At about €15m a year, Swiss industrial giant ABB’s Formula E sponsorship deal is one of the biggest in motorsports in recent years, raising the question of whether FE is now a more attractive option for brands than Formula 1.
The ABB brand may not be well known to most sports fans, but there’s no question that the $33.8bn (€27.6bn) revenue firm looks like a good strategic fit for Formula E, now in its fourth season. Active in 100 countries, the firm is a pioneer in all stages of the electrification chain from renewable energy to the kind of fast charging technology that will be required to make mainstream e-mobility a reality.
Announcing the deal in London on Tuesday January 7th, Formula E founder and chief executive Alejandro Agag said the two partners will “showcase breakthrough technology on a global scale to fans and consumers who follow the ABB FIA Formula E Championship.”
Equally enthusiastic, ABB chief executive Ulrich Spiesshofer said: “FE has done a great job as an ambassador and change agent for electric mobility but as partners we will build on that momentum. In the same way F1 innovations have later been put into mass deployment, the innovations that arise from this partnership will give the world of electric mobility a strong boost.”
If the value of the deal seems high, it’s worth noting that this is the first time an FIA-endorsed series has had a title sponsor. Agag revealed a title sponsor “wasn’t part of the plan” and “I was in shock” when it was suggested. “But when the idea became a reality, then it was clear the perfect match for us is ABB.”
Like Agag, FIA President Jean Todt has gone from skepticism to support, saying: “The ABB announcement as title partner is proof of the attractiveness of this championship, which is still in its infancy. The mobilisation of major economic powers around the pillars of this discipline – new technologies, electric mobility and sustainable development – is a very good sign. This contributes to the development and expansion of Formula E.”
ABB’s interest in Formula E is part of a wider trend that has seen several B2B brands invest heavily in sport – though this doesn’t explain why the company wanted a title sponsorship rather than a more targeted official supplier relationship. Outlining his thinking, Spiesshofer said: “We want to change the world but we also want to make money and for that we need to differentiate ourselves. This partnership is about making the technology we work with appear cool and exciting – not just good for you.”
ABB will use Formula E as an innovation platform and, presumably, seek to leverage its new status in areas such as PR, corporate hospitality and staff incentives (the company has 136,000 employees around the world). One thing it won’t get a lot of at this stage is TV audiences. In its first three years, Formula E has not given much guidance on the size of its TV audience, but it is believed to attract 60-100 million total viewers a season worldwide. By comparison, the more established F1 series, which commenced in 1946, generates around 400 million global viewers per race.
At the launch event, Agag downplayed this point by referring to TV audiences as a “stone age concept” that is not a useful measure of fan engagement in the digital era. “We are in the middle of a strategic choice about where to go with our media rights. The likes of Amazon and Facebook are changing the landscape so you have to be careful about whether you try to monetise in a traditional way or try new channels.”
Asked about the status of Formula E’s commercial model here and now, Agag said: “A traditional sports revenue model might be split three ways between sponsorship, TV rights and areas such as ticketing/merchandising. Our model is based on team and sponsorship revenues, with support from strong manufacturers (e.g. Mercedes-Benz, BMW, Porsche and Nissan) and sponsors. Luckily for us, we have some great partners and are adding new ones all the time. We have to change our shirts every two months because we keep adding new partners.”
Other brands that have signed up to Formula E are DHL, Allianz, Hugo Boss, TAG Heuer, Visa, Mumm Champagne and Swiss private bank Julius Bar. Typically, sponsors also like widespread TV exposure, but Agag said: “The great thing about many of our partners is that they are looking at the long term transformation of the landscape of sport and mobility, so they are not as worried about how many are watching on TV.”
Fossil future
As part of the FIA family, Formula E has generally been diplomatic about F1. But in the highly-charged atmosphere of the launch event there was a sense that the pro-electric lobby is increasingly keen to push its agenda at the expense of fossil fuels. This point was put forcefully by Christiana Figueres, co-chairman of Formula E’s new global advisory board and an architect of the Paris Climate Agreement. Speaking at the launch, Figueres challenged Agag and Spiesshofer to consign the internal combustion engine to history as soon as possible – going so far as asking them to name a target date.
While neither executive was rash enough to do so on stage, Spiesshofer said: “Solar tech today is probably where e-mobility will be in three of four years, namely environmentally responsible and economically attractive. Many people say there will be a shift to electric in the next 20 years, but I think we will see faster deployment than that once people start to get excited by how cool and efficient these cars are.”
If that is the case, should Formula 1’s new owners, Liberty Global, be starting to worry? If Spiesshofer is right, is there a risk that the fast-moving electric agenda might undermine the telco giant’s attempts to recoup on its $4.6bn investment in the circuit?
Anthony Indaimo, global head of corporate and commercial at WithersWorldwide, has been deeply involved with motorsports for more than 30 years. Speaking to SportBusiness International, he said this question needs to be analysed from the perspective of both audiences and sponsors. “If you’re looking at diehard F1 fans then I don't think they see much to interest them in Formula E, because they love the noise, the smell, the drama and the history of F1. But if you look at younger audiences, I think there’s more of a propensity for them to split into two camps. Some will be drawn to Formula E’s short races, easier access to the drivers, the social media activity and the sense that it is not as elitist.”
The key, says Indaimo, is for F1 to learn from Formula E. “I think Formula E has stolen a march on innovation, with Fan Boost a case in point. They have made much of their reputation as a so-called disruptor, with the typical swagger of a nascent race series – so all credit to Alejandro and Ali Russel (Formula E commercial director) for achieving success in a relatively short period of time. F1 faces the same challenge as all traditional sports, which is how to stay relevant to all of its stakeholders. Liberty Global completed its ‘listening tour’ last season and they realise that they need to evolve and make changes to their format to win younger audiences and stay relevant to all parties. That might mean new cities, more racing across the weekend, a more festival atmosphere, reversed grids, esports, social media and mobile activity. My sense is that nothing is off the table. After all, Liberty, as a publicly listed company having paid $4.6bn billion for the rights to Formula 1, has a responsibility to it shareholders to make a return on its investment.”
Liberty Global is also a minority shareholder in Formula E, so it is well-placed to co-opt marketing innovations from that circuit for F1. And there’s no question that F1’s senior management is seeking to introduce some of the changes indicated by Indaimo. For example, Formula 1 chief executive Chase Carey has emphasised the importance of events like F1 Live , recently held in London “the type of event that is important for us to engage with fans much more actively and broadly. We don't really have an appropriate digital platform today, so there are investments that we've made to support a digital platform for us going forward. In the next few months for the first time we’re refining our plans around that.”
Lessons for F1?
While sponsors generally follow eyeballs, there is a question about whether Formula 1’s dependence on fossil fuels might compromise its proposition – making it look retrograde compared to Formula E’s battle against “the invisible menace that is global warming” (Agag’s words). Indaimo acknowledges that sustainability is a consideration for potential F1 sponsors, but he doesn't think it dominates their thinking (unless their DNA is inextricably linked to renewables as with ABB). “If F1 hadn't addressed sustainability it might be more of an issue,” says Indaimo. “But the teams, working with the FIA and manufacturers, have for some time been focused on energy efficiency – for example around hybrid engines.”
Indaimo’s view is that the real starting point for any sponsor is that Formula 1 hits an audience of 400 million across 21 race weekends a year (and that doesn’t include the hype between meetings). “When we assisted Intel with its title sponsorship of BMW-Sauber, that ongoing global exposure in new markets was a key reason that they preferred F1 to alternatives such as the FIFA World Cup or Olympic Games, which occur every four years.”
Looking at the relative merits of Formula E vs Formula 1, he says: “I can see why a fashion brand like Hugo Boss might view FE as a better way to reach millennials, so that is perhaps a lesson for F1. But if you’re a technology brand then F1 is a remarkable environment to work in. Walking into the paddock or the garage on race day is like visiting NASA mission control.”
Insiders like Red Bull team chief Christian Horner have acknowledged that Formula 1 must create “a more attractive show to draw in sponsors”. But Formula 1 management clearly believes it is heading in the right direction to win over sponsors, claiming that it was the fastest growing sports brand in social media during 2017 (a 54.9 per cent year-on-year increase to 11.9 million followers across the main platforms). Speaking to SportBusiness International last year, managing director of commercial operations Sean Bratches said: “We’re putting the fans in the middle of the table on every conversation because if we can serve the fan, all manifestations of our business will benefit. We think there’s a significant upside on the sponsorship side for Formula 1, particularly as relates to our incumbent assets, but we’re also developing sponsorable platforms that don’t exist today in the sport.”
Bruce Grant-Braham, director of the Motor Sport Research Group at Bournemouth University, is reserving judgment, however. He asks why a brand like Hugo Boss would quit Formula 1’s leading team [Mercedes] for Formula E at a time when Mercedes is dominating Formula 1 TV coverage and the Formula 1 circuit is making such loud noises about attracting a younger millennial audience. He also points to the fact that Santander recently ended its ten-year association with the sport and shifted its investment into UEFA Champions League.
If F1 had replaced these sponsors with progressive brands then there might not be such an issue. But its most high-profile new additions recently have include beer brand Heineken and oil and gas giant BP. Likewise, the recent news that Ferrari has renewed its long-term partnership with tobacco giant Philip Morris doesn’t come across as particularly forward-thinking.
Grant-Braham has tracked F1’s promises of fan-facing innovation but says “when it comes down to it, the thing F1 really needs is to get back is exciting racing, the kind of thing you’re more likely to see in Formula 3. No one wants the sport to be dangerous but there needs to be more overtaking and the teams at the back of the grid need to be competitive. The Abu Dhabi Grand Prix came in for particular criticism last year because of the lack of action. That’s something Liberty Global needs to address if it wants to attract young audiences.”
