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Formula E closing the gap on Formula 1 as a sponsorship proposition

(Photo by Sam Bloxham/LAT Images/FIA Formula E via Getty Images)

  • Motorsport agency Right Formula says servicing of Formula E clients has more than doubled
  • CSR messaging and alignment with future of mobility is important to brands 
  • But low deal values in Formula One mean now is a good time to enter the sport

When season six of the Formula E Championship gets under way in Saudi Arabia on November 22, there will be a brief overlap with the 2019 Formula One Championship, which ends in Dubai on December 1.

Overlaps on the financial scale of the two FIA-approved motorsports series may not yet be as close, but the convergence of sponsorship rights fees between the two is increasingly apparent – and one specialist business is making the most of the situation.

London-based Right Formula is now the largest motorsports agency by volume of brands represented, and the growth of Formula E has made a significant difference.

Servicing of clients in Formula E has more than doubled at Right Formula over the last year and the agency is currently receiving more enquiries from potential sponsors about Formula E than Formula One.

Right Formula founder and chief executive, Robin Fenwick sees future interest going only one way, with Formula E getting closer to Formula One in terms of both team and series sponsorship deals values.

OEM heaven

Given the Formula One season is longer than Formula E’s, with 21 rounds of racing compared to Formula E’s 15, full value convergence seems unlikely, but Fenwick believes that Formula E has created a compelling sponsorship platform.

“The interest is in what Formula E stands for, and how that aligns with Fortune 500 companies,” he tells SportBusiness.

“The CSR [corporate social responsibility] messaging is important, as is the association with the future of mobility and electric vehicles.

“It’s fascinating for me when you have a property with ‘purpose’, as Formula E most definitely does, to see that brands will flock there because they feel there’s a real story there and it’s something that they can get behind as a business.”

Fenwick also highlights the fact that Formula E has attracted a significant volume of OEMs (original equipment manufacturers) to the sport – currently more than in Formula One.

“You are naturally going to attract a number of brands because of potential association with carmakers like BMW, Porsche, Nissan, Mercedes-Benz and Audi.

“It’s also interesting to see the big fuel and oil companies coming into the sport. ExxonMobil, for example, just announced with Porsche, Shell with Mahindra, as well as Nissan and BP Castrol with Jaguar.

“I know there’s a couple of others that are looking very closely at deals too, and it’s not just because of the alignment with the OEMs, but because they can also use the series as an R&D platform to further develop their EV ranges.”


Consumer brands

One criticism previously levelled at Formula E, compared to Formula One, is that it’s a technology platform that speaks only to itself, and has less appeal to a broader spectrum of consumer brands.

Fenwick doesn’t agree with this characterisation. “I think the Formula E messaging can be widespread, it depends how the marketing assets are used. You’ve seen Bosch, Heineken and ABB come into the sport, which you could argue was relatively unexpected. This is mostly down to the synergy they see with the positive messaging around Formula E.

“There’ll be other businesses that are interested from a consumer perspective too, because you’re talking to a younger demographic, compared with most other forms of motorsport.

“Formula E have just launched ‘virtually live ghost racing’ so that esports fans can actually race against the drivers on track as they’re racing, which is pretty phenomenal. So I think initiatives such as this will continue to attract a digital-savvy audience, which will in turn start to draw brands in.”

Moreover, just because Formula E is purpose-led doesn’t mean there are no ancillary benefits for sponsors: “Aside from the traditional benefits of hospitality experiences and brand exposure, there will be some B2B sales benefits such as pourage rights for Heineken at the races and a reasonable logistics spend with DHL.”

Over time, he expects the deal values to increase in Formula E as the audience continues to grow, the calendar increases, and the organisers continue to improve the sport’s infrastructure.

Reducing Fees

Formula One’s part in the convergence story is largely negative.

Formula One deals, Fenwick says, have largely reduced in value over the years at both a team and series level: “Although the value of the largest series deals are still quite far apart between Formula E and Formula One, it has been a while since Formula One has signed a really significant consumer brand partnership.

“This is partly to do with the sponsorship market. Brands are more cautious than ever about parting with significant sums of money, which could be as much as $40m (€36.5m) per annum in Formula One.”

Right Formula, he says, have been tasked with more strategic analysis than ever before, requiring them to independently evaluate partnerships and ultimately demonstrate the return on investment to the brand’s senior management or board members.

“We all need to understand that the sponsorship market has evolved, with brands looking for ‘better, more tactical deals, that are justifiable’.

“In general, there are fewer brands interested in global sponsorship properties where large sums are involved and Formula One is no different.

“In the early 2000’s teams were looking at $50m-plus per year for title partnerships, and some of the Formula One series sponsors were around $40m per year. There are fewer of these deals around today and significantly lower values are being accepted.

“It’s a little ironic that the benefit and value of a Formula One partnership has actually risen during this time.

“Liberty Media have delivered value to the sport; its social media is growing faster than any other major global sports series, new initiatives have been implemented such as esports, and new races have been added to the calendar and enhanced fan experiences now exist at each Grands Prix.

“You could say that now would be a smart time to enter the sport while the deal values are lower than they have been for decades.”

(Photo by Charles Coates/Getty Images)

Inflated prices?

That said, almost three years into Liberty Media’s tenure, the new owners have failed to generate any uplift in sponsorship value.

Fenwick thinks the problem pre-dates Liberty’s intervention.

“Some Formula One stakeholders have been reluctant to drop their prices when confronted by brands unable to justify the asking price.

“One brand we represented was offered a price tag of $20m, which they simply couldn’t justify. They offered to pay $10m instead and the team in question turned them down, so the brand walked away. A year later the team said they would now consider a lower price, but by then it was too late!

“Maybe with hindsight it would have been better to focus on the value of the deal to the sponsor and understand how the team could grow the partnership over time based on KPIs that could be achieved.

“This approach will need a change in mindset from some entities selling rights in Formula One. They will have to listen to what brands believe the value to be rather that what they believe it to be.

“Formula E is in a slightly differently place, it started from a much lower base and they’ve been quite accepting of smaller fees as they established their sport. They’re now building it back up, and as Formula One’s coming down, they’re now closer than they have ever been before.”

Better racing

If there is a solution to the sponsorship proposition in Formula One, many industry observers, including Fenwick, believe that more competitive racing would get the sport back on track, with the next Concorde Agreement, starting in 2021, as the best hope for a reset.

“Whilst there have been improvements and great additions to the sport, the racing hasn’t been as exciting as it could have been over the past few years and that’s not helped in attracting new brands. Let’s not forget fans drive the popularity of the sport and they need on-track entertainment.

“There will be lots of politics in the final Concorde negotiations but, ultimately, I hope that that key stakeholders understand the need to make the racing more competitive and unpredictable.

“Hopefully with a budget cap in place, the teams outside of the top three will stand a greater chance of competing, maybe not immediately, but certainly in the future.

“In the meantime, perhaps Formula One could give some further thought around its purpose before it is overtaken by Formula E.”

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