F1: What’s Next for the World’s Most Logistically Complex Sport?

Read the original article on Sportico.

All eyes are on this week’s F1 Miami Grand Prix—and it’s a lot of eyes. Formula 1 is the sport of the moment. The 2022 season saw 1.5 billion fans tuning in worldwide vs. a mere 500 million in 2018, which places F1 fourth after soccer, cricket, and field hockey among the most-watched sports globally, even though it’s a series.

F1, like most racing series, operates with a unique sports business model, particularly as it pertains to live-events revenue. While teams in leagues such as the NBA and NFL make money at a home venue with direct ticket sales and concessions revenue, Formula 1 is a traveling circus that goes around the world and technically doesn’t have a “home ground.” It’s like Taylor Swift’s sold-out Eras tour. Taylor and her crew go city to city with her backup dancers, musical equipment, and operations teams, playing in arenas they don’t own. The venue makes money, gives Ticketmaster a cut (probably a little more than they deserve), and Taylor keeps the rest after paying the salaries and expenses for the tour. 

In similar fashion, F1 travels to 23 cities, 20 countries, and five continents annually. The circus flies the cars and essential mechanical equipment and IT equipment like servers, monitors and cables on six or seven Boeing 747s across long-haul distances. Each team can travel with 50 tons of gear per year, and up to 300 trailers can be used on the road between European stops. The in-house TV production equipment alone can occupy as many as eight trailers and up to 165 tons in total. The teams fill these flights and trailers with, at times, two to three sets of parts and equipment for backup.

And then there’s the people component. Each team travels with 50 to 100 people, and F1 operations have a similar number of team members. F1’s 2019 sustainability report mentions that almost 72% of its carbon footprint comes from logistics—45% from equipment transfer and 28% from business travel. Much like Taylor Swift, they drop in on a venue they don’t own, liaise with local promoters and governments in sometimes volatile geopolitical landscapes, collect a fee, and put on a show for the fans. They don’t have a home to charge money from visitors directly, and they spend most of their time, money and energy traveling the globe.

I’m a career strategist and an operations nerd and have spent most of my career working with cars and technology—from fixing operations at engine parts manufacturers, to negotiating commercial terms for global procurement contracts and supply chain routes, to running the repair strategy on a fleet of 15,000 cars during my days at Lyft. And seeing what F1 does week in and week out in terms of logistics—is simply enthralling.

This week’s stop is Miami, now in its second year as host. However, last year did not go without a hitch. The premium $11,000 paddock club suites reportedly had challenges with the guest experience, and traffic in and out of Miami Gardens reflected the minimal number of roads to the race site. Miami’s street circuit creates its own issues, and a crew has been working round the clock for the last four weeks to prepare the track for this weekend. 

For all that, Miami’s first year was a relative success, and it helped convince F1’s parent company, Liberty Media, that it was right to expand its U.S. presence. Las Vegas will host its first race in 40 years and is being touted as the most significant single sporting event in the world this year in terms of expected revenue generation, at $1.3 billion over a three-day weekend. The Las Vegas race is the first that will be vertically integrated across all physical and operational levers, with Liberty, acting as the race promoter. That’s a different model than the one used in Miami or Austin—a fixture on the calendar since 2012. 

Is that the right move towards a stronger balance sheet for a series with little to no experience with playing host? Maybe. Assuming they have hired the right people, are ready for the learning opportunities and the relative investment risk that comes with rapid growth.  

F1 is trying to reduce costs by capping team expenditures, leading to new logistics patterns by teams shipping multiple sets of equipment across sea freight. For example, the Haas pitwall is being split in half from a six-seat station to a three-seat station and the other half will travel via sea freight in advance and save the air freight expense in the value of $250,000 in annual savings.For the non-European races or fly-away races, five shipping containers containing 200 tons each of non-essential equipment like tables, chairs, printers, moving carts, catering and gym equipment are sent in advance and moved via seas to the international destinations.

However, F1 now needs to ensure its share of the revenue from physical races is more significant, and the answer cannot just be more expensive tickets. Vertical integration of all components for a race weekend, like the Vegas race, could be a long-term game changer.

After that, monetizing more value from fans sitting at home has to be the next frontier. Does that mean more multimillion-dollar technology partnerships, off-race experiences, exclusive content, and gaming tie-ins? Yes. Even $20 a year, from each of the numerous fans who will never make it to a track, can bring in billions of dollars in revenue vs. the $2.5 billion the sport made annually in 2022.

Whichever way F1 decides to go next, I’m convinced they have barely scratched the surface of commercialization the sport can plumb. If I’m one of the sport’s leaders, my biggest challenge is taking advantage of the current hype to increase my revenue line while not eroding the essence of the sport’s experience. It’s an almost impossible task, yet a fascinating journey to watch out for in the next few years.