No Mercy / No Malice: F1 Is at an Inflection Point

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I'm Scott Galloway, and this is No Mercy, No Malice. Formula One may be the future of sports and media, but it's not without some speed bumps. F1 is at an inflection point, as read by George Hahn.

Just as my obsession with relevance and economic security have often crowded out what's really important relationships, I've let my preoccupation with the election results crowd out the blessings in my life. God, so fucking sick of politics. So, let's talk about cars. Fast cars.

I'm in Vegas for Formula One. Actually, the truth is, I'm not here for the race. It's more a desperate attempt to avoid the inevitable melt into irrelevance, which I believe can be arrested by extending my adolescence. Also, I love Vegas. The last race I went to was the inaugural Miami Grand Prix in 2022. It was a great time, despite F1 races being boring. Here he comes. There he goes. And so on. And so on.

and so on. The real fun is found far from the track. The vibe is money, tech, and glamour. A Super Bowl for the super rich. If NASCAR is Android, F1 is iOS.

In Miami, I went to a dinner party on the beach hosted by Carbone, a fabulous restaurant right in the middle of a COVID flare-up. Fab, you, us. Wyclef Jean played to 700 people crowded into a hot tent with no ventilation. I had two thoughts. I'm getting COVID tonight and it's worth it. I was right on both counts.

F1 has long had large and rabid fan bases in Europe and South America, but that enthusiasm didn't land on U.S. shores until 2017, when Liberty Media bought a controlling interest in the league. Under new boss Greg Muffet, F1 took a big swing at America. Targeting young people, Muffet and the F1 team built an iconic brand in the most competitive market in less than a decade.

There were races with celebrities in attendance, Tom Cruise, LeBron James, Rihanna, new sponsorships, and an aggressive social media presence. However, Liberty's gangster move was the Netflix docu-series drive to survive. Now in its sixth season, the show was rewriting the playbook regarding how sports leagues market themselves.

It's a behind-the-scenes look at a lot of young, good-looking guys, as Mephe once told CNBC, hard-charging billionaire team owners and high-tech pit crews competing in a series of Uber Lux international locations. F1 wasn't the first to try this. The NFL's Hard Knocks premiered on HBO back in 2001.

By focusing on individuals and harnessing the power of storytelling, drive to survive used streaming to introduce US viewers to drivers who are superstars overseas. Among them, Lewis Hamilton and Max Verstappen. It gave Newby, read American fans, a compelling point of entry and became a fount of bingeable video that was easily shared, particularly on Instagram.

There are accounts devoted to what Hamilton wears as he walks on red carpets. Tribal rivalries, betrayal, greed, revenge, all the stuff humans are hardwired to love in a lustrous package every week. Champions muse about having a target on my back. Young guns talk about being hungry.

Everybody obsesses about forces beyond their control. Shakespeare knew this turf pretty well. Marcus Aurelius would have felt at home. The song remains the same. The actual game being played is unimportant. The results? Liberty paid $4.6 billion for F1. It now has a market cap of about $22 billion.

In 2023, F1 generated about $3.2 billion in revenue, up from 2.6 the year before. Most of it from promotional deals with host cities, media rights, and team sponsorships. TV viewership has doubled since Liberty took over, though the US audience pales besides those of the NFL and other big team sports, and it's only a third of NASCAR's.

In 2022, F1 signed a three-year deal with ESPN. Up for renewal next year, worth $270 million. American TV viewership of this year's Miami Grand Prix was 3.1 million, the largest ever for a US race. Meanwhile, between 2017 and 2021, the average age of an F1 fan dropped from 36 to 32.

About 40% of fans are now female. Earlier this year, Liberty announced it had bought a majority interest in MotoGP, which is to motorcycle racing, what F1 is to autos. Owning a team, F1 has 10, used to be a money pit for a brand or a billionaire in the throes of a midlife crisis. Now teams are a legitimate asset class.

Oracle is paying Red Bull $100 million to put its name on their car. Mercedes paid $176 million for its team in 2010. It's now worth $1.5 billion. The Phoenix Suns and Chelsea FC were recently purchased for $4 billion and $5.3 billion respectively.

So, media, tech, increasing value, and Wyclef John. Everybody's happy, right? Sort of.

The mood in Vegas this year is subdued, a bit chastened even. For starters, the business face of all this success, Muffé, is out. His contract expires at the end of this year, and Liberty announced he'll be leaving, to be replaced temporarily by Chairman John Malone.

Malone is brighter than me, but that won't stop me from making the following assertion. He retired, slash fired, the wrong guy.

Mephe has doubled Liberty's shareholder value in the past 12 months and received comp averaging $25 million per year. David Zazlob has been paid an average of $115 million for the last three years to destroy two-thirds of Warner Bros. Discovery's shareholder value.

Muffé says he's ready for something new. Liberty thanked him and said 2024 made a fitting capstone to his brilliant tenure. Who knows what really happened? Liberty is also restructuring assets with spin-offs to tell a cleaner story. Maybe Muffé didn't want to drive a smaller car or didn't want to deal with the Department of Justice's antitrust investigation. It's looking into F1's rejection of a proposed new team from retired driver Michael Andretti.

Maybe a sale of F1 is looming. Liberty says it's not. Or none or all of the above. Whatever the reason, Muffé leaves a sport that, while still thriving, is at an inflection point. Last year's much-hyped Vegas Grand Prix was something of a shit show. Race fans complained that prices were crazy and getting around the event was difficult. Drivers complained about the track.

casinos, bars, and restaurants complained about disruption. US Grand Prix sites, with a few exceptions, don't have the infrastructure that European and South American sites do. Courses, grandstands, and other structures tend to be ad hoc affairs. Fans watching at home have complained about glitchy streams on ESPN+, and other services.

Meanwhile, F1 still hasn't completely shaken the funk of last season's uncompetitive races, which wafted into 2024. Max Verstappen won so many, seven of the first ten this year, that a lot of board fans tapped out, and TV viewership and social media engagement have sagged.

It all feels very 1990 when Pete Sampras was so dominant and boring that people felt he'd ruined tennis. Seasoned race fans point out that periods of dominance by a hot driver have always been part of the sport. Think Michael Schumacher. And it was just a matter of time until the other teams figured out how to take him on.

which seems to have happened recently. While Verstappen is a locked wind driver of the year for a fourth time, competition for the team championship has gotten much livelier. The downturn, though, highlights two weaknesses.

While F1's marketing has been brilliant, it has had trouble providing one, a consistently great product like high excitement, competitive races, and two, a consistently great experience at an affordable price for fans who aren't wealthy. F1 must balance its luck's aspirational vibe with a simple fact. Most auto racing fans are not rich.

A fan on a budget would have to spend at least $2,200 for a bare-bones Vegas Grand Prix weekend. Given last year's fiasco, it's not surprising that hotel prices are way off this year. The hardest things in business are pricing and compensation. F1 blew the pricing. Wimbledon's center court has a capacity of $15,000 and seats there average $200.

The seating capacity at F1 Vegas last year was $100,000 and grandstand tickets were $2,500. It may have set a record for the worst demand slash elasticity forecasting of any event its size in history.

I am not, as I said, into racing, so I don't know what kind of rule or organizational changes F1 needs to make it harder for another Verstopan to dominate and kill viewership. A secret to the NFL's success is a draft system that helps keep all teams somewhat competitive.

In the last five years, 94% of NFL teams have appeared in the playoffs. Similarly, in an attempt to maintain some level of parity, F1 has implemented spending caps. Also, F1 would be well served to do more to foster young US talent and produce a homegrown superstar.

At this year's Brazil Grand Prix, half of Argentina showed up to watch Argentine driver Franco Colopinto. American fans need someone they can get that excited about. Netflix could keep applying the drive to survive formula to new sports, going to teams and saying, pay us $100 million and we'll do two seasons of what it means to play for the Boston Red Sox.

or take a league in a second or third tier pro sport, say pickleball or lacrosse, to the next level at a lower price point. Magazine publishers do this. Their most profitable businesses are custom jobs, like that Four Seasons magazine in your hotel room.

What is definitely going to happen, though, is that sports teams are going to keep increasing in value, even though they're shitty businesses in terms of cash flow. Most of them will lose money every year. Then, in a few years, they'll sell at extraordinary multiples to the next generation of men in their 60s still trying to impress their dads.

However well or badly F1 handles the bumps it's hitting now, what it has done with Netflix may become the default sports media model. You're gonna start to see media businesses, celebrities and streaming companies come together to build sports entertainment enterprises. Imagine Tom Cruise and Disney not buying the Anaheim Ducks, but an entire league.

There's something more here. One in seven men can't name a single friend, and one in four can't name a best friend. The Premier League, the NFL, and F1 give men license to bond and express emotions in a safe place.

In addition, these events happen in the most wonderful venues ever constructed, not on a fucking screen. We are a social and emotional species, and being part of a collective watching people with speed, strength, and alien-like instincts compete puts us in the moment. I'll be at F1 this weekend, and for a few moments, I'll be in that moment.

pardoned from the past where my anger and depression won't let me forgive myself and distracted from the future where I'm focused on garnering more relevance and money. I'll be there watching the collision of men, machines, technology and culture. But more than anything, I'll just be there. Life is so rich.