitial advertising into the broadcast. Of course, F1 would not keep all of the incremental revenue. The teams are entitled to a portion of it.
The CEO refused to let on if F1 plans to re-up with a traditional linear broadcast partner or pursue the potentially more lucrative streaming route. Since it’s a relatively novel sport in the U.S., which is heavily reliant on sponsorship and advertising revenue, one would assume F1 would lean towards the reach of linear television. Remember, Steve Phelps told us back in February that “a network or over-the-air component is going to continue to be an important component for [his sport moving forward.]”
Maffei certainly did not rule out that approach. But he noted that the F1 and NASCAR fan is not necessarily the same individual. “Our demo is higher [in terms of household revenue] as the pinnacle of motorsports.” It is also an increasingly young and female audience, which could in theory make digital a more viable option.