Hi Everyone 👋, Welcome to the +346 subscribers who have joined this week. If you’re reading this but haven’t subscribed, join our community of +51k smart, fun & edgy investors 👇
*This is sponsored advertising content.F1 drivers lose about 3 litres of water from their body per race. Roughly equivalent to the amount of sweat a TikTok day trader perspires at each market open. The drivers also experience anywhere from 4 to 6 G forces when cornering, which is the same amount of pressure that hedge fund managers are under after underperforming the market in 2021. Last week, we had one of the most exciting finales to an F1 season in recent memory as the top two contenders were exactly tied going into the final race. Winner takes all. The stuff of legends. The story was a compelling one too. In one corner - the seasoned veteran, Lewis Hamilton was looking for his 8th championship to lock him in as the all-time leader (Michael Schumacher has 7). In the other corner - the hungry and aggressive up-and-comer, Max Verstappen who was chasing his first trophy. After a controversial call on the safety car method used near the end of the race, Verstappen on fresh hard tires snatched victory from the jaws of defeat in the final lap of the race in epic fashion. Cue the “we are the champions” victory video and Max showering his team in champagne.
But before the fans, the champagne, the yachts, and the model girlfriends, F1 had to start somewhere and it needed a champion of its own. That champion was Bernie Ecclestone, who created one of the most widely watched entertainment properties in the world. This week, in <5 minutes, we’ll cover the business of Formula 1:
Let’s get started! 1. The History of Formula 1 👉 An Origin StoryF1 is the pinnacle of motorsport, and the history is a long and winding one. Throughout many innovation lifecycles, two aspects are the primary drivers: technical and design. By technical I mean the car getting faster and faster and by design, I mean how the structure of the teams, organization, safety procedures, and races would evolve. These two aspects take turns pulling each other forward, which has led F1 to be one of the best R&D centers for transportation. When each team is pushing to be the fastest, they have to develop new technology to do so. Active suspension, traction control, carbon fibre construction, advanced aerodynamics and semi-automatic paddle gearboxes all began in the technology race that is Formula 1. The name “Formula” comes from the set of rules that the participating cars and drivers must follow. For instance, F2 cars are backed by a 500 horsepower engine, which is about half of the F1 cars. Keeping in mind the “technical” and “design” aspects I mentioned, you can roughly break down the history of F1 as follows:
However, the ownership structure and monetization in the early days was murky at best. F1’s future would forever change when in 1972, British Businessman Bernie Ecclestone bought a team called Brabham after he built the county’s largest used car dealership. According to Forbes (source below), F1 races ran essentially as amateur events. Each team made separate deals with each event promoter and TV coverage was patchy as races could be canceled at the last moment if there weren’t enough cars to fill the grid. Mr. Ecclestone seized the opportunity to change this and in 1981 he convinced the teams to sign a contract, called the Concorde Agreement, committing them to race. He took this to TV companies who could then guarantee coverage. Originally, the teams controlled F1’s commercial rights but Mr. Ecclestone’s company Formula One Promotions and Administration (FOPA) negotiated the deals for them and took a share of the proceeds. The remainder went to the teams and F1’s governing body the Fédération Internationale de l’Automobile (FIA). In 1988 Mr. Ecclestone sold Brabham in order to concentrate on running FOPA. The top drivers soon commanded salaries of between $10 million and $12 million, five or six times what they received a decade earlier, and sponsors were spending hundreds of millions of dollars a season. Since F1’s commercial rights were controlled by the teams, they were owned by the FIA and when its agreement with them came up for renewal, Mr Ecclestone made an offer to take direct control through his personal investment vehicle F.O.C.A. Administration. On 19 December 1995 the FIA declared that F.O.C.A. Administration had won the bid for the commercial rights to F1 for 14 years beginning on 1 January 1997. Mr Ecclestone owned 100% of F.O.C.A. Administration, which is now known as Formula One Management (FOM), so this gave him complete control of F1’s rights for the first time in the sport’s history. In return for the F1 rights. the FIA was paid $10 million annually by F.O.C.A. Administration giving the company an 800% return on investment on its $90.7 million net profit in 1997 alone. Buying the F1 rights was the best business move of Mr. Ecclestone’s career and handed him the keys to the billionaire’s club. F1 itself was an even bigger beneficiary as Mr. Ecclestone drove commercial success forward. Ultimately, F1 would change ownership hands leading to Liberty Media buying controlling interest for $4.4B in late 2016. The Formula One Group now trades on the NASDAQ under the ticker FWONK. All this has led to where they are today - with over 400M unique fans globally, and (thanks to Netflix), the fastest-growing major sports media property.
Under the RadarREAL ESTATE APPRECIATION IS JUST A PLUS. Greenbriar Capital is developing the next era of sustainable living with a 100% owned (debt-free) $480M entry-level subdivision in south California which 995 families will be able to call home soon! This crucially essential project alone is a $120-150M net value to Greenbriar*! NEW SHERIFF IN TOWN. The crypto market is described by some as the Wild, Wild West. BIGG Digital Assets believes the future of crypto is a safe, compliant, and regulated environment, and they are making this vision a reality by investing in crypto businesses that support and enhance a compliant and regulated ecosystem*! CELLULAR AGRICULTURE. More than one third of global greenhouse gas emissions can be linked directly to the way we produce, process, and package food. This means something has got to change! CULT Food Science is leading the way by giving investors ground floor access to the most disruptive startups in cellular agriculture*! REVOLUTIONIZING ONLINE GAMING. Online betting and sports & gambling media/entertainment are 2 of the fastest growing segments in the gaming industry. Rivalry is already the most engaged esports betting brand in the world, and now they’re literally creating a new category of online gaming with Rushlane: a Massively Multiplayer Online Gambling Game (MMOGG)*! EARLY STAGE ACCESS. How do you get access to potential 25x growth opportunities without looking for a needle in a haystack? Invest in the company that’s breeding the next big tech giants! Victory Square is a technology accelerator that is ushering in a new breed of companies representing the future of tech. Investors get ground-floor access to 25 game-changing startups from around the world*! WORLD’S LARGEST PLANT-BASED ONLINE MARKETPLACE: During the pandemic, online grocery sales grew 54.0% in 2020 to reach $95.82 billion. Vejii is a digital powerhouse that’s built for rapid scale! Their infrastructure of data, tech, marketing, and logistics is giving ethically-aligned buyers access to the world’s largest selection of plant-based and sustainable-living products online*! *This is sponsored advertising content.2. Recipe for Success 👉 Characteristics of the Sport Allowing for Rapid AdoptionIf you break down the composition of the sport you can see how and why it’s so extremely popular to watch: Easy to follow but difficult to master, large install base (top of funnel), truly global, and Hero based. Easy to Follow but Difficult to Master To optimize a sporting property, you need to find a balance between easy to follow and difficult to master. Easy to follow means that the sport can be understood right off the bat which will drive up initial interest. If I only have a certain amount of leisure time in the day, I want to allocate this time to entertainment that has lower barriers to entry (learning the rules of engagement) and shallow learning curves. Fast cars go around a course - first guy to cross the finish line wins. Got it. Difficult to master means exactly what it sounds like. Driving a Formula 1 car is one of the most difficult and technical sports in the world. There has to be a perfect marriage between the braking system, chassis, accelerator, tires, steering wheel, gearbox, and the driver. Mix this together with the fear of death at any moment and you’ve got yourself a “difficult” task to say the least. When you see someone doing something extraordinary at a differentiated skill level - you watch. Large Install Base (Top of Funnel) When thinking about a spectator sport, some people make the argument that you have to play it (or had played at one point) to watch it. While I agree that those who play the sport are more likely to adopt it as a fan, I don’t think that tells the whole story. For instance - there are an estimated 250M soccer players in the world, but an estimated 3.5B soccer fans. I would argue that in order to become a fan of the sport, you simply have to have an affinity for connection and excitement. The connection could be that you have a local team to cheer for or that your son plays soccer so you watch it with him. The excitement is the sense that it awakens something in you. There are roughly 1.5B vehicles on the road. Those vehicle owners have first-hand experiences of pushing one pedal to go and the other one to stop. The connection for F1 is that nearly everyone has been in a motorized vehicle and the excitement is the sense of crossing the line first - being the best and fastest. I usually hate broad generalizations of TAM, but this is one I absolutely believe that the target market can be more broadly defined when looking at the casual viewer. Truly Global In F1 there are 20-23 races that each takes place in a different country across the world. When you look at the driver's nationality, there are 20 drivers from 14 different countries. Carrying on from our soccer example, if you think of the Premier League as one of the most “global” leagues in the world, they have roughly 300M unique viewers vs. Formula 1 with 400M. While motorsport may not be even close to the top when it comes to participation in the sport, F1 really is the world’s most global spectator league. Hero Based The best way to popularize a sport on a global basis is to create a hero. If you caught the Michael Jordan documentary on Netflix, you know that the NBA spearheaded expansion into China through the profile and clout of Michael Jordan. When you can put a face to the sport, it’s easier to form a connection. This hero for F1 has been Lewis Hamilton. Hamilton is from humble beginnings with a dad that once held four jobs at one time to support his racing career. With a father of Grenadian descent, Lewis battled racism to overcome the odds and rightfully dominate the racing scene. His attachments to high-fashion, music and social activism have made him a cultural icon. Oh… and he also got knighted a couple days ago so that SIR Lewis Hamilton to you! But every hero needs a villain. The villain de jour is Max Verstappen. He is seen as brash, brazen, and a ruthless (sometimes wreckless) competitor. He filled this most recent season with drama by frequently touching wheels with Lewis, finally challenging his dominance. Max’s raw focus and hunger to be the best are unrivaled. Has the torch been passed? Or are we in for another head-to-head? Find out next season… But first, let’s check in with our Outrageous Chartered FinMEME Analyst Dr. Patel!
3. Structure of the League 👉 Formula One Group, Teams, PromotersFormula One Group Formula One is quite a fantastic business model. They do not pay to host the races, the promoters pay all these costs. They pay out the teams based on a percentage of revenue generated, so the cost structure there is variable instead of fixed. They own the most valuable and durable assets which are the digital content and brand. The Formula One Group did roughly $2B in revenue last year. Main Revenue Drivers:
Main Costs:
Teams
In Formula 1, one man crosses the finish line, but an entire army of people get him there. The largest teams can have upwards of 1,200 people and the smaller teams have around 200. Positions on the team include team principal, managers, assistants, race engineers, R&D engineers, designers, aerodynamicists, other engineers, race mechanics, and production. Owning a team is usually not a great business, operating around breakeven. Main Revenue Drivers:
Main Costs:
Promoters Promoters actually run the race itself. They provide everything from the track, the entertainment, and the concessions. The promoter can be anyone from a racing enthusiast club that owns a track, the government, a local bussiness person, or an event corporation. Main Revenue Drivers:
Main Costs:
There is also an absolutely fantastic podcast episode on business breakdowns that digs into the weeds of all the revenue splits that you can find here. Wrapping Up…Formula 1 looks like it’s getting a breath of fresh air right now. It’s not about cars going around lap after lap anymore. It’s about telling a story. Netflix has given behind-the-scenes access so we can see what it’s like to run a team. What it’s really like to scream through hairpin turns before accelerating to 350km/hr on a straight in a 1,600lb aerodynamically designed piece of perfection. The inclusion of the casual fan opens up a massive market for increased fan engagement across plenty of new digital channels which can be optimized far more effectively than they are now. Time to rev your engines. Until next time. Always Yours. Incessantly Chasing ROI, -Genevieve Roch-Decter, CFA P.S Metaverse is going to be a +$1 trillion dollar industry. Are you buying your tickets to the show? #bitcoin #ethereum
What else we Grittin’ On?PRODUCER PRICE INDEX. We saw a higher-than-expected rise of producer prices last month, jumping 9.6% last month. That's the biggest increase on record! THEY ZIG, SHE ZAGS. While everyone is losing their collective minds over inflation, Cathie Wood is still pounding the table on DEflation. Wood says innovation stocks are in "deep value territory". HARLEY-DAVIDSON SPINOFF. The hog manufacturer is spinning off its e-motorcycle brand in a $2.3B SPAC merger. LiveWire will be the first publicly traded EV motorcycle company in the U.S.. $100M IN NFTs. Sotheby's, the 277-year-old auction house, has sold $100M worth of NFTs in 2021. I guess an old dog can learn new tricks! FAT FINGER WHOOPS! A Bored Ape Yacht Club (BAYC) NFT accidentally sold one of them for $3,015 despite being valued at $300k. At least they got a story out of it? Sources:https://www.joincolossus.com/episodes/33643069/gokgol-kline-formula-one-the-iconic-motor-sport?tab=transcripthttps://en.wikipedia.org/wiki/History_of_Formula_Onehttp://www.f1-grandprix.com/?page_id=222https://www.forbes.com/sites/csylt/2016/10/16/how-bernie-ecclestone-steered-f1-to-make-1-billion-more-than-star-wars/?sh=11f8093f5168https://www.linkedin.com/pulse/formula-1-business-models-how-f1-teams-make-money-stay-del-bello/Disclaimer: The publisher does not guarantee the accuracy or completeness of the information provided in this page. All statements and expressions herein are the sole opinion of the author or paid advertiser. Grit Capital Corporation is a publisher of financial information, not an investment advisor. We do not provide personalized or individualized investment advice or information that is tailored to the needs of any particular recipient. THE INFORMATION CONTAINED ON THIS WEBSITE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF ANY COMPANY MAY TRADE AT ANY TIME. THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. INVESTORS SHOULD MAKE THEIR OWN INVESTIGATION AND DECISIONS REGARDING THE PROSPECTS OF ANY COMPANY DISCUSSED HEREIN BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable. They are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur. Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein. The information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and the publisher undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional material. The publisher, its affiliates, and clients of the a publisher or its affiliates may currently have long or short positions in the securities of the companies mentioned herein, or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities). To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions. Neither the publisher nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. By using the Site or any affiliated social media account, you are indicating your consent and agreement to this disclaimer and our terms of use. Unauthorized reproduction of this newsletter or its contents by photocopy, facsimile or any other means is illegal and punishable by law. For Full Terms of Use Click HERE. For the Privacy Policy Click HERE.
You’re a free subscriber to Grit Capital. For the full experience, become a paid subscriber. © 2021 Genevieve Roch-Decter, CFA Unsubscribe
|
Grit Capital
But before the fans, the champagne, the yachts, and the model girlfriends, F1 had to start somewhere and it needed a champion of its own. That champion was Bernie Ecclestone, who created one of the most widely watched entertainment properties …
WW3
It is possible to integrate a functional, comprehensive API security system that minimizes the greatest risks to end-to-end systems. Properties, tools, and controls vary but important security requirements must be able to protect against major threats to potentially harmful APIs. …
Grit Capital
High-growth tech stocks have been on an absolute tear. At least they WERE until the end of November. There has been tons of blood in the streets as indices like the Goldman Sachs Non-Profitable Tech Basket fell 30% in a …
We're always happy to help, get in touch to discuss your needs.
Give us a call or send us an e-mail, we'd love to hear from you.
Library and Suggested Readings
r8shop - Our online marketplace
Back to R8RISK Homepage
