Why does Formula 1 attract so much investment?

It is a consortium that has invested in Alpine. Among the investment groups, we find Maximum Efforts Investments, owned by Reynolds and McElhenney, but also Otro Capital and RedBird. The common point of these groups is that they have knowledge of investing in sports. For example, Ryan Reynolds’ company bought the Welsh club Wrexham in 2020. This investment, which represents 24% of Alpine’s capital, is an example of the opening up of Formula 1, which is no longer just a niche sport. Investments in the sport are becoming increasingly common, and it is not a coincidence.

A sport that has been opening up in recent years

The moment is perfectly chosen for investors! Simply because Formula 1 is emerging on all continents. This sport, which has been around for over 70 years, has experienced ups and downs in popularity, but since the acquisition by Liberty Media in 2016, Formula 1 has been experiencing a significant boom. Since that date, the sport has continued to develop in the media, especially on social networks.

But it is mainly with the creation of the series “Drive to Survive” by Netflix that the enthusiasm around Formula 1 has considerably grown. Starting from 2019, the release date of the first season, Formula 1 has attracted new fans, intrigued by this sport that was still unknown to them. In parallel to this, more and more investments have been made and some countries have even regained interest in Formula 1. The United States, for example, have returned to the spotlight: this season, they have 3 Grand Prix and the fans are always increasing in number. Proof that Formula 1 continues to attract more and more people. However, after the chaotic Grand Prix in Indianapolis in 2005, where only 6 cars had started, the trajectory of F1 was quite different.

So it’s the right time to invest: Formula 1 is slowly but surely establishing itself as one of the most popular and widely televised sports in the world. It is an opportune moment for investors to grab their share of the pie.

Benefits for stables and investors

Formula 1 also attracts because since the acquisition by Liberty Media, it’s a sport with a lot of benefits, both for investors and teams.

Let’s take the example of Alpine. In late 2020, Renault decided to change its name in Formula 1 and rebrand itself as Alpine, in order to promote its sports car brand. Located between Viry-Châtillon in France and Enstone in England, the French firm has been rapidly expanding in recent years and is establishing itself as a global brand, especially in Formula 1. But above all, the American market is a target for Alpine! The brand plans to launch the Alpine A110 there by 2026, as well as all its models by 2027. This American investment is a golden opportunity for the brand, which will already have a glimpse of the American market through Formula 1.

Sportively too, it’s extremely beneficial. With this additional money, the brand Alpine is growing and can hope to get closer to Formula 1 giants like Red Bull, Mercedes, Ferrari, and even Aston Martin with Lawrence Stroll’s colossal investments in the team. This step is necessary to become a top-tier team.

Finally, for investors, it is also positive. Investing in a Formula 1 team in 2023 can yield significant returns. If the team grows, improves, wins races, becomes a leading team, and even manages to win world championships, then the investment will be more than profitable. Furthermore, it is quite challenging for a brand wishing to enter Formula 1. Joining the ownership of a team is another solution to have a foothold in the discipline.

As stated by Alec Scheiner, co-founder of Otro Capital, « If you look at what Liberty Media has done, repairing the sport’s structure with cost caps, and then launching the sport in the United States, we believe it’s the ideal time to invest. We believe Alpine is the perfect vehicle: a hardworking team, an iconic team, high performance, and a brand that is just starting out. » The words are clear, and it’s easy to see why Formula 1 attracts so many investors.

More races that pay more and increasing TV rights

The FOM, Liberty Media, shares a portion of the revenues with the Formula 1 teams. For several years, with 10 teams in the paddock, the number of races has increased, and especially the entry fees. Promoters are willing to spend considerable amounts and are more numerous. While in the 2010s there were between 19 and 21 races, there are now 23 Grand Prix races in 2023, and it is still planned to have 24 in 2024. Therefore, the share of the pie is increasing, and each team receives a larger portion, making them increasingly profitable businesses since costs are now capped.

TV rights are also on the rise. In order to achieve this feat, Liberty Media plans to sign TV contracts exclusively with pay channels, thus allowing them to obtain a higher admission fee.

Hollywood: an industry attracted to Formula 1

Finally, there is one industry in particular that seems to be getting closer to Formula 1: Hollywood. Indeed, with the boom of Formula 1 in the United States, Hollywood has approached the discipline, once again showing that Formula 1 has transcended the boundaries of sport. A film is currently being prepared, with the notable participation of Brad Pitt, and with the assistance of Lewis Hamilton who wants the production to be as realistic as possible. Some drivers have also crossed the boundary of sport. In fact, Brad Pitt is expected to ride in a car specifically created by Mercedes during the Silverstone weekend for the film.

Ryan Reynolds and Rob McElhenney, Hollywood stars, are determined to capitalize on this American enthusiasm in order to expand with Alpine.

Formula 1 is undeniably attractive. Investors see it as a booming market, while teams can grow with these investments. A virtuous circle emerges, demonstrating that Formula 1 has many assets. It is definitely more than just a sport: like Hollywood, Formula 1 has become a true industry.