Formula 1

0:00 I was just Listening to the F one theme song to get pumped up. Me too. Were you really? Yes. It's so good. I just got new speakers here in acquired HQ North. And uh actually thanks to a recommendation from a listener in the acquired Slack and yeah, it was bumping. Amazing. All right, let's do this. Let's do this.

0:21 Who got the truth? Is it you, is it you, is it you? Who True.

0:29 Is it you, is it you, is it you? Down Another story Welcome to the spring twenty twenty-six season of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert. I'm David Rosenthal. And we are your hosts.

0:49 Today we dive into a sport that started in the 1930s that began for the pure love of auto racing. Extremely dangerous. Auto racing. Then, after World War II, the British Air Force veterans and mechanical engineers joined the sport to push the limits of technology and physics. It eventually became the sport of rich guys who want to own teams to gallivant around Europe, losing colossal sums of money along the way. And in fact, David, Since the sport began, over one hundred separate teams have entered and exited the competition.

1:20 mostly because they went bankrupt, and today the sport has been dragged kicking and screaming into being professionally managed and is now owned by the publicly traded US company. that has owned the Atlanta Braves, Sirius XM and live nation. That is liberty media. And against all odds, Liberty has managed to turn the sport, the teams, and the drivers into real.

1:43 Viable. businesses. Today's episode, listeners, is on Formula One. The world's premier Motorsport series.

1:51 Who. I was gonna save this for um Later in the episode. But do you know what else among the many other like hundreds of companies that Liberty has owned? Do you know what else they owned?

2:01 You won't guess it'cause there's so many. Excite at home. No way. From our Google series. Throwback. That's awesome. Well listeners Really what we're doing here today. With formula one.

2:13 It's three sports in one. It is, of course, the world's best race car drivers showcasing their skills. But it's also the World Cup of Engineering. These days, it's fair to say that the races are more determined by the design feats of the thousand plus people that work on each car. then the drivers.

2:31 And formula one is the only motorsport in the world that requires a team to design and build their own car from scratch. Which is an insane engineering feat to enter the competition. And as one listener put it to us. It's also the World Cup of Office Politics, or as another one put it, the It's real housewives of the garage, which that makes for a fantastic Netflix show. Oh, does it ever. We might talk about that towards the end of the episode here. Yes. The sport itself is completely insane. It is a grid of twenty drivers. competing at over 200 miles per hour in races that last 190 miles. And they do this every week or two in a different city around the world. They load the entire circus, the cars, the teams, the hospitality onto a fleet of seven Boeing triple sevens between races.

3:19 And they set up shop in twenty-four different cities from Monaco to Bahrain to Melbourne, Australia. Each car costs twenty million dollars to make and hundreds of millions of dollars to develop. The cars have three to six hundred sensors on them, and shockingly to me as an American. David, I don't know if you knew this before we started researching. It's actually the world's most popular annual sporting series with over eight hundred and twenty-seven million viewers. Yeah, I had no idea until we started researching. Because we're Americans. And you know, the Olympics and the World Cup don't count'cause they're

3:50 every two and four years. So Pretty crazy. Listeners, starting in just five days, a season will kick off that's gonna see some of the biggest changes in the sport in decades. So we've got new regulations, which means all new car designs, an expansion to an 11th team with Cadillac, Audi and Ford are also entering the sport, and a brand new broadcast partner in the US in Apple TV. And well uh everything got Much more professionalized.

4:15 It's still owned by a bunch of rich guys who love auto racing. They're just no longer money losing rich guys. That's right. So listeners, just like our NFL, NBA, and IPL cricket episodes, this show is about the business of F1. So uh we apologize in advance if we don't spend time on your favorite rivalry or regulation detail. Or the V ten engine sound. You can join the email list to get updates every time an episode drops at acquired.fm slash email. You get to vote on future episodes, and the email list is just getting much, much better. So we now have episode summaries, our big takeaways, and exclusive photos from our research process. That's acquired.fm slash email. Chat about this afterwards with us with the whole acquired community in the Slack, acquired.fm slash Slack.

5:03 And before we dive in, we want to thank our presenting sponsor, JP Morgan Payments. Yes. And just like how we say every company has a story, every company's story is powered by payments, and JP Morgan Payments is a part of so many of their journeys from seed to IPO and beyond. So with that, this show is non-investment advice. David and I may have investments in the companies we discuss, and this show is for informational and entertainment purposes. Only. David Rosenthal.

5:28 Where do we dive in? Well, first off, we owe a huge thank you to Joshua Robinson and Jonathan Clegg, who are the sports editors over at the Wall Street Journal. And Just recently published I think the

5:42 best business history book of Formula One called The Formula. It was one of the main sources for this episode and uh they both actually helped us in the research. So Thank you guys. Yep. So Ben, Formula One as we know it. really started after World War Two in nineteen fifty.

5:59 But Unlike a traditional company or even many of the sports leagues that we've studied over the years. It doesn't have a exact sort of founding moment. Its origins are really part and parcel with the beginning of motor racing itself. So

6:14 It didn't take long after the invention of the modern automobile, which is generally agreed upon to be by Carl Benz in Germany in the late eighteen hundreds. That people had the idea to start. Yeah. I mean, after all, like people raced horses, why wouldn't they race cars, too? Yeah. So Throughout the first few decades of the NS

6:34 Various automobile clubs popped up across Europe. And they would host these races, they'd sell tickets and advertising to fund prize purses. And drivers and manufacturers would travel from all over the world to Compete in these races. The automobile club of France, which was the largest in Europe at the time,

6:54 hosts an inaugural race just to the southwest of Paris called Lemon. L E M A N S. And this group of organizers, they decide to call this Le Mont race. By a very literal name. In order to attract

7:10 Spectators and participants. They call it the Grand Prix. to Lamont. Literally

7:17 Translated as The big prize. It's great. Carries all the way forward to this day. Yes, the names in this sport are very literal. So The success of this Lemont Grand Prix

7:29 causes a bunch of similar races to pop up across Europe all throughout the teens and twenties. Copying the same rules or formula. as the automobile club of France. You had Monza pop up in Italy, you had the Monte Carlo race in Monaco, you had the Nuremberg Ring in Germany, et cetera, et cetera, et cetera. You probably heard of all these places. Yep. Eventually. In the nineteen twenties. all the major European automobile clubs get together in Paris and they say,

7:55 Why don't we centralize oversight of this formula? into one international organization, and that becomes, after a series of name changes over the years, the Federation Internacional de l'Automobile. Or The F I A. Still exists today.

8:12 And still administers the rules of Formula one. And as Jos and Jonathan point out in the book. The sport is literally named after the rule book. There's a lot of fighting about the rules in this sport, both when they're setting the rules every few years and in races when they're going up to yell at the race stewards, Oh, this is illegal, this is not illegal. Anyone who is sort of complaining that this sport is too into the rules needs to remember it is named after them. It's named after the rule, yes, yes.

8:42 Okay, so at this point, you've got all these Grand Prix and these famous racetracks that you know today, and you have the FIA as this sort of rules body overseeing the common regulations amongst them. But they're all independent events. There's no championship series. There's no league. There's one winner at the end of each race and then you go to the next race. Yeah. There

9:02 A couple attempts before World War Two to create a championship series, but they all fizzle and then of course the war. Disrupts everything. After the war, however, There's renewed interest. Everybody wants to have a world drivers championship. And so in nineteen forty nine.

9:17 The FIA announces the inaugural Grand Prix World Championship for Formula One. Drivers. A global drivers competition. Of seven of the most prestigious Grand Prix races.

9:32 Set to begin. The following May thirteenth, with the running of the British Grand Prix At the Silver Stone Circuit. And

9:41 England. And that becomes the first race of the first season. officially of F one. Nineteen fifty. Now

9:48 There really are three sort of foundational pillars. of this early era of the sport. There's one in the UK There's one in Monaco and there's one in Italy. So

9:59 Taking them in turn first in the UK. Britain was and is the heart of the sport. both in the early days and all the way through to today. So today, seventy percent of the F one teams are based in the UK. Really the only notable exception is Ferrari, which of course is in Italy. Yes. All of these teams, despite having such different cultures and opinions and rivalries, a giant amount of their employees, at least on the technical side, work in a very small area in the English Midlands. Within

10:30 Tens of miles of each other. Yes, it's like very, you know, seemingly random. So Why was the UK and this weird part in the middle of the country like the natural home of F one. If anything, given the proto history, it should have been France or maybe Germany. Well after World War Two

10:48 Britain had been, as you alluded to In the intro Absolutely the right set of circumstances for this all to come together. Yep. one, unlike Germany, they'd actually just won the war. But

11:00 the country was in bad shape and like in desperate need of entertainment and redevelopment. And then unlike France Britain had a ton of empty airfields. And lots and lots of newly unemployed.

11:15 British. Fighter pilots and mechanics. And what better way to, you know, redevelop the infrastructure in the heart of the rural area of the country. than to put all of these people and abandoned airfields to work. Racing fast cars.

11:31 And much like the development of Silicon Valley, which we talked about in our Lockheed Martin episode. There's sort of this. positive feedback loop that keeps that area the main area for this. So there's universities that specialize in aerodynamics and engine design and mechanical engineering. It's still the best place to source talent. to build an F one team. Yeah, even the teams

11:53 that are owned and nominally operated by companies in other countries. Most of them still in the countryside in the UK for this reason. Yeah.

12:04 So one of these newly unemployed Royal Air Force pilots Is a man named Colin Chapman. who also happen to be a mechanical engineer in addition to a former pilot. And who Along with Enzo Ferrari probably did more than

12:19 Any single person. to shape the first era of F one. So Chapman founded the Lotus Racing Team. In nineteen fifty two, with twenty five pounds as his initial start up capital in a set of empty stables. in North London. Even then

12:37 twenty five British pounds was not enough to build a car capable of racing an F one. So he had to have another way of making money. In parallel. He also started the Lotus Road car business. Which quickly became, you know.

12:49 Look, hey, it's not Ferrari, but like decently successful. In fact, the first uh Tesla Roadstar was based on a Lotus Elise chassis. That's right. So in nineteen fifty eight, Chapman finally has enough capital together to build an F one car. He enters his first Car in Formula One.

13:07 And He revolutionizes the sport. I mean, today teams are super professional operations with hundreds of engineers and Tons of equipment. Back then it was much more like the early days of the NFL. You have like One or a couple people

13:23 Who are team owners. Managers, coaches, and sometimes also players or drivers. Yes. And it says a lot that there actually was not a constructor's championship when it first got started. That wasn't until nineteen fifty

13:37 Eight. Yes, it was just about the drivers. Right, it was just the driver's championship. Yeah, because often these were the same people. Right. So for anybody who follows the sport today, there's sort of two different things you're competing for. Can the driver individually win the season or can the team between its two drivers win the constructor's championship? called constructors championship, of course, because each of these teams is required to construct their own vehicle. Yep, and enter two cars and thus two drivers.

14:04 in the competition. So Chapman was the first constructor to realize that Building a winning race car

14:12 wasn't just about adding more horsepower to the engine. Which was kind of the Ferrari prevailing viewpoint at the time. That was Enzo's you know, arguably till he died, what he really cared about was power. Chapman had a great quote on this. He said, Adding power makes you faster in the streets. Subtracting weight makes you faster everywhere. So he realized like a whole bunch of stuff though. Being lighter is better. Having better handling is better,'cause it's not like

14:37 These racetrackers are like NASCAR race tracks where the cars just go around in a circle. There's all these technical corners. There's hairpin turns, there's chicanes, there's double apexes. It's a very technical sport. Not just From the engineering for the cars, but also for the drivers. Yep. One other very important element that Colin Chapman introduces to the sport during his time in F one.

15:00 Which was sponsor logos on the cars. So until Chapman add sponsorship to his cars, all the F one cars had just been painted whatever color the FIA assigned their country. Yes. And that's how you have Silver with Mercedes and British Racing Green and of course Ferrari Red. And they stick to this day. So

15:22 Chapman, when he goes out in the sixties and finds a sponsor to, you know, finance his building activities, he paints his lotuses Red and white. In the corporate colours of his new sponsor. Gold Leaf Tobacco and this is the start of one of the most important partnerships in F one history.

15:39 Fast cars and cigarette companies. Yes. And this was illegal for a long time. The FIA did not allow you to have sponsorship. And then they realized, okay, we're being too much of purist about this. These teams are all gonna go out of business, but there are companies lining up to try to pay them to put the logo on it, okay, this is the way to make the sport viable. Yeah.

16:00 Ironic because then the EU would legislate tobacco advertising and sponsorship out of existence in the early two thousands, once again. But it's actually really weird. Go look at any of the sports historical greats like Garrett and Senna or Michael Schumacher or Alan Pross. They all had the Marlboro logo all over them. Or John Claire special. I mean, there were these cigarette companies, some of which I'd never even heard of. But they're so dominant on the cars for a long time there that you actually don't see the team name. At least on the liveries now you see the team name and their big sponsors. This looked like it was Team Marlboro Racing or Team John Player Special, not, you know, McLaren or Yeah, I mean they actually painted the cars to look like cigarette boxers going down the track. Yep.

16:45 Unfortunately. His story has a sort of strange and sad ending. Did you find this, Ben? Oh yes. Yeah. So in the uh Late seventies and early eighties. He gets tied up in an embezzlement scheme with John DeLorean. Chapman designed the chassis for the DMC twelve, you know, like the back to the future car.

17:04 Which would be awesome if the car didn't suck and the company didn't end in a giant scandal. Totally. The company collapsed and British prosecutors accused John DeLorean and Colin Chapman of each embezzling eight million dollars in government incentives that they supposedly were gonna use to build the factory. Chapman dies of a heart attack once this comes out at age fifty four. Truly sadly. And then DeLore and goes on to be arrested by an FBI sting in LA. Attempting to buy two hundred and twenty pounds of cocaine. with the intent to distribute to like pay off his debts for DeLorean.

17:40 Man, you can't make this stuff up. He was a man with a dream, David. Through all of this, though the cowboy nature of the teams, the individual iconoclastic owner slash mechanic, slash designer, slash drivers, the cigarette money. The vague or not so vague whiff of fraud. That totally embodies the early era of F one.

18:03 It was the Wild West. In Europe. Yeah. And just so people can really picture it. I think you kinda know what an F one car looks like now. Uh an open wheel car with a giant spoiler or rear wing. It's got a front wing.

18:18 When we first started here in nineteen fifty and really even into the sixties, too. These cars didn't look anything like that. They look like uh soapbox derby cars. That's exactly right. Almost like little bullets. Yep. So the UK contribution and the Chapman story really reflects this. Wild West aspect of F one. If that's

18:37 All there was in the beginnings of the sport. I don't think we'd be doing This episode today. Right around the same time that Lotus is coming into the league. There's another

18:49 Very different founding pillar number two of F one. Taking place in Monaco. Which is that in nineteen fifty six, the sovereign Prince Rainier the Third of Monaco As we talked about. At great length in our Hermes episode.

19:04 married the American movie actress Grace Kelly. And brought her to live in the Prince's palace of Monaco. This brings together. All of the

19:14 Old world luxury and heritage and legitimacy of Europe with the glitz and the glamour of Hollywood and the New World. In a way that's still very much part of F one today. I mean, basically this marriage was like the twentieth century's version of Travis and Taylor at the NFL and you know Swifty crossover. Like it was the crossover event. Of the century. So As we said a minute ago, if there had been Grand Prix races on the streets of Monaco for many years, going back to before World War Two and the

19:42 track and the location. But when Princess Grace comes to the party. Things go to a whole new level. So all of her Hollywood circles start.

19:53 coming out to the race to visit her. And conveniently on the race calendar, It you know, it just happens to coincide with the Cannes Film Festival right up the road in Can in France. So Frank Sinatra becomes a regular attendee to the Monaco Grand Prix. The Beetles, the Rolling Stones, et cetera, et cetera. Eventually Many not most of the F one drivers start

20:15 moving to Monaco and becoming stars themselves. I mean like today, Lewis Hamilton, Max Verstappen, Charles Leclerc, Lando Norris, they all live in Monaco. Well it also has some tax benefits. Yeah, also has some tax benefits. But for anybody who has been to Monaco or seen pictures of Monaco, or really any towns sort of on the French Riviera in that area, you might think Wait, but it's like cliffside. And the streets are all really narrow and old and winding. These cars that we were talking about at that time

20:45 it kind of made sense to race those cars in these types of environments. It makes a lot less sense now. There's no chance they would add Monaco with the cars being the size that they are today. to the race calendar. Yep. But there is also no chance that they would ever get rid of Monaco. This is what brings luxury into the sport. And today, again, also this doesn't seem that radical. It's part of sports league setup playbook one oh one, like look at you know our episode on the IPL.

21:13 This was so far ahead of its time back in the nineteen fifties and also Totally by accident. Which leads us then To the third. Italian founding pillar of F one.

21:25 Ferrari. Undeniably The most Important team. Company.

21:31 And person. Of this first age of F one. was Enzo Ferrari. And so Actually founded the company before World War Two.

21:40 Purely as a racing company. It wasn't any racing Alpha Romeo cars. Yes, that was the purpose of the company was to race Alpha Romeo cars. Also a red racing team because they were Italian. Yes, indeed. Frara itself didn't start making cars until after World War Two. But of course when the F one championship series starts in nineteen fifty.

22:00 Enzo has to join. This is the pinnacle of racing. And Ferrari is the Only team that's been part of every single F one season. Going all the way back to the beginning. There's a funny thing here where you might think, oh, Formula One, that's the big established series that legitimizes an automaker by being a part of it.

22:19 It actually works the other way with Ferrari. Ferrari participating in Formula One legitimizes the series. Ferrari, if they ever decided to stop racing in Formula One, would make people go Oh, so what is the big racing series? Yes, totally. Formula one. Is actually the marriage of

22:37 Two separate things. The teams And the race tracks. Unlike just about every other sport out there. These are separate entities.

22:48 It'd be like if the Seahawks you know, were a team that would play wherever Whenever they could get a game going. And they didn't have any relationship with, you know, Lumenfield in Seattle. So what Formula one the organization is doing is they are Bringing

23:03 The set of teams And this set of race tracks on the calendar, this set of Grand Prix. Together. And in the early days, it was kind of a different set of teams and drivers at each of the Grands Prix. Who can we get to come race at this track when? And it would come together in a very haphazard way.

23:21 So Back to Enzo and Ferrari. Unlike Chapman and Lotus and the Brits. Enzo actually had business sense. He was an entrepreneur.

23:30 And he was the first person who realised The deal was And Absolutely incredible business opportunity. At the intersection.

23:39 Of These really fast cars, these sort of legitimizing racing heritage. And all the glit and the glamour and the wealth of the celebrity That was represented by Monaco.

23:51 And that opportunity. Was selling fast cars to the rich and famous. Yeah. So Ferrari Pretty quickly after World War Two.

24:00 becomes a legitimate luxury brand. I think you could maybe even argue They're the only legitimate luxury brand established. In the second half of the twentieth century. Oh, that's interesting. Yeah, and it's very impressive how fast it happened. Before the war, it was Enzo racing a bunch of alpha Romeos. And then suddenly it's Ferrari. Right. Because as he's participating in F one

24:25 And those also handmaking cars for all the European royalty and all the American movie stars that are flowing through. F one. And so just like the equestrian heritage kind of serves as the like legitimizing soul of Vermes. Motor racing in F one serves as the legitimizing soul of Ferrari. It's just that they were co developed together. Here in the fifties and sixties after World War Two.

24:48 Mm. So We need to talk much more about Ferrari Odin. Another episode of its own. Oh yeah, we could do a Ferrari episode. For the purposes of F one, they really were that unifying factor. that pulled together the glitz and the glamour and the luxury

25:04 And the hardcore. Racing. Because the Ferrari cars became this tangible way that fans, even though they couldn't afford to buy them. could relate to what was happening.

25:15 on the track by dreaming about buying these road cars that they saw their favorite celebrities or, you know, royal monarchs. Driving around. 'Cause a lot of these other teams are building one or two or three cars period and they're racing them and then that's it. Yep, totally. Whereas with Ferrari. Probably

25:33 Every boy growing up around the world, you know, myself included, probably you too. Like has had a poster of a Ferrari or a model of a Ferrari in their bedrooms. Okay, so you might be wondering Where are the Germans in all of this? We talked about the Brits with Colin Chapman, we talked about Monaco, we talked about Ferrari. In the fifties, Mercedes actually was a major player in formula one and auto racing. But while they were racing one of their cars in Laman,

25:59 It actually crashed and killed eighty two people. Oh yeah, it was one of the worst disasters in motor racing history. They actually pulled out of I think all racing, and they didn't return to Formula One for another forty years. That accident was so devastating that four of the remaining Grands Prix were canceled. Racing was just so dangerous in this time. I mean you'd fourteen deaths. in F one alone. Not even counting other racing series or

26:25 audience attendees. Across this first decade. Totally. Mortal danger. was actually, I think, a core part of the appeal. of the sport in those early days.

26:36 What better to go along with all your glitz and glamour than An element of mortal danger. These guys were gladiators. They were risking Their life every time they got in a car. In the nineteen fifties, you had 14 deaths, so that's one point four a year. In the nineteen sixties, you also had fourteen deaths plus fifteen spectators in the nineteen sixty one Italian Grand Prix crash. In the nineteen seventies, didn't get much better, you had another twelve deaths

27:03 And then it starts to get safer from there. And we'll talk about all that later. But the first three decades, you were on about a one to two death per year rate. So that's five to ten percent of the entire Racing field. Would die. Every year.

27:17 Yep. And there were many, many more crashes and many, many more injuries. These were just fatalities. Famously Nicki Lowda's head caught on fire and he was scarred for the rest of his life. Yeah. And then he was back out racing several weeks later. It's insane. It's unbelievable. So Back to Ferrari though.

27:32 He's really the entrepreneur. That figures out how to build a real big business at the intersection of everything that's going on here. He's just doing it through his road car business. There's a great quote. from another team owner.

27:47 During this era. And it goes, Formula One is Ferrari. And Ferrari is formula one. It's that simple. This is another team owner that is saying that. Like a competitive team to Ferrari.

28:01 And You might know. who the team owner was who said that quote. Hmm. Oh, it's Bernie.

28:08 Yep. It was the person who quite literally would replace Enzo. Mm. Bernie

28:17 Ecclesiastes. The uh Supremo Impresario Owner? Of F one.

28:24 Owner of some part of F one. but controller of all of F one. So Josh and Jonathan in uh the formula book. Have a great Quote.

28:34 About Bernie. And Ferrari. As it turned out No one would get richer off the Ferrari Mystique than Bernie, a man who was never once employed in Marinello. Yep.

28:47 And that will be our protagonist today, but before we begin Bernie's tale. Now is a great time. To thank our presenting partner, JP Morgan Payments. Yes.

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30:29 So if you want to learn about how JP Morgan Payments powers seamless experiences for fans and businesses across all industries, check out jpmorgan.com slash acquired to discover what solutions can help accelerate growth for your business. Okay, so David. Enter Bernie Eccleston. Bernie Eccleston. So Bernie Was born.

30:51 In nineteen thirty. And he was a Hard scrabble kid. He grew up in Suffolk, which is to the northeast of London. His dad was a commercial fisherman.

31:01 And his mom was a authoritarian homemaker, according to many biographies about him. Although you never really know with the legends about Bernie, but that's the story at least as he wanted it told. Yeah. After The war. Bernie.

31:16 Ends up getting into the uh wheeler dealer business. In London. with surplus cars and motorcycles. From the war. He Opens his own showroom

31:30 In the outskirts of London. Where he starts to specialize in selling luxury automobiles to the newly rich and famous. Basically he becomes like the London celebrities car guy. You know, you got your jewelry guy, your clothes guy, you got your drugs guy in the sixties, you got your car guy. Bertie's the car guy. People refer to him as a former used car dealer, but that's not really right. Yeah. Well, I mean it is right. He started that way.

31:57 It's like calling someone else's puzzle dial Rolex a used watch. You know, it's not really used. No, no. It's like You wanna Ferrari or you wanna Bugatti? Hold the phone. Let me make some calls and see if I can get you one. Right. There's also Always been plenty of gossip over the years that Bernie was involved in more um

32:17 underground activities, shall we say, at the time. And Bernie himself would encourage this. So specifically, there was a longstanding rumor. That Bernie was the mastermind behind the great train robbery of nineteen sixty three, where two point six million pounds was stolen from a British Royal Mail train. This is like one of the most famous train robberies in history. Bernie Love this speculation. It's so it's two thousand five, a long time later.

32:45 He finally addressed it. When he's what, seventy years old or something? Yeah, seventy five years old. He gives a quote to the media when asked about it. There wasn't enough money on that train for me to be involved. I could have done something bigger. You start to get a flavor of you know who Bertie is. Which actually is correct given what he would go on to do. Very correct. Two point six million pounds. That's jump change. So Criminal mastermind or not.

33:12 Bernie is smart. Once he gets into Hawking cars to the new money rich folks in London. He doesn't Just sell them the cars.

33:23 He also steers them into Financing. Which I think is basically how car dealers make money. They mark up the cars a little bit, but then they really get you on the financing and the servicing fees, et cetera, et cetera. And when you're selling really expensive cars, the financing. Start to add up.

33:40 So this nets Bernie his first Small fortune. Now The deeper that he gets into this luxury auto world Bernie has the same realization that Enzo Ferrari had a decade or two earlier.

33:54 Which is that motorsport and racing Із лежимізing Of all of these fast luxury cars. So just like Enzo himself, Bernie. Wants to have his dealership and his brand. Associated

34:08 With Formula One. So in the mid sixties Bernie starts hanging around with F one drivers and being the wheeler dealer that he is, he pretty quickly becomes the Agent.

34:20 For a few. of his pals, negotiating better deals for them. With their Teams for their salaries, you know. Small fee, of course. Yes, of course.

34:29 Eventually he cooks up a scheme. with one of his star clients who actually drives for Lotus for Colin Chapman, a driver named Jochen Rint. To leave Lotus. А бас.

34:45 They're gonna become not just the talent. Yeah, Yokan's gonna become an owner. Yokan at the time he's one of the best drivers in the world. He's on top of the standings in F one. He's blowing away the field throughout the nineteen seventy season. And then tragically

34:59 during his practice session at the fourth to last Grand Prix of the season, crashes and is killed. and Rent and Chapman were constantly fighting about the safety of the lotuses that he was driving. Rent was so far ahead of the pack in the standings when he was killed that he would actually win the drivers championship that year. Oh, he still won, right? Yeah, posthumously. He's the only driver ever to um win a championship posthumously. So he got zero points in all of the races after his death, but he was so far ahead that he still

35:30 One. Bernie, as the story goes, is devastated after Rin's death. And to honor the memory of his friend. He decides that he's gonna carry through. on the plan that they had together, the dream they had.

35:44 And in nineteen seventy two, Bernie Spies the Brabham. F one team. For a hundred thousand British pounds, which would be about two point three million.

35:54 Dollars today. Today I think every single F one team is worth At least one and a half billion, I think is the floor. That's exactly right. Uh Birdie doesn't make that much money on the Brabham team as we will see, but he sells it for what, five million later? Five million a couple years later, yeah. So uh you know a nice return. But definitely the fact That team valuations go from a hundred thousand pounds to A floor of one and a half billion is

36:21 Thanks to Bernie. Well, thanks to Bernie. For part of it and then specifically thanks to Bernie leaving after that. Yes, for the other part of it. As we will get into. So when Bernie buys the problem team in nineteen seventy two. Along with it

36:36 He also gains membership into the quote Formula One Constructors Association. Now this is a very loose Organization.

36:48 organization is being generous here of All the team owners that Colin Chapman had actually kind of taken the lead in pulling together back in nineteen sixty three. With the original purpose solely of coordinating joint travel and transport logistics.

37:05 To getting their teams and cars to all the various races around the world. It's like hey, you're my bitter rivals. I never want to associate with you. I battle to the death with you out on the tracks, but we are going to the same place. We're going to the same place, why don't we share a ride, so to speak. And today actually Formula One management does handle all this. And I think they make a little bit of profit on it. Like it's a service that they sort of sell to teams, the tiny amount of profit relative to the rest of it, but they handle the logistics of moving the whole circus around the world. Yep. Well one thing I can guarantee is that once Bernie takes it over, he's definitely making a profit on it. So Bernie when he joins this owner's table, shall we say.

37:45 pretty quickly a couple things. One. Except for Enzo Ferrari. None of these other guys have a lick of business sense. All they care about is

37:57 fast cars and winning races. Whatever money they have or don't have, it's all going down the tubes in pursuit of victory. The second thing he realizes Is that Except for Ferrari.

38:11 And by this point in time, Enzo has sold half the company to Fiat, so he has major resources behind him in Italy. None of these other guys actually have any real money. I mean, for God's sakes, Colin Chapman is about to nearly go to jail over a eight million dollar embezzlement case with Delorean. Eight million dollars went a lot farther back in the seventies, but These cars are quickly becoming very expensive and the teams are becoming very expensive to run.

38:36 There is not a sustainable way to run a team. I think the average tenure over the entire existence of Formula One is about six years for a given team. Just to make this exact point. Here is the list of F one teams in nineteen seventy two, the year that Bernie buys into the league. Lotus.

38:54 Tyrell. McLaren. Probably know that. Ferrari, you definitely know that. Certes, March, BRM

39:02 Matra And Braboom. So there's two that exist today. And at that point in time, only one of them is a real Business.

39:10 So Bernie sees this and he's like Dang. There's an opportunity here. All these other guys are focused on winning races. Yeah, I'd like to win. But I really care about getting rich.

39:24 And there's So Just to paint the picture of the business state of F one. When Bernie came into the league. Each

39:35 individual team. negotiated their appearance fees. With each individual Grand Prix separately. So they're like a whole bunch of Grand Prix, each with their own race promoters and organizers. There are a whole bunch of teams, nine of them to be exact.

39:53 And they're all negotiating separately. With each other. Assuming there's I don't know, fifteen races or something, that would be a hundred and thirty five distinct agreements between teams and local races. Everybody's getting paid wildly different amounts and usually not very much.

40:09 And these things sort of need to depend on each other because How valuable is a race to go to if the other teams aren't gonna show up to that one. Right. I mean, this is like the sports business world's worst practice number one. Not only is it bad for overall revenue. You know, you have

40:29 no centralized leverage over the tracks if you're all negotiating separately. To your point, Ben, it's just playing bad for the sport. How are you supposed to sell tickets and tell fans they should come if you don't know if Ferrari's gonna show up or if McLaren's gonna show up. There's no way to know as a fan until you actually showed up at the racetrack. Who was gonna be there The other aspect of the sport that I say would be in shambles, but Wasn't even in shambles'cause it didn't exist. Was

40:59 Broadcast and television and promotion. There was none of it. Yeah, thankfully Bernie came along before that became too big. I mean, can you imagine if each of these racetracks was trying to do their own media rights deal? I mean he came along at the perfect time. It was already criminally too late that F one and the

41:18 Grand Prix. hadn't gotten a television, we're talking about the mid seventies. If you look over at the NFL in America, they're already making like fifty million plus a year. In broadcast rights. Yeah, it was ten years into their I think nineteen sixty one was their first national broadcast deal. I mean they'd already launched Monday Night Football in nineteen seventy. It's not like there wasn't a playbook for this out there. Yes F one, meanwhile, is just as, if not more, popular.

41:46 is a global sport, has great demographics. And is making zero dollars in Meteorite. So Bernie shows up, he's hardly a media professional here, but even he can see that there's Room for improvement on both of these fronts.

42:00 Even before realizing hey media rates are gonna be super valuable. The thing that he clearly sees is centralizing these negotiations. is going to be the way to extract the most value. Yes. There's two opportunities here. The near term easy one is

42:16 Centralize the negotiations with the racetracks, extract the most value. Capture a bunch of it for myself. And then there's a longer term play of like, ooh, what can I do about these television deals. I think it's actually worth one more quick pause here to Compare, contrast. Formula one and the NFL and Bernie and Pete Rosell.

42:35 'Cause these are sort of happening at the same time, but Bernie is like the anti Pete Rosell. You know, Pete Rosel was this consummate manager, professional media guy from Los Angeles. He started as the LA Rams PR guy. And then He gets drafted by the owners of the NFL to be an employee of the league.

42:56 to serve them and their interests as commissioner. And the league is owned thirty two ways by the owners of the teams. Right. So Razell's Unifying vision to the NFL owners was communist capitalism, as we talked about on that episode. Like, hey, this league first. We're all in this together.

43:15 Let's centralize our negotiating and our media rights so that we can all grow the pie and Share the spoils evenly. Bernie's MO doesn't league first, it's me first. He does centralize things, but it's not like Formula One. becomes owned by all the teams equally, it's more like he says Okay.

43:36 I'm gonna start a company. And that company is gonna go sign agreements with racetracks, and then you're all open to do business with me. what it's gonna be like for you to race at those racetraks. Yep.

43:50 So the way he does this He proposes to the other team owners Hey, obviously we need to centralize our negotiations, and you know, I can tell that you guys don't want to do this. Or you would have already done it. Why don't you just leave it to me?

44:05 I'll take care. Of everything. You give me your rights for your team appearances. And I We'll go fight with these race promoters.

44:15 many of whom are probably gangsters themselves. And I will get us the best collective deal. I tell you what. I will even take all the risk. And guarantee to all of you other guys

44:28 Up front. that you're gonna get paid at least as much as you're making now. Mm And you must come to the races. That was the teeth. No more of this like I might show up, I might not. Yes, that was also the part of the motivation of we gotta fix the sport. Nobody says, So I'll do all this.

44:43 And I'll just take a small fee. off the top for my services. Supposedly in the meeting of the constructors association He verbally says that he he will only take two percent. of the total race fee revenue off the top for his services. Really?

44:59 But of course Nobody writes anything down because Bernie never writes anything down. And when the dust finally gets settled and many decades later All of the books and stuff become public through Whole series of court cases.

45:14 Turns out Bernie's actually taking eight percent. Off the top. For his fees, which is uh you know. A healthy amount. In addition, he's also an owner of one of the teams. So he's getting his owner split. Honestly, eight percent is not bad. If you are massively increasing the amount that every

45:31 team is getting paid by doing this and you are sort of like organizing and orchestrating the sport. Taking eight percent for those services. Yeah, it seems quite reasonable. Absolutely great point. And you are one hundred percent. Correct.

45:45 Burning is doing a great service. For all the F one teams and owners. He is instantly making the sport. A lot more. Valuable.

45:56 And sustainable. And sustainable, totally. Every single team would go bankrupt except Ferrari otherwise. Yep. So Before Bernie gets there. The average prize purses and payments that

46:07 teams would get from a Grand Prix. And obviously they varied wildly, but on average It was like ten thousand dollars per team. So like Nothing. In Bernie's first year running the show He takes the average prize and fee payment up to forty thousand dollars a year. So four X in one year. And then

46:27 A couple years later by the mid-seventies, it's up to a hundred and fifty K. per race. And then by the end of the decade he's gotten it up to two hundred K. So like Massive, massive improvements per team per race. Yeah, so suddenly you can start to actually fund your operation if you know that every time you show up to the track, you're getting two hundred K to do it.

46:48 As Bernie would never fail to point out, All of the other team owners should be massively grateful to him for essentially saving their asses here and funding their teams. Yeah. And back to the original purpose of the constructors association of coordinating travel costs. Bernie also goes out and negotiates competitive rates with freight providers and

47:10 massively improves travel costs on the Logistics side of the business for the teams. Basically Bernie's sort of first act in F1 reminds me of one of my favorite sayings that I heard earlier in my career from a mentor. He may be a thug. But at least he's our thug. Yes. So it's worth taking a pause to say

47:32 the FIA is still the governing body of the sport of this racing series. And so Bernie takes over this thing called the Constructors Association, but really the FIA and their set of rules is still governing what happens between these teams at the racetracks. He's just the one sort of organizing the commerce through the constructors association. Yes, and importantly The FIA is the one who blesses each of the racetracks. with being a Grand Prix part of Formula One. Mmm. So what happens next, as you might imagine

48:08 You know, these race promoters are none too happy about this. Little guy from England coming and beating them up. Right. Someone's aggregating all this power in the ecosystem and they're negotiating with us and it doesn't feel good because they've got all this leverage now. Yep. They go.

48:24 to the FIA and say, hey, you gotta do something about this Eccleston guy. He thinks he's running F one. Yep. This results In a whole series. of protracted negotiations between Bernie

48:39 And the constructors association. And the FIA. That finally Get hammered out. In nineteen eighty one with the first

48:49 Concord agreement. which is still the name of the roughly every five year agreements. That government. F one to this day. Do you know why they're called the Concord Agreements?

48:59 I do. that is the physical location in Paris. of where they were negotiated, right? Yes, of the FIA headquarters at the Place de la Concorde. Which gives you a sense here. The Place de la Concorde in Paris is one of the ritziest, most famous parts of Paris. It was a bunch of like uh stuffy bureaucrats. And so what is the FIA? Is it a nonprofit? Is it a government body? Is it like an NGO? It is an an NGO. That's exactly what it is. It is an international organization.

49:29 That was formed by all of the respective European country motoring clubs. So the FIA also regulates like rally sports, endurance racing, et cetera, et cetera. It's not just Formula One, it's just that Formula One is the pinnacle. of racing. It's a a standards body. Yeah, exactly. Concord agreement. The two sides, Bernie and the Constructors Association and the FIA and

49:54 race tracks by proxy. Agree on Four things. One. The FIA will have full

50:03 Unilateral and unchallenged jurisdiction over the rules of the sport. Going forward. The Constructors Association and Bernie. They have no say over the technical rules of the sport. Two.

50:15 The constructors association teams will commit to showing up and participating in every official Grand Prix race. In return All of the race fees and prize money. Now contractually must be paid centrally. Two.

50:30 Burney. And the constructors association. And two Bernie and the Constructors Association. Will control all rights and income.

50:41 From any future televising of F one races. For the next five. Seasons. Panana.

50:50 No rights to the race organizers. No rights to the FIA. All the T V money. Flowing through Britney. Which if you look today, that is the single largest revenue stream of the whole thing.

51:02 Of course. How could it not be? Yep. So what's interesting is Both sides. here actually feel like they're getting a pretty good deal.

51:10 And to be fair The reason that they thought that Was The T V media rights. weren't actually worth anything yet.

51:19 Well did they put in that the T V media rights when they do happen. Bernie still only gets eight percent and the teams get the rest of the ninety two percent, or is that yet to be negotiated? Gray area. Okay. Bernie thrives in the gray zone. So at the time.

51:35 European and British television was A mostly state controlled with organizations like the BBC and its peers all across Europe. And be very far behind the US in terms of monetization and Sophistication of televising

51:53 sports especially, but any kind of media. And again, these are mostly like the equivalent of PBS in the US. They're public broadcasters. There's not a competitive ecosystem there's really one party to go to. So the teams and the FIA and the tracks Yeah, even though they're giving up all the T V rights to Bernie They don't look that valuable to them. They're like, All right, you want to go have a boondoggle and see if you can figure this out. Good luck to you. Right, and to be honest, it sounds hard to film. You got

52:20 These race tracks with Fifteen. and cars that whiz by real fast and crappy technology at the time to try to film them. And you wanna go do business with the government to try to get them to broadcast Okay.

52:35 Yeah. Have fun. So Bernie Unclear if he had a vision for this all along, or if he was like, Oh, here's something I can grab. Let me go see what I can do with it. Either way.

52:46 He basically executes it. Perfectly. So once he gets the T V right. He goes to

52:54 An umbrella group of all the public broadcasters all across Europe. called the European Broadcasting Union. Represents ninety two different countries. national public broadcasters, including the BBC in the UK, and says Hey.

53:12 You have a lot of F one fans in your respective countries. That's a big sport in Europe. I now have the rights to broadcast this sport. How about I'll sell'em to you for Super, super, super cheap.

53:27 A couple million a year for all ninety two countries. So like amortized in aggregate, basically nothing for any individual broadcaster to take these rights. The only thing I want Them all to do. Is promise. to show every single race on the calendar.

53:45 Not just the ones. That are in their home country. Hm. So seems like a pretty good deal, right? So he's in grow the sport mode, right? Not capture value right here. This is a growth opportunity. Yep. This is a long game.

54:00 So they all say yes. And then Ben, as you were saying A minute ago it pretty quickly becomes clear Hey All ninety two public broadcasting entities don't really have the expertise or the interest.

54:13 In figuring out how to television. This sport seems hard. It's still true today. The way that most of the broadcasters around the world take F1 is they take one main feed that is produced and then they do more stuff on top of it. So this is when that starts. Bernie says, All right.

54:30 No problem. I'll take the risk. I'll fund the investment. Up front, personally. to create a central single television feed.

54:40 For each race that Formula one. quote unquote slash me Bernie. Yeah, what is Formula One at this point? Yeah, what is Formula One? So we should say Bernie loved to operate without contracts. Here's his exact quote.

54:56 I carry out my business in a very unusual way. I don't like contracts. I like being able to look someone in the eye and then shake them by the hand rather than do it the American way with ninety two page contracts that no one reads or understands. If I say I'll do something, I'll do it. If I say I won't. I won't.

55:14 Yeah. And who owns these things? I don't know. I'm making sure it happens. So Bernie goes and sets up a new company. Formula One Promotions and Administration.

55:25 Or Fopa. Not to be confused with FOCA, FOCA, which was the constructors association that you know, just did that deal with the FIA. Right. That Bernie is now de facto head of, but doesn't

55:38 have any legal ownership of. Right. The first thing that he has Fopa do is create this centrally produced TV feed from England and then distributed out to all the various broadcasters all across Europe. He just keeps running this playbook over and over again of okay, cool, I'll centralize something, I'll aggregate something.

55:57 And now I have leverage to go and do business with the rest of the ecosystem. Yep. And his plan has been, like you identified, I'm gonna get all these public broadcasters across Europe. To basically go develop the market for me. Right. They're making the next negotiation much more favorable to me. They're out there right now. Sure, we didn't really exchange much money, but they're out there building the brand, getting people excited, and then as soon as that Agreement period is up. Okay, it's really expensive, and I am the one who you have to pay. Yes. I'm gonna be sitting in the middle as the choke point for

56:30 What will now be a hugely in demand television product. Which is exactly What happens. Now Bernie also gets really lucky here because in the intervening years. The pay TV ecosystem in Europe. Finally

56:45 comes online. So one of the reasons why America was farther ahead in developing the television market is that had become a thing earlier in America. And so there's just a lot more bidders for content. out there in America.

57:00 When Bernie started this adventure It wasn't clear that the same thing was gonna happen in Europe. But it did. Yeah. And there was one other element that developed in all this too. In addition to these agreements that Bernie was having everyone sign

57:14 Race organizers were required to surrender income from track side advertising and corporate hospitality to formula one owned entities. So this now means that the race organizer, the track business model, is really just ticket sales. Yeah. So as it's becoming clear that T V rights are now gonna be really valuable. The original nineteen eighty one Concord Agreement term comes up. And

57:41 Bernie now needs to go negotiate. A new deal. Oh because Fopa. And the T V rights were actually not

57:50 a party to the previous Concord agreement. Right, exactly. It didn't exist yet. Bernie created it in the interim. So the other two sides of course come in and they're like Hey. Thank you for making T V rates a thing. We're pretty sure they're gonna be valuable going forward. We deserve a cut.

58:08 No teams, no tracks, no races. We want in on this. Yeah. So Bernie says okay, okay. He starts with Why don't we just

58:15 Divide it all up a third, a third, a third. Foka and the teams you'll get a third. FIA, you guys can get a third. But then a third really should officially go to Fopa.

58:29 I'm the one that created this and we're producing the broadcasts. So After a whole bunch of negotiation. It ends up splitting out that the FIA gets thirty percent. Foka and the teams get forty seven percent. And Fopa, Bernie's company.

58:45 It's twenty three percent. Fopa is just a guy. You're just saying and twenty three percent of it goes to Me, a thing I fully own. Yes. This company that I created. Bernie is a master at playing everyone off here.

58:59 This split gets negotiated. before Bernie really ramps up running bidding processes in each country for the TV rights. So he actually renews the European broadcasting union deal. for another three year term. To sort of

59:17 Keep growing the sport. And not value maximized just yet. Because he doesn't want a lot of money to start going to the other organizations. Hm.

59:28 So that was the second Concord agreement. When the third Concord Agreement comes up for negotiation in nineteen ninety two Burning goes to the FIA and he's like You guys. You're getting the T V money, but

59:42 You can't be happy because it's really not that much. You know, and there's a lot of complexity here. You're a international organization. What if I just make this easy for you? I'll pay you a flat fee. Rather than you taking thirty percent.

1:00:00 I'll pay you five million dollars a year. Going up by one million. Every year. Up to nine million at the end of this term. In exchange for

1:00:11 Your percentage. of the T V rooms. This will be way easier for you. And the FA is like Great. That sounds like a great deal.

1:00:19 Let's do that. So Bernie now has the twenty three percent he originally had plus Another thirty percent that used to belong to the FIA. For which he has to pay five to nine million dollars a year. And you can actually imagine if you're an international regulatory standards body

1:00:37 the fact that a guaranteed payment is being made available to you so you're not taking risk anymore. might actually be great. Of course, and this is the justification that they all give to the press when the Deals are done. So

1:00:48 Deal gets done. Bernie's now got fifty three percent plus All of his cuts that he's taking from the Constructors Association for His services plus his team ownership, et cetera, et cetera. Deal gets signed.

1:01:03 He goes out. runs auctions across Europe and really across the globe with any T V provider who's interested in showing F one. All of a sudden T V rights go from small single digit millions in aggregate to F one.

1:01:18 to over twenty five million a year. just flowing into FOPA and Bernie. From the T V rights. Oh wow. But call it forty to fifty million a year. So a big, big step up. Okay, so how do the teams feel about this? I mean that suddenly there's this guy that's

1:01:35 Getting half ish. of the revenue from the broadcast of their sport. That is the key question. You would Think

1:01:43 That the other owners would be pretty pissed. And some of them were. To be fair. One of the other owners, Ken Tyrell of Tyrell, which Fun fact is actually the forerunner of the Mercedes team today publicly accuses Bernie of quote stealing F one from the teams.

1:02:02 But That's kind of a minority opinion. By and large, they're all still pretty grateful to Bernie at this point. Because Turning F one into this major T V sport

1:02:16 meant that all of a sudden all of their individual team sponsorship deals just got way, way, way more valuable. Uh That makes sense. Before

1:02:28 F one was televised. All that sponsors were getting when they got their logos on the cars was just exposure to whoever happened to show up at uh any given track. For any given race. And really it wasn't even

1:02:45 The totality of the fan base that showed up. It really was only fans that were sitting close enough or at the right angles. Where they could actually

1:02:55 Read the logos on the cars. At this point in time, the more valuable real estate would have probably been the track side advertising. Whereas today the track side advertising is not nearly as valuable as the space on the car because the cameras stay fixed on the cars and on the drivers. That's

1:03:15 the valuable space that people are after. And unless you're televising it, the cars are the thing in motion whizzing by. Right. Yeah. There's no way you're gonna be able to read what's on an F one car when it's whizzing by live. Right. So This Is when sponsorship money and in particular tobacco money really starts.

1:03:34 Funneling. Into the sport. In aggregate. Until it finally gets banned. by the EU in two thousand six.

1:03:42 tobacco company advertising poured four point five billion dollars Into team sponsorships in F one. Over the years.

1:03:54 That is A lot of money. And that was just one category. And in particular, part of the reason why tobacco is so interested here is there was sort of a loophole that as there was all this pressure to ban tobacco advertising on TV and on radio and on billboards and in newspapers. putting it on a car that happened to show up in a TV broadcast, oh, that was a sponsorship of a team. it's sort of this way that the tobacco companies got to stay on TV and it was heavily associated with a brand image that they wanted to cultivate. It's glamorous, their speed, it's risk taking They get to do these full takeovers of the liveries of the cars. I mean, it is a full screen ad. It's just not classified as a TV advertisement.

1:04:35 Okay, so finally, thanks to tobacco companies and T V media rights and birdie, there's all this money into Formula One to fund these. ever increasingly expensive operations. And of course the question then is w what do they do with All this money you know, these teams wanna just go out and beat each other and so they're gonna spend

1:04:55 into an infinite limit to attempt to do so. Oh yes. And of course they come up with some pretty clever ways to uh Invest slash burn that money and make the cars go faster on the grid. Yes. But first, listeners, now is a great time to thank longtime friend of the show, ServiceNow, the platform that puts AI to work for people. And listeners, we're doing something fun and special today.

1:05:20 One of the main ways that we did research for this episode was to go to the Las Vegas Grand Prix with ServiceNow. And we spent a ton of time with their CMO and EVP Colin Fleming. Colin also happens to be a former Red Bull test driver. So it was amazing to hear a lot of research directly from him and just grill him with questions all weekend. We have him here with us today. Hello, Colin. Thanks for having me, guys.

1:05:44 So we thought a fun thing to do this segment would be to share one of the F1 tidbits that you shared with us when we were in the paddock club together. So what is one of the things that you think most people don't know about the sport? Everyone talks about that technology and speed, but the under discussed component is the human side. And F1 drivers operating at fighter pilot like cognitive load for 90 minutes straight. Six G's under pressure, which means their head weighs like 80 pounds at that moment. Their heart rate is 180 beats a minute or more, and they've lost five percent of their body weight during the course of the race. They're doing this, making micro decisions of thousands of times. With no Timeouts, no commercial breaks, and I don't think there's another sport like it.

1:06:24 We're talking a lot this episode about the specific technologies that were leaps forward in different F one eras. What do you think was the most significant over the years? For me, it was the hybrid introduction. I think it was twenty fourteen. It moved the sport from being about pure horsepower to being about energy management. And as a result, the driver's lives got way busier. Now they're managing battery deployment, harvest modes, engine maps, and they're doing this at unreal speeds. And Mercedes cracked it first. They won eight straight championships. Okay. Now from the service now angle, I'm very curious why you decided to uh sponsor an F1 team in Aston Martin. What is the business case? Three things that are really critical for us. Storytelling, hospitality, and brand. It's a super complex sport, as we know, logistics, uh technology everywhere.

1:07:08 And that is the life that our customers live every single day. So we didn't just tap a logo on it. We deeply embedded our technology into the organization to help them really find that one tenth of performance they're all looking for. The hospitality gives us the opportunity to tell that story and the brand is truly lead. We're thrilled to be part of it. Okay, last question while we have you. What's the latest in the world of service now? Well, anybody that's deploying AI today knows it's absolute chaos. Companies don't know what's running, what's working, what's not. And that's why we've built the AI control tower. It helps companies turn that chaos into control, giving them visibility, governance, orchestration. And to really understand what value it's bringing together.

1:07:45 So we think the answer is ultimately this incredible probabilistic intelligence. with deterministic controls and that orchestration layer from service now. And in May, we're gonna show it off at Knowledge. We'll be there. Amazing. We hope all of your listeners will join us. Well, a huge thanks to Colin for joining us today and to our friends at ServiceNow. You can go to service now.com/slash acquired. To learn more.

1:08:08 Okay, so we're in this era now where team owners Have a lot more resources at their disposal. And boy are they deploying it. Ben, what are some of the crazy things that they start doing during this time? So in nineteen sixty eight

1:08:23 Colin Chapman from Lotus had become a really big believer that the way that his drivers could go faster in the turns was applying more downforce, so they'd have better traction on the road. And they put the first airfoils or wings on the car. And in 68, that was just really small wings. They almost look like Early Formula One the cars that were just these like long tubes, but with like little hints of what Formula One would become on them. It's this kind of amazing transitional period. We'll link to it in the show notes. And then don't they go to like

1:08:55 Big wings before the FIA regulates those out of existence, right? There is a lot of experimentation, yeah, that happens in this period. It's really fun. In the email we'll put a bunch of pictures of crazy F one cars that were technically within regulation when they were first tried before all these tactics were made illegal. But It's probably time to stop and do a little physics lesson here. I never really understood this.

1:09:21 So This is Listeners education for me. Lighter cars are faster. So why would you want to put a spoiler on a car?

1:09:29 That pushes it into the ground harder. You don't want a heavier car. And so you sort of have to separate this idea of Down force pushing down on the ground from just weight. There are ways to get down force, which can be good, that is different than a heavy car. Yeah, it's funny. Before

1:09:48 Doing this episode and learning all this alongside you. I always just sort of assume that like at least road car manufacturers Put this stuff on cars to make them look cool, not to actually do anything. Right. But you want downforce to make it stick to the road better on turns. But the issue, of course, is that with a big spoiler Yeah, you're creating down force, but you're actually creating a ton of drag also. So the car is facing resistance.

1:10:13 to going forward as a byproduct of what you're attempting to really do is force the car down. So if you focus too much on optimizing for downforce on the turns, you end up slowing yourself down in the straightaways. So the takeaway from lesson number one here is downforce good. Drag bad. Yep. So let's flash forward nine years from that 1968 initial aerodynamics experiment. So we're now here in the late 1970s. Lotus is still working on this issue. They were trying to figure out a way to produce down force that doesn't produce a lot of drag.

1:10:45 And what followed is the stuff of F one lore. You will hear racing nerds talk about the Lotus Seventy Eight and the Lotus Seventy Nine as if these are like gilded vehicles. Mythical beasts. Yes. Yeah. So the first breakthrough is Well wait. What if we can turn the whole car into a wing? I mean, rather than our traditional shaped car with a wing slapped on top, what if we made it actually part of the body style itself? So the whole thing gets

1:11:12 Push down. And when you look at the low to seventy eight. It really does look like one big wing. I mean Google it. We'll put in the email. It's really cool. The second breakthrough

1:11:22 is a fun one from the world of fluid dynamics. Everyone listening is probably familiar with how airplanate lift. The wing is shaped in a special way such that when the plane moves forward, you generate high air pressure underneath the wings, low air pressure over the wings, and thus the airplane is pushed up into the air. Well what if you did the opposite? That Is what the Lotus team did. They shaped a car like an upside down airplane wing.

1:11:49 So the bottom of the car had a special skirt on it that shaped airflow to speed up under the car, squeezing air into a very small space since it's super close to the road as the air molecules move along at high speed under the car, which creates that low air pressure zone and then carefully control the air with a gradual upslope. And a diffuser to guide how the air comes out. from underneath the car in the back. The effect this had was to create low air pressure under the car, high air pressure over the car, and essentially suck the car. onto the ground. And in physics this is called the venturi effect. So the areas under the car are called

1:12:27 ventury tunnels. Ah, that's why. It is funny when you and I were at the Vegas Grand Prix and we kept saying, Oh my God, these are like fighter jets on the ground. They actually are like fighter jets on the ground. Yes, they really are like upside down fighter jets. So did it work? Absolutely. Mario Andretti, upon driving it, said that it cornered as if it was painted to the road. And he won both the driver's championship and Lotus won the constructor's championship in nineteen seventy eight.

1:12:57 Interestingly, by the nineteen eighties, it was producing so much downforce that the drivers could take these corners at super fast speeds. And it actually became a safety hazard, especially because if the car would go up on a curb or the skirt slipped in any way, the cars were then going way faster than they otherwise could have without that sort of uh sucking to the ground, the ground effect to cause the traction. So in 1983, these ground effects were outlawed. And regulations were updated to say that you must have a flat bottomed car. Mm interesting. Yes.

1:13:30 But For fans of ground effects, they would make their way back for the 2022 to 2025 regulations, which that's what we saw in Vegas, David. It was crazy cool to watch because I think 70% of the downforce from those cars is created. By the ground effects, not from the pushing down of the spoiler, but the sucking of the car onto the track. And so

1:13:54 It was kicking up all that dirt, especially during qualifying, because it's driving around on these Las Vegas roads that just have sand and dirt and silt that sort of builds up and creates these just like huge clouds of dust in the air from all the sucking. And then qualifying in the rain was insane seeing like all the rainwater just shooting up off of these cars. Yeah, the rooster tails, as they call it. And I think it was two years before we went in Las Vegas. One of the cars even

1:14:22 Sucked. up a drain cover that had been welded shut and basically wrecked the car. But these cars produce so much downforce that if you drive over even a welded shut manhole cover. Chunk. It sucks it right up.

1:14:35 Wild. Yeah. So ground effects, very, very powerful. There are a few other just giant leap forward that would happen in areas other than aerodynamics also. So engines over the years have gotten way more fuel efficient, with only fifty percent of energy in an F one engine lost to heat compared to seventy or eighty percent in a road car. Being lost to heat. So this obviously is something that F1 teams care a lot about because if it's more efficient, you can carry less fuel, have a lighter car, go faster. So huge, huge advantage. They've also gotten a massive increase in horsepower, tripling from three hundred something horsepower engines when we first started in the fifties to

1:15:17 a thousand ish horsepower coming out of these engines today. Insane. In cars that are light enough that you could basically pick them up. A half to a third as heavy as like an average road sports car. The F one cars are that light? Because of all the carbon body work. Yeah.

1:15:33 So a thousand horsepower in something. It's basically light as a feather. As far as cars go. And then, of course, there's turbochargers, which are an insane invention. This harnesses the unused energy from the exhaust gases. To spin a turbine.

1:15:49 And then use that to compress the air that is going into the engine, which ultimately means then there's more oxygen in each engine cycle. So you can have a more powerful combustion. every single engine cycle and thus more power again in the car. Which actually raises a important point too. It's not like any of these teams Even the ones that were backed by actual car manufacturers.

1:16:13 We're doing this with the goal of advancing technology for consumer road cars, but As a byproduct, a lot of this technology over the years did make its way into The consumer. Landscape.

1:16:27 Yes, and it did become an intentional strategy over time. And it provided a air cover for a lot of spend, especially for these constructors that were also consumer car makers, if they could say, Oh, this is R and D and stuff's gonna go into cars. And it did. I mean, you had paddle shifters and carbon. Or even just turbos. I mean, so many cars, even like Not sports cars are Turbo these days and a lot of the things that we're going to do. technology got perfected in F one. Yeah. I think people sort of overstate this when they say there's all this technology that came from F one cars, but I think it's More like the technology was sort of iterated and perfected, or they would explore new material science or something in F one cars that would eventually go into road cars. Yep.

1:17:08 So that's engines on top of aerodynamics. Then there's this whole third category where they really had a breakthrough in electronics. So all the cars we've been talking about at this point. were very, very manual and analog. And in the early nineties, the Williams team comes along and realizes Oh.

1:17:25 This technology is finally good enough for us to try to automate some of the systems in the car in real time. Let's add software, baby. This is the early nineties. I mean, this is pre internet. So they come up with this whole crazy broad set of ideas. And remarkably they implement Basically all of them, and they work very, very well. So the systems are

1:17:47 Traction control. Anti-lock breaks. Active suspension. Semi automatic transmission. Speaking of road relevance, David, and transferability to consumer cars. Yeah, totally.

1:17:59 All of these worked together and the car even automatically adjusted its ride height. customized to each corner on each racetrack. So competitors saw this and got so mad and accused Williams of making a car that drove itself. But for a couple of years, this was legal. And they won both drivers and constructors championships in nineteen ninety two and nineteen ninety three with Nigel Mansell and Alan Prost. In fact, the car was so dominant that Prost' old teammate and rival from McLaren, the great Ireton Senna, who we have not yet talked about in this episode, the three time world champion, wanted to jump ship.

1:18:38 from McLaren to join Williams and Prost was actually retiring After that ninety three season. So a spot did open up for Senna to join Williams and In ninety four. Uh but then the FIA

1:18:52 made it illegal to do all this software stuff. Change the rules as soon as he gets there and says, Hey, you can't have all these electronic driving aids. I mean, I know it makes the car really desirable, but No, this is not the same sport anymore because it actually decreases the amount that the driver matters so much that we are aren't really willing to go there. So Senna is then left on a New team. with a car that's just on par or quite possibly behind the quality of the whole rest of the grid when they had to take out all these electronic innovations. And sadly, early in that nineteen ninety four season, the racing world would witness its most infamous and fatal crash.

1:19:32 in that Williams car. Yeah. Which is obviously Santa's death in nineteen ninety four. Which becomes this Global

1:19:40 Moment. I believe still to this day Arton Sena's funeral in Brazil. Is the largest attended public funeral in history. Three million people showed up in the streets for his funeral.

1:19:57 It's this horrible tragedy. He had just sort of gone from rising star to clearly the best race car driver in the world, just this natural talent. There's a beautiful documentary released in twenty ten for anybody who's interested to go learn about his life and this crash. I mean the one at scientists light on just the sport in general in a way that hadn't happened since the modern television. Era began.

1:20:22 Two, it specifically shin a light on how unsafe it still was. Yeah, so it's interesting because by this time the fatalities had really dropped off. So we mentioned I'll just go through the counts here by decade. Nineteen fifties there were fourteen. In the sixties, there was another fourteen. In the seventies, there were twelve. Yeah. Yeah, more than one a season. Yes. So then they start implementing a bunch of obvious stuff. The FIA has to inspect every track and make sure it is complying to all the rules before every race. You can't have straw bales anymore. That's right. The barriers used to be straw bales.

1:20:57 Yes, now you need these guardrails, they have to be double reinforced, you need separation on the pit walls. There was a lot of stuff going on sort of near the pits that drivers were going too fast or accelerating too fast. Finally you get fireproof overalls in the nineteen seventies. You get fuel safety cells, mandatory seat belts, multi point harnesses. So Big steps in the seventies. Yeah, this is one of the craest things.

1:21:21 A long period of time. F one drivers actually refuse to wear their seat belt. Because they wanted to get thrown out of the car so they didn't catch fire after it crashed. Right. Insane. They didn't want to limit their options in a dangerous situation. So after all that

1:21:41 Then in the nineteen eighties you have Four deaths. Lot better than fourteen or twelve. And in the nineties, the only two deaths. Or this one weekend.

1:21:52 Roland and Senna. And so it did kind of come as a shock. 'cause w I think people felt like oh we're through this era, things are a lot safer But obviously they still have a long way to go. So

1:22:05 What happened after Senna's death. From a safety perspective and what impact did it have. The biggest one is they just slowed down the cars. Right. I mean, all this R and D and sticking to the road and getting crazy traction and taking high speed turns The faster you go, the more dangerous it is. And so Interestingly, F one racing in today is not that much faster than it was in nineteen fifty.

1:22:28 The top speed is like forty miles per hour faster than the old Top speed. I would have thought, oh, all this RD, these cars are probably two, three, four times faster. No, they're not. And so Right after Senna's death, they limited the aerodynamics of the cars.

1:22:44 you couldn't use as big of wings, you couldn't use as big of diffusers. In nineteen ninety eight, a few years later, they groove the tires to reduce cornering speed. So they actually looked a little bit more like the tires we use on the roads instead of the flats or the slic that you see real race car tires. There were also some structural things they put into the cars, so deformable crash structures, survival cells, front impact testing, higher sides on the cockpits, and they changed the tracks too. A lot of corners were given larger runoffs and upgraded barriers. So that all did help. But in the twenty tens there were also two fatalities, and so This is when the really big noticeable change happened.

1:23:26 The halo. The halo. So in twenty eighteen In response to the twenty fourteen crashes, the FIA says enough is enough. We are gonna mandate that every car

1:23:39 Has this really, really rigid, robust, heavy. Thing. That you put right on top of the driver.

1:23:47 And there's a giant bar directly in the center of the driver's field of view. So There's a giant compromise here. But It has saved at least three people's lives since then because it can protect a driver even when a car is upside down and skidding. These innovations have made it so we've had zero fatalities.

1:24:06 since twenty fourteen. It's I think the longest stretch in F one history without a fatal accident. Yep, it certainly seems like this board is a lot safer these days. Yeah, it's still dicey, but over the last seventy years, they've observed all the lowest hanging fruit of ways that they can protect the driver. Yeah. So

1:24:25 Bring it back to the Business narrative here. One of the kind of great ironies here of the obvious right decision to focus on safety and slow the cars down. Is it? just further fuels this sort of

1:24:38 spending spiral amongst the teams because the harder you make it to go fast, the more they're gonna be incentivized to spend every last dollar and look in every last little corner and find Every last little loophole. To get an advantage. Yeah, I mean when the sport first started, there were giant gains to pick up left and right, and you could sort of do all sorts of crazy stuff. And we were talking about all the different car designs with spoilers that are up on giant poles and I mean truly wacky ideas. There was a six wheeled car at one point. That's right. Because it wasn't in the rules that you only had to have four wheels.

1:25:14 And over time, as they start adding more and more guidelines for safety and for all these other reasons, The way to succeed in Formula One shifted from making a more powerful engine or figuring out the very best arrow to figuring out how to exploit the rules. Yeah and do more and more exotic stuff. Yes. What is left unclear in the rules where I can see a little bit of daylight between what they intended to write and what they did write, and what can I catch that the other teams won't catch, and how do I sink 50 million dollars of R and D into uh achieving some speed outcome with that.

1:25:50 It's really funny. I hadn't thought about this till now, but Actually, the right analogy is the semiconductor industry and Moore's Law. It's like a different set of rules. It's like the rules of physics instead of the rules of the FIA, but As you progress, like TSM C and ASML have really gotta spend Incrementally more and more CapEx and more R and D every year to push the boundaries farther and farther, and all the low hanging fruit is gone and they get more and more exotic with Lasers melting tin just in time, you know, et cetera, et cetera. Good point. Yeah, I hadn't thought about it that way.

1:26:20 Meanwhile while the teams are spending themselves into Unprofitable oblivion. Bernie. Starting in nineteen ninety three. becomes the highest paid corporate executive in Britain. Taking home in nineteen ninety three

1:26:35 Forty four point five million dollars in cash, and that's Only what's Reported. He's also Getting older.

1:26:47 By this point in time, he's in his late sixties. He's On his second marriage. He has two young daughters with his Second wife, Slavica.

1:26:58 And he starts to think about Estate planning and maybe some Liquidity for His family and his estate.

1:27:06 But in doing so. He just about causes the whole thing to fall apart. Because even though he was the highest paid corporate executive in Britain. That didn't necessarily mean that he was running FOPA and F1 like any kind of professional organization. He did everything himself. And intentionally didn't keep any records. He minimized

1:27:29 The number of contracts that he would sign intentionally. He kinda operated F1 like a sole proprietorship, shall we say. The whole Corporate operation. Was run out of a building in London that was also his house. Seriously, like the bottom four floors of the building were F1 offices. And then he had the floors above. And supposedly he had all the rooms in the offices bugged. So he could listen to what everybody was saying at every point in time. And famously

1:27:58 He would kick everyone out at six PM. He'd be like, All right, leave my house now. It's time for y'all to go home. Yeah. Wow. This continued until Liberty takes over in twenty seventeen. He had a few lawyers and finance people to Make it all function. But There was no marketing department for F one. There was no research or data department. There was no sales department besides Bernie. Well, there weren't actually that many things to sell. They weren't selling a lot of sponsorship at the league level at that time. That was pretty much all teams.

1:28:29 I guess T V rights you have to sell. Exactly. Like uh yes on the sponsorship side, but T V rights, you know, they're in Ninety soon, a hundred, hundred and twenty, hundred and thirty countries all with different contracts and different providers. Bernie's just out there doing this. More or less all by

1:28:46 Himself, though we should say. He also had a right hand man and essentially number two in the business. A former Formula two driver. And also owner of another team in the league, the March Team.

1:29:02 A man named Max Mosley. who happened also to be a lawyer. Very useful for Bernie's activities. There's this great quote that Bernie recalls saying to him when they first start working together. Your problem, Max is

1:29:16 Is you always want things absolutely clear. And sometimes it's better if things are not clear. So he gets with the program and uh they pretty quickly become Yeah. In Nineteen Nighty three, that same year that Bernie becomes the highest paid executive in the UK. He

1:29:33 Kind of shadow arranges. To get max installed as the new president. Of the FIA. Meanwhile, he had already somehow

1:29:45 connive to get himself, Bernie. already an official role at the FIA. As the vice president in charge of promotional affairs. In addition to all this, at one point along the way, he also took over as the promoter of the Belgian Grand Prix at Spa. Oh, so he was paying a race fee to himself. Yes. So at various times.

1:30:04 Bernie was serving in a principal role. You know. All of the major F one stakeholder categories. Team owner, race promoter. Official FIA representative

1:30:18 And of course CEO and owner of FOPA and De facto the league itself. And I think at every point in time he was always in at least Two, if not three or four, of those roles simultaneously.

1:30:35 Unbelievable. He really takes the, you know, no conflict, no interest phrase to new heights. Absolutely unbelievable. There's a great quote from Eddie Jordan, who is a Formula One legend. Do you know this quote? I don't, I don't he said that Bernie Ecclestone was someone who sold Formula One four times Has never bought it back.

1:30:54 Has never lost its control. And still owns it. And do you know the most important thing? He never effing owned it in the first place. Yes. So let's tell that story about how he sells it four times, never buys it back, and still owns. And never owned it in the first place. That is such a great quote. I hadn't found that. I love it. I love it. Yes.

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1:33:19 So Bernie's Many sales and Monetization opportunities. Here in the mid-90s, he starts exploring liquidity options for himself. And in particular, he wants to funnel that liquidity. Into a new set of offshor віє.

1:33:36 to avoid British estate taxes for his family after he dies. And you know, this is like a natural activity for somebody approaching their seventieth birthday. What Bernie didn't foresee or anybody else is He had another twenty five years at least in him. At least,'cause he's still alive in twenty twenty six. Yep. Насоби фер. Protecting his estate from the

1:34:00 Heavy British inheritance taxes. is a legitimate concern. Because Otherwise there would be no way that his family could keep control of F one after his death. It would have to be broken up and sold.

1:34:13 Just purely to fund the estate taxes. Mm. So if you actually are a team This is starting to become kind of an existential risk of what if Bernie dies suddenly and then They have to sell F one.

1:34:26 off into different parts with different owners. And you say you know if you're a team owner. It's not just if you're a team owner. If you're a team owner or a race promoter you want to play in here. So It just so happens here in the mid to late nineties. That we're in the height of the dot com era.

1:34:42 Wait, that plays into this? Oh yeah. So what's the natural thing to do? Bie's gonna IPO F one.

1:34:51 Oh, I've totally missed this. Oh yeah. Oh there is so much delicious chaos that gets unleashed here. By this point in time. Bernie's various companies, and there are even many more than we have talked about on this episode, just for simplicity. Collectively they're earning about two hundred and fifty million British pounds a year. in revenue.

1:35:14 And they have fifty percent plus EBITDA margins. And remember, this is at a time when the British pound Is worth call it. sixty to seventy percent more than the US dollar.

1:35:27 This is a very IPOable business. If it were a you know regular business. Yes. None the less, times are so crazy. That Bernie hatches a plan. With his bankers at Solomon Brothers.

1:35:42 to consolidate all the various F one companies that he owns. into a single holding company called SLEC Holdings. S L E C Holdings. And he's gonna transfer his ownership of that new company. To his then.

1:35:58 Second wife Slavica. For tax reasons, so S L E C was short for Slavica Eccleston. And float it. In a dual listed IPO In the US and England.

1:36:12 with an anticipated valuation of around four billion dollars. Uh we should also note here, too, we've being a Bernie ultimately pleaded guilty to tax fraud as a result of all the machinations we're about to talk about.

1:36:32 and had to pay a six hundred and fifty three million pound payment. to the crown and back taxes and fines. And he also received a I think seventeen month jail sentence, which was then suspended. Probably in large part to his advanced age. Crazy.

1:36:50 All of this lurking in the background. May have been part of the reason that famously he turned down several offers of knighthood throughout his life. Yeah. Although you'd think it would actually bode better for you if you're a knight going into some lawsuit with the government over owing the government money. Good point. Yeah, does the crown sue one of their own? I don't know.

1:37:09 Yeah. Anyway. As he starts formulating all these plans with Solomon brothers, they're like Well I see your revenue.

1:37:19 I see your EBIT And what were those again? Two hundred and fifty million British pounds of revenue and call it uh fifty plus percent EBITDA margins on that. Good business. Yeah. Great business. What they don't see

1:37:34 Is any sort of formal legal control or document. that he has from anybody giving him the Actual rights. To a lot of this, you know, he's got the actual rights to the T V stuff. But the promoter fee stuff, the transportation. Uh we haven't even mentioned the paddock club that gets set up along the way here. There's a lot of money flowing through that.

1:37:59 And to be clear, these are all Income streams. to Bernie. I mean, so of course we've talked about the media rights, but what a race promoter does Is If F one is thinking about going to a racetrack

1:38:10 the person who owns the racetrack or a company affiliated with the racetrack or a government affiliated with the racetrack. Pays. a giant amount of money to Bernie for the privilege of having a race there. That's a promoter fee. Yep. So

1:38:24 Conveniently. Right at this same time as they're doing IPO preparations. It comes time to negotiate the fourth. Concord agreement. With the teams and the FIA.

1:38:36 In this new agreement. Burney. swaps in a new entity. Called Formula One Constructors Association. Administration Limited.

1:38:50 A new company owned by Bernie Foca. Ah. For the original. Foca so that he can now legally have all the rights to everything.

1:39:01 He's doing. And remember who the new president of FIA is that just got installed. Max Mosley. Yeah. Ha ha. So he's just gonna rubber stamp it. Or that's at least the belief. Yeah. Well, it it it passes. Let's just say that. The path is now Paved.

1:39:20 To IPO. Except There's one snag that comes up. News of the plans, as well as Bernie's recent sort of consolidation of legal power, gets leaked to the press. And this causes the European Union antitrust investigators to start poking around.

1:39:37 You don't say. Bernie is doing. So much self dealing here that there's no way he's gonna survive an investigation. Hm. So Bernie shelves the IPO idea.

1:39:47 And also resigns from his official role as a vice president at the FIA. And the combination of those two things is enough to at least get the EU off his back for the moment. But for getting liquidity. So he switches banks to Morgan Stanley.

1:40:04 And convinces them That instead of IPOing They should issue debt. On F one. And use the proceeds from the debt.

1:40:14 To pay himself and his new offshore entities. A special one point four billion dollar dividend. What Secured by the future Trig streams. By the revenue streams from the future TV rights. This deal actually happens. It's called the Burning Bonds. It is

1:40:33 Always something you should be a little bit worried about if a company is raising a giant amount of debt. principally to pay out its primary shareholder a special dividend. Yes. Especially if it's birding. Why would you buy that debt? That's a really good question. The offering, I believe, was intended to be two billion dollars. Uh but there was not enough demand and that Morgan Stanley could only rustle up one point four billion worth of money that was willing to do this deal.

1:41:01 Either way. The deal happens on a Friday. All gets done, debt's issued, Bernie gets his dividend, money gets transferred to the offshore entities. On the following Monday Bernie calls up his bankers.

1:41:15 And says. Oh. There was something else that I didn't tell you. I'm having triple bypass heart surgery.

1:41:24 Today. Today. So they just did the debt deal. Three. Just issued the special dividend, took one point four billion dollars out. Three days later Bernie is having triple bypass heart surgery. The entire future success of this thing is heavily dependent on Bernie being in the seat. Yes. Fortunately for him and everybody else, he survives the surgery.

1:41:48 I have disappointed so many people. Which uh later one of his principal bankers would recall her response being, If you make it out alive, I'm gonna come kill you myself. Oh man. Well, Bernie survives.

1:42:09 Later that year, we're in nineteen eighty nine now. His wife Slavica I Yeah. Start selling off equity stakes.

1:42:19 In Slack holdings. Private equity firms. Including Cannot make this up.

1:42:27 In February of two thousand They sell a thirty seven percent stake in F one. to Hellman and Friedman. The giant private equity firm.

1:42:38 Based in San Francisco. H and F. then goes and buys out some of the other minority owners that Slavica slash Bernie had been selling stakes to. And

1:42:49 Helmut and Freeman collectively gets a fifty percent Ownership stake. In F one. And then They go negotiate with Slavica and Bernie.

1:42:59 an option to buy another twenty five percent from them. For six hundred million pounds and gain seventy five percent majority ownership of F one. So they get the option, the option's papered. One month later.

1:43:16 In March of two thousand. This was in March of two thousand, right when the Dot com crash happened. The dot com crash is about to happen.

1:43:24 But it gets crazier before The bubble purse. Really? In March. H and F

1:43:31 Gets an unsolicited over the top bid. From a German new media company. Called EM.tv. To buy their entire stake. in Sleck slash F one immediately right away. This is the height of

1:43:51 Dot com craziness right before the crash. So this German company, EM.tv. They had just previously bought The Jim Henson Company in the US Which of course makes the Muppets and they were just trying to roll up

1:44:07 All of these media properties and they were gonna bring them into the digital era or something. Some sort of dot com fever dream. H and F. Hits the bid. They sell out. So how long did H and F own Formula One?

1:44:23 One month. One month. They make an immediate Two hundred and forty one million pound Profit in one month. On how much Invested.

1:44:36 one point one, one point two billion investing. So you know, a twenty percent return, but like In a month. I got more. So Fifty.

1:44:46 Of F one is now in the hands of EM dot TV. They wanna exercise the twenty five percent option that H and F had negotiated. But They don't have any more cash. They blew it all on the first transaction. And the Muppets. And the Muppets.

1:45:03 So EM dot TV Goes out. And does another One point six billion Euro debt deal.

1:45:13 To raise the money. So they take Six hundred million. From JP Morgan and Lehman Brothers and they take a billion From a local German bank called Bayern LB.

1:45:26 They use this debt. They exercise the option. They now own seventy five percent of F one. And Bernie and Slavica hold the last twenty five percent. Wow.

1:45:36 And then the bubble bursts. And wow. So all that was done like in days, weeks. Like right up to the end times. Bernie, meanwhile, is just getting Tons of money into his bank accounts. The bubble bursts.

1:45:54 EM T V Misses their Interest payments. Shocking. Shocking. Shocking. Shocking. Another German media mogul named Leo Kirsch comes in and saves the company.

1:46:05 His company Curse Media takes over EMTV. They now assume F one ownership. Eighteen months later, they go bankrupt. So two thousand two. The net result of which Is that Ownership of the seventy five percent stake in F one.

1:46:21 Transfers To the debt holders. Which is who? Bayern L B The German bank.

1:46:28 JP Morgan. And Lehman Brothers. With Bernie and Slavica still owning the twenty five percent. Minority show. Crazy.

1:46:39 Okay, so it all comes to a head. In two thousand four, when the banks are super frustrated.'Cause Bernie's still running the thing. As he always did, paying himself everything. The banks

1:46:50 Keep trying to tell Bernie what to do. They're like Issuing him directions as if he's their employee. And Bernie just keeps ignoring them. So The bank consortium

1:47:00 Sues Bernie for control of the sport. The judge rules in favor of the banks, however Bernie addresses the media after the court proceedings. And says that the verdict would mean, quote, nothing at all, and he's planning to continue business as usual. Because he's got an ace up his sleeve.

1:47:22 Separately. He has been negotiating. with CVC capital partners. The large European private equity firm. The deal gets done with C V C

1:47:32 They buy out the banks. They also Buy out. Bernie in Slavic is twenty five percent. So more money. Going to Bernie now here.

1:47:41 But Bernie will remain CEO. So he's just an employee hired by C V C to continue being Bernie. And He gets the opportunity to use some of his proceeds to invest with CVC alongside them in the deal. Amazing.

1:47:57 All told. C D C And Bernie for his portion. spend about two billion dollars.

1:48:05 acquiring one hundred percent ownership. They finance One point one billion of it with another Set of debt. So they put nine hundred million of

1:48:15 cash equity into the deal. Compared to I believe over three billion that Bernie and his trusts had pulled out of the company. Through all the debt and equity. Matinations that we discussed earlier. Unbelievable.

1:48:30 Oh my goodness. This is important to know the C V C Slash Burney. Buy in. to this new F one entity is about nine hundred million of equity. Yes.

1:48:42 two billion dollar total purchase price. Including the debt. Bernie. Resumes his job with renewed vigor. Now that he is newly incentivized to uh grow revenue and profits again. So

1:48:56 The first thing that he does After C V C cleans up the ownership. Is he kinda goes right back to his original Yeah.

1:49:06 Which is extracting more money from race promoters. So by this point in time Two thousand five ish. Yeah. Basically three types of Grand Prix races. You have the prestigious historic ones like Monaco and Monza and Silverstone.

1:49:22 They're not going anywhere. The European Heritage tracks, if you will. Exactly. They don't pay nearly as much in race fees to F one. But they're sort of there to build and maintain the brand. Yeah.

1:49:34 Then you have a new set of races. Lake Bahrain and China that had just come on. The fly away races. They are paying. Huge fees. To F one.

1:49:46 In order to have Their races on the calendar. We're talking two to three X. Yes. thirty, forty, fifty million A year.

1:49:54 Yeah. And today even into the sixty millions. Yes. The problem slash opportunity at this point in time is You had a whole bunch of races in the middle.

1:50:05 Canada, Australia, Spain, Belgium. The second race in Germany that wasn't the Nurembergering, the second race in Italy that wasn't Monza. Et cetera, et cetera, et cetera. Those other races actually made up most of the calendar. But they neither brought in a lot of revenue nor were they

1:50:23 any sort of strategic value. Like nobody got excited. Right. They weren't an expansion opportunity for the sport. They weren't a way to find new audience. Yeah. Yeah. So Bernie goes out. And he courts

1:50:35 Abidabi. Singapore And India. To come in. And displace some of those middle races.

1:50:43 And be new Grand Prix. And just like Bahrain and China, these are big money deals. So India Is forty million a year just in race fees. F one. Abu Dhabi is the biggest.

1:50:54 They commit to a billion dollar Total. F one investment over the coming years. Including constructing a whole new track from scratch. In the desert outside.

1:51:07 The city. So Bernie's on a roll with these new races. So then in the early twenty tens. Bernie. Lands the big one. Russia.

1:51:16 He'd been trying to get a Russian Grand Prix. For a long time. Russia had just won The twenty fourteen winter Olympic bid. For Shi.

1:51:26 Yep. And put fifty billін dollars. into the ground and infrastructure. At Sochi for the Olympics. Bernie and F one.

1:51:36 goes and convinces them that the best way to sort of amortize the cost of this investment in Sochi. is to put a race there. After the Olympics. Probably not wrong. Totally not wrong.

1:51:48 So they sign a deal with Russia. And of course it's a deal with the state. You know, any time you're negotiating with Russia you're negotiating with the state. Increasingly a lot of these flyaway races are. Yes. This is not unique to Russia here. It's not a local entrepreneur race promoter with a race track. These are sovereign deals. Yes. to construct a new two hundred and seventy million dollar F one track around the Olympic Park.

1:52:12 And Pay F one fifty million dollars a year for seven years. To host the race. It is an amazing

1:52:23 As they're in final negotiations for the deal. The Russian contingent Asks Bernie to fly over to Sochi. And sit down with Put to finalize the deal.

1:52:37 Responds, Do I look stupid? If they think I'm gonna go negotiate this contract with Putin, no way. If they want me to go, they can send back the contract first. Signed, which they do. And then Bernie goes to Sochi and sits down with Putin and do a press conference and announce the whole thing. I guess that's how you negotiate with Putin is you you don't negotiate with Putin. So ultimately the Russian Grand Prix would get canned early in Twenty twenty two after Russia invaded Ukraine.

1:53:08 I was gonna say it it's not on the calendar I saw. No, no. Bernie would get asked on a British morning TV show after the Ukraine invasion, what he thinks about all this. And he famously says that Putin is a quote first class person And that he, Bernie, would take a bullet for him. Wow. Okay. Yeah, okay. I did hear from some folks that I talked to and I'd always ask the question, What's it like working with Bernie?

1:53:33 Overwhelmingly people said delightful. I can believe that. That like when all the dust settled, like the term you kinda look at the terms and go, Oh Whoa. There's actually not much here for me. Yeah. But

1:53:45 Just delightful to work with. He's a very loyal partner. Yeah. So anyway. That's the racetrack.

1:53:52 side of things under the reinvigorated Bernie and C V C The other big piece of course is that Team relations side of things. We

1:54:02 But At this point. The whole stick of Hey, I'm getting rich, but you're getting rich too. Has

1:54:11 Way worn out. It's welcome. Hm. There's also the fact too that now it's not just Bernie getting rich, it's The private equity firm that's also

1:54:19 getting rich on the backs of the teams and all the investments that they're making into the cars and R and D. And By this era it uh kinda mid Late two thousands. It's truly gotten out of control.

1:54:32 The top teams are spending like four to five hundred million dollars a year. on their cars. And the race calendar is insane because You know, it started in the fifties, sixties of hey, we'll go wherever we can get enough teams to race. And then it turned into we'll go wherever anybody will write. a forty million dollar or larger check.

1:54:52 Let's put this circus on a plane to Russia and China and I'm not going to be able to do it. By this point in history we're talking about here, the mid late two thousands, the Broadcast calendar makes no sense. You've only optimized for who will pay us the biggest race promotion fees. These races are being run at All hours of the day and night.

1:55:11 Yes. So team relations are pretty bad. And then two thousand eight hits. Uh Biggest teams with the biggest budgets.

1:55:20 Yes, they're spending themselves way into the red, but at least they were sort of backstop by actual consumer car manufacturers that Own them and We're investing into them for all sorts of, you know, strategic or R and D or Brand marketing.

1:55:34 purposes. So you know you had Honda in the sport. Toyota, BMW, obviously Ferrari, Renault. Yeah. As we hit two thousand eight in the financial crisis. The consumer

1:55:46 car businesses for All of these guys except Ferrari just fall off the cliff. So all of a sudden it becomes no longer tenable either financially or just public perception wise for Honda or BMW, et cetera, to keep operating these money sink hole F one teams. Yep.

1:56:06 So as they get into two thousand eight Bernie C V C and the F IA. all team up and they float a solution, a lifeline. To the teams. We are gonna help you guys

1:56:18 Institute a cost cap. on manufacturing. And We'll help you design it. Let's get it approved by all the teams. This will save you. Basically what they're proposing is the F one equivalent of a salary cap.

1:56:31 In other sports like the NFL or the NBA. The salary cap is gonna be on the investments into the cars. Yes. And there are some teams

1:56:43 That are a fan of this. And there are other teams who hate this more than anything they could possibly imagine. Yes. Specifically Ferrari and McLaren. Ferrari would like nothing more than to lose half a billion dollars a year. m making their F one cars as long as they get to win. They do not care. It pays back infinitely. in brand marketing if they are just a winning F one team for their particular line of business. You know what car manufacturer is basically unaffected by a global financial recession? Ferrari. Yes. Their customers are staying on the wait list no matter what the financial climate is out there.

1:57:24 So Ferrari and McLaren has a lot of the same dynamics. They threatened to pull out of the sport. And ultimately they bully all the other teams. into joining them. In opposition to the cost cap.

1:57:38 There's also all of this pent up. Bad will against burning all these deals that have happened, C V C, the FIA, et cetera. In two thousand nine Eight of the ten teams

1:57:52 threatened to pull out of the sport. And start a rival Breakaway League. Called photo. The formula one

1:58:01 Teams Association. Yeah. And they announce that they're doing it and they're creating their own series. starting in twenty ten. Yeah, so the Formula One Teams Association or FOTA was

1:58:13 really two things in one. One, it's can we band together as a team to negotiate as one to get leverage in whatever we're negotiating over. And in this instance it's We don't want a cost cap. The other thing is it is a legitimate breakaway series. Yep. Which it would be a really hard thing to start. I mean to go figure out how to sign all these new deals with the best tracks in the world.

1:58:36 And media rights deals. There's a lot of value. In what Bernie and the series are actually doing. Yeah.

1:58:44 So It works. The cost caps didn't happen. They did impose a ten year freeze on engine development. And so in the short term This is kind of how these negotiations go.

1:58:56 the teams got what they wanted without actually having to leave by having a credible threat. to leave. Yep. And specifically What they got.

1:59:06 was Max Mosley's resignation from the FIA, or at least agreement not to stand for re-election. It's hard for them to actually link arms for Because Kind of two reasons. One, Bernie and Max could offer different things to different teams to get them to individually cave. So like they can go to the Bronn team and we'll talk about the Bronn team in a minute, but there was this

1:59:29 Shoestring budget team, scrappy upstart. Bernie had been withholding their payments from the previous year when they had raced as Honda, because Bernie's opinion was, Well, you're not the same team, so you don't deserve your payout. And so Braun really needs the cash. So it's very easy to go and get them to capitulate. When you owe'em a few million bucks. And you're gonna wire the money immediately as long as they break race with the other team. Yeah, that's a great way to bust a strike. But The biggest thing is it's just this kinda

1:59:58 misaligned incentives where All these constructors actually have very different reasons for Racing. And different incentives.

2:00:06 And so it's hard for them to be unified on anything. given the wildly different incentive set. Yep. So I don't know if you knew this, David. I talked to Zach Brown, the CEO of McLaren Racing, to prep for this episode, and I specifically asked him

2:00:22 Why teams don't form a breakaway series now? And we'll talk about the economics of what the business looks like today. I need a great answer. So he said prior to Liberty's acquisition of F1, there had been many discussions and even attempts at a breakaway series. Of course, the teams would unite around the sport themselves, but it always fell down when the teams had to discuss. how to share the pie. And you know, it's one of these things where Ferrari is gonna say, We're entitled to this and our heritage for the sport and McLaren and Mercedes they're gonna say, Oh, we're really good. So we deserve more. So yeah, they just never would agree on how to divide up the pie. Yeah.

2:00:56 The net of this is that team and league relations in F one Or at uh all time low here at the end of the two thousands. Yeah, and we didn't even talk about If you're a fan of F one during this time period, you know about uh Spy Gate and Crash Gate.

2:01:11 Uh both of these, uh McLaren magically wound up with A giant binder full of the complete specification of Ferrari's car for that year and there was this b all giant hullabaloo and case uh court hearings and everything about the the these stolen documents and did they use them to When

2:01:32 U at the same time you have Crashgate. Yeah. This is bad. It ended up looking pretty conclusive. That A

2:01:42 Team intentionally had one of their drivers crash. In order to get a safety car to come out. which would advantage their other driver to do better in that race. putting one of their driver's life at risk. Not just one of their drivers, like other drivers too, yes could be involved in the crash. So and and they're covering it up and they're These are major sports integrity issues. Yes that are public trust is at an all time low.

2:02:06 Yeah, yeah, yeah, yeah. So Ironically Miraculously.

2:02:13 And certainly Despite All of Bernie's Best efforts to the contrary. Pretty much this whole situation.

2:02:21 By two New teams. That enter Formula one.

2:02:30 Who nobody saw coming. One of which was a Auto manufacturer. And uh Dark horse re entrant into the sport. Yep.

2:02:41 The other Was a Well I was gonna say energy drink manufacturer. But I don't think we can say manufacturer because they don't actually make the drink. An energy drink company. An energy drink marketing company. Named

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2:05:07 Alright, so David, uh you mentioned An energy drink company. Yes. So let's start. With Red Ball. The Red Bull. Company story itself, like

2:05:18 Absolutely deserves its own acquired episode someday. Truly Insane. So Briefly.

2:05:27 Dietrich. Mata shit. Was An Austrian Toothpaste salesmen.

2:05:33 For Unilever. And P and G who goes on a business trip to Thailand in nineteen eighty four. Decides to radically change his life.

2:05:44 And brings back a local Thai energy tonic. To start bottling and selling or or again, I can't even really say that'cause he outsources manufacturing, bottling, and selling it. And turns it all into a company that now does Over ten billion dollars a year in annual sales, like

2:06:03 Astonishing. The key pillar of what Red Bull the company actually does. Is Of course, marketing. And one of the main pillars of its marketing strategy has always been extreme sports. Red Bull, their entire business model is, yeah, we sell these drinks but really you're buying the drinks to associate with a lifestyle and we need to

2:06:25 uh educate you about the lifestyle that you are uh you know associating yourself with. So In nineteen eighty nine, like I mean actually a Five years pretty quickly after

2:06:36 D Trick starts the company. Red Bull sponsors its first F one driver. And then they steadily grow their investment in the sport. Until ultimately They become the title sponsor of the Sauber Team in Nineteen Night Five.

2:06:51 Is that the team that's now Audi? Yes. Sauber Steak. Sauber steak. Yep. Yep. Yep. Yep. This is where Red Bull starts. Huh. The Red Bull entrance into F one. Mm-hmm. was so perfectly timed because this is right as the EU regulation is coming online, forcing tobacco finally out of the sport.

2:07:13 And so the great irony is that it's actually like an energy drink company that replaces the There's a great quote that Josh and Jonathan have in the formula. Two decades after Marlborough execs looked at F one drivers and saw the airs to the American cowboy. Matachits recognized them for what they really were. Over caffeinated adrenaline junkies with scant regard for their personal safety. It was a match made in marketing heaven. Perfect.

2:07:43 Perfect. So Red Bull. totally breaks the mold of what an F one sponsor should be doing. Previously the sponsors were all leaning into like

2:07:55 the prestige aspect of the sport, you know, the the the luxury, the aristocraticness of it, you know, all the Monaco stuff. The oil companies, the watch companies None of these sponsors are Rocking the boat. And importantly Just like F one and Bernie itself. None of these sponsors except maybe the cigarette companies

2:08:19 are interested in younger audiences. Bernie has a great quote about this when he's asked about the challenges F1 faces of its aging demographic. He says that younger audiences are not a priority because they quote, don't buy Rolexes. Yeah. Yet. Yet. That is the key thing, Bernie. Yet, yet. Yep. Anyway, Red Bull, though, of course, is the opposite of this. They are all about young people, the extreme lifestyle

2:08:45 They don't just sponsor F one, they sponsor all these Extreme Sports like jumping out of Planes in the stratosphere, you know. Balloons.

2:08:55 Yeah, they're uh unique among the F one. Sponsor. Set. The problem though

2:09:04 Isn't very good. So there's another great quote from Matasitz in in the formula. If an insurance company sponsors a team and that team loses. People don't change their insurance company.

2:09:17 But when the Red Bulls lose, people get a new drink. Yeah. In two thousand four Red Bull dumps. Sauber and makes the radical decision. That rather than sponsoring another team

2:09:31 They're going to directly get into the business. And Mata shits and Red Bull. Bye.

2:09:39 The failing Jaguar racing team. Which was at this point in time owned by Ford. Because Ford had acquired Jaguar and with it came the F one racing team. Jaguar was going through all sorts of trouble, as was Ford during the financial crisis and the lead up to it.

2:09:56 Things are so bad. For the team. That Ford is willing to sell The whole team to Red Bull. For one

2:10:06 British pound. Really? I didn't realize that. Yep. The purchase price. That Red Bull paid. was one British pound to establish Red Bull Racing. The problem is they still gotta make the team good, but Can we talk about the like amazing full circle moment of this year now that Ford is Yes. Yes. Yes. It's so full circle. It's amazing. Also, Ford actually did

2:10:31 make engines for F one for a long time. So it's interesting that like their exit from the sport was they were no longer an engine manufacturer. Then they had this weird team with Jaguar. They divested that and then they're dormant in the sport for Twenty years, yeah. Back to Red Bull taking over. Yes, they need to make the team good. Obviously that's not gonna happen overnight, but they start, you know, putting steps in place. What they can do now that they actually own a team instead of just being a title sponsor.

2:11:00 Is they can act However they want. within the paddock. So when Red Bull rolls up to the paddock the next year in two thousand five Which remember is the first year of C V C's ownership in the new Bernie regime.

2:11:15 They bring it up. No joke. A mobile nightclub named the Energy Station. as their team paddock facility to all the Grand Prix around the world. And they have A radical open door policy. So previously the paddock was like the you know sacred place. Corporate sponsors and high rollers could spend for paddock club access. It was very limited.

2:11:41 Red Bull rolls in and we're like, the door is open all the time. Anybody who is in the paddock can come in. To our energy station. Uh you could be from any other team, you could be any other sponsor, you could be a guest. Just come on in.

2:11:56 And party with us. So they have DJ is at all hours. Uh they have Uh uh a team of girls, the the Red Bull Formula UNA's team of you know hostesses who are there. They have a swimming pool on the roof. Do you know what they did in Monaco?

2:12:15 I read about this, but I can't remember. There there's not room for the Red Ball energy station because it's Monaco and there's not room for anything. And so they constructed A temporary Building. that they put on pontoons and they have in the harbor out in the harbour.

2:12:31 Amazing. Amazing. Yeah. They're just like Giant middle finger to the whole establishment. Yes. Uh there's alcohol everywhere, drinks are flowing, and of course there is Red Bull. Free from I mean it's genius. It's absolutely genius. So All of this is masterminded by Dietrich.

2:12:50 And the young team principal. That he hires, takes a chance on. Run the team. Christian.

2:12:58 Ha ha. Yeah. If you watch Drive to Survive, uh You probably know all about Christian Horner. Yes. The other team owners and principals and Bernie hates this like hate it they hate it so much you know they're trying to control everything this is a serious sport this is a serious enterprise

2:13:17 And here's Red Bull. Just partying. And Red Bull got much better as a racing team, but the essence of the strategy is basically still the same. They generate zero profit despite being one of the best teams and the highest revenue teams or near zero profit, very thin to create the biggest marketing spectacle that they can to sell energy drinks. It's a just a super different business model.

2:13:39 than anyone else in the It's almost like uh like Amazon and streaming, you know, like Prime Video, which we'll talk about later. Like the business model is not the streaming. It's the retailer. Anyway. Obviously all the other team Owners hate it.

2:13:56 But the drivers and the staffs Love it. You know, these are all young people mostly who are driving the cars. Working on The engineering is mechanics, et cetera. All of a sudden there's like a twenty four seven party following them around the world, like

2:14:12 Hell yeah. So McLaren They even forbid all members of their team from entering the energy station. Like it's like a fireable offense if you're caught. No fun. And honestly, like you're gonna go have drinks, you're probably gonna share team secrets. It's probably a good thing. Exactly. Exactly.

2:14:33 So one night Back to Christian Horner and the strategy of like how do we actually start building a winning team here. He

2:14:41 Clandestinely invites McLaren's Legendary technical director. Over to the energy station. Fred Chat.

2:14:52 Late at night against rules. And that technical director just happened to be a man named Adrian Newy. The Single most legendary

2:15:05 Probably in history. The way people talk about Adrian Nui is Is basically the same way that they talk about Kelly Johnson from Skunk Works from our Lockheed Martin episode. And I've I've heard the comment from more than one person. It's like he can see air. Yes.

2:15:24 He is a savant of aerodynamic design. And Adrian's book is great, talking about sort of his career in F1 and what he's learned. Uh He still draws by hand. Yeah. Yeah, in the age of CAD and AI and everything.

2:15:40 physical forms of cars. how air will flow around them and then Draws with a pencil. Yep.

2:15:48 So Horner And Dietrich. Lur Newy

2:15:54 Into joining Red Ball. And this Is how they build. A winning team. It takes a couple of years to ramp. But starting in twenty ten, so what's that?

2:16:04 Five seasons after they enter. The league. Uh Red Bull starts a run.

2:16:11 of four consecutive drivers and constructors titles. From twenty ten to twenty thirteen. And importantly. For the product on the field up until this point. The racing had gotten pretty boring.

2:16:28 Because Ferrari had been on this huge run where Michael Schumacher was just dominating the sport. And like blowing away all competition. Well, I mean, there were some years where it really came down to the wire or didn't go Schumacher's way, but If you were an F one fan in the nineties and early two thousands, it is totally fair to say

2:16:48 There was Schumacher And then there was everyone else. Yep. And that had started to fade, as we'll get into in a minute. And was this Sebastian Vettel? in two thousand ten that kicked off the Red Bull run. Yep.

2:16:59 This Starts a new dynasty. Within. F one. Of an energy drink company.

2:17:05 I know. And it's so fun watching I mean it's they they are d truly a central figure of the drive to survive narrative, uh starting with Sebastian all the way through You know, uh Max is arguably the best driver in the sport today. And so it's so fascinating that he's on an energy drink team. Right. The most insane thing about Red Bull, I think, is I used to think they were like a sponsor, like oh, this energy drink company uses F one for marketing. But

2:17:35 They have developed so much competency. In actually being a constructor. That they're building a car, right? Like a r like a road car. Yeah, they're like a real car company now.

2:17:46 Yeah. Not technically road, but track. So they're building a supercar, limited production and all that, but like A Car that you can go buy and race on a racetrack. I think it's the RB 17. It's the last thing Adrian Knew he did when he was there is design this car. And I mean you look around like w what does a car company do? It makes the body, it makes the power units. Red Bull has Red Bull power trains, which is a lot of former Honda people that they've sort of hired and now they're working with Ford, but like

2:18:15 They they do A lot of the things that a car company does. Yep. It's an incredible story. And

2:18:24 As you start to think about dragging this sport kicking and screaming into the twenty first century and positioning for the social media era. You could imagine that uh this is a really good thing. So

2:18:36 Meanwhile, during this era. As we alluded to earlier. There is another Hugely successful team. That builds its own dynasty.

2:18:48 That comes out of nowhere. Also gets purchased. For one British pound. And uh Listeners, I

2:18:59 suspect unless you are a hardcore F one fan, you probably will not be able to guess. What team this is. See if you can figure it out as we go along. But who is it in two thousand and six, David? What is what does the team start as?

2:19:16 So We talked a second ago about Michael Schumacher's Dominance. of the league in the late nineties and early two thousands at Ferrari. Side note Did you know he is one of the first athletes to pass a billion dollars in career earnings?

2:19:31 It was apparently right around the same time as Tiger Woods. No way. I didn't know that. Yes. How? Michael Schumacher was getting paid sixty million dollars a year wow in that era. Like that's what Max and Lewis make today. Today. And and with all the inflation that's happened with the growth of the sport. I mean this illustrates just how much Ferrari

2:19:51 is perfectly willing to burn money. to win. Like they they will generate an infinite amount of losses in order to win in Formula One. You had the driver of his generation, sort of the the person who took the torch post Senna and is so obviously the best driver. And obviously. you know, most athletes that you would think of who bec have become billionaires.

2:20:13 didn't become billionaires because of their sport salaries. Right. It was off the field, but Schumacher had a lot of off the field off the field stuff. Interesting. Interesting. So one thing we didn't In Schumacher's dominance at Ferrari.

2:20:29 Was like, yes, it was him. He was the driver of his generation. But it was also the engineering team behind him. And specifically the engineering team led by Technic at Ferrari at the time. Ross. Brawn.

2:20:47 Okay, and the whole tires thing. We gotta talk about that. Well, I'm gonna get into it. Okay. So what Braun realized, maybe not first, but I think better than anybody was the dynamic we talked about Earlier that's a After the FAA started clamping down so much on the rules. The way to win was to exploit loopholes. So

2:21:08 Braun figured out a whole bunch of stuff. Together with Schumacher. And Schumacher's work ethic was unbelievable. I mean, th there's another great documentary that people should watch, Schumacher on Netflix, but he was like. a driver and an engineer or like a driver and a mechanic. He's always in the garage. He's there at all hours. He's getting as many test laps in as he can. And this is an era where you could do that. He's spending, you know, if he's not

2:21:34 On the track. And he's not in the garage, then he's working out. And he's his work ethic is just like unbelievable. Yeah. He's I know he's like he's the Max Verstappen of his era. But he's got a wrench in his hand and he's like ultimate collaborator for the engineers. Yes. So they figure out that there's a loophole

2:21:54 With The way tires work in F one. So for a brief period of time you could pick between one of two Tire manufacturers. Bridgestone had a big issue. So almost everyone said, Oh, we're going to move away from Bridgestone to Michelin. And Ferrari and Ross Bron in particular realized well wait a minute. If we're the

2:22:14 Only ones. that stick with bridge stone. Like, yeah, it's counterintuitive to do that, because like these tires apparently have a big problem. But like if we send a bunch of engineers over there, they send a bunch of over engineers over here, we can effectively have custom made tires just for our car. And just for Michael's driving style. And so they spent a year working together together, basically getting to develop their own custom tires, whereas everyone else who were on the Michelins had to use this sort of like common denominator tire that worked with all the cars and all the driving styles. Yep. It's important we should note here for folks who are not deep F one fans. The one I think maybe the only

2:22:53 Part of F one cars. Common mandated across the whole league. Tires in the halo. Yep. Yep. Whereas if you look at like NASCAR or like other motorsport out there, a lot of stuff is mandated to be common and like the degrees of freedom of parts of the car that you can actually engineer is like much, much, much narrower. It's part of what makes F one unique is and and and so expensive is that

2:23:18 Every car truly is custom engineered except for the halo and the tires. Yeah, p uh teams are designing their own bolts. Yes. Yes. So here Braun and Schumacher and Ferrari are like Oh wow, we just found a way to custom engineer our own tires. Like hell yeah. So that was a big part. Of Schumacher and Ferraris.

2:23:37 Dynasty. So The FIA eventually closes the tire loophole. Braun. Leaves Ferrari.

2:23:47 And becomes the team principal. Honda. Which he joins. In two thousand seven. Head out of the

2:23:54 Two thousand eight. Season. Now remember we said a minute ago that in two thousand eight with the financial crisis, Honda Exits the sport. So Braun is one year into the job. And they come to him and they're like

2:24:07 Uh Sorry. We're gonna shut the team down. We gotta get out of the sport. Like this is untenable in this environment. We can't

2:24:17 B. operating F one team. Braun is scrambling. He just went from like top of the world at Ferrari to getting to be team principal at Honda, and now he's out of a job. With

2:24:29 As good as he is, no real prospects for another one'cause this is Bad times for the sport. And there are very limited chairs in this world. Yes. So He's scrambling.

2:24:39 And he's like, Wait, what Wait, Honda. You're worried about looking bad to the public and shareholders by continuing to operate an F1 team in this climate. You know what's gonna make you look even worse?

2:24:55 If you lay off the like Thousand people. That are part of this team. So how about Instead you just give me some time.

2:25:05 Yeah. I understand you might need to lay everyone off. Look, that business reality. Give me a few months and I will find a buyer. for the team. I just need you to keep everyone employed. So that there's something to sell.

2:25:19 Yes. Looks around. Can't find anything as you would expect comes two thousand eight, the world's falling apart. Back to Honda and says, Look, I know we have very limited time left. We're not gonna find another buyer. What about a management buyout? Yeah. I'll take it off your hands. And when I say buyout

2:25:36 I'm also not really gonna give you any money. Yeah. But what if What if you're

2:25:44 If there's some period of time where you agree to keep funding people's salaries, I'll give you one British pound. Yep. You give me the team. And then at some point you're ful, but we have some sort of consulting agreement in the meantime, some some contracting. You know runway down to, you know, do a soft landing here for the team and these people. But you get to tell your board and the shareholders that like you are no longer wasting money on this extraneous thing. And you're not gonna lay off, you know, a thousand people in England. Yeah. Yeah.

2:26:14 So apparently I don't know if you read this. Bernie, of course, gets wind of what's going on. Oh, Bernie does not like Rossby. He doesn't like Braun anyway. He definitely doesn't like somebody else. Buying a team for one pound. He tries to swoop in and convince the Honda board that they should sell it to him instead. Oh, I didn't realize that. Yes, yes, yes. Never mind that

2:26:36 He's like head of F one. Yeah. Well he's still willing to buy the team. He just generally doesn't like the idea that there's a transaction that doesn't go through him. Yes. Or or that there's a good deal to be had and he's not getting in on it. Great drama. If only this drama could be televised. In fact, there is a great Keanu Reeves documentary. Yes. Yes, it's on called Bronn. Called Braun on this team. It's awesome. Anyway, back to the story at hand. Amazingly, Honda doesn't go with Bernie. The board decides, you know what, we're gonna stick with who brung us.

2:27:09 We'll sell the team to you, Ross, for One pound. But When we say we're out, we'll fund you for the year, but We're really out. We're not gonna give you an engine anymore. Right. That's so Ross is like, but surely I can just like enter into a commercial agreement and pay you like fifteen million dollars or you know, whatever it is to be the engine supplier and and you'll give me

2:27:31 An engine. Like you've already made the engines in the years past, they're gonna be the same or similar. This used to be your team. Right. Nope. They're like this is where we draw the line. We can't B. putting any more money

2:27:43 Besides the salaries these people into the F one. So quick pause. Uh it is worth noting, not every team makes their own engines. There's only at any given time a handful of engine suppliers. And so like Mercedes today makes the engine for the Mercedes car, but McLaren also goes and buys the engine from Mercedes. So this is like a Reasonably common Ferrari will supply engines to other teams. Right. Ca Cadillac is racing in a uh Ferrari engine. Yep, yep, yep, exactly. So Ross is desperate.

2:28:14 He goes and chats with Mercedes. Who? as you said, Ben, had been out of the sport since I think nineteen fifty five or whatever we said earlier. Yeah, they at this point in time do not have a team and since that horrific crash, all those decades before Yep. Not in F one. Not in F one. But

2:28:32 They had been supplying engines to. McLaren. So Mercedes says Okay, Ross Braun. We have our McLaren relationship that's very important to us.

2:28:44 But we respect you and your body of work at Ferrari and we respect what you're trying to do here. We will supply you an engine for two thousand nine. You know, we're s we're still loyal to McLaren, but like we will give you An engine so that you can compete. And it like s it sort of doesn't fit In the chassis that Honda had developed. They had to like

2:29:05 Do some real aftermarket janky stuff. So everyone thinks this car is gonna absolutely suck. Suck. Suck. Oh the team is called Bron GP. It's not even like a real company. They the the team just looked at Ross Braun and they were like, You're a leader, so how about calling it Braun? Like the whole thing. Yeah, they couldn't even line up a title sponsor. And they're even landing sponsors for like individual races. Cause they can't actually land financial. The financial crisis. Nobody wants to yeah, exactly. The it the whole thing nobody expects anything performance wise. Yes. out of this team. Yes.

2:29:37 Well it turns out. That before the Honda engineers got pulled away back to Japan. They had come up. With a new aerodynamic.

2:29:51 Innovation. called the double diffuser. Oh yes. I have no idea how this thing works. I just know that it performs like a beast. And most things you read about it really don't explain how it works either. In general, what diffusers do is they direct the airflow that is coming out from the bottom of the car. Uh Mm- Up.

2:30:12 and sort of out of the way to to ideally shape the aerodynamics as the air escapes the back of the car. Somehow they came up with a double version of it. challenging it at the beginning of the season, going, Wait, wait, wait, this isn't legal. It performs so well that by mid season everyone else has adopted double diffuser too.

2:30:33 Yeah, I mean you're burying the lead, which is first race of the season in Australia in Melbourne. These two Bron GP Franken cars roll out. And they win first and second place. Like they blow away the field.

2:30:48 uh Jensen Button, who was the the first driver on the team. He wins six of the first seven races of the season. Uh it's like Sending the sport intake. Chaos. Yes. And I I wish I had known this, David. We had just started our research on F one. And we met Jensen. We met Jensen. We went to uh the Las Vegas Grand Prix with service now, and part of the whole weekend of festivities they had planned for us was a luncheon with Jensen Butnett. He was telling the stories of the Braun GP.

2:31:16 I did not appreciate this is the outlier of outliers. No team has been on this shoestring of a budget with this type of Franken car. uh and this real underdogness and performed in such spectacular success the way they did. Yeah, usually it's like either you're Ferrari and you invest hundreds and hundreds of millions of dollars, or you're Red Bull, you hire away Adrian Nui, and even then it takes several years to develop a winning car. This just doesn't happen in F one. No. And so David, how does the season end? So Buy like

2:31:51 A hair's width. Jensen and Braun had accumulated enough of a lead In the first half of the season. That even though they don't win a single race in the second half of the season after everybody else also figures out the double diffusers. They still end up winning.

2:32:09 Both the constructors. And the drivers. Championships. This team and Ross Braun went from like New Honda team principle.

2:32:20 To nearly out of the sport. to owner of his own team for one pound. To world champion. This is what makes F one great. I it's it's really not watching the races. The the races are fine.

2:32:34 There's not that much passing. Once you get Through the first turn. You know, you kinda know who's most likely to win, and it's probably from one of the top four teams anyway. It's not any given Sunday, the way that it that NFL game is. But

2:32:49 This act of heroics and teamwork and personality and perseverance and engineering and engineering like this is what makes F1 great. So There's just one problem for the, you know, new world champions. They don't have funding for the next year. Uh

2:33:08 Th there's no way as cool as it would be to continue the Cinderella story. Bronn GP and its current financial state and ownership can't. continue for the twenty ten. Season. Yeah. There's just not enough money to invest in developing the next car and et cetera, et cetera.

2:33:27 So Ross knows that he has to sell The team. And of course Who's the logical Buyer.

2:33:34 Now Mercedes. They don't currently have a motorsport team. They clearly are interested. They make your engine? Make the engine.

2:33:45 They've just Had all of this success. With Frawn. Yeah, they have the strategic partnership with McLaren, but like Hey, what's McLaren compared to

2:33:55 an opportunity to own their own team. So they announce in the off season that they're dumping McLaren. Mercedes is. And buying a seventy five percent majority share in Braun. For two hundred million dollars.

2:34:10 And renaming the team. Mercedes. The Should be Mercedes.

2:34:18 Team. That you know of today. Where Lewis Hamilton won six drivers championships and the team won eight straight constructors championships. is the team that rises out of the ashes of Bron GP.

2:34:32 Incredible. Just incredible. The first thing they do after they buy their team, they're so excited. They hire Michael Schumacher to come out of retirement. Lewis Hamilton is still a young kid at this point in time. They hire Schumacher out of retirement to come reunite with Braun. The dream team and you know, drive this monster car. Yeah. Uh doesn't work out. It's like Jordan on the Wizards. Yeah, it's this is the Jordan and the Wizards era.

2:35:00 Although I mean I was gonna say it's like Tom Brady, but Tom Brady won a Super Bowl with the Bucs, so Yeah, yeah, no. Schumacher and Braun and Mercedes. Do not win another. Super Bowl. Everybody else had picked up the double diffuser. And that that really was the advantage that they had. It wasn't any more than that. А фік Мерси.

2:35:18 They were buying something that had Somewhat of a durable advantage. You know, oh maybe you've started thinking about next year.

2:35:28 The team really hadn't. And so there's sort of this realization at Mercedes of Oh crap, we bought a lemon. Yeah. We need to put hundreds of millions of dollars into this on top of that. Steak that we already. But

2:35:41 And To Mercedes's credit. They did. I mean they they could've cut their losses and said, Ah, this doesn't make s sense for us and instead they built

2:35:50 arguably the best formula one team to ever exist across multiple decades. Well They bring on a partner. Yeah.

2:36:00 Yes. So after a couple of years Up Schumacher and Braun. Braun, by the way, who bought the team for a pound and then sold seventy five percent of it for two hundred million dollars. Yeah, he's doing just fine. But after a couple of years, Mercedes decides this isn't working. They fire Braun and Schumacher.

2:36:20 Which is crazy. Who fires Michael Schumacher, right? Mercedes, F one. This is what happens. And they make two key hires. Yeah. As team principal

2:36:32 They bring in Austrian businessmen. who previously had been an investor in the Williams F one team. Name Toto Wolf. And again, if you watch Drive to Surviv, you

2:36:45 Definitely no too. Yeah. Probably the best Formula One team executive in History? Certainly by valuation increase. Yes. Yeah, I've got some numbers for you later on why. Yes. Okay. So put it put a pit in that.

2:36:58 Who could you possibly hire to replace Michael Schumacher as your Number one driver on the Mercedes team. Well Obviously you know the answer. A young British racing driver Lewis Hamilton.

2:37:11 Yeah. Yeah. So Toto Lewis and then the other driver they bring on, Nico Rosberg. As you said, Ben, would go on to win eight constructors championships in a row. And Nico won

2:37:23 The drivers Championship one of those. So it's not even like oh well they had Lewis Hamilton, so how good was the car really? It's like No. No, it was the car. The one year that Lewis didn't win, Nico won. Yep. Certainly the most dominant run in the history.

2:37:39 Yeah. And this ended Red Bull's own run. But what was so great For the sport. During this period is it's not like The

2:37:48 Schumacher era where The top team is just blowing away the field. You now have this great drama. Of the fight. Every season. Between Mercedes and Is it Vettel? Is it

2:38:00 Hamilton, is it the young up and coming Verstappen? Yes. Yes, it's these. Epic. Dramas. That are playing out.

2:38:09 On the track. And really it's these two teams that Create the modern era. For the teams and For the sport.

2:38:18 I mean Christian Horner at Red Bull and and certainly Toto at Mercedes. They're a totally new breed of team principals. These guys are CEOs. And and Zach Brown and McLaren is Also he actually is the CEO. Right. He's literally not the team principal. He is just the CEO. He's just the CEO.

2:38:36 They're playing roles that nobody at the team level had ever played before. Except Enzo Ferrari and Bernie. And Bernie, of course, had greater aspirations. They're building these businesses. They're not just building race cars and and race teams. Yeah.

2:38:53 So just to quickly take the Mercedes example. Ross Braun buys it in Two thousand eight, two thousand nine for one pound from Honda. Mercedes buys it a year later, or seventy five percent of it for two hundred million pounds.

2:39:09 Today Mercedes is worth six billion dollars under Toto. Not not Mercedes the car company. The Mercedes racing team alone. Just did a minority transaction valuing the team at six billion dollars. Yes. That is

2:39:27 What, twice as much as All the cash that Bernie pulled out of F one in its entirety during his heyday. Just for one team. Yeah.

2:39:38 And Speaking of valuations and Cashing out. Mm.

2:39:44 In twenty sixteen As all this is taking place. F one. Finally lands in The right set of hands to

2:39:53 Shepherd the sport. Going forward. Yeah. So Starting a few years after C V C

2:40:02 And Bernie. Reacquired. Mm. F one the league. C V C

2:40:09 starts reselling minority pieces. To other asset managers out there, including BlackRock, um the Norwegian Sovereign Wealth Fund, Nordis Bank. Uh Increasations.

2:40:24 They also load F one up with A bunch of debt. Again and pull cash out. Actually of debt. On the league. I mean, this is what private equity does, but and the cash flows are growing at F1, like thanks to the new races and the increasing TV contracts, et cetera, et cetera.

2:40:42 But By twenty sixteen CVC is now down to a thirty five percent Ownership stake.

2:40:50 They've pulled out A total of four and a half billін dollars of cash. Through a combination of the debt. And equity sales. Remember, they and Bernie only put in nine hundred million.

2:41:02 To start. And they still own Yeah, the largest single stake. And thirty five percent. Yeah. The league.

2:41:11 But It's time for a Transition of power, shall we say. A full exit. And w we've checked in a few different times along the way what is formula one at this point. 'Cause it was the weird Bernie entities and then it was the holding company in his wife's name.

2:41:27 Yeah. A at this point it is a company that is owned by CBC. But interestingly a thing to know is that company doesn't actually Own the sport. But what it does have, did you find this, David? The two thousand and one deal. The the key asset that this company owns.

2:41:46 Is In two thousand and one Bernie had secured the one hundred year commercial rights. Two formula one. from the FIA.

2:41:58 In a no bid process. In a no bid process for three hundred and sixty million dollars. When you think what is the asset really? The asset Is the right

2:42:11 to run the business of What FIA defines as formula one. Yeah. So basically all the commercial activities except team sponsorships. Which are the provenance of the teams.

2:42:23 And race. Tickets, which are the provenance of the promoters. And there's some other little things that the teams make money on and that the promoters make money on, but but basically, yes. So in September of twenty sixteen, it finally gets announced. That the American media company Liberty Media

2:42:39 Is acquiring F one for four point four billion dollars of equity value And assuming all of the outstanding debt that the Company has. for a combined total enterprise value of eight.

2:42:53 billion. Now the way they do it is interesting. Uh liberty and John Malone and Greg Maffay. We've talked about liberty many times over the years on Acquire. They are masters of deals on financial engineering. The way they do it. They initially acquire

2:43:12 A like eighteen, nineteen percent stake in F one. From C V C. So enough to make them the largest shareholder. And then they actually Change the whole name of

2:43:25 Liberty Media, the company, the publicly traded company. Into the Formula One group. create a new tracking stock to track The value of F one group. F W O N K or Fonk as the investment community refers to it. I know. It's so great. And then they

2:43:44 Issue Fwon. Share. to the remaining equity holders, including C V C and Bernie, et cetera. Such that A hundred percent of the company is now liquid and publicly traded.

2:43:57 The completely fascinating thing about liberty media today is it sort of doesn't exist anymore. They Bought. F one. Then they did enough other spin offs through the Atlanta Braves spin off through Liberty Live, the

2:44:12 the live nation spinoff at this point like ninety percent of Liberty itself is Formule One. And the stock is actually Formula One. It's like they spun out everything else. that was left and so the holding company is actually

2:44:27 Basically Formula One now. And so The plan that they announce Is that Former

2:44:34 Fox and News Corp executive Chase Carey. Who had been President and COO of News Corp. would become chairman of F one But that Bernie would remain.

2:44:45 as CEO. No. Chase Carry. Had been a Total.

2:44:51 Legend at Fox. I mean, I remember him when I worked at News Corp. And at Dow Jones. Chase. Helped. Rupert launch Fox Sports.

2:45:00 And built The whole th Fox NFL. program. Like da da da da was Chase. So he's the right man for the job. And he brings over a team of like

2:45:14 All the NFL. OGs, uh Fox and NFL OGs. So Sean Bratchus, who had been one of the key people who had built ESPN during its kind of parallel rise with SportsCenter and comes and joins the team. And The whole thesis is that Formula one is this incredible sport, incredible fan base, incredible asset.

2:45:38 And we can see with what's going on at Red Bull and at Mercedes that like It's gonna crush in the modern era. It just needs the right management to like get out of the way and let this happen. And that Bernie had sort of systematically underinvested, which which created opportunity. So there was almost no US market development. I mean, they by this point they had circuit of the Americas in Austin.

2:46:06 uh but no other US races yet. There was very limited sort of storytelling around the sport and digital investment. There was no social media Presence. The property was mostly behind like a closed paywall with restricted ass access, especially in the US. And really it was about old white guys with money. as the demographic. So is this like

2:46:28 If you kinda like looked at it with a modern media company approach. You're like oh there's low hanging fruit everywhere here. Asset just waiting to be unlocked. Yes. So pretty quickly when Chase and Liberty come in. Um It becomes clear that

2:46:46 There's not enough room for two bosses in F one of Jake being chairman and Bernie remaining is CEO. I mean really there as long as Bernie's there, there's not Room for Anyone else to run anything. So on January twenty third

2:47:01 twenty seventeen. after they had announced the acquisition the p previous fall. Liberty announces That Bernie Stepping down as CEO.

2:47:11 He will become honorary chairman emeritus and an advisor to the board of directors of F one. But not actually on the board. So in other words Liberty fires him. I mean they had to. There's no way

2:47:26 That they could. do what they wanted to do and and what needed to be done. As long as He was still there holding the reins. This is a classic what got you here won't get you there situation.

2:47:37 Yep. All that stuff that Bernie did, no doubt built the sport and created the sport. And the way in which it needed to go from here. uh Bernie could do almost none of those things and was probably holding it back at this point. Yep, yep.

2:47:52 So I was doing the math on his run. What year Did he sort of start becoming the steward of Formula One? Nineteen seventy two. And he left in twenty seventeen.

2:48:06 The long run. Forty five year run. I can't think of a sport a sporting league. that was basically controlled by a person for almost half a century like that. The closest that I can think of is

2:48:21 Pete Razelle. Thirty years at the helm of the NFL. Yeah. Yeah. So

2:48:28 Chase takes over. S C L. And he and Liberty. know they have their work cut out for them. So they come up.

2:48:36 With a four. Point plan. Number one. Most importantly. They need

2:48:42 To fix the relationships. With the teams. Thanks to Red Bull and Mercedes teams had started to become more successful financially, more business minded on their own. But the relationship with Formula one the league was still like

2:48:57 highly contentious through all of this. Arguably even more so as they were growing in power under Bernie. So The cost cap. Is the obvious thing to do. And like we said, Really w it was the indication of how broken things were before. that Bernie and the FIA couldn't get it done and it resulted in the photo breakaway attempt. Like you don't have a cost cap, you are just going to have

2:49:23 Teams. That have some Either independent funding or some other business that lets them go hundreds of millions of dollars into the red. which basically means everyone needs to to compete with them, which means that other than those one, two, three, four teams, it you're just gonna keep churning.

2:49:41 your bottom six on the grid over and over and over again because they can't run a viable business. So Number one priority. Is they gotta fix. The teams.

2:49:51 Which they do in the first Concord agreement that Liberty negotiates. They get everyone To agree. to a cost cap of a hundred and forty five Million dollars. And expenses on the car.

2:50:04 So not including driver salaries, that's separate. This is huge. And not including the three most powerful executives. Or the highest paid executives. Not including marketing spend. And power units are outside the cost cap too. So

2:50:22 It's a cost cap for sure. And um You know, it it gets some of the job done, but if you spit off a lot of cash, there's still plenty of ways to spend that cash to become more successful. Yes. That is definitely true.

2:50:35 But I think it really does end up functioning. Kinda as intended, like a salary cap in Other sports. The Cowboys can spend a lot more on marketing than the other teams. But they but they haven't been to the Super Bowl in a while. Yeah, right, right, right. The amount that they can spend on, you know, their equivalent of the car on the field, and in that case the players is same as everybody else. And they also implement wind tunnel restrictions. You can only spend so much time in the wind tunnel. We already have the restrictions on testing in season. So there really are at this point heavy restrictions. It's gone from one hundred and forty five million down to one thirty five, but then it got adjusted now up to one seventy with inflation and with adding more races because you get to add more to the cost cap for that. But you know, they're they're now spending every team under 170 million than

2:51:20 There were several teams that were spending four or five hundred million before. This is huge. Yeah. Instantly makes Every team at least close to break even. It doesn't make every team profitable, but it makes a lot of teams profitable.

2:51:34 And for the top teams This overnight makes them like immensely profitable. So when we talked about Mercedes going from being worth One pound to Six billion dollars. This is why.

2:51:47 The Mercedes team is a great business now, like an NFL level. Business. Yes. And Ferrari Obviously hasn't traded, but

2:51:55 Certainly is worth more than that. And every team, as we talked about at the top of the episode, is worth at least a billion and a half now. Yeah, so the numbers on this now are the average revenue per team today in 2026 is about four hundred and thirty million. About sixty percent of that comes from sponsorship. And the next highest comes from the sort of distributions coming from Formula One group. And we'll talk about how those distributions work later.

2:52:23 But what's their share of meteor rights and everything. Uh then they have kind of five to fifteen percent. uh that come from selling merch or engines or licensing or garage tours or what have you, but sixty percent is sponsorship. Um, and so if your average revenue team per team is around four hundred and thirty million

2:52:40 And the cost cap is only 170 million plus your driver, plus your marketing expenses, plus your you can kind of see how these become pretty quickly pretty good businesses. At least breakeven or close to breakeven businesses. Now there there are some outliers uh toward the front of the grid, like you were saying. Mercedes does eight hundred million in revenue now. Wow. Ferrari six hundred and seventy, McLaren somewhere right in that neighborhood, too, around six six fifty to seven hundred.

2:53:07 uh four hundred and twenty for Red Bull racing. Fifteen years ago, all four of those teams were operating at a loss. And ten years ago most of them were operating at a loss. Yeah. It's interesting back to your point earlier about Red Bull strategy. They could be

2:53:22 Make much more, I think. And they intentionally choose not to. That's exactly right. They they t try to keep their profit margin at their operating margin at like one percent or less. Yeah. So McLaren now does seventy ish million. uh in profit.

2:53:36 Ferrari. Does about eighty million. But the real outlier. Mercedes does an estimated two hundred million in operating income. From Formula One now.

2:53:47 I mean, that's like the level that Bernie was making for the whole league. couple decades ago. Right, twenty five percent operating income. Yeah. And On top of being phenomenally profitable, Toto Wolf estimated in twenty twenty one that Mercedes

2:54:01 that he thinks Mercedes gets a billion dollars of advertising equivalent value for being involved in the sport. Yeah, easy. So on six hundred million dollars of total spend last year, Mercedes generated a double bottom line of over a billion dollars in marketing equivalent value plus two hundred million dollars in actual profit. I mean think back to Ten, twenty years ago, Mercedes was just like luxury cruisers. You know, like, Yeah, they had AMG, you could get more horsepower in your S class, but like

2:54:29 Nobody thought these things were. Ferraris. Yeah. Now They're a legitimate sports car maker. Yeah.

2:54:37 We should say. Total wolf is just so unbelievably impressive. So they're an extreme outlier in doing two hundred million a year as in operating income. And this isn't like

2:54:49 They're underinvesting. They're a competitive team at the front of the grid. So they're not holding back an R D investment. That six billion dollar number that you cited, David, is r is real because that is a transaction that happened Where the CEO of CrowdStrike bought into Toto's holding company to get a sort of proxy ownership in the team. So why does Toto have

2:55:11 a uh a little holding company of his own. Unlike all the other team principles, Toto is a major equity owner in the team. So when he joined the team in twenty thirteen, he negotiated to own almost a third of the team.

2:55:28 Which at the time The whole team was worth about a hundred and sixty five million. And it's now 13 years later worth six billion dollars. So He's now a billionaire.

2:55:39 From his team ownership. Even though it's actually like the the main owner is Mercedes. He just managed to become a major equity owner, and that is really unique among team principals. Yeah. So that's obviously

2:55:53 Priority number one for liberty is We gotta fix the teams to fix the sport. Less Obviously. Priority number two was

2:56:03 They had to fix The relationships With the race promoters with the tracks. Talk about a stakeholder that Bernie had just been uh Extracting from The whole

2:56:16 Calendar as we talked about a minute ago. was just designed to maximize Race fee. Payments to F one. There was zero consideration or thought.

2:56:27 At the leag level About how to make the races Successful. Like How do you market each one and grow the pie and you know, avoid a situation where you have this huge middle of the pack of the races that nobody cares about? That's not good for the sport. I mean when liberty came in.

2:56:47 There was so much Mistrust. With the race promoters. That other than the just straight economic fee payments None of the races shared

2:56:58 Anything. With F one the league. So no data on fan attendance, no marketing strategies, nothing. Well, think about just how squeezed you were getting. You walk up to F one as a race promoter and say, Hi, I'd like to ha have a race, please. I own a racetract, and they say, Okay.

2:57:16 Well send back this contract in a fifty million dollar payment. Right. Pay us twenty million dollars if you're you know one of the European tracks. Pay us Forty, fift million dollars if you're one of these new US ones trying to come online, pay us fifty to sixty million dollars if you're uh a Middle East sovereign wealth fund. Oh, when your revenue streams right. Well, the Paddle Club, that's all gonna belong to us. Yeah and um the sponsorships on the racetrack, that's gonna belong to us too.

2:57:44 I guess you can sell tickets. You can sell tickets? Uh you should set up some hot dog stands. I think food and bev. That that you can do. Oh yeah, but also food and bev for Paddic Club. No cameras,'cause of course we've already sold the media rates and that exclusively flow to us and you don't get to participate in that. So you probably aren't going to be profitable on this. And if you are, certainly not in the first few years, you might want to get your local government to kick in. This is gonna be great for the city, which it is. So

2:58:14 My advice on getting profitable on this thing would be Go get some tax help. Find other people's money. Yeah, exactly. Exactly. So one of the first things they do is they get All the race promoters.

2:58:26 Together. You know? In a room. And say They're business partners. They should be. Yes, we're partners. We're partners. They're not competing with each other. We gotta work together here and let's share data. Like, hey, there's a lot of hardcore fans that like travel race to race. Shouldn't we all be sharing data and like marketing to those people and getting them to come to more races in more cities? Just no brainer stuff. Ultimately

2:58:50 The vision here which has mostly been realized, I think, is This is an opportunity. For twenty two Super Bowls every year in cities and countries around the world. When F one

2:59:03 Comes to your country, comes to your city. It is an entire weekend that should be treated. Just like the Super Bowl. So like Let us help you make that happen. Let us help you get musical acts. Let us help you coordinate the celebrity attendees. Let us help you coordinate social media. Austin has been really smart about this, the circuit of the Americas. They've landed Taylor Swift, Ed Sheeran, Sting, Eminem, Garth Brooks. They really do turn it into

2:59:32 Yes, just Giant. Festival. And it all kind of stems from Uh

2:59:37 An admission? that the race might not be that good. So you need to provide an experience. For everyone. I think they would argue that the whole weekend needs to be great. Right. There's one of four teams who are gonna be on the podium. And after you do the qualifying, whoever's in poll has like a very good chance of winning.

2:59:58 And um after the first turn, if there's no crashes, and after the first lap, then We pretty much know. So I hope the rest of the activities are fun. So Fix. Stakeholder relations with the tracks, number two.

3:00:15 Number three. Fix. Stakeholder relations with The fans. We've alluded to this a little bit, but and Red Bull and Mercedes and Lewis Hamilton were starting to push the edges, but like F one had a huge

3:00:29 Social media. Problem. Bernie and an F one. Had been doing

3:00:35 Everything they could. To keep the sport. In sort of the heyday state for them of the mid nineties where

3:00:44 He controlled everything. It all flowed through Bernie. Control over growth. If you have to pick between those two things, control. Yes, I control TV, I control the presentation, I control the race fees, I control the journalist access, I control who gets to go where in the paddock club and when, who gets to see what, et cetera, et cetera, et cetera. It was so bad. Yeah. Lewis Hamilton, when he came into the sport as this

3:01:09 Incredible star. Who you know had Global appeal was the first real F one driver to become a legit celebrity in America. The first superstar black athlete in Formula One, like first black athlete, period. There were no other black before since all the things that Lewis Hamilton is. He being a native millennial.

3:01:31 Wanted to Have an Instagram account. And and and that's underselling, like being one of the most fame savvy individuals. That too. And what he had that he brought into Liberty's office was a stack. Of cease and desist letters.

3:01:48 That Bernie kept sending him. to take down posts on his Instagram because he was quote illegally distributing F one's intellectual property. Mm-hmm. That's how bad this was. Nothing sums it up better than that. Yeah. So Liberty immediately is like, Yes, please, Lewis, post as much as you want on your Instagram. Yeah.

3:02:10 Uh Yeah. And then finally and related. There was also just A whole

3:02:16 Basket of low hanging fruit opportunities to grow the sport. So one of these was Esports and video games. There had been an independent

3:02:26 video game studio in the UK. That had been making official F one video games for Several years. Shortly after Liberty acquires F one. That studio gets acquired by

3:02:37 Electronic arts. Makers of Madden. And FIFA that do billions of dollars of revenue for EA and their league partners every year.

3:02:48 Liberty works with them. Another initiative. Again, remember Chase and The whole crew, they're coming from the NFL world. Among the many things that the NFL has done so great over the years

3:02:59 Is Turning all the off season content. Into Exciting marketable events like the NFL draft. Well What's the equivalent of the NFL draft for F one?

3:03:10 The testing period. Let's Televise the testing period. Let's make it an event. Let's generate revenue and grow the sport. Can we generate narrative out of it? I mean all the sports journalists who recover F1 right now can't stop writing about how little track time the Aston Martin team has gotten because of the new crazy stuff that by the way, Adrian Nui is now designing for Aston Martin. He's team principle now.

3:03:36 So he's got some new crazy design that uh isn't uh I guess super reliable yet. And so there's all these great You know, stories being talked about of how are the drivers gonna do when they've had so little time to actually Practice with all the other drivers. This is exactly what you want.

3:03:54 Yep, and all that was just Falling on the floor before. No engagement, no revenue. No utilization of that. Yeah. So then.

3:04:03 The last bucket. Is also pretty obvious. We should probably go start courting Hollywood.

3:04:12 Racing movies seem to be pretty popular. They're medium medium popular. People like'em. I mean, especially for the budgets that they've been made for in the past. Uh certainly this is a sport that Lends itself to visually compelling. Narratives.

3:04:30 I think you're right that the initial thing was, Oh yeah, people like racing and this is visually compelling. That was actually wrong. That is not the correct thesis, but it is the place to start. Yeah. Of course.

3:04:43 What we're getting at. With I Think

3:04:49 The most impactful Peace. Of sports media. In history. Ever across any sport.

3:04:57 Absolutely. And that is Netflix's drive to survive. Oh yeah. All right. So They go to Netflix.

3:05:07 These clever F one guys. And they say hey, I I think You should do a series. And the initial idea, David, like you're saying, is Race cars are cool.

3:05:17 visually compelling people like racing. Seems like a no brainer. And what it would evolve to Really it's a human drama. Yes.

3:05:25 It's about when we said there's three concurrent competitions. There's a driving competition, there's the world cup of engineering, and there's the world cup of office politics. It turns out the World Cup of Office Politics. is an amazing Amazing thing for a uh

3:05:39 effectively a reality TV show, especially most compelling television product. When you then uh a as secondary flare elements layer in race cars going super fast. Occasionally crashing. Yes, attractive mid twenties dudes in the most

3:05:58 extravagant, amazing places on earth. swimming and being on yachts and partying the night before your big race and it it's It's just perfect. It's Incredible.

3:06:11 But the human story, that is the killer unlock of Drive a Survive. And It was So Perfectly made for what

3:06:20 Everybody in the sport needed at the time. Because if you had made Drive to survive for I don't know. Let's take um The NBA.

3:06:31 Sure, it would have succeeded on a lot of the dimensions you just Mentioned. But the hardcore fans would hate it. 'Cause they'd say like, This isn't basketball. Come on. Right. This is just fluff for attracting new audiences.

3:06:47 The thing about F one at this moment is everybody was so starved for access. Any glimpse behind the curtain. That even the most hardcore petrol heads. Who would be the first to say, like, yeah, of course this isn't? The sport. This isn't F one. They loved it too. They'd never gotten To peek behind the curtain.

3:07:08 Alright, so how did it come to be? So Netflix and Liberty start talking. F one was also pitching Amazon on doing something, trying to get a little bit of a bidding war here. Who's it gonna be? Netflix or Amazon or someone else? Amazon already had something in the works with Mercedes and Lewis Hamilton that was just focused on them.

3:07:25 But hilariously. F one and Liberty control the actual track rights. So even though Amazon was gonna get the rights to Lewis and Mercedes. they couldn't film the documentary on track. So that it kinda ruins the whole thing. Ultimately.

3:07:42 You do need F one to play ball. So Amazon ends up bidding the most for the league wide thing, the thing that would become drive to survive. Liberty comes back with that bit in hand to Netflix and says, Hey, can you guys match this? Rumors are That it was about

3:07:56 double the Netflix bid. This is the Right payment. That Netflix or Amazon would pay to F one for the right to go make this series.

3:08:07 Which is the way it used to work, but based on how successful Drive to Survive has become. You don't have to pay the sports leagues anything. Netflix doesn't pay those sports leagues. Even the NFL, they don't pay'em anymore. It's such a giant, giant Spotlight. On your sport. Yeah. Yeah. They're small numbers. I think it was the order of like five million versus ten million or something like that. But Netflix comes back and says, You know what?

3:08:30 We're at our ceiling. But We do think we're the best partner for this. So Our offer remains the same.

3:08:37 If you guys are really focused and really mean it about growing the sport is the priority here our global audience is gonna grow the sport. So Liberty goes for it. They say, Yep, we're in for the lower price. And at this point in time, Netflix's audience in the US was something like two X. What Amazon's was.

3:08:56 Once Netflix secures these rights, they then start working down a list of production companies. box to box films wins because they had done that twenty tenna documentary. Which is great. I highly recommend folks find it and watch it.

3:09:11 Box to box had already been working with Red Bull Racing, but on a documentary idea just focused on them. I had heard rumors that the whole thing started as a Red Bull documentary. Now it makes sense. Yes. So ultimately the Red Bull idea gets scrapped, along with that Lewis and Mercedes idea that that Amazon was working on that gets scrapped. Although, listeners, we have heard rumors that That one is back in the works now with with someone else.

3:09:34 F one takes a big Leap of faith and gives Netflix and box to box films complete creative control. And final cut. Which I also think is really important that like Yeah.

3:09:47 This is a highly opinionated version of with full access that is not controlled by the sport. The other really interesting nuance here is Netflix is like yo yo, we make highly produced content that doesn't come out right away, we can't turn around a new episode every week during the season.

3:10:05 Right. Drive to survive comes out right before the next season starts. So once always. Always a season behind. In fact, if you're listening to this episode, then like three days ago, the most recent season of Drive to Survive. So

3:10:23 Mercedes interestingly declines to participate. probably partly because of the documentary that they think they have in the works at the time. with Amazon, but also because They're Mercedes. Right. This seems like a risk.

3:10:39 One everything you could possibly win like eight years in a row. they're very profitable or they're getting very profitable at this point. Why would you take any risk? And then Ferrari looks over and says, Well if Mercedes is out, we're definitely out. We're Ferrari.

3:10:53 So things are actually looking Kinda dire. Netflix is left with the bottom eight teams. And they ended up creating something really amazing out of Daniel Ricardo. I mean, that first episode just Hooked A lot of people. After the success of seasons one and two, which we heard was kind of a slow burn.

3:11:11 People loved it if they watched it, but the algorithm wasn't surfacing it to that many people. And over time they sort of realized Oh wow, this is actually applicable to many more people than we thought. young women across America and the world are into this and we thought it was gonna be fifty year old petrol head men, or at least we we fear that it might be. So we sort of started in that narrow circle. As it grows and grows and grows, and season two's doing well, and season three was this massive smash hit. suddenly then all the Mercedes and

3:11:40 Ferrari partners and sponsors are coming to them and going, Why are we not in drive as well? Why are we not getting these? What are you doing? Yeah. And so then of course in the later seasons, all the teams are in it. Yeah. Amazing. So

3:11:53 The other thing you may remember is Seasons one and two were fully filmed, released, and on Netflix. when the pandemic hit. Yep.

3:12:03 But it was sort of like the perfect thing for everybody to get really into just when they were starting to get trapped at home. And F one actually did a pretty amazing job. of reacting to the pandemic within a few months They were back on the track racing. They were doing these clever sort of double headers where they would race twice in a row at the same track. They were creating

3:12:26 bubbles just like other sports were creating bubbles. But The pandemic was weirdly very successful for the sport. Because they had Drive to survive, ready to watch. And

3:12:37 the sport sort of lent itself to their ability to recover quickly. Remember when everyone was uh building an F one simulator and playing the eSport too? Yeah, yeah. Yes. So Eventually it would become the number one Netflix show in ninety three countries at peak. And when you try to walk through some of the numbers, trying to figure out what actually was the impact of this.

3:12:59 In the first week, and that' this this is an official reported number. There tend to be over five hundred thousand Accounts. that view the new season just in that first week.

3:13:11 And with the Netflix stuff, it's always reasonable to multiply it by two or three because of password sharing. So call it like a million and a half people that watch just in that first release week. We heard elsewhere that in the fullness of time, a season of Drive to Survive is viewed in the sort of low tens of millions of accounts. So again with password sharing, you could generously assume call it 40 to 50 million unique people. Would watch the show. By the way. That is a huge number of people watching a single piece of, you know.

3:13:41 Non live event, non sporting event content. In fact it it's um here's a funny story. I was watching Drive to Survive The most recent season with my wife. To prep for this episode. And

3:13:53 While we're watching it and Christian Horner's getting interviewed. I made a comment of like Yeah, it's crazy he Like gets fired. He's not with

3:14:01 with Red Bull anymore. And she's like, Whoa, spoilers. And I was like, That happened six months ago. Like that's It her mental model is Real life is irrelevant, drive to survive is canonical. That's the really unique thing about this sport is how many more people are fans of the sport.

3:14:21 But don't watch races. Yeah. And this is where the Modern. Media business model. That liberty came in embraced.

3:14:30 There's a Bernie World never could have realized or seen this. Everybody still makes money. Even when fans only watch Drive to Survive.

3:14:40 Why did T Mercedes and Ferrari sponsors pressure them to participate. It's all the impressions of The sponsor logos. Yeah. Okay, so impact.

3:14:52 Obviously d drive to survive worked, but how do you slice it? How how much? What stats did you find, David? So one part of the liberty strategy that we hadn't hit yet'cause we were saving it for Drive to Survive was Bring this sport to America. Yes.

3:15:07 feels like it should have an audience here in a way that it Never had under Bernie. And so drive to survive was a big part of that strategy. So if you look at F one viewership in the US. In twenty eighteen, before Drive to Survive launched. About half a million.

3:15:26 Americans. Watched races. In twenty twenty one That has doubled in three years to over a million Americans.

3:15:36 Watch F one Grand Prix. I don't know what percentage of that doubling is attributable to drive to survive, but It's not ten percent. It's probably more like Eighty percent. Yep. So then Three years.

3:15:49 Later on. In twenty twenty four. once there are more US races on the calendar, which we'll get to in a second. viewership of the Miami Grand Prix in twenty twenty four was three point one million Americans.

3:16:03 Now, granted, that's optimal, like a US time zone, a US freeze, so there's natural interest, et cetera. But like the idea that three point one million Americans would be watching an F one race before Drive to Survive. Totally. Insane. It's more than most NBA games. So that's just in America.

3:16:21 globally F one added Seventy three million New fans. Between twenty twenty and twenty twenty one alone.

3:16:32 During the Covid period. That's a twenty percent increase in fans during COVID. Yeah. The stat on that in the US is that the US Now has fifty two million Americans. Which has doubled.

3:16:46 Since Drive to Survive came out. Most of those fans don't watch the races. Right. The average viewership of a Grand Prix in the US is about one point three million people today. Miami is a giant outlier at three point one million US viewers. But There's all sorts of other ways the fans can Engage.

3:17:04 With F one beyond the races. And then Probably the most Obviously directly attributable. Stat.

3:17:11 to drive to survive. The percentage of F one audience. That is women. Went from seven percent. Two there are reports out there that it's like forty percent.

3:17:23 today. Of F one fans or women. Of F one fans. Again, not watching the races necessarily, but Follow the sport. are interested in what's happening. Yeah. One uh quote I heard in research was that Liberty helped F one move away from the male, stale, and pale audience. Yes, that it certainly did. Thank you, Daniel Ricardo. Yes.

3:17:45 So staying on the America strategy for Liberty and F one. Obviously adding races in the US is a big priority here. I think Austin went much better than they thought it was going to. Yeah. And Austin obviously launched before Liberty bought the sport, but They make it a priority.

3:18:02 Uh, do you know about the previous US track record? Which is a little bit more. It's so bad. They raced in Long Beach at one point, right? Yeah, so anyone who's familiar with F one today probably doesn't realize there were

3:18:19 Nine different races historically. that attempted to run in the US. All of which are defunct. And they typically only lasted a year or a few at a time. So bad. The most successful One uh long running one was in upstate New York. Yeah, Watkins Glen, right.

3:18:37 They held Grands Prix in Phoenix. They did have one in Vegas before, but it was confined to just the Caesars Palace property. And it was just like all tight turns back and forth and back and forth and back and forth. They were in Detroit. And they were also at the Indianapolis Motor Speedway, where the N D five hundred is. But they they never really uh made a good impression. Yeah, well there was a bad there was a horrible thing where like half the teams refused to race one year there, right, and the fans revolted and threw stuff on the track and like

3:19:07 That was bad. Yeah. So the US track record not good. And then then they come in and do brand new from scratch built track for Circuit of the Americas in Austin and does Quite well. You now have that.

3:19:22 You've got In the similar time zone window in the Americas, you've got Mexico City. You've got the Canadian Grand Prix in Montreal. And you've got the Sao Paulo race. So you now have sort of four in this time zone window.

3:19:38 And Liberty and F one really go for it at this point. Yes. So Pretty quickly after Liberty.

3:19:46 buys the league. They start working on adding another race in the US. Uh and that becomes Miami, which launches in the twenty twenty two season. And then uh just one year later, they launch the Vegas race. But this is a different type of race.

3:20:02 There is no promoter. Rather than charging a fee And having someone else run the race. They say

3:20:12 Okay, we're gonna forego the promoter fee and we're just gonna operate this race ourselves. We're gonna take all the risk and and get all the reward. It's a A pretty big bet. 'Cause they actually bought the real estate. to build the paddock club.

3:20:25 So After talking to a lot of the different folks around F one. I would say it hasn't been an Obvious win. I I I don't think they will

3:20:35 Pursue this model. Elsewhere if I'm reading the tea leaves right now. These things take a long time to pay back. And I think they've sunk. over half a billion dollars.

3:20:46 into building this out. And They really shut down the city for a long period of time and block off a lot of stuff to to make it happen. It's much easier to run a business where you say, You know what, we're not gonna keep every little bit of upside for ourselves. You guys handle that, we'll just take the money. Yes. Bernie had some things, right? Yes. He had a lot of things, right. Yeah.

3:21:09 But there are now six races in the North American, South American time zone, and the US is the biggest media market in the world. So They're leaning in hard. Yeah. Well speaking of the paddock club you mentioned. It has

3:21:23 Totally transformed. Since Liberties. of F one.

3:21:30 You and I got to experience it with service now in Vegas. We were just beginning our F one research at that phase and we left for like weeks afterwards saying Oh, F one is a corporate sport. The consumer side must really not be big at all, but it's the most B to B thing we've ever seen. There's a strategy interview that Ben Thompson did with Mike Cannon Brooks, the Atlassian.

3:21:56 CEO last year. They're the title sponsor of Williams. And Mike says this. He says hey. We view our William sponsorship and our F one participation as

3:22:07 We get to have a mobile executive briefing center that we can go around the globe. throughout the year and bring our customers to this amazing event. And Have an amazing customer example to show them in Williams of how they use our software. Like I don't think

3:22:26 At Lassian has a physical executive briefing center. I think F one and the Paddo Club is their executive briefing center. It's funny, yeah. Since this was our first experience with it, it it was shocking to me realizing how large the consumer. element of the sport m was globally. Because in America it feels like this Like a little enterprise software conference.

3:22:48 Exactly. Okay, so what are the economics of all of this and how does that play into F1 as a business? So apparently the title sponsorship at the front of the grid now can be a fifty to a hundred million dollar deal. And Oracle's title sponsorship of exactly per year of Red Bull Racing is reportedly a hundred million. Uh, other places cite that the big title sponsorships are are more around fifty million.

3:23:12 But either way, I mean really big numbers and right in line with the biggest deals that F one itself does. So the L VMH deal is a hundred million dollars per year, and that's The Louis Vuitton banners everywhere, Tag Hoyer being the official time keeping sponsor. the L V trunk. And of course they spray Moet all over each other on the podiums. So you get sort of um wrapped in a blanket of L VMH now when you watch a a race. Yes, and back to the impact of Drive to Survive for a minute. Oracle's CMO said

3:23:45 I believe on an earnings call. Mm. Yeah. Drive to survive was the reason that they decided. to get into F one. And do the big red bowl spots. Really? Yes.

3:23:59 Fascinating. That they weren't engaged with the sport beforehand and then started to watch Drive to Survive and that led to Wow. Ultimately a you know, multi hundred million dollar investment over several years. Five hundred over five years is the the rumored value. So thank you, Netflix, for that gift. So the cheapest deals you can get, let's say you want to slap your logo on a car somewhere, you know, a little under a bumper or something, uh the cheapest deal is about a million dollars. And that's

3:24:27 A back of the grid car The most valuable real estate, I thought this was interesting, there's an airbox on the car that sort of sticks up behind the driver's head that you can see from the side. Those go for the sort of six to seven million dollar range. And the logo placement on a driver's chest is also very desirable. That's about a million and a half, especially toward the front of the grid. And this really is the way that these teams

3:24:52 Make money. It's About sixty percent of the revenue comes from sponsorship. And the teams are now averaging about two hundred million dollars of total sponsorship per team. But average is kind of the wrong way to look at it because it varies wildly from front of the grid to back of the grid. Yeah.

3:25:08 The other big thing is that hospitality is rolled in. So if you're entertaining a client at a football game, like let's say you do a big sponsorship deal with an NFL team and you get a suite. you get three to four hours together, and most of that is actually consumed by watching football because you care about it. It's an exciting game. Anything can happen. If you bring a client to an F one race

3:25:29 Like service now brought us. You spend three days together. And the race is only like Two hours. And actually in the race, there's not that much need to pay attention to most of the time. That there's some really exciting moments and you pay a lot of attention then, but there's plenty of time for a conversation otherwise. So it's much more conducive.

3:25:48 to forming real relationships. Versus a traditional two, three hour sports game. And you get to do it in geographies where your business operates all over the globe. not just a stadium near your office. And I even heard some uh comment of sponsors saying, Oh, we didn't even bother with a logo placement on the car. It's actually more about the relationships and hospitality.

3:26:11 Totally. So I can totally see why If your strategy is something like Atlassian and this is our mobile briefing center. It's really only F one. I mean, maybe like uh tennis or golf or something like that. That you could

3:26:25 Think about as a alternative. Here's my last bullet point on this. Ultimately, this sport is a magnet for sponsors because it is a global reach for brand. It's humans pushing the limits, both in physical competition and engineering cleverness. It's bleeding edge technology. And the sport is premium, if not luxury, in its positioning in almost every market around the world. Yep. Right.

3:26:46 Media rights. Media rights. Well To put a bow. on the liberty strategy. Or at least the

3:26:53 Come to America, part of it. Right after Liberty takes over in twenty seventeen They do A deal With ESPN.

3:27:02 Much like Birdie's original European broadcasting union deal. Liberty says Will you please show all of the F one races on the calendar on ESPN? We will give it to you for zero dollars. Was it actually zero? It was actually zero dollars.

3:27:22 for the twenty eighteen Season. I think maybe twenty nineteen, twenty twenty as well. We just want to grow the sport. Yeah.

3:27:30 Get something going, some traction in America. And ESPN, despite being a cable company, not a broadcaster, does have huge reach. It's the most valuable channel in every cable package. Yeah. If you're a sport And you want to grow in the US. You need to be on ESPN. F one had bounced around for a while. It was on the Speed Channel. Yeah, yeah. It was on MBC for a while, but only certain Grand Prix. They didn't show the whole

3:27:56 Season. Anyway. After drive to survive in Covid, uh those rights become a lot more valuable in America. So ESPN comes back in for another

3:28:06 Three year round of rights. In twenty twenty two After the sport has grown so much. E SPN does Start.

3:28:14 Paying. Real money for the rights, rumored eighty to ninety million dollars a year for a three year deal for the US TV rights. Up from zero? That's huge. The ESPN contract ends in twenty twenty five. In the interim Apple.

3:28:31 had their own F one media success. on their hands this past summer With the F one movie. With Brad Pitt. F one the movie, to say the title movie. Precisely, David.

3:28:43 Which grossed six hundred and thirty million dollars worldwide at the box office. The highest amount of Not only for a racing film for Any sports movie ever And

3:28:58 The highest grossing Box office movie of Brad Pitt's entire career. That's wild. And this massively exceeded people's expectations. It kinda shouldn't.

3:29:10 Like it was Brad Pitt. It was beautiful camera work. It was a feel good story. It had incredible special effects. It was the same director and producer of Top Gun. Like people were calling it Top Gun on Land. Yeah. You can't go wrong. Right. The only thing working against it really is it was a racing movie, and racing movies Other than Ford versus Ferrari haven't ever really been like Big box office smashes.

3:29:33 Yeah. And even that was Fine. Well nobody had ever made a racing movie like this before. Right. So if you do the quick math on that six hundred and thirty million and uh call it I don't know, thirty dollars a ticket, that you c you come to the number of twenty-one million tickets sold at the box office.

3:29:51 And depending on which estimates you believe from our drive to survive conversation earlier. There's a chance that the movie actually reached more people than drive to survive has. Or at least it's kinda in the same ballpark. Yes. Either way, both are

3:30:05 Home runs. So on the back of that Apple comes in Over the top.

3:30:12 For the US media rights negotiations. With a five year deal at a hundred and fifty million dollars a year. Rumored. Lumber.

3:30:22 But probably close. Probably close. For the media rights. I mean On the one hand, sure, this is not NFL.

3:30:28 Dollars yet. But this is real money for again a geography that was zero when Liberty took over. was a huge deal to get ESPN up from zero to call it eighty to ninety. Now you're talking about almost Double that

3:30:43 And For Apple. This is probably just the tip of the iceberg of what they can do with F one. Yeah, F so if you think about the uh a bull case for F one here. Thirty three percent of F one's revenue comes from media rights, and that hundred and forty million is only thirteen percent.

3:31:01 Of the total Meteor rights worldwide, which is one point one billion. Total. So this is, you know. Important to F one, but This is not

3:31:10 The bulk of their consumption and the bulk of their media rights dollars are outside the US. And hey, Apple's a global company, like Sure, they love their US Apple TV subscribers and Apple customers, but They love their European and Asian and Middle Eastern Customers just as much. They'd love

3:31:29 To show them, you could imagine. F one on Apple TV someday. And the the real bull case for I know we'll do bear and bull case later, but just to pull this one forward for F one here is in a lot of those markets, we like we were talking about earlier. they've got these vertically integrated sort of the channel is the broadcaster is the network thing and they don't have a competitive bidder. And so with Apple, with Netflix, with

3:31:53 Uh More likely Amazon, I think, than Netflix. But with streamers. And with YouTube buying media rights, now you have these tech companies as real viable bidders against the you know, one or two broadcasters in the country. So you actually can sort of more fully realize the media rights when there's a r a real market for them.

3:32:12 Yep. But I will say, just so listeners like are really grounded in this. US viewership is only one point three million people actually watching any given race with a peak of three point one million at the Miami Grand Prix. That is half. of what NASCAR averages.

3:32:29 Like this is Not even the number one motor sport in the US, and actually quite far from the number one motor sport in the US. International viewership. Із ситі та севні мільян піло. on a race weekend.

3:32:40 So there the US if if They crack the code, man, the US has running room ahead of it. Yep. And I mean Hell. Clearly it's working so far.

3:32:49 Yes. All right, sh before we catch up to today, should we do the uh the the quick update on the teams that are hitting the grid this year. Yeah. Got some new teams coming in. So we've got the return of consumer auto manufacturers.

3:33:02 Steak has become Audi. Honda is partnering with Aston Martin. Ford has joined with Red Bull as an engine partner. Honda. used to be the partner who would make Red Bull's engines in around twenty nineteen.

3:33:17 And then in twenty twenty one Honda left the sport. And Red Bull, instead of picking another engine supplier, they actually took it in house and started Red Bull power trains. with Honda's technology and technical support. And I think they hired a bunch of the people away from Honda. Yeah.

3:33:33 This Ford partnership is actually like a More of a partnership, right, with Red Bull and less of a straight We're supplying you the engine. Oh you're the uh Ford is very much not supplying the engine to

3:33:46 uh Red Bull. They are sort of a uh engineering partner on Red Bull power trains. And I know there's engineers sort of flying back and forth and multiple uh Ford sites that are sort of collaborating with Red Bull on building their engines. A lot of shade has been thrown at Ford saying that this is just a marketing exercise and hey, Red Bull was all prepared to Take engine manufacturing in house. So why do they need Ford's help?

3:34:11 Um but speaking of a marketing exercise Cadillac is entering the sport this year. And uh you might say, Well, that's a whole team. Like that's that's not just marketing. They're really, you know, uh an equity owner and and putting their best foot forward. This is a team. called Cadillac that uses Ferrari engines. And a lot of other components too.

3:34:32 The whole power unit The gearbox I mean it's like still a major deal that it's a major American manufacturer that is joining the sport. But This is a Cadillac with a Ferrari under the hood.

3:34:43 And Cadillac is shelling out. four hundred and fifty million dollars in a like an expansion fee uh effectively just to join the grid. Just is great for the sport that all of this has happened. So great. And just really reflects how far things have come. with relations with the teams that

3:35:01 It's so healthy. that manufacturers are coming back and the number of teams is expanding. To the the GM Cadillac versus Ford kinda opposing case studies are really interesting. I kinda love the rivalry though, right? Yeah, the rivalry is amazing. Sniping at each other. Yeah. And it's really unclear, like what you should do and what the better strategy is. You pointed out some of the downsides in both.

3:35:26 You know, the upside for GM and They on the team. they can over time invest, build this into a powerhouse. Or if they can, that would be great. They're certainly gonna start in the back of the pack.

3:35:39 It would be a A real coup if they didn't. Whereas Ford is coming in. With Red Bull. One of the top teams. Like

3:35:47 They're gonna be On the podium from season. Real big blue oval on that car. They announced and unveiled the cart. in Michigan. I mean it was like a Ford Red Bull event. Yeah.

3:36:00 And uh Meanwhile, uh GM and Cadillac unveiled theirs during the Super Bowl, right? They did. With a Super Bowl commercial and then with an activation in Times Square. Yeah.

3:36:10 Yeah. I love it. I I love to see it. Yep. And

3:36:14 The other big thing. for this year is there's a new Concord agreement. Complete with a full Rewriting of the rule set by the FIA.

3:36:22 So there's a resetting of the field. People always say these things come with a big reset, but Do I think Mercedes and Red Bull and McLaren? are not gonna be, you know, three of the top four teams. No, I think that's gonna stay Have we seen anything f in pre season from any of the teams at the back of the grid where they have some magic car that they've developed?

3:36:41 Not really. I mean, f uh the biggest thing I think we've seen is Ferrari, who is a front of grid team, uh is doing something very clever to create down force with their exhaust, but We'll have to see how that actually plays out. Yeah. We should say there's

3:36:56 some excitement around this new rule set where It's gonna enable more passing, which make should make for more dynamic races, which I I've been ripping on the whole time. I do like watching F1 races. But I do also think they could learn something from the NFL and figure out how to make it more competitive and A better pure sport. More exciting. Yeah, better product on the field.

3:37:17 On the cons, man, there's a lot of graming about these hybrid engines. Yeah, what Max for Sappen call it like a souped up formula E car or some Which is you know, it's it's actually perfect formula one drama that he's out there. you know making fun of the cars even before the season starts, but you know, everything from the the noise to the

3:37:38 Max's comment about how they drive to the kind of confusing nature of watching the sport and trying to on top of everything else now understand the strategy behind battery preservation that that might be a little tough for them to overcome in presenting to the viewer, especially new viewers. Yeah. Kind of unanimously from folks who've been around the sport for a while.

3:38:02 It's just sort of a shame. That no one can experience the old cars anymore. Like you can watch videos, you can listen to audio. Early two thousands, V ten, you just had to be there. But everybody says yeah. There's nothing like having one of those old Big engines. go by you and just the sound and the power and the vibrations or

3:38:25 Something you would never experience anywhere else. Certainly kills any uh, you know, sustainability angle that Formula One is trying to push these days. Okay, I have a major beef with this. So there's two reasons why they switched to hybrid engines. One is road relevance, because ten years ago or whatever, everyone thought that electric cars were gonna take over the world, or at least hybrid cars were, and it was good to start investing in Formula One in these technology so they could trickle into the cars that everyone's driving.

3:38:51 adoption has been much slower than we expected there. The other reason is this sustainability push, which look, I'm I'm all for sustainability. V carbon footprint of Formula One. It is absolutely hilarious to me when people talk about the sustainability of the power units, like the engines in the cars. When they are flying the whole circus around the world every week on a fleet of seven triple sevens. I mean

3:39:17 Okay, the European races. Everything goes by truck, which is a little better, but it's still three hundred trucks. If if you line these up, it would form a convoy over five kilometers long. And so I I was trying to like do some math of okay, how much of the carbon footprint is actually from The power units.

3:39:36 themselves when they're driving on track. During the twenty nineteen season, the logistics operation, moving the these cars in the circus around. Accounts for sixty four times the emission of the cars themselves. Even when you include practice. qualifying.

3:39:53 And races. I mean these F one tanks have thirty gallons of gas. Max. Right? It's three thirty gallon tanks. Over the course of a weekend.

3:40:03 And there's only twenty two cars. It's a rounding error. This is a complete farce. I I think I'm hearing a passionate argument from you to bring back the V ten. Bring b I've never heard one and I wanna hear one. I don't know. My my general belief on this is let the sport be the sport and do whatever is gonna be the best sort of fan and driver experience. And I think they are trying to cram too many things.

3:40:29 into F one. Like let it be a sport. Secondarily let it be a innovation playground for Auto manufacturers. But like

3:40:39 Don't die on the hill of sustainable fuels. How about just putting two races really close to each other and just rearranging the flight calendar a little bit. That would, that would do so much more, even if you just change one race than any compromises you're making on power units. Well You know what would make A really big impact to

3:40:59 American viewership of F one races and adoption of the sport. If they stop going head to head with the NFL on Sundays in the fall. Yes. In research we heard some strong and very compelling arguments for Uh creating sort of uh

3:41:17 A mini season in the spring. For US time zones, yeah. And kind of staying over here. So it's good for a carbon footprint. It's great for viewership, because you get six races that all build on each other in excitement. It great for US ratings, the biggest media market in the world. Uh I'm amenable. I I think it's a win win. And bring back the V Tens and you know what do Americans love more than loud engines. That's right. That's right. All right. The business today. Tell us about the business today. Yes.

3:41:45 Alright, so Formula One Group. Does$3.4 billion in revenue. And the most recent numbers here are from 2024. The revenue mix. Is

3:41:57 The media rights, which is broadcasting, is exactly thirty three percent. about one point one billion dollars. Race promotion is the next biggest budget at twenty nine percent. About a billion dollars. Race promoters. Exactly.

3:42:11 Advertising and sponsorship is the smaller bucket, nineteen percent. That's six hundred and thirty million dollars. It is their fastest growing. And to be clear, that's advertising and sponsorship to the league. Just to not the individual teams. Which y you'll notice uh that six hundred and thirty million is pretty small compared to the sum of all the teams. The teams are in about two billion dollars in total sponsorship across all of them.

3:42:37 Which makes sense because the teams actually have a lot more to sell in the way of driver access, hospitality packages, speaking engagements, garage tours, Also, the best sponsorship placements are on the cars and the drivers, which the teams own. So the camera is actually focused on those while the walls of the track just kind of go whizzing by, which is why they need to repeat the same logo a thousand times on the wall of the track for you to to get an impression of it. So the the best assets that are sponsorable. actually belong to the teams. Yeah. This is one of the really unique aspects of F one as a sport. That actually allow it to operate in this really weird way where the league is not owned by the teams.

3:43:19 Because so much Of the media rate's value. de facto will go to the teams. Like as the media reach grows, the value of the team sponsorship grows, and that's their primary revenue driver. Right.

3:43:33 Yeah, it's a funny way to think about it. They their exposure grows, therefore their own direct sponsorships can grow. Yeah. So Back to the revenue mix we talked about for the the parent company, thirty three percent broadcast, twenty-nine percent race promotion, nineteen percent advertising and sponsorship. Uh, and then they've got this other bucket at nineteen percent. That's hospitality packages, merch, and licensing.

3:43:56 So that's on the revenue side, total three point four billion. Now let's look at costs. The biggest cost is the distribution to teams. Which we haven't talked that much about how this works yet.

3:44:09 this couldn't be more different than the way it works in the NFL. The NFL splits the league revenue Exactly thirty two ways even No questions asked. Communist capitalism, it's delightful.

3:44:22 The distribution to teams. is renegotiated in every Concord agreement. Both the split with Formula one group is renegotiated.

3:44:32 And the distribution mechanisms amongst the teams, yeah. Exactly. They currently distribute about thirty seven percent of Formula One groups revenue out to the teams, which comes to one point two seven billion of their three point four billion. There are three components to how this formula works. The first is equal participation. The second is the constructors championship allocation.

3:44:59 Which is kind of interesting. The drivers championship has nothing to do with how prize money is paid out. It's just about the constructors. And then the third is uh historical length in the sport. Ferrari. Yeah. So for a long time Ferrari was guaranteed at least five percent of the pot total pool. just as like a thank you for being Ferrari. You've been a part of the series uh every year since its inception. You help legitimize the sport. You continue to help legitimize the sport. Absolutely. This has gotten negotiated away a little bit over time, but Uh when you look at the

3:45:33 the the rumored distributions, because this is the Concord agreements are not public. There is definitely still a large chunk as a Thank you, Ferrari, for being Ferrari. And you know what? They're worth Every penny.

3:45:46 So the stats that I've seen is that even today In the Max Verstappen, Lewis Hamilton, well I guess Lewis is now with Ferrari, but thinking when he was with Mercedes, I think it's Mercedes. Yeah, yeah, exactly. Even today. Thirty percent. Of all F one fans.

3:46:06 Their favorite team. It's Ferrari. Wow. So when you blend those three factors together, the participation, which is equal, the constructor's championship allocation, and the uh

3:46:18 The estimates are that the top team gets around 14% of the pool. And the bottom team gets around six percent. So to keep the math kind of simple uh imagine it as the top team getting

3:46:33 Hundred and forty million ish in prize money, and the bottom getting sixty million ish. This is a lot closer than it used to be. the the constructors used to wildly skew the distribution and the Ferrari premium was even higher. But like This is

3:46:48 holding the sport back. In my opinion, you you get a positive feedback loop and a negative feedback loop at the top and the bottom. And so Uh we're sort of stuck in this world right now where the the teams on the fr front four or five of the grid stay there and the back stay there. And You could make the argument that

3:47:08 Hey, making another twenty, thirty, forty million dollars. from the back of the grid is not gonna make you magically competitive. But

3:47:18 Every little bit helps and I think these things are nonlinear. They sort of spiral up or spiral down is maybe another way to Think about it. And

3:47:27 For every ten million dollars you get. out of the constructors championship you probably can go find twenty or thirty more million. In Sponsor dollars.

3:47:38 So I A few people have tried to tell me, hey, I actually don't think money uh is really the answer here. It's certainly not helping. To keep the back of the pack penalized with less dollars per year.

3:47:49 Yeah. People wanna see the stars win. That's true. But the bottom five may as well not even be racing. Well, you need you need'em on the grid, but you Do you why you need some warm bodies there. Just to like clog it up.

3:48:03 They risk causing crashes and getting in You know, the top few guys is Way and I guess that throws a race up in the air and anything can happen, but Yeah, the back of the grid's just the back of the grid.

3:48:14 Yeah, but I can't imagine it being a healthy state for the sport if there were only five teams. True. Very true. Alright, so back to Formula one itself by the numbers. There's eight hundred and thirty million people who identify as fans globally. This is different than

3:48:32 viewers. There are four hundred and fifty million global TV viewers. The last time that they broke this out and reported it in twenty twenty one seems to have become like a state secret since then, where they no longer report this information. Now onto team valuations. So as of twenty twenty five, Forbes estimates team valuations at about three point six billion dollars on average. average. This has been a huge, huge growth recently.

3:48:59 It's an eighty nine percent increase. in the last two years. Wow. Wow. It it's completely night and day since they put in this the the cost caps. I mean these these teams

3:49:10 used to be basically worthless in the Bernie era. And now have an average value of three point six billion dollars. Yes. Every team is now north of a billion dollars with the least valuable team Haas at one point five billion. Then at the top end.

3:49:26 Uh we've got six and a half billion dollars for Ferrari. Again, not the best business, but the most valuable asset. Love Ferrari. Uh six billion dollars for Mercedes, four point four billion for McLaren, and four point three five billion for Red Bull Racing. the multiples on these things.

3:49:45 Are very silly. Like if you compare them'cause again, most of these teams except for F the top three. produce very, very little in the way of profit. And so

3:49:56 If you c look at an NFL team, they actually spit off a lot of cash. If you look at these teams I mean it even the most connected to their intrinsic value, Mercedes, is trading at thirty times operating income. They trade at values because they're scarce assets, not because they are cash generative assets. Yes. People got very excited when they started

3:50:18 not being absolutely horrible businesses. And when they started being fine businesses, everyone sort of pulled forward many, many years of growth and potential profitability into their valuations, or they basically said, I don't care what the valuations are at all. I'm a sovereign wealth fund or deck a billionaire and this sounds fun. Yes. And in defense of this. I can think of a million reasons why being an owner or part owner of an F one team is a highly profitable trade for a person or an entity.

3:50:47 The funny thing is a lot of these people if they're currently cash flow negative. if they ever decided to sell the team would make up all the cash that they lost in the business ever from the asset appreciation. Right. It's almost like you're loaning money to the team for a while and then you get it back. So market cap of Formula One itself. Now remember Liberty bought in twenty seventeen the company for eight billion with four point four billion of that being equity value.

3:51:14 Today in 2026, it has a market cap of 22 billion with an enterprise value of 25 billion. So liberty has done quite well turning four point four billion of equity in twenty seventeen and to five X that In nine years. That's about a twenty two percent compound annual growth rate.

3:51:31 So then on top of the series itself, formula one group being worth twenty five billion dollars of enterprise value. You look at the teams, those if you sum them all up. Are worth another thirty six billion or so.

3:51:45 Not including Cadillac yet. And so there's a grand total then of sixty one billion dollars of enterprise value between the teams and formula one itself. Interestingly Skewed toward the teams. Yep. And that

3:51:58 is valuing the races at zero. Which I think the races probably have value. What did you say you think that F one invested in Vegas? Half a billion.

3:52:10 Half a billion. Okay. Let's say the Grand Prix are all worth half a billion just as a swag. There are Twenty two of them?

3:52:18 Yeah. Is that right? So there's another eleven billion dollars. You're assuming that's money well spent? Well if the if Formula One itself is willing to put five hundred million dollars up to stand up a Grand Prix.

3:52:33 Then Yeah, that seems a reasonable proxy for the value of a Grand Prix. Yeah. That's a great point. So you you say, Okay, the whole sport inclusive of of races then has seventy ish billion.

3:52:44 Of enterprise value, all told. Kind of fun. Like mental mm gymnastics to go through to think about how that value all breaks down. Yep. So then my key question

3:52:56 the and and the one the one unfilled in puzzle piece in all of your minds should be Ben and David are obsessed with the communist capitalism as of the NFL. And the fact that the NFL, the NBA, MLB, NHL, these are Thin leagues. These leagues do not retain earnings or or have their own enterprise value. They are purely distribution mechanisms where nothing's left over at the end, or like pass through entities of of of a sort.

3:53:22 This is a fat league. much like the UEFA Champions League or IPL. It's a company. It has its own earnings, it generates profits, it has enterprise value. So the key question you should all be thinking about is Ar teams geting their share.

3:53:37 Of the overall dollars. compared to what liberty gets. And how does it? compare to a league like the NFL where the teams are entitled to all the profits. Well, on the one hand, we can look back at the percent of F one management revenue that goes to teams, which was fifty percent.

3:53:54 back in twenty eighteen and has shrunk. to about thirty seven percent. last year. So something's going on there. F one is actually getting leverage over the teams. On the other hand

3:54:05 There's actually just not that much operating income left over. once formula one pays for all the other stuff. generated four hundred ninety two million in operating income. on revenues of three point four billion So even if we take all that operating income and we say, Okay, what if we were to distribute that four hundred ninety million to the teams?

3:54:28 That would only grow the team's distribution. From one point two seven billion to one point seven six billion. Yeah. In other words, th the teams are already making seventy two percent of what they would make if they owned the league.

3:54:43 Because there's just not that much profit left over. After all the costs to run the league. after selling all the sponsorships at the league level General overhead administration and of course running the Las Vegas race. Yep.

3:54:56 I suspect. If we were to have access to all the books during the Bernie era, that would be a very different story. Yes. And I th I think it's because what's going on is liberty is investing in the sport. Yes. Certainly there would be more operating income if if Vegas was on not on their books. It has reached this very interesting equilibrium where if the teams were making significantly less than this 72% of what they could make, I'd start going like

3:55:24 Gosh. Maybe they should break away. Maybe the league is keeping too much, but it somehow seems like this twenty eight percent Uh of of

3:55:35 What the teams are leaving on the table. Is like just right. You know? Mm-hmm. The racing series is complicated and expensive and

3:55:46 has to maintain this big global footprint and run this logistics operation. And ultimately we are not starting from whole cloth here. F one management exists. And it's just a matter of every time the Concord rolls around.

3:55:58 Uh how much leverage do the teams have in that. particular year. Yep. So that leads us to I think maybe the most interesting question of

3:56:08 the analysis section for this episode, which is Did F one require burning. Yes. That is the key question. Got to uh Obviously there is this incredible counter example out there with the NFL.

3:56:28 Of A similar dynamic. Arguably a much more complicated dynamic. 'Cause there were a lot more teams. in the NFL that needed to be wrangled.

3:56:39 Yep. It was Heroes Work by Pete Rosel to get them all to buy into communist capitalism. I think though You did need a Bernie. To get F one.

3:56:52 To where it is today. For two reasons. One. Doing this episode and telling the Bernie story. Has made me appreciate much more.

3:57:03 How unique what Pete Roselle did at the NFL. It was it's like Dhawk. at Visa. Yes. He was an N of one person who did an N of One job. Yeah, you could rerun that experiment a thousand times.

3:57:19 And Almost assuredly not end up with the NFL today. I mean, the the other major US sports haven't managed to do it. Nope. I mean the NBA is inching closer, but still isn't there. Baseball's a long way away. Yep.

3:57:33 At a minimum I think you Absolutely needed. A strong individual personality to emerge at the right moment in time.

3:57:45 And for the NFL, that was Pete Rizzelle in the fifties and sixties. And for Formula One, that was Bernie. In the seventies. And then you're kinda at the whim of the Is there something about

3:57:59 the other parties you're dealing with and their personalities. Or something about the global nature of the sport. So the here's where I was going with the second reason why I think you needed a Bernie. The global nature of the sport uh the insane logistics required to be operating a global sport. You know, the idea that an employee that the that the teams

3:58:22 the F one teams could have gotten together and hired an employee like the NFL did with Pete Rizel. To go and Create all this, there's no way you could incentivise somebody in the right way. Why was the NFL able to do it? Could Pete Rosel have developed the same structure in F one.

3:58:42 No, definitely not. Why? To go and negotiate. With all of these teams, all of these tracks. Uh all of these

3:58:51 broadcasters, the FIA and this crazy NGO rules regulation rules regulator. Because of the complex multipartiness, you have to have the incentives of like being your own entrepreneur with a company. Uh not just an entrepreneur. I think you need somebody Truly with Bernie's. background is a ruthlessness like you need a street fighter to do this. Pete Rosel was many great things, but he was not a street fighter. Yeah.

3:59:19 Hm. What do you think? I largely agree with you. You have uh nothing more to add in. Charlie's words here.

3:59:26 Nothing more to add. All right, power. Power. Yes. But actually first There's something interesting to think about, which is

3:59:34 Powen teams. Mm. So F one has become about exploiting the tiniest little advantages or cracks in the rule book as we've talked about.

3:59:44 And usually other teams can figure out what you did. And copy it. Very soon. Like within a few races. There are some advantages that last a whole season. Like if you do something different in the fundamental layout of the engine or battery or gearbox, that that will buy you

4:00:01 A year of edge if it is the correct decision. And there's real magic when you can do something that lasts multiple seasons, like what Mercedes did where You know, I I I can't exactly explain to you why, but something happened where they were just better at designing the car than anybody else. And they won for eight seasons.

4:00:21 Or having a driver that was just so much better than anyone else in that era with Lewis Hamilton. But those things Are more operational excellence. Yeah. I mean the drivers are the ultimate definition of not a power because anybody else can hire them. Right, not a power

4:00:38 I think they exist entirely outside the world of strategy. It's it's uh competency, it's operational excellence. And uh like being good at aerodynamics and car design and engine design is kind of that too. And so the the thing that I would throw out here is I think

4:00:55 skill or operational excellence is actually more important. In building a successful F one team. than strategy. Because a lot of these Ways that you can win via strategy have a short window.

4:01:09 That closes. when other teams can sort of quickly arbitrage the value away. And from what I can tell Almost all durable advantages.

4:01:20 In F one that last three, four seasons or more. come from operational excellence. Mm. Yeah, I could probably make an argument for

4:01:31 Scale economies too. In that even with the cost caps If you have More Financial resources you're gonna be able to

4:01:43 Certainly you can hire the best driver. I mean if you Uh if i if you have an extra hundred million dollars versus your nearest competitor. you pretty much should be able to go sign the best driver in the world. Yeah. So at any given time. And like Yeah, that's I guess sort of more like balance sheet. Financial scale economies, but

4:02:02 There does seem to be persistence in The top teams on the grid? That doesn't seem related to power. To me. Yeah. Like what what power does it? Grid just our uh

4:02:16 They're just operationally better. Yes. Competency. Skill competency, operational excellence, not A strategy they pursued that differentiated them. On a du coup. I think that exists w year to year, but not for

4:02:31 eight year winning streak. I can see that. Not by your argument. The teams are all about operational. The teams are powerless. Yeah.

4:02:39 Which I think is what you want. I think that's right. I think a league. I think in sport, yes. You you always want The most talented and highest performing team.

4:02:50 And you don't want structural barriers or advantages the way that You sort of uh do want if you're a capitalist investor.

4:03:01 Yeah. Let's narrow this at least to like the front half of the grid but the bottom teams that are kind of always the bottom. There's there's definite negative Power spirals for the the the the bottom. Yeah.

4:03:15 But for the top half of teams Over the arc of a couple seasons. There is transference. Yes. Among that set. Yes.

4:03:26 Yeah. Okay, I buy it. I buy it. Exactly. And so thus there must not be real power there. Yes. Great. I like it.

4:03:33 All right, so back to the Formula One group. Yeah. Let's analyze the takeoff phase different than the scale phase. Why did it become the premier motor racing series. Like why is it bigger than Lama or Indycar I can think of a few reasons.

4:03:51 I believe Formula One is the Only Racing car series. where pretty much everything is custom engineered by the teams. Mm-hmm. There's very little

4:04:04 Stock elements to it. Uh, which inherently makes it more interesting and exciting. Yep. Two. The

4:04:13 Prestige, luxury, old world European royalty ties. Yep. Plus the crossover with Hollywood. Yep. And once you have that, you can kinda like hold on to it. Like that's sort of a cornered resource. Yeah, no other racing series, once you have it, can get it. Like Rally racing may be cool.

4:04:32 Grace Kelly was never gonna go to a rally race. Yeah or all the slew of celebrities who come to F1 races these days. Probab most important though. I think is the FIA's Explicit Designation of Formula One as the pinnacle. Yeah.

4:04:53 You have the more or less global regulating body for many other motor sports, though obviously not all. FIA doesn't regulate Nascar or IndyCar or stuff like that, but for many other sports explicitly saying This is the pinnacle. Right. So you sort of have a like regulatorily granted monopoly. Yes, yes. It's like the royal seal of approval. Yes. our normal capitalist forces aren't really allowed to play out in the same way uh uh because it's it's been declared. It is The number one motor racing series in the world. It's right there in the name. Formula One. Yeah. So that would be a cornered resource in the uh power framework for sure. So now let's ask like a more literal question uh which is just the the seven powers framework applied to

4:05:36 the Liberty Media Formula One entity. Today. And the framework for power is what is it? That enables your business to have persistent differential returns, or basically to be more profitable than your closest competitor on a sustainable, durable basis. Yep. And the seven are scale economies, network economies, counter positioning, switching costs, branding, cornered resource, and process power.

4:06:02 Alright, so what is stopping someone from eating Formula One's lunch today. What is stopping uh the teams from breaking away and starting photo? That's the biggest thing. Is that your suppliers

4:06:16 Both at the track side. And at the car side could build something and go around you. It's expensive.

4:06:26 And annoying. to do that. Yeah. Formula one is pretty interesting as a sports league in that it has inherent network economies.

4:06:35 Within the boundaries of the sport. Yeah. Uh The Grand Prix and the teams. Yep. There's also real branding power. I mean, people will tune in to watch F one in a way that they wouldn't tune in to watch photo. It is designated as the pinnacle of motorsports. Yes. Yes. Uh and they've got that as a cornered resource.

4:06:57 Uh that has been designated by the FIA. I think that that's what I would classify that as There are switching costs certainly for the teams. Major switching costs for the teams and the circuits, too. Yep. In fact, this is actually looking like a very protected business. The more we analyze it, that you're they're they're pretty well dug in with all their parties.

4:07:18 Look, I mean, it really speaks to how powerful The F one group. Is That despite all the years of abuse from Bernie, The circuits and the teams never actually broke away.

4:07:32 Yeah. Certainly scale economies. this type of racing series is so expensive to operate. That you kinda have to have this scale. Yeah.

4:07:40 You have to amortize all the overall costs of the league across a series of twenty two races. Twenty two races across the teams, across all the viewers, such that you can generate the billion dollars in in media rights. Yep. Actually uh uh I'm coming away feeling like this is very defensible. Very defensible. Uh I guess the key to the whole thing is fans continuing to care. All right, Baron Bull.

4:08:05 Yep. Let's do it. Okay. So I have a uh table setting exercise for us getting into this. Great, great. So there are eight hundred and thirty million global F1 fans.

4:08:15 for a league that does three point four billion and teams that generate another two billion or so on top of what the league them. So that's About five and a half billion dollars. gross total revenue. across the whole sport for eight hundred and thirty million fans.

4:08:34 Wow. Sure feels like there's a lot of room to grow there. The NFL Generates twenty three billlion dollars of revenue across Just a hundred and eighty. million fans.

4:08:45 So so that's four times the revenue on one fifth The number of fans. Yep. The NFL monetizes a fan at a hundred and twenty seven dollars per year. And formula one monetizes a fan at seven dollars per year.

4:09:01 David, what is going on here? Well, one major thing. That is an issue for F one similar to IPL on our IP L episode. Uh they just don't have anywhere near as much inventory. Right.

4:09:15 the NFL. Twenty two races a year. And there's there there's no path for them to get to. A hundred races a year. just Haas and Mercedes are gonna head out to this circuit on this day. And at this at the same weekend you're gonna see Red Bull it's not happening. Yeah. So they're just fundamentally limited by inventory. Now that said, the flip of that is they absolutely have the opportunity

4:09:40 Like Liberty Identified to Make those twenty two races into twenty two Super Bowls, which they're well on their way to doing. Right. They have to. So

4:09:49 There's that. The biggest thing is the US is the biggest media market in the world with the highest uh revenue per consumer and the highest subscriber fee per media broadcast. And You just don't

4:10:02 You don't have penetration here yet. They're working on it. So that I think is like the easy answer. And then I think inventory, you're right. There's sort of a structural thing. Yeah. And then that you know, leads to hey, if you really care About

4:10:15 Growing revenue. And you really care about the US strategy. You've got to fix the race calendar. Yes. You cannot be going up against the NFL in the fall. And especially not with two of the three big US races in the fall. Yeah.

4:10:30 So that's a bull case. They figure that out. Another bull case is actually around the European TV rights, the thing we were talking about, they they more fully realize the value where you have actual competition bidding for those rights. And since so many of the viewers are there, moving the needle a little bit actually is a giant amount of revenue change for F1. Yeah.

4:10:50 The uh last bull case that I had thought of that we haven't really covered yet is A US driver or US team becoming world champion. Mm. Yeah. That could really kick start.

4:11:02 fandom here. Yep. I think there's a related champion or champion level female driver emerging in the coming years. Yes.

4:11:12 Gonna happen. Has to happen, should happen and Given how much of the sports fandom has already shifted. Towards women thanks to Drive to Survive and the movie

4:11:25 That feels like it could be a further acceleration there. Yeah. Spare cases. The biggest one that I just keep hearing is that it is more of a parade than a race. I mean, like NASCAR, you have aggressive overtaking lap after lap. It's just constantly exciting and F one is this beautiful competition, but so much of it is strategy.

4:11:44 engineering Stuff that happens in qualifying, conserving resources, pitting at the right time. It takes away from the like natural observability. Of

4:11:55 the sport. And so the bare cases that despite everything they'll try to do in regulations to make it more competitive. Yeah, these are Really big cars.

4:12:05 Because of safety. That it's just hard to pass and you're really incentivized to conserve fuel, not burn your tires when you don't need to, et cetera, et cetera. Yeah. Which puts a natural ceiling on the

4:12:18 amount of fervor around it. Yeah. One thing that I think You could have argued a couple years ago was a bear case. But I think has been

4:12:27 Put to rest. Is This was a Covid driven fad. I think F one has proven enough staying power. Post COVID. That's true. I probably would have bet that actually it was a COVID fad in the US, one or two years after Drive to Survive, which would have been wrong. I mean it was really in that category with like COVID tropes, like you got your Peloton, you got your F one simulator, you're watching Drive to Survive and Tiger King.

4:12:52 But of the Set of activities. F one feels like one of the few that is persisted. Yeah.

4:12:59 If you're an investor one reason why you might not give it The multiple that uh it used to have. Like Li Liberty bought it for eight eighteen or twenty times earnings, something like that. one reason you might not be as generous

4:13:13 In its future growth is It's kind of optimized now. A lot of the low hanging fruit that was available for Liberty to do is levers that they have pulled. So e everything from here is gonna be a little bit more of like a multi decade slog than some Easy quick fixes. Not that that's really a bear case, but

4:13:32 It won't show up right away. Yep. This last thing that I just keep thinking about, I don't know if it's a bullcase, barricades, it it really could be either is The broadcast right now. at least bla when I watched it last season, do leave a lot to be desired if you are not super into the sport.

4:13:47 So there's this bull case of bringing drive to survive storylines into the race. Like let us see the drivers before the race more. After getting to know these people so much on Drive to Survive, it felt weird that I was watching a race and I like didn't get any of their human product. It's like are these the same people? Uh it says their names, but like I can't see their face. I can barely hear their voice. Like once or twice a race I get some little

4:14:13 tiny amount of radio chatter. So uh I I think there's there's more you could do of like Bringing the people from Drive to Survive into the race that they're the same people. So you should be able to do it. And second, uh data visualization to make the dynamic moments of the race. Like there are amazing moments in the race, but make them more understandable to new fans. So if we're likely to see an overtake five laps from now when so and so has the right tires and so and so else is has pitted, like exposing that, start talking about it, building toward it and help me visualize it. Like why is that gonna happen in five laps and not two laps.

4:14:50 Like a sensible way to show Hey, that person on our little thing, it says they're in first, but really they're not in first because they haven't pitted yet. And those other four people have, so Yeah, help me understand better what's going on. Yep.

4:15:04 This is actually a opportunity, or maybe we could frame it as part of the bull case for Apple's involvement in the sport. You know, they already Developed special cameras for Yeah.

4:15:18 Uh Apple did. Yep. And they're bringing those to their coverage of the races. It's basically an iPhone and they rearrange the components to fit in the standard F one camera package. Yep. And It's not that difficult to imagine. Some of the Vision Pro technology being

4:15:36 really game changer on this front for F one. I'm not even really thinking about consumers wearing Vision Pro watching these things. But to your point about seeing the drivers experiencing the drivers more during the race. Like Apple absolutely has the technological ability and resources to invest in

4:15:56 In helmet camps. Driver facial recognition. Oh, yeah, they should uh the construction. What do they call it in the Vision Pro where uh I could take a video call wearing the Vision Pro and it uses my avatar. Right. Do do that with the drivers. Totally. I don't know. It'd be hard, though their faces are so squeezed in those helmets. But you're right, there's technology solutions to this. Acquired doesn't need to do product development for Apple and F one here, but like uh

4:16:20 This is a bullcase for Apple becoming a major partner of F one. Yeah. Anything else in Baron Bull? That's what I got. All right.

4:16:28 Quintessence. Oh man. Listeners, this is where we try to land the plane. What is the thing that's the first time that's the first time. Yes, that uh That we still can't stop thinking about. Box, box, box, box, box.

4:16:41 Boxes left. Mm. Yeah. Alright, so here's mine. It won't come as a shock to anyone.

4:16:50 But I am so astonished. That This is a sport. that might be durably popular.

4:16:59 with a giant group of people who never watch the sport. I can't think of another sport where that is true, where someone would say, Oh, I'm a big football fan. But I've watched zero NFL games this year. But there are lots of people who say they love F one who can name people who will buy merch.

4:17:19 Who will associate and purchase from sponsors of teams. And who can tell you who won the championship last year, but will never tune in live. And that might be like the majority of the US audience.

4:17:33 Yeah. I can't think of another one either. Yeah. Ooh, my quintessence. This

4:17:39 is by far The most Complex sports business and league, certainly that we have studied. And it's hard to think of others at this scale.

4:17:54 That my match it in complexity. It's more akin to a boxing or UFC with this sort of uh a competition happens in a place at a time. It's not anybody's sort of home stadium. There's a promoter Yeah.

4:18:10 But This has been a Ten teams, not two fighters, and they have three hundred million dollar race cars. So with a thousand person teams

4:18:22 behind it. I was gonna make the point earlier in the episode that It'd be like if the equipment manager and an NFL team was the most important person on the team. And had eight hundred people who worked for him or her. Yeah.

4:18:39 Yeah. Ah I can't imagine any other sport that is anywhere near as complex as this. And so you've had this crazy history as a result. But it's still been

4:18:52 Durable. Because nobody else could pull all of these disparate parties together in the way that Formula One is managed to. The activation energy to do something similar than this is pr prohibitively insane. Yes. Yes. The next formula one is not a direct thing that looks like Formula One. It's something completely different that can start small and grow organically from here. To the point you made a few minutes ago. Nobody would ever

4:19:18 draw up a league that looked like this on paper. Right. It's it's like wonderfully organic. Yes. Yes, and chaotic. And it's funny, e even though it is a thick league or a fat league just like IPL cricket is. That started out of nowhere.

4:19:33 And was it came out guns blazing and burned hot and worked. Yeah. And this is kind of the opposite. It took seventy years. Yeah.

4:19:42 Alright, that's my quintessence. What I got. Carve outs. Carve outs. Let's do it. So for anyone new to the show, this is where we highlight one or two things that we have loved recently that are totally unrelated to the episode that we wanted to share with all of you.

4:19:55 So for my wife's birthday, we went to Marymore Park in Seattle, where they have a Can't figure out. It seems reasonably permanent, but it's a Yeah.

4:20:06 with a cirque de Soule show in it. And the show. is called Echo and it is so awesome. The Cirque de Sulay uh blows me away every time. But

4:20:17 The performers are just otherworldly in their talent. They're Unlike many live performances, it's not like, oh, we'll see if this works. And if not, I can bail out and I've a a a fallback plan. There's no fallback plans. They hit their marks perfectly every time doing absolutely superhum stuff in an awe inspiring way. Go see it if you can, or really any Cirque du Soule, because it's just so, so impressive. I wanna go see five more. Like I I'm I'm in. I'm super

4:20:43 Actually really awesome. If you appreciate N of one performers who are doing something that Well, you'd you'd have to train your entire life for it, and you're the very best in the world, and you make no mistakes, and it's coupled with like unbelievably creative, clever things where you think like How did they even think of this?

4:21:00 That's Cirque de Zule. Awesome. My second one is super quick. The Seahawks just won the Super Bowl and NFL Films released on YouTube a forty minute cut of the game called Mic'ed Up and you get to hear a whole bunch of the players talking to each other and it is awesome. Uh whether you're a Seahawks fan. It actually makes the game interesting. God, was that a boring Super Bowl and I love it. We had a great time. God, that Superbowl game was like an F one race. Yeah. It was super, super special doing the innovation summit and then going to the game with you. That was

4:21:32 That was a real life moment. Yeah. All right. My first carve out is tonal.

4:21:39 The Exercise equipment. So we have some acquired listeners at Tonal and they heard me Oh I'd redone.

4:21:50 My home gymnastics. And uh which I'm very happy about, but it is a very small space. And uh so so space is at a premium. Before we redid the space, I had a full squat rack in there. I had enough room for that and kinda don't have enough room for it anymore. And so the folks at Tonal reached out. This thing is awesome. It just mounts to the wall and it takes up no space. It's

4:22:13 Perfect. And it's better than a Squat rack,'cause I can do a infinite number of strength training exercises on it. So Uh very happily User of Tonal now. Thank you for

4:22:24 Making my home gym. Much better. My second car out is continuing My truly amazing and gratifying saga as a parent of my older daughter discovering video games.

4:22:36 Because I've been documenting this whole saga via carve outs for the last several months, listeners have been reaching out and Old classmates from college, Ryan actually sent me an email. About A game called Princess Peach Showtime.

4:22:52 Nintendo finally got the picture that like, hey, girls are a growth audience for them. And they made a Princess Peach game where Peach is The heroine. Peach goes

4:23:05 To a magical theater. And an evil witch named Grape takes over The theater and Peach has to dress up in different costumes and go reenact all the plays. To save The theater.

4:23:18 My daughter loves this thing and it's been So fun to watch her like become an expert at this game. The way that I fell in love with Super Mario sixty four back in the day. Uh it is so, so, so cool. Uh so highly recommend to anyone with little kids.

4:23:35 And a Nintendo Switch, go get Princess Peach Showtime, especially if you have a young daughter. Might be their gateway. Into video games. Nice. Well we have some

4:23:45 Thank you, and lots of great people we spoke with this episode. But first To our partners this season, JP Morgan Payments, trusted, reliable payments infrastructure for your business, no matter the scale. That's jpmorgan.com/slash acquired. Verse. the developer tools and cloud infrastructure to build and scale fast, secure applications on the web.

4:24:05 For sale dot com. Slash acquired. To service now. The platform that puts AI to work for people. That's service now.com slash acquired, into Statsig, bringing experimentation, feature flags, and product analytics into one unified system for product teams. Statsig.com slash acquired.

4:24:22 As always, you can click the links in the show notes to learn more or see all of our sources. And special thank you. As always, to Arvind Navarotnam at Worldly Partners for his awesome Awesome write up. on formula one linked in the show notes.

4:24:38 Arvin really did a banger job. I mean it's he does a great job every time, but like This was a bad thing. He's become a real indispensable part of uh of research for acquired episodes. Similarly, on my end, thank you again to Joshua Robinson and Jonathan Clegg. At the Wall Street Journal. auth of the formula. Truly the best business history book on F one out there.

4:24:59 All right, and I've got a great list here. Big thank you to Zach Brown, the CEO at McLaren Racing. Thanks so much for your time and prepping. to Greg Mafey, the former CEO of Liberty Media. When they of course bought Formula One from C B C. Thanks, Greg, for helping me understand. The whole company. To Brandon Reg, who oversees nonfiction and sports at Netflix, very helpful for understanding Netflix's strategy with Drive to Survive and the impacts it had.

4:25:25 To James Gay Reese, the co-founder of Box to Box Films, the production company behind Drive to Survive. To Eddie Q at Apple. long time for one fan and of course who recently bought the US broadcast rights. to Pavangami, Alex Knight, and Jimmy Fairbanks, who are equity investors and analysts who really helped me understand the investor perspective on Formula One group and Liberty Media.

4:25:49 to Sid Travetti. partner at Foundation Capital and lifelong F1 fan. to John Najjaafee, the former vice chairman of McLaren Racing. And from Ford. Will Ford and Mark Rushbrook, who obviously did the big engine partnership with Red Bull Racing. Thanks for your time, guys. Yep.

4:26:07 To Nathan Bashez, my good friend and longtime F one fan. to our friends at Shopify, Toby Lutka and Mikhail Perakin. both total motor sports nuts and uh Toby actually races in another racing series. So kind of fun to get his uh his perspective as a driver. Toby Mm-hmm. to uh Andrew Craig, former chairman of IndyCar and sports marketing consultant.

4:26:28 to Mike Miller, former Wall Street Journal editor, who helped us think through a lot of the big beats on the story on this one. To our friend Dustin Sedgwick, who has done partnerships and sponsorships with teams and races all over the course of his career. To Colin Fleming and the whole ServiceNow team for bringing us to the Paddock Club for the Las Vegas Grand Prix for some first party research. To Bobby Epstein, CEO of the Austin Track Circuit of the Americas and promoter of the US Grand Prix. And lastly, to our friends at Dalupa for providing us with some amazing financial models and spreadsheet of all the historical data on Formula One, just like they did for us on Coca-Cola and Google.

4:27:07 Yeah. And just one more on my end to Chase Carey. Uh board member now of Liberty and Fox, but obviously former CEO of The F one group.

4:27:17 Yeah. Thanks for chatting with us. Really uh quite the cast this time, David. These lists are getting a little nuts. In addition to all the people that we aren't even saying that that helped us too, so Thanks if uh if you didn't hear your name.

4:27:29 Yes. All right, if you like this episode, go check out our other sports episodes, the NFL, NBA, IPL cricket. Some good ones in there. And uh now if you're fired up about F one. The first race is just a few days away, so

4:27:42 If you want to see any images from this Episode, you can join our email list, acquired.fm slash email. We'll also share our big takeaways from every episode, episode summaries, uh, where you're gonna get involved in helping us pick future episodes. We we do polls and little hints to that email list of what our next episode will be. So sign up at acquired.fm slash email. and come talk about it in the Slack at acquired.fm slash slack. Without listeners. We'll see you next time.

4:28:11 We'll see you next time. Who got the truth? Is it you, is it you, is it you Who got the truth now

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