Ben Gilbert and David Rosenthal on Formula 1, Liberty Media, and the Business of Racing

Acquired’s history of the world’s premier motorsport — a sport that began for the love of dangerous racing, was welded into a business by one street-fighting dealmaker, passed through three private-equity owners, and was finally turned into a real company by an American media conglomerate. Ben Gilbert and David Rosenthal trace the arc from the constructors of the 1950s through Bernie Ecclestone’s forty-five-year grip on the commercial rights to Liberty Media’s transformation, and land on the thesis in the episode’s subtitle: Formula 1 is fast cars, celebrities, and B2B software.

Key ideas

1. The sport is named after its rule book, and the rules are the game. The FIA sets a common ‘formula’ every few years; teams must design and build their own car from scratch to that formula. As the low-hanging engineering gains vanished, winning shifted from raw horsepower to exploiting the daylight between what the rules intended and what they actually said — a Moore’s-law-style spend spiral where the top teams once burned $400–500m a year chasing tenths of a second.
2. Bernie Ecclestone built the business by aggregating rights he did not own, then sitting in the choke point. He centralised the teams’ race-fee negotiations (taking a fee off the top), talked the teams and the FIA into handing him television rights that then looked worthless, and gave those rights away cheaply to public broadcasters to grow the market before charging for them once demand was real. Eddie Jordan’s line: he ‘sold Formula 1 four times, has never bought it back, has never lost its control, and still owns it’ — and never owned it in the first place.
3. The commercial rights are the asset, not the sport. In 2001 Ecclestone secured the 100-year commercial rights to F1 from the FIA in a no-bid process for $360m. That contract — the right to run everything except team sponsorship and race tickets — is what CVC bought, and what Liberty Media acquired in 2017 for an $8bn enterprise value.
4. Liberty’s cost cap turned worthless teams into billion-dollar franchises. Capping car spend (~$170m today, excluding drivers, marketing, top executives and power units) made most teams break-even and the top teams immensely profitable overnight. A team Ross Brawn bought for one pound became Mercedes, later valued at $6bn; every team is now worth north of $1.5bn.
5. F1 is a media and hospitality business wrapped around a race. Drive to Survive — a human drama, not a racing show — roughly doubled US fandom and lifted the female share of the audience from 7% toward 40%, and most of those fans never watch a race. The paddock is a mobile executive-briefing centre; the sport monetises a fan at ~$7 a year against the NFL’s ~$127, which is both the bear case and the whole runway.

Summary

Origins: the formula, the constructors, and three founding pillars

Formula 1 has no clean founding moment; its origins are ‘part and parcel with the beginning of motor racing itself’. Automobile clubs across Europe ran Grand Prix events from 1906 (the literal Grand Prix de Lemans — ‘the big prize’), copying a common rule set, or formula, overseen from the 1920s by the FIA. The sport ‘is literally named after the rule book’. After the war the FIA created a world drivers’ championship, and the first F1 season ran in 1950.

Three pillars shaped the early era. Britain — 70% of teams are still based within a few miles of each other in the English Midlands, a Silicon-Valley-style cluster of demobbed RAF pilots, empty airfields and aerodynamics expertise. Colin Chapman’s Lotus embodied the wild-west founder-mechanic-driver archetype (‘Adding power makes you faster in the streets. Subtracting weight makes you faster everywhere’) and introduced sponsor liveries — beginning F1’s long marriage to cigarette money. Monaco — when Prince Rainier married Grace Kelly in 1956, Hollywood glamour fused with old-world luxury, bringing the celebrity layer the sport still runs on. Italy — Enzo Ferrari, the only early team owner with genuine business sense, saw the opportunity at the intersection of fast cars, racing heritage and celebrity wealth: selling road cars to the rich and famous. Ferrari legitimises the series rather than the other way round, and is the only team present in every season since 1950. Mortal danger was part of the appeal: one to two driver deaths a year through the first three decades.

Bernie Ecclestone’s consolidation of the commercial rights

A London used-car dealer turned driver-agent, Bernie Ecclestone bought the Brabham team in 1972 and joined the loose constructors’ association. He saw that, Ferrari aside, none of the owners had business sense or real money, and that the sport left enormous value on the table: each team negotiated appearance fees with each Grand Prix separately (roughly 135 distinct deals), and there was no television business at all. Unlike the NFL’s Pete Rozelle — a league-first commissioner employed by the owners — Ecclestone was ‘me first’: he offered to centralise the teams’ negotiations, guarantee their payments and force them to attend every race, taking a fee ‘off the top’ (2% promised, 8% taken). Average per-team race payments went from ~$10,000 to $40,000 in his first year, then to $200,000 — saving teams that would otherwise have gone bankrupt.

The 1981 Concord Agreement (named for the Place de la Concorde) settled the structure that still governs F1: the FIA controls the rules; the teams commit to every race; all race and television income flows centrally through Ecclestone. Television rights looked worthless, so he took them. He then gave them to Europe’s public broadcasters almost free on the condition they show every race, growing the market at others’ expense before charging for it once pay-TV arrived. Through a web of entities he never fully owned — and by installing his lawyer-ally Max Mosley as FIA president while himself holding roles as team owner, race promoter and FIA vice-president simultaneously — he made himself the choke point. TV income climbed from single-digit millions to $40–50m a year; tobacco poured $4.5bn into team sponsorship before the EU ban. Ecclestone became Britain’s highest-paid executive; in 2023 he pleaded guilty to tax fraud and paid £653m.

The private-equity era: liquidity, debt, and a game of pass-the-parcel

Approaching seventy and worried about British inheritance tax, Ecclestone sought liquidity. A dot-com-era IPO of a consolidated holding company (SLEC, in his wife Slavica’s name) at a ~$4bn valuation was shelved when an EU antitrust investigation began. He switched to debt — the ‘Bernie bonds’, a $1.4bn issue secured against future TV rights, used to pay himself a special dividend three days before triple-bypass surgery. What followed was financial farce: stakes sold to Hellman & Friedman (who flipped F1 for a 20% profit in one month to the German media roll-up EM.TV, itself fresh from buying the Muppets); EM.TV’s collapse in the dot-com crash; ownership passing to its debt-holders (Bayern LB, JP Morgan, Lehman). When the banks sued for control and won, Ecclestone had an ace: he had separately sold to CVC Capital Partners, who bought out the banks and Ecclestone’s stake and rehired him as CEO. CVC and Ecclestone put in ~$900m of equity for a business Ecclestone had already pulled over $3bn out of. Reinvigorated, Ecclestone extracted ever-larger race fees from sovereign promoters — Bahrain, China, Abu Dhabi ($1bn commitment), Russia ($50m a year) — while the calendar bent entirely toward whoever wrote the biggest cheque.

Two teams bought for a pound, and the modern team-as-business

The 2008 financial crisis pushed relations to breaking point: manufacturer-owned teams (Honda, Toyota, BMW) hit the wall, a cost cap was floated and killed by Ferrari and McLaren, and eight of ten teams threatened a breakaway league (FOTA). Two accidental arrivals fixed the sport. Red Bull — an energy-drink marketing company that replaced tobacco as F1’s youth-culture sponsor — bought the failing Jaguar team from Ford for one pound in 2004, ran near-zero margins to sell drinks, lured designer Adrian Newey, and won four straight titles from 2010. Brawn GP — Ross Brawn bought the shuttered Honda team for one pound, ran a ‘Franken car’ with a borrowed Mercedes engine and a legally contested double diffuser, and won both championships in 2009 before selling 75% to Mercedes for $200m. That team, under Toto Wolff and Lewis Hamilton, won eight consecutive constructors’ titles and is now valued at $6bn. A new breed of team principal — Wolff, Horner, Brown — ran teams as businesses, not just race outfits.

Liberty Media, Drive to Survive, and the American media playbook

In 2016 Liberty Media (John Malone and Greg Maffei) acquired F1 for $8bn enterprise value, installed Fox/NFL veteran Chase Carey, and — once it was clear F1 could not hold two bosses — fired Ecclestone in 2017, ending a 45-year run. Liberty’s diagnosis was that Ecclestone had systematically under-invested, leaving ‘low-hanging fruit everywhere’. Their four-point plan: fix the teams (a $145m cost cap, since ~$170m, making franchises profitable and valuable for the first time); fix the race promoters (treat them as partners, share data, turn each race into one of ‘22 Super Bowls every year’); fix the fans (let Lewis Hamilton — whom Ecclestone had sent cease-and-desist letters over his own Instagram — post freely, and open the sport to social media); and chase the growth levers Ecclestone ignored (esports, testing as televised content, Hollywood). The killer unlock was Netflix’s Drive to Survive — pitched as a racing show, discovered to be a reality drama of office politics. F1 gave the producers full creative control; Mercedes and Ferrari initially refused to appear. US race viewership roughly doubled, the female share of the audience rose from 7% toward 40%, and the show made the sport’s central paradox visible: most fans never watch a race, yet everybody still makes money on the impressions.

The business model: sponsorship, hospitality, broadcast, and race fees

Formula One Group does $3.4bn revenue: media rights 33% ($1.1bn), race promotion 29% ($1bn), advertising and sponsorship 19% ($630m, fastest-growing), and hospitality/merchandise/licensing 19%. It distributes 37% of its revenue to the teams ($1.27bn) — down from 50% in 2018, evidence Liberty is gaining leverage — split by equal participation, constructors’-championship finish, and historical tenure (the long-standing ‘thank you, Ferrari’ premium). Crucially the league is not owned by the teams: it is a ‘fat league’ with its own enterprise value, unlike the NFL’s pass-through ‘communist capitalism’. Yet because most sponsorship value sits on the cars and drivers the teams own (a front-of-grid title deal runs $50–100m; the LVMH league deal is ~$100m a year), the teams already earn ~72% of what they would make if they owned the league outright — there is simply not much profit left after Liberty runs the global logistics circus and funds bets like the wholly-owned Las Vegas race. Hospitality is the quiet engine: three days with a client at a race, versus three hours at a stadium, makes the paddock the most B2B product in sport — Atlassian calls its Williams sponsorship a ‘mobile executive briefing centre’.

Did F1 need Bernie? The thesis and the powers

The hosts judge that F1 genuinely required an Ecclestone where the NFL had a Rozelle: the global, multi-party complexity — teams, sovereign promoters, broadcasters and an NGO regulator across two dozen countries — could not have been wrangled by a salaried league employee. It needed an entrepreneur with his own company’s incentives and, in the hosts’ reading, a street-fighter’s ruthlessness. Run through Hamilton Helmer’s 7 Powers, today’s F1 looks strikingly defensible: scale economies (the cost of a global series), network economies (teams and circuits locked together), branding (people tune in to F1, not a breakaway), switching costs for teams and circuits, and a cornered resource — the FIA’s explicit designation of Formula 1 as the pinnacle of motorsport, ‘right there in the name’. The teams themselves, the hosts argue, hold little durable power: most winning advantages are arbitraged away within races, so persistence at the front comes from operational excellence, not strategy. The bull case is the US (monetising a fan at ~$7 against the NFL’s ~$127, with a fixable calendar that stops colliding with the NFL) and fuller-value European TV rights; the bear case is that F1 remains ‘more of a parade than a race’, with a natural ceiling on fervour.

Speakers

• Ben Gilbert — co-host of Acquired; co-founder and managing director of Pioneer Square Labs.
• David Rosenthal — co-host of Acquired; San Francisco-based venture investor.

See also

• Ben Gilbert and David Rosenthal on Ferrari, Enzo's Racing Obsession, and the Luxury Brand Machine — the companion deep-dive on the marque that legitimises F1 and sells road cars off its racing heritage.
• Ben Gilbert and David Rosenthal on the Walt Disney Company, the Flywheel, and Monetising Nostalgia — the other Acquired company history in the wiki.
• Jamie Dimon on Building JP Morgan Chase, the Fortress Balance Sheet, and Not Blowing Up — Acquired’s Jamie Dimon episode.
• 7 Powers — Hamilton Helmer’s framework, applied here to F1’s scale, network, branding, switching-cost and cornered-resource moats.
• Hamilton Helmer — author of that framework.
• Positional Assets — scarce, status-conferring goods; F1 teams now trade as scarce assets on multiples untethered from their cash generation.
• What Strategy Is — the theme this operational-excellence-versus-strategy discussion speaks to.