“Adapt or die” is a popular maxim in the business world – but, to paraphrase the famous words of Mandy Rice-Davies: they would say that, wouldn’t they? Change is inherently self-justifying, especially when one business is buying another and swaggering egos are in play.
Many are those in management, particularly the c-suite, who like to cite wisdoms from Sun Tzu’s Art of War (largely without having read it, of course). Big acquisitions therefore play out according to the psychology of warfare, with a winner (the acquirer) and a loser (the acquired); the ‘victor’ brings a mindset that everything the defeated was doing is wrong – of course, because they lost, right? – and needs to change.
That looked to be the situation playing out in 2017, when Liberty Media began the process of acquiring complete control of F1’s commercial rights through a complicated deal involving $4.4bn of cash (reportedly only $354m), newly issued stocks, and debt. When the deal was announced, Liberty’s paperwork signalled the arrival of former News Corp executive Chase Carey as chairman, with long-time F1 ‘ringmaster’ Bernie Ecclestone remaining as CEO – and “looking forward to working” with the new regime.
Within months Ecclestone had been booted upstairs to a ‘chairman emeritus’ non-role, in preparation for clamping the proverbial gold watch on his wrist and escorting him out of the door. Incoming commercial chief Sean Bratches pushed through a total rebrand including a controversial (at the time) new logo, and brand-proposition documentation that included frankly baffling and largely meaningless aspirations such as “smell the oil”.
The widespread perception at the time was that here was a bunch of outsiders who knew nothing about Formula 1 or how it worked – but weren’t going to let that stop them changing everything anyway, because they’d ‘won’.
Actually, of course, there was much that needed fixing. Ecclestone had a massive blind spot when it came to the young audience – why bother with people who couldn’t afford a Rolex? Half the grid was on the verge of insolvency because of the inequitable commercial settlement. TV viewing figures were on the slide – principally because F1 had been moved on to subscription platforms, though the tendency was to blame the lack of on-track spectacle.
Much of the above was the responsibility of Ecclestone and CVC Capital Partners, the private equity outfit into whose hands he’d steered ownership of the commercial rights in the expectation that it would keep him in charge as chief wonga wangler. CVC financed the purchase with debt and continued to enrich itself throughout its tenure while loading the business with more debt.
Seasoned paddock folk therefore expected more of the same under the new owner, and such prognostications appeared to be coming to pass as further calendar expansion was announced to destinations such as Saudi Arabia.
Many of the changes, though, proved to be prudent, undoing opportunities missed by Ecclestone because he’d failed to discern immediate return on investment. F1 opened up social media engagement, relaxed its zero-tolerance copyright policy on YouTube, improved the TV broadcast, and allowed in the Netflix cameras.
Bratches left early in 2020 to “spend more time with his family” and Carey did likewise later in the year. Among his final acts before announcing the handover to Stefano Domenicali as new chairman and CEO was to navigate the existential threat posed by the COVID-19 pandemic. This required much financial engineering within the Liberty empire and the negotiation of a budget cap and a new and more equitable Concorde Agreement, one which not only rescued several teams from oblivion but also set them on the road to becoming lucrative franchises.
On Wednesday, F1 confirmed Domenicali, whose contract was up at the end of this year, has signed an extension that will keep in in charge until 2030. He is indubitably the right man for the job, one who has extensive hands-on experience of F1 from the factory floor upwards – as well as occupying senior roles outside the goldfish bowl of motor racing.
During Domenicali’s tenure, F1’s audience reach has increased massively, the calendar has expanded further into new markets (including prized destinations such as Miami and Las Vegas), and F1 has signed lucrative sponsorship deals with the likes of Aramco and LVMH. Cynics would be right to point out that much of this growth can be traced back to ‘the Netflix effect’, and the explosion of US interest that followed Drive to Survive.
Certainly a rising tide lifts all ships. But Domenicali has also poured energy into agendas where positive outcomes are often obscured by footling political divisiveness: education, a push towards ‘net zero’, and greater diversity and inclusion. Nattering nabobs might mutter about snowflakery but these are initiatives that have long-term business benefits as well as social value.
Domenicali’s broad experience gives him an appeal to new investors as well as the respect of insiders: he’s been around long enough to know how F1 works but isn’t afraid of change, and is prepared to engage.
“His door is always open to us as drivers and he’s very easy to talk to,” said Oscar Piastri, “very receptive of our ideas and concerns if we have any, so I’m very happy that he’s sticking around for a long time.”
“It’s great news,” said George Russell, “because the sport is in the best place it’s ever been. Since Stefano’s been at the helm it’s just gone from strength to strength.
“He’s always got ideas to continuously grow the sport; as I said, the sport is at the peak right now, but he’s not looking to stop here.
“He’s looking at what’s next, how can we continue this growth, and also just that stability and transparency from such a leader. I believe all the teams and all the drivers are fully behind him.”
If that endorsement from a GPDA director weren’t enough, Lewis Hamilton’s pithy assessment was “thank God he’s staying, because it’s good to have a neutral, good leader at the helm”.
Off the record, insiders point to Domenicali’s willingness to listen to and work with all stakeholders to improve the show, including the iterative development of the sprint race format. Initially seen by competitors as an unwelcome and potentially expensive imposition, and dismissed as a pointless gimmick by a large section of the fanbase, it has matured to a point where it is broadly accepted. Most race promoters are keen, too.
Before his interregnum as the FIA’s single-seater commissioner and CEO of Lamborghini, Domenicali was a popular figure in the paddock. He could be seen running round the racetracks of an evening, long before it became popular; he came up through the ranks of Ferrari, and respect for him only grew when he made a principled resignation as team principal in 2014 rather than be forced to blame and fire key staff for the underperformance that season.
Among Domenicali’s next challenges is one that cuts to the heart of Liberty’s business: the TV rights. In the Ecclestone era, squeezing maximum value by selling to the highest bidder was the priority, even if that meant consigning F1 to pay-TV channels that were too expensive for mainstream tastes.
Linear broadcasting is now in a process of decline as people ‘cut the cord’ in favour of digital platforms that offer content on demand. The youth demographic has long since abandoned conventional TV in favour of digital media and social content: Domenicali noted in a recent earnings call that 230 million people watched race highlights on YouTube.
For the commercial rights holder, pivoting towards digital offerings – including its own F1 TV service – brings it into potential conflict with those organisations who have paid for traditional TV rights, as well as the wider media. In the early years of the Liberty era there was much harrumphing when a diktat came down that F1 TV crews and ‘talent’ were to have priority access during scheduled driver interviews. Under Domenicali there has been less of a feeling that F1 is trying to push everyone else out.
Domenicali has also successfully put relations with the FIA back on a more stable note after the governing body’s president staged several controversial and high-profile interventions in what F1 saw as its business. For that reason alone, Liberty’s shareholders will sleep happily at night…
