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

Ben Gilbert

Today we dive into a sport that started in the 1930s for the pure love of extremely dangerous auto racing. After World War II, British Air Force veterans and mechanical engineers joined to push the limits of technology and physics. It became the sport of rich guys who wanted to own teams and gallivant around Europe, losing colossal sums of money along the way. Since the sport began, over 100 separate teams have entered and exited the competition, mostly because they went bankrupt. And today the sport has been dragged kicking and screaming into being professionally managed, and is now owned by the publicly traded US company that has owned the Atlanta Braves, SiriusXM, and Live Nation. That is Liberty Media. Against all odds, Liberty has managed to turn the sport, the teams, and the drivers into real, viable businesses. Today's episode is on Formula 1, the world's premier motorsport series.

Ben Gilbert

Really what we're doing here is three sports in one. It's the world's best race car drivers showcasing their skills, but it's also the World Cup of Engineering. These days the races are more determined by the design feats of the thousand-plus people who work on each car than by the drivers. Formula 1 is the only motorsport in the world that requires a team to design and build their own car from scratch to enter the competition. And as one listener put it to us, it's also the World Cup of Office Politics. Or as another put it, it's Real Housewives of the garage, which makes for a fantastic Netflix show.

Ben Gilbert

The sport itself is completely insane. It's a grid of 20 drivers competing at over 200 mph in races that last 190 miles. They do this every week or two in a different city around the world. They load the entire circus — the cars, the teams, the hospitality — onto a fleet of seven Boeing 747s between races and set up shop in 24 different cities from Monaco to Bahrain to Melbourne. Each car costs $20 million to make and hundreds of millions to develop. The cars have three to 600 sensors on them. And shockingly to me as an American, it's the world's most popular annual sporting series with over 827 million viewers.

David Rosenthal

I had no idea until we started researching, because we're Americans. And the Olympics and the World Cup don't count, because they're every two and four years. This show is about the business of F1, just like our NFL, NBA, and IPL cricket episodes. So we apologise in advance if we don't spend time on your favourite rivalry or regulation detail or the V10 engine sound.

David Rosenthal

We owe a huge thank you to Joshua Robinson and Jonathan Clegg, the sports editors at the Wall Street Journal, who recently published the best business history book of Formula 1, called The Formula. It was one of our main sources, and they both helped with the research.

David Rosenthal

Formula 1 as we know it started after World War II in 1950. But unlike a traditional company or many sports leagues, it doesn't have an exact founding moment. Its origins are part and parcel with the beginning of motor racing itself. It didn't take long after the invention of the modern automobile — generally agreed to be Carl Benz in Germany in the late 1800s — before people had the idea to start racing. People raced horses; why wouldn't they race cars too?

David Rosenthal

Throughout the first few decades of the 1900s, various automobile clubs popped up across Europe hosting races. They'd sell tickets and advertising to fund prize purses, and drivers and manufacturers would travel from all over the world to compete. In 1906 the Automobile Club of France hosts an inaugural race just southwest of Paris. They call it the Grand Prix — literally, the big prize. The names in this sport are very literal.

David Rosenthal

The success of that Grand Prix causes a bunch of similar races to pop up across Europe through the teens and 20s, copying the same rules, or formula, as the Automobile Club of France. Monza in Italy, Monte Carlo in Monaco, the Nürburgring in Germany. Eventually in the 1920s all the major European automobile clubs get together in Paris and centralise oversight into one international organisation, which becomes, after a series of name changes, the FIA — which still exists today and still administers the rules of Formula 1. The sport is literally named after the rule book.

Ben Gilbert

There's a lot of fighting about the rules in this sport, both when they set them every few years and during races, when teams go up to yell at the stewards that something is or isn't illegal. Anyone complaining that this sport is too into the rules needs to remember it is named after them.

David Rosenthal

So you've got all these Grand Prix and famous racetracks, and the FIA as a rules body overseeing common regulations, but they're all independent events. There's no championship series, no league. There are a couple of attempts before the war to create one, but they fizzle. After the war there's renewed interest. In 1949 the FIA announces the inaugural Grand Prix World Championship for Formula 1 drivers, a global competition of seven of the most prestigious races, beginning May 1950 with the British Grand Prix at Silverstone. That's the first race of the first season of F1.

David Rosenthal

There are three foundational pillars of the early era. One in the UK, one in Monaco, one in Italy. First, the UK. Britain was and is the heart of the sport. Today 70% of F1 teams are based in the UK, the only notable exception being Ferrari in Italy. And a huge amount of their employees, at least on the technical side, work within tens of miles of each other in the English Midlands.

David Rosenthal

Why the UK and this weird part of the country? After the war, Britain had the right set of circumstances. Unlike Germany, they'd won the war, but the country was in bad shape and in desperate need of entertainment and redevelopment. And unlike France, Britain had a ton of empty airfields and lots of newly unemployed fighter pilots and mechanics. What better way to redevelop the rural heart of the country than to put those people and abandoned airfields to work racing fast cars? Much like Silicon Valley, there's a positive feedback loop — universities specialising in aerodynamics and engine design, and it's still the best place to source talent to build an F1 team.

David Rosenthal

One of these newly unemployed RAF pilots is Colin Chapman, also a mechanical engineer, who along with Enzo Ferrari probably did more than any single person to shape the first era of F1. Chapman founded the Lotus racing team in 1952 with 25 pounds as his startup capital, in a set of empty stables in North London. That wasn't enough to build an F1 car, so in parallel he started the Lotus road car business. In fact the first Tesla Roadster was based on a Lotus Elise chassis.

David Rosenthal

In 1958 Chapman finally has enough capital to enter Formula 1, and he revolutionises the sport. Back then it was much like the early days of the NFL — one or a couple of people who were owners, managers, coaches, and sometimes also the drivers. It says a lot that there wasn't even a constructors' championship when it started; that didn't come until 1958. It was just the drivers' championship, because often they were the same people.

Ben Gilbert

For anybody who follows the sport today, there are two things you compete for. Can the driver win the season, or can the team win the constructors' championship? It's called the constructors' championship because each team is required to construct their own vehicle and enter two cars, and thus two drivers.

David Rosenthal

Chapman was the first constructor to realise that building a winning race car wasn't just about adding horsepower, which was the prevailing Ferrari view. Chapman had a great quote: 'Adding power makes you faster in the straights. Subtracting weight makes you faster everywhere.' Being lighter is better, having better handling is better, because these aren't NASCAR ovals — there are technical corners, hairpins, chicanes, double apexes. It's a very technical sport, for the engineering and for the drivers.

Ben Gilbert

There's one other important element Chapman introduced: sponsor logos on the cars. Until then, F1 cars were painted whatever colour the FIA assigned their country — silver for Mercedes, British racing green, Ferrari red, which stick to this day. When Chapman goes out in the 60s to find a sponsor to finance his building, he paints his Lotuses red and white in the corporate colours of Gold Leaf Tobacco. This is the start of one of the most important partnerships in F1 history: fast cars and cigarette companies.

David Rosenthal

This was illegal for a long time — the FIA didn't allow sponsorship. Then they realised these teams were all going to go out of business, but there were companies lining up to pay to put a logo on the car. So this became the way to make the sport viable. Ironically the EU would legislate tobacco advertising out of existence in the early 2000s. Go look at the sport's historical greats — Senna, Michael Schumacher, Alain Prost. They all had the Marlboro logo all over them, or John Player Special. They actually painted the cars to look like cigarette boxes going down the track.

David Rosenthal

Chapman's story has a strange, sad ending. In the late 70s and early 80s he gets tied up in an embezzlement scheme with John DeLorean. Chapman designed the chassis for the DMC-12, the Back to the Future car. The company collapsed, and British prosecutors accused DeLorean and Chapman of each embezzling $8 million in government incentives supposedly meant to build the factory. Chapman dies of a heart attack at 54 when this comes out. DeLorean goes on to be arrested by an FBI sting attempting to buy 220 pounds of cocaine to pay off his debts. You can't make this stuff up.

David Rosenthal

Through all of it — the cowboy nature of the teams, the iconoclastic owner-mechanic-designer-drivers, the cigarette money, the whiff of fraud — that totally embodies the early era. It was the wild west in Europe. When we started in 1950 and into the 60s, these cars didn't look anything like today's open-wheel cars with wings. They looked like soapbox derby cars, almost like little bullets.

David Rosenthal

Pillar number two is Monaco. In 1956 the sovereign Prince Rainier III of Monaco married the American movie actress Grace Kelly. This brings together all the old-world luxury and heritage and legitimacy of Europe with the glitz and glamour of Hollywood in a way that's still part of F1 today. It was the 20th century's version of the Travis and Taylor crossover. There had been Grand Prix on the streets of Monaco for years, but when Princess Grace comes to the party, things go to a whole new level. Her Hollywood circles start coming out — Sinatra becomes a regular, the Beatles, the Rolling Stones — conveniently coinciding with the Cannes Film Festival up the road. Eventually many F1 drivers move to Monaco and become stars themselves. Today Hamilton, Verstappen, Leclerc, Norris all live there.

Ben Gilbert

It also has some tax benefits. But if you've seen Monaco, it's cliffside, the streets narrow and winding and old. It made sense to race those early cars there. It makes a lot less sense now — there's no chance they would add Monaco to the calendar with the cars the size they are today. But there's also no chance they'd ever get rid of it. This is what brings luxury into the sport. It seems obvious now, part of the sports-league playbook, but it was far ahead of its time in the 1950s, and totally by accident.

David Rosenthal

Which leads to the third, Italian pillar: Ferrari. Undeniably the most important team, company, and person of this first age was Enzo Ferrari. Enzo founded the company before the war purely as a racing company, racing Alfa Romeos — also a red team, because they were Italian. Ferrari itself didn't start making road cars until after the war. But when the championship starts in 1950, Enzo has to join; this is the pinnacle. Ferrari is the only team part of every single F1 season going back to the beginning.

Ben Gilbert

There's a funny thing here. You might think Formula 1 is the big series that legitimises an automaker. It actually works the other way with Ferrari. Ferrari participating legitimises the series. If Ferrari ever stopped racing, people would ask, so what is the big racing series? Formula 1 is actually the marriage of two separate things: the teams and the racetracks. Unlike almost every other sport, these are separate entities. It'd be like if the Seahawks played wherever, whenever, with no relationship to their stadium. What Formula 1 does is bring a set of teams and a set of racetracks together on the calendar.

David Rosenthal

Unlike Chapman and the Brits, Enzo had business sense. He was the first to realise there was an incredible opportunity at the intersection of really fast cars, legitimising racing heritage, and all the glitz and wealth of Monaco. That opportunity was selling fast cars to the rich and famous. Ferrari pretty quickly becomes a legitimate luxury brand — maybe the only legitimate luxury brand established in the second half of the 20th century. Just as equestrian heritage is the legitimising soul of Hermès, motor racing is the legitimising soul of Ferrari.

David Rosenthal

You might wonder where the Germans are in all this. In the 50s Mercedes was a major player. But while racing at Le Mans, one of their cars crashed and killed 82 people — one of the worst disasters in motor racing history. They pulled out and didn't return to Formula 1 for another 40 years. Racing was so dangerous then. You had 14 deaths in F1 alone in that first decade, not counting other series or spectators. Mortal danger was a core part of the appeal. These guys were gladiators, risking their lives every time they got in a car.

Ben Gilbert

In the 1950s, 14 deaths — 1.4 a year. In the 1960s, another 14, plus 15 spectators in the 1961 Italian Grand Prix crash. In the 1970s, another 12. So the first three decades ran at about one to two deaths per year — five to 10% of the entire field dying every year. And there were many more crashes and injuries. Famously Niki Lauda's head caught fire and he was scarred for life. And he was back racing several weeks later.

David Rosenthal

There's a great quote from a rival team owner during this era: 'Formula 1 is Ferrari and Ferrari is Formula 1. It's that simple.' And you might know who said it — Bernie Ecclestone, the impresario who would quite literally replace Enzo in that quote. Josh and Jonathan have a great line: no one would get richer off the Ferrari mystique than Bernie, a man who was never once employed in Maranello. That's our protagonist today.

David Rosenthal

Bernie was born in 1930, a hardscrabble kid. His dad was a commercial fisherman, his mum an authoritarian homemaker, according to the biographies — you never really know with Bernie, but that's the story as he wanted it told. After the war he gets into the wheeler-dealer business with surplus cars and motorcycles, opens a showroom on the outskirts of London, and specialises in selling luxury automobiles to the newly rich and famous. He becomes the London celebrities' car guy.

Ben Gilbert

People call him a former used-car dealer, but that's not really right. It's like calling someone's precious dial Rolex a used watch. It's not really used. It's, you want a Ferrari or a Bugatti? Hold the phone, let me make some calls.

David Rosenthal

There's always been gossip that Bernie was involved in more underground activities, and Bernie encouraged it. There was a long-standing rumour he was the mastermind behind the Great Train Robbery of 1963, where 2.6 million pounds was stolen from a Royal Mail train. Bernie loved the speculation. In 2005, at 75, he finally addressed it: 'There wasn't enough money on that train for me to be involved. I could have done something bigger.' You start to get a flavour of who Bernie is.

David Rosenthal

Once he's hawking cars to new money in London, Bernie doesn't just sell them — he steers them into financing, which is how dealers really make money. That nets his first small fortune. And the deeper he gets, he has the same realisation Enzo had a decade earlier: motorsport is the legitimising heritage of these fast cars. So in the mid-60s he starts hanging around F1 drivers, and being a wheeler-dealer he becomes the agent for a few pals, negotiating their salaries for a small fee.

David Rosenthal

Eventually he cooks up a scheme with a star client who drives for Lotus, a driver named Jochen Rindt, to leave and buy a team together. Rindt was one of the best drivers in the world, blowing away the field through the 1970 season. Then tragically he crashes and is killed in practice at the fourth-to-last Grand Prix. Rindt and Chapman had constantly fought about the safety of the Lotuses. Rindt was so far ahead that he still won the drivers' championship that year, posthumously — the only driver ever to do so.

David Rosenthal

Bernie is devastated. To honour his friend, he decides to carry through on their dream. In 1972 he buys the Brabham F1 team for 100,000 pounds — about 2.3 million today. Today every F1 team is worth at least one and a half billion; that's the floor. Bernie doesn't make much on Brabham — he sells it for five million a couple of years later — but the fact that team valuations go from 100,000 pounds to a floor of one and a half billion is thanks to Bernie. Partly thanks to Bernie, and specifically thanks to Bernie leaving after that.

David Rosenthal

When Bernie buys Brabham, he gains membership into the Formula One Constructors Association — FOCA, a very loose organisation of team owners that Colin Chapman had pulled together in 1963, solely to coordinate joint travel and transport logistics. It's like, hey, you're my bitter rivals, I battle you to the death on the track, but we're going to the same place, so why don't we share a ride?

David Rosenthal

Bernie quickly realises a couple of things. Except for Enzo Ferrari, none of these guys has a lick of business sense — whatever money they have is going down the tubes chasing victory. And except for Ferrari, none of them has real money. Cars were becoming very expensive; there was no sustainable way to run a team. The average tenure over the whole existence of Formula 1 is about six years. Here's the list of teams in 1972: Lotus, Tyrrell, McLaren, Ferrari, Surtees, March, BRM, Matra, and Brabham. Two exist today. And at that point only one, Ferrari, was a real business.

David Rosenthal

Bernie sees the opportunity. All these guys are focused on winning races. He'd like to win, but he really cares about getting rich, and there's a void of power he can insert himself into. Here's the state of F1 when he arrives: each team negotiated appearance fees with each Grand Prix separately. With nine teams and maybe 15 races, that's over 130 distinct agreements. Everyone gets paid wildly different amounts, usually not much.

Ben Gilbert

This is the sports business world's worst practice. Not only is it bad for revenue — you have no centralised leverage over the tracks — it's bad for the sport. How are you supposed to sell tickets when you don't know if Ferrari or McLaren is going to show up? There was no way for a fan to know until they got to the track. And broadcast, television, promotion — I'd say it was in shambles, but it wasn't even in shambles, because it didn't exist.

David Rosenthal

He came along at the perfect time. It was already criminally too late — F1 hadn't gotten to television by the mid-70s. Meanwhile the NFL was making 50 million-plus a year in broadcast rights, had launched Monday Night Football in 1970. F1 was just as popular, a global sport with great demographics, making zero in media rights. Even Bernie, hardly a media professional, could see room for improvement on both fronts. The near-term easy play is to centralise negotiations with the racetracks and capture value. The longer-term play is television.

Ben Gilbert

It's worth comparing Bernie and Pete Rozelle, happening at the same time. Bernie is the anti-Rozelle. Rozelle was drafted by the NFL owners to be an employee of the league, serving their interests as commissioner, with the league owned 32 ways by the teams. His vision was communist capitalism — league first, we're all in this together, centralise and share the spoils evenly. Bernie's MO isn't league first, it's me first. He centralises things, but F1 doesn't become owned equally by the teams. He starts a company, that company signs agreements with racetracks, and then the teams do business with him.

David Rosenthal

His pitch to the other owners: we need to centralise, and clearly you don't want to do it. Leave it to me. Give me your appearance rights, I'll go fight the race promoters — many of them probably gangsters — and get us the best collective deal. I'll even take all the risk and guarantee you'll get paid at least as much as now. And you must come to the races. That was the teeth — no more 'I might show up.' He says he'll take just a small fee off the top, supposedly 2% of total race fee revenue.

David Rosenthal

Of course, nobody writes anything down, because Bernie never writes anything down. Decades later, when the books become public through court cases, it turns out Bernie was taking 8% off the top, plus his owner's split as a team owner.

Ben Gilbert

Honestly, 8% is not bad. If you're massively increasing what every team gets paid, and organising and orchestrating the sport, taking 8% seems quite reasonable. Bernie is doing a great service. He's instantly making the sport much more valuable and sustainable — every team would go bankrupt except Ferrari otherwise. Before Bernie, the average payment per team per Grand Prix was about $10,000. In his first year he takes it to $40,000 — 4x. By the mid-70s it's 150K per race, and by the end of the decade 200K. Suddenly you can fund your operation.

David Rosenthal

As Bernie would never fail to point out, all the other owners should be massively grateful. He also negotiates competitive freight rates, improving travel costs. His first act reminds me of a saying from a mentor: he may be a thug, but at least he's our thug.

Ben Gilbert

Worth pausing to say the FIA is still the governing body of the racing series. Bernie takes over the constructors' association, but the FIA and its rules still govern what happens at the racetracks. He's just organising the commerce. And importantly, the FIA is the one who blesses each racetrack as a Grand Prix part of Formula 1.

David Rosenthal

The race promoters are none too happy about this little guy from England beating them up. They go to the FIA: you've got to do something about this Ecclestone guy, he thinks he's running F1. This leads to protracted negotiations that finally get hammered out in 1981 with the first Concorde Agreement — still the name of the roughly five-year agreements that govern F1 today. They're named after the Place de la Concorde in Paris, the location of the FIA headquarters where they were negotiated, one of the ritziest parts of the city.

David Rosenthal

In this first Concorde Agreement, Bernie, FOCA, and the FIA agree on a few things. One, the FIA has full unilateral jurisdiction over the rules; Bernie and the teams have no say over technical rules. Two, the teams commit to showing up at every official Grand Prix, and in return all race fees and prize money must be paid centrally to Bernie and FOCA. And three, Bernie and FOCA control all rights and income from any future televising of F1 for the next five seasons. No TV rights to the race organisers or the FIA — all the TV money flowing through Bernie, which today is the single largest revenue stream of the whole thing.

Ben Gilbert

Both sides felt they were getting a good deal, because the TV rights weren't worth anything yet. European and British television was mostly state-controlled — the BBC and its peers, the equivalent of PBS, public broadcasters, not a competitive ecosystem. Even giving up TV rights didn't look valuable. It sounds hard to film — racetracks with 15 turns, cars whizzing by, crappy technology, and you have to do business with the government. Good luck.

David Rosenthal

Whether Bernie had a vision all along or just grabbed something, he executes perfectly. He goes to the European Broadcasting Union, the umbrella group representing 92 countries' national public broadcasters, and says: you have lots of F1 fans, I now own the rights, I'll sell them to you super cheap — a couple of million a year for all 92 countries, basically nothing. The only thing I want is for all of them to promise to show every single race, not just the ones in their home country.

Ben Gilbert

So he's in grow-the-sport mode, not capture-value mode. This is a long game.

David Rosenthal

And it quickly becomes clear that 92 public broadcasters don't have the expertise or interest to figure out how to televise the sport. So Bernie says, no problem, I'll take the risk, I'll fund it personally to create a central single television feed for each race that Formula 1 — slash me, Bernie — produces. That's how the world feed starts; most broadcasters still take one main produced feed and add their own material on top. He keeps running the same playbook: centralise something, aggregate it, and now I have leverage to do business with the rest of the ecosystem.

David Rosenthal

Bernie loved operating without contracts. His quote: 'I don't like contracts. I like being able to look someone in the eye and shake them by the hand rather than do it the American way with 92-page contracts no one reads. If I say I'll do something, I'll do it.' He sets up a new company, Formula One Promotions and Administration, or FOPA, not to be confused with FOCA, the constructors' association he's de facto head of but doesn't legally own. The plan is for the public broadcasters to develop the market for him, so the next negotiation is far more favourable — they're out there building the brand, and as soon as the term is up, he's the choke point for what's now a hugely in-demand product.

David Rosenthal

Bernie also gets lucky: the pay-TV ecosystem finally comes online in Europe, so there are far more bidders for content. And in these agreements, race organisers were required to surrender income from trackside advertising and corporate hospitality to Formula 1-owned entities. So the track's business model is really just ticket sales.

David Rosenthal

When the original 1981 agreement comes up, the teams and FIA realise TV rights are going to be valuable and want a cut. Bernie proposes dividing it a third each — FOCA and the teams, the FIA, and FOPA. After negotiation it ends up FIA 30%, FOCA and the teams 47%, and Bernie's company 23%.

Ben Gilbert

FOPA is just a guy. You're saying 23% goes to me, a thing I fully own.

David Rosenthal

Then, when the third Concorde Agreement comes up in 1992, Bernie goes to the FIA: you can't be happy with your TV money, it's not much and it's complex. I'll make it easy — I'll pay you a flat fee, $5 million a year rising to 9 million, in exchange for your percentage. The FIA loves it. So Bernie now has his original 23% plus another 30% that belonged to the FIA. He then runs auctions across Europe and the globe, and TV rights go from small single-digit millions in aggregate to over 25 million, then 40 to 50 million a year flowing to Bernie.

Ben Gilbert

How do the teams feel about a guy getting half the broadcast revenue of their sport? Some were pissed — Ken Tyrrell publicly accused Bernie of stealing F1 from the teams. But that's a minority view. By and large they're grateful, because turning F1 into a major TV sport made all their individual sponsorship deals way more valuable. Before F1 was televised, sponsors only got exposure to whoever showed up at the track — and only fans close enough to read the logos.

David Rosenthal

This is when tobacco money really funnels in. Until it gets banned by the EU in 2006, tobacco poured $4.5 billion into team sponsorships over the years — one category. Part of the reason: as pressure mounted to ban tobacco advertising on TV, radio, billboards, putting it on a car that shows up in a broadcast was a sponsorship of a team, not a TV ad. It's a full-screen ad that isn't classified as one, wrapped in the brand image they wanted — glamour, speed, risk-taking.

Ben Gilbert

In 1968 Colin Chapman became a big believer that his drivers could go faster through turns with more downforce, so he put the first small wings on the car. Then teams go to big wings before the FIA regulates those out. It's a fun period of experimentation. But it's worth a physics lesson. Lighter cars are faster — so why push a car into the ground harder? You have to separate downforce from weight. There are ways to get downforce, which is good, that are different from a heavy car.

David Rosenthal

You want downforce to make the car stick to the road better on turns. But the issue is that a big spoiler also creates a ton of drag — resistance to going forward. So if you optimise too much for downforce in the corners, you slow yourself in the straights. The takeaway: downforce good, drag bad.

Ben Gilbert

Flash forward nine years to the late 70s. Lotus is trying to produce downforce without drag, and what follows is the stuff of F1 lore — the Lotus 78 and 79, mythical beasts. The first breakthrough: what if we turn the whole car into a wing rather than slapping a wing on top? The Lotus 78 really looks like one big wing.

David Rosenthal

The second breakthrough comes from fluid dynamics. Everyone knows how airplanes generate lift — the wing is shaped so that moving forward creates high pressure underneath and low pressure over the top, pushing the plane up. What if you did the opposite? Lotus shaped the car like an upside-down wing, with a skirt that sped up airflow under the car, creating a low-pressure zone, then guided it out the back with a diffuser. The effect sucks the car onto the ground. In physics this is the Venturi effect, and the areas under the car are Venturi tunnels.

Ben Gilbert

That's why, when we were at the Vegas Grand Prix, we kept saying these are like fighter jets on the ground. They actually are, like upside-down fighter jets.

David Rosenthal

Did it work? Absolutely. Mario Andretti said it cornered as if painted to the road, and he won the drivers' championship and Lotus the constructors' in 1978. By the 1980s it produced so much downforce that if the car went over a kerb or the skirt slipped, it became a safety hazard. So in 1983 ground effects were outlawed and cars had to have a flat bottom. But ground effects came back for the 2022 to 2025 regulations — that's what we saw in Vegas, where about 70% of downforce comes from the ground effects, kicking up huge clouds of dust in qualifying, and rooster tails of water in the rain.

David Rosenthal

There are other giant leaps outside aerodynamics. Engines have gotten far more fuel-efficient, with only 50% of energy lost to heat in an F1 engine versus 70 or 80% in a road car — so you can carry less fuel and go faster. Horsepower has tripled from around 300 in the 50s to a thousand-ish today, in cars light enough you could basically pick them up, a half to a third the weight of an average road sports car, thanks to carbon bodywork. And there are turbochargers, which harness unused energy from exhaust gases to compress the incoming air, so there's more oxygen and more power every cycle.

Ben Gilbert

An important point: none of these teams, even the ones backed by carmakers, were doing this to advance consumer technology. But as a byproduct, a lot did make its way into consumer cars — paddle shifters, carbon, turbos. It became an intentional strategy over time, and it provided air cover for spend if a constructor could say it was R&D.

David Rosenthal

I think people overstate this when they say technology came from F1. It's more that technology was iterated and perfected there, or new material science was explored, before eventually going into road cars.

Ben Gilbert

Then there's a third category, electronics. In the early 90s the Williams team realises the technology is finally good enough to automate systems in the car in real time — this is pre-internet. They implement traction control, anti-lock brakes, active suspension, semi-automatic transmission. The car even automatically adjusted ride height for each corner. Competitors got so mad they accused Williams of making a car that drove itself. They won drivers' and constructors' championships in 1992 and 1993 with Nigel Mansell and Alain Prost.

Ben Gilbert

The car was so dominant that Prost's old rival, the great Ayrton Senna, the three-time world champion, wanted to jump from McLaren to Williams. Prost was retiring after 93, so a spot opened for Senna in 94. But then the FIA made all the software stuff illegal — it decreased how much the driver mattered, and they weren't willing to go there. So Senna joins a car now merely on par with or behind the grid. And sadly, early in that 1994 season, the racing world witnessed its most infamous and fatal crash in that Williams car.

David Rosenthal

Senna's death in 1994 becomes a global moment. His funeral in Brazil is, I believe still today, the largest attended public funeral in history — I think three million people showed up in the streets. He'd gone from rising star to clearly the best driver in the world, a natural talent. There's a beautiful documentary released in 2010. His death shined a light on the sport in a way that hadn't happened since the modern television era began, and specifically on how unsafe it still was.

David Rosenthal

By this time fatalities had really dropped. They'd implemented obvious stuff — the FIA inspects every track; no more straw-bale barriers, now double-reinforced guardrails; fireproof overalls in the 70s, fuel safety cells, mandatory seat belts, multi-point harnesses.

Ben Gilbert

One of the craziest things in the research: for a long time F1 drivers refused to wear seat belts, because they wanted to be thrown clear so they didn't catch fire after a crash. They didn't want to limit their options. So after all that, the 1980s had four deaths, much better than 12 or 14. And in the 90s the only two deaths were that one weekend, Roland Ratzenberger and Senna. So it came as a shock — people felt they were through this era.

Ben Gilbert

After Senna's death, the biggest change was slowing the cars down. Interestingly, F1 today is not much faster than in 1950 — top speed is maybe 40 mph faster. They limited aerodynamics, and in 1998 grooved the tyres to reduce cornering speed. They added deformable crash structures, survival cells, front-impact testing, higher cockpit sides, larger runoffs, upgraded barriers.

David Rosenthal

In the 2010s there were two more fatalities, which brought the really big change: the halo. In 2018, in response to the 2014 crashes, the FIA mandated this rigid, heavy structure right on top of the driver, with a bar in the centre of their field of view. A giant compromise, but it's saved at least three lives, protecting a driver even when a car is upside down and skidding. There have been zero fatalities since 2014 — I think the longest stretch in F1 history without a fatal accident.

Ben Gilbert

Bringing it back to the business: one great irony of the right decision to focus on safety and slow the cars is that it further fuels the spending spiral. The harder you make it to go fast, the more teams are incentivised to spend every last dollar and find every last loophole. When the sport started, there were giant gains everywhere — a six-wheeled car at one point, because the rules didn't say you needed four wheels. Over time, as safety and other guidelines pile up, the way to succeed shifts from making a more powerful engine to exploiting the rules — finding daylight between what they intended to write and what they did write, and sinking $50 million of R&D into it.

David Rosenthal

It's really the semiconductor industry and Moore's law — a different set of rules, physics instead of the FIA. As you progress, like TSMC and ASML, you spend incrementally more capex and R&D every year to push the boundaries, all the low-hanging fruit gone, getting more exotic — lasers melting tin just in time.

David Rosenthal

Meanwhile Bernie, starting in 1993, becomes the highest-paid corporate executive in Britain, taking home $44.5 million in cash that year — and that's only what's reported to the crown. He's getting older, in his late 60s, on his second marriage with two young daughters, and starts thinking about estate planning and liquidity. But in doing so he nearly causes the whole thing to fall apart. Even as the highest-paid executive, he didn't run F1 like any professional organisation. He did everything himself, intentionally kept no records, minimised contracts, and ran it like a sole proprietorship.

David Rosenthal

The whole operation ran out of a building in London that was also his house — the bottom four floors were F1 offices, and supposedly he had every room bugged. He'd kick everyone out at 6pm. This continued until Liberty takes over in 2017. No marketing department, no research or data, no sales department besides Bernie. His number two was Max Mosley, a former Formula 2 driver, owner of the March team, and, usefully, a lawyer. Bernie's quote to him: 'Your problem, Max, is you always want things absolutely clear, and sometimes it's better if things are not clear.'

David Rosenthal

In 1993 Bernie shadow-arranges to get Max installed as president of the FIA, while he himself already held an FIA role as vice president in charge of promotional affairs. He also became the promoter of the Belgian Grand Prix at Spa — so he was paying a race fee to himself. At various times Bernie held a principal role in every major stakeholder category: team owner, race promoter, FIA representative, and CEO and owner of the league itself.

David Rosenthal

There's a great quote from Eddie Jordan: Bernie Ecclestone was someone who sold Formula 1 four times, has never bought it back, has never lost control, and still owns it. And the most important thing — he never owned it in the first place. So let's tell that story.

David Rosenthal

In the mid-90s Bernie starts exploring liquidity, wanting to funnel it into offshore vehicles to avoid British estate taxes after he dies — a natural activity for someone approaching 70. What nobody foresaw is that he had at least another 25 years in him; he's still alive in 2026. To be fair, protecting his estate was a legitimate concern — otherwise there'd be no way for his family to keep control of F1; it would have to be broken up to fund estate taxes. So this becomes an existential risk for the teams: what if Bernie dies suddenly?

David Rosenthal

It's the height of the dot-com era, so the natural thing is to IPO F1. Collectively his companies were earning about 250 million pounds a year in revenue with 50%-plus EBITDA margins, when the pound was worth 60 to 70% more than the dollar. He hatches a plan with his bankers at Salomon Brothers to consolidate all his F1 companies into a single holding company called SLEC Holdings, transferring ownership to his second wife, Slavica — SLEC was short for Slavica Ecclestone — and float it in a dual US-England IPO at around $4 billion.

Ben Gilbert

We should note we've been a little glib. In 2023 Bernie ultimately pleaded guilty to tax fraud as a result of these machinations, paid a 653 million pound settlement to the crown in back taxes and fines, and received a 17-month jail sentence, suspended, probably owing to his age. All this lurking may be part of why he famously turned down several offers of knighthood.

David Rosenthal

As he formulates plans with Salomon Brothers, they see the revenue and EBITDA, but they don't see any formal legal control giving him the actual rights to a lot of it. He has the TV rights, but the promoter fees, transportation, and the Paddock Club — which we haven't even mentioned, with a lot of money flowing through it — are all income streams to Bernie. A race promoter pays a giant fee to Bernie for the privilege of having a race at their track.

David Rosenthal

Conveniently, right as they're doing IPO prep, it's time to negotiate the fourth Concorde Agreement. Bernie swaps in a new entity, Formula One Administration Limited, owned by him, for the original FOCA, so he can legally hold all the rights. And remember the new FIA president is Max Mosley, so it gets rubber-stamped. It passes; the path is paved to IPO. Except news leaks to the press, and the European Union antitrust investigators start poking around. Bernie is doing so much self-dealing there's no way he survives an investigation.

David Rosenthal

So Bernie shelves the IPO and resigns his FIA vice-presidency, which gets the EU off his back. But he still needs liquidity. He switches to Morgan Stanley and, instead of an IPO, issues debt on F1, using the proceeds to pay himself and his offshore entities a special $1.4 billion dividend, secured by future TV rights streams. It's called the Bernie Bonds.

Ben Gilbert

You should always be a little worried when a company raises a giant amount of debt principally to pay its primary shareholder a special dividend. Why would you buy that debt? The offering was intended to be $2 billion, but there wasn't enough demand — Morgan Stanley could only rustle up 1.4 billion.

David Rosenthal

The deal happens on a Friday. Debt issued, Bernie gets his dividend, money transferred offshore. The following Monday, Bernie calls his bankers and says, oh, there was something I didn't tell you — I'm having triple bypass heart surgery today. The entire future depends on Bernie being in the seat. Fortunately he survives, and gives a quote from the hospital: 'I have disappointed so many people.' One of his bankers later recalled her response: if you make it out alive, I'm going to come kill you myself.

David Rosenthal

Later that year, 1999, Slavica — really Bernie — starts selling equity stakes in SLEC to private equity firms. In February 2000 they sell a 37% stake to Hellman and Friedman, the San Francisco firm. H&F buys out other minority holders to reach 50%, then negotiates an option to buy another 25% for 600 million pounds to get to 75% majority. The option is papered in March 2000 — right when the dot-com crash hit.

David Rosenthal

But it gets crazier first. In March, H&F gets an unsolicited over-the-top bid from a German new-media company called EM.TV to buy their entire stake immediately. EM.TV had just bought the Jim Henson Company, which makes the Muppets, and were trying to roll up media properties for the digital era. H&F hits the bid.

Ben Gilbert

How long did H&F own Formula 1?

David Rosenthal

One month. They make an immediate 241 million pound profit in one month on about 1.1 to 1.2 billion invested — a 20% return, in a month. So 50% of F1 is now in EM.TV's hands. They want to exercise the 25% option, but they blew all their cash on the first transaction and the Muppets. So EM.TV does a 1.6 billion euro debt deal — 600 million from JP Morgan and Lehman Brothers, a billion from a German bank, Bayern LB — exercises the option, and owns 75% of F1, with Bernie and Slavica holding the last 25%. And then the bubble bursts.

David Rosenthal

EM.TV misses interest payments. Another German media mogul, Leo Kirch, saves the company; his Kirch Media takes over, assumes F1 ownership, and 18 months later goes bankrupt. By 2002 the 75% stake transfers to the debt holders — Bayern LB, JP Morgan, and Lehman Brothers — with Bernie and Slavica still owning 25%.

David Rosenthal

It comes to a head in 2004 when the banks are frustrated because Bernie's still running the thing as always, paying himself everything and ignoring their directions. The bank consortium sues Bernie for control. The judge rules for the banks. But Bernie tells the media the verdict means 'nothing at all' — he has an ace up his sleeve. He's been negotiating with CVC Capital Partners, the large European private equity firm. CVC buys out the banks and Bernie and Slavica's 25%. Bernie stays on as CEO — an employee, hired by CVC to keep being Bernie — and gets to invest some of his proceeds alongside them.

David Rosenthal

All told, CVC and Bernie spend about $2 billion for 100% ownership, financing 1.1 billion with debt, putting in 900 million of cash equity — compared with over three billion Bernie and his trust had pulled out through all the earlier machinations. The key number: the CVC/Bernie buy-in is about 900 million of equity on a $2 billion total price including debt.

David Rosenthal

Newly incentivised, Bernie goes back to his original bag of tricks: extracting more from race promoters. By 2005 there are three types of Grand Prix. The prestigious historic ones — Monaco, Monza, Silverstone — pay much less but build the brand. A new set — Bahrain, China, the flyaway races — pay huge fees, 30, 40, 50 million a year, today into the 60 millions. And a bunch of middle races — Canada, Australia, Spain — that make up most of the calendar but bring neither revenue nor strategic value.

David Rosenthal

So Bernie courts Abu Dhabi, Singapore, and India to displace some middle races. India is 40 million a year in fees; Abu Dhabi commits to a billion-dollar investment including a whole new track in the desert. Then in the early 2010s he lands the big one, Russia. They'd just won the 2014 Sochi Winter Olympics and put $50 billion into infrastructure, and Bernie convinces them a race is the way to amortise that. It's a deal with the state — increasingly, a lot of flyaway races are sovereign deals, not local promoters.

David Rosenthal

There's an amazing story. In final negotiations, the Russians ask Bernie to fly to Sochi and sit with Putin. Bernie responds: do I look stupid? If they want me to negotiate with Putin, no way. If they want me to go, send back the contract signed first. Which they do — then Bernie flies over and does a press conference. The Russian Grand Prix would get cancelled in 2022 after the invasion of Ukraine. Asked about it on British TV, Bernie said Putin was a 'first-class person' and that he'd take a bullet for him.

Ben Gilbert

I did ask everyone I talked to, what was it like working with Bernie? Overwhelmingly they said delightful — that when the dust settled you'd look at the terms and go, whoa, there's actually not much here for me, but just delightful to work with, a very loyal partner.

David Rosenthal

By the mid-to-late 2000s the 'I'm getting rich but so are you' pitch has worn out its welcome. Now it's not just Bernie getting rich, it's a private equity firm, on the backs of teams spending 400 to 500 million a year on their cars. The calendar's optimised only for who'll pay the biggest fees, so races run at all hours. Team relations are bad. Then 2008 hits. The biggest teams were backstopped by consumer carmakers — Honda, Toyota, BMW, Ferrari, Renault. In the financial crisis their car businesses fall off a cliff, and it becomes untenable to keep operating money-sink F1 teams.

David Rosenthal

So Bernie, CVC, and the FIA float a lifeline: a cost cap on manufacturing, the F1 equivalent of a salary cap, but on investment in the cars rather than players. Some teams love it. Others hate it — specifically Ferrari and McLaren. Ferrari would happily lose half a billion a year as long as they win; it pays back infinitely in brand marketing. And Ferrari is basically unaffected by a global recession — their customers stay on the wait list. Ferrari and McLaren bully the other teams into opposing the cap.

David Rosenthal

In 2009, eight of the 10 teams threaten to pull out and start a rival breakaway league — the Formula One Teams Association, FOTA — with their own series in 2010. FOTA is two things: a negotiating bloc, and a legitimate breakaway threat. But starting a real breakaway is very hard — you'd have to sign all the best tracks and media deals. There's a lot of value in what Bernie and the series actually do. It works: the cost caps didn't happen, though they did impose a 10-year engine-development freeze, and the teams got Max Mosley's resignation from the FIA.

Ben Gilbert

It's hard for the teams to link arms for long, for two reasons. Bernie and Max could offer different things to different teams. Take the Brawn team — a scrappy, shoestring upstart. Bernie had been withholding their prior year's payments from when they raced as Honda, arguing they weren't the same team. Brawn needed the cash, so it's easy to get them to break ranks when you owe them a few million and will wire it immediately. But the biggest thing is misaligned incentives — all these constructors have very different reasons for racing.

Ben Gilbert

I asked Zak Brown, the CEO of McLaren Racing, why teams don't form a breakaway now. He said before Liberty there had been many attempts, but they always fell down over how to share the pie. Ferrari says we're entitled to more for our heritage; McLaren and Mercedes say we're really good, so we deserve more. They never agree on how to divide it.

Ben Gilbert

So team and league relations are at an all-time low at the end of the 2000s. And we haven't even mentioned Spygate — McLaren magically wound up with a binder of the complete specification of Ferrari's car — and Crashgate, where it looked pretty conclusive that a team intentionally had one of their drivers crash to bring out a safety car and advantage their other driver, putting lives at risk. These are major sports-integrity issues. Public trust is at an all-time low.

David Rosenthal

Ironically, this whole situation gets fixed by two new teams nobody saw coming — one a dark-horse re-entrant carmaker, the other an energy drink company named Red Bull. Well, an energy drink marketing company, because they don't actually make the drink.

David Rosenthal

The Red Bull story deserves its own episode. Briefly, Dietrich Mateschitz, an Austrian toothpaste salesman for Unilever and P&G, goes to Thailand in 1984, brings back a local energy tonic, outsources the manufacturing, and builds a company doing over $10 billion a year. The key pillar is marketing, and one main pillar of that is extreme sports. Their model is: you're buying the drink to associate with a lifestyle. In 1989 Red Bull sponsors its first F1 driver, and by 1995 becomes title sponsor of the Sauber team — the team that's now Audi.

Ben Gilbert

Red Bull's entrance was perfectly timed, right as EU regulation forced tobacco out of the sport. So the great irony is an energy drink company replaces the cigarettes. Josh and Jonathan have a great line: two decades after Marlboro execs looked at F1 drivers and saw the heirs to the American cowboy, Mateschitz recognised them for what they really were — overcaffeinated adrenaline junkies with scant regard for their personal safety. A match made in marketing heaven.

David Rosenthal

Red Bull breaks the mould. Previous sponsors leaned into prestige, luxury, aristocracy — none interested in younger audiences. Bernie's quote when asked about F1's ageing demographic: younger audiences aren't a priority because they 'don't buy Rolexes.' Yet. Red Bull is the opposite — young people, the extreme lifestyle, jumping out of planes in the stratosphere. But the problem is Sauber isn't very good. Mateschitz's line: if an insurance company sponsors a losing team, people don't change insurers. But when the Red Bulls lose, people get a new drink.

David Rosenthal

In 2004 Red Bull dumps Sauber and gets directly into the business, buying the failing Jaguar racing team from Ford. Things were so bad Ford sold the whole team to Red Bull for one British pound, establishing Red Bull Racing. The full circle this year is that Ford is now partnering with Red Bull on their power units, and Ford actually made F1 engines for a long time.

David Rosenthal

Now they need to make the team good. When Red Bull rolls up in 2005 — the first year of CVC's ownership — they bring, no joke, a mobile nightclub called the Energy Station as their paddock facility, with a radical open-door policy. Previously the paddock was sacred, access very limited. Red Bull says the door is always open — any team, any sponsor, any guest, come party. DJs at all hours, a swimming pool on the roof. In Monaco, where there's no room for anything, they built a temporary building on pontoons out in the harbour. A giant middle finger to the establishment, with Red Bull flowing free. Genius.

David Rosenthal

This is masterminded by Mateschitz and the young team principal he takes a chance on, Christian Horner — if you watch Drive to Survive, you know Horner. The other owners and Bernie hate it. This is a serious sport, and here's Red Bull partying.

Ben Gilbert

Red Bull got much better as a racing team, but the essence of the strategy is the same. They generate near-zero profit, very thin, to create the biggest marketing spectacle to sell energy drinks. It's like Amazon and Prime Video — the business model isn't the streaming, it's the retailer. McLaren even forbids its team from entering the Energy Station; it's a fireable offence. Honestly, you're probably going to share team secrets, so it's a good policy.

David Rosenthal

And that's exactly the move. One night Horner clandestinely invites McLaren's legendary technical director to the Energy Station against the rules — Adrian Newey, probably the most legendary car designer in history. People talk about Newey the way they talk about Kelly Johnson from Skunk Works. The comment I've heard from more than one person: he can see air. He still draws by hand, in the age of CAD and AI — he envisions the physical forms and how air flows around them, then draws with a pencil. Horner and Mateschitz lure Newey to Red Bull, and that's how they build a winning team. Starting in 2010, Red Bull runs off four consecutive drivers' and constructors' titles through 2013, with Sebastian Vettel.

Ben Gilbert

Important for the product on the field: up to this point the racing had gotten boring, because Ferrari and Michael Schumacher had dominated. If you were an F1 fan in the 90s and early 2000s, there was Schumacher and then everyone else. So an energy drink company kicking off a new dynasty is fascinating, and central to the Drive to Survive narrative, all the way through to Max Verstappen, arguably the best driver today.

Ben Gilbert

The most insane thing about Red Bull is I used to think they were just a sponsor using F1 for marketing. But they've developed so much competency as a constructor that they're now basically a real car company — Red Bull Powertrains, a lot of former Honda people, working with Ford. They even built a track supercar, the RB17, the last thing Newey did there. They do a lot of what a car company does.

David Rosenthal

Meanwhile there's another hugely successful team that builds its own dynasty out of nowhere, also purchased for one British pound. Unless you're a hardcore fan, you probably can't guess who.

David Rosenthal

Back to Schumacher's dominance at Ferrari. He's one of the first athletes to pass a billion dollars in career earnings, around the same time as Tiger Woods — getting paid $60 million a year, which is what Max and Lewis make today, before all the inflation from the sport's growth. It illustrates how willing Ferrari is to burn money to win. But it wasn't just Schumacher; it was the engineering team, led by technical director Ross Brawn.

David Rosenthal

Brawn realised, maybe better than anyone, that after the FIA clamped down, the way to win was to exploit loopholes. He found one with tyres. For a brief period you could pick between two tyre manufacturers. Bridgestone had an issue, so almost everyone moved to Michelin. Ferrari and Brawn realised: if we're the only ones on Bridgestone, we effectively get custom-made tyres for our car and Michael's driving style, while everyone on Michelin uses a common-denominator tyre. They spent a year developing their own custom tyres.

Ben Gilbert

Worth noting for non-fans: tyres and the halo are maybe the only parts of the car mandated to be common across the league. In NASCAR and other series, much more is mandated. It's part of what makes F1 unique and so expensive — every car is truly custom-engineered except the halo and tyres. Teams are designing their own bolts. So finding a way to custom-engineer their own tyres was huge.

David Rosenthal

The FIA eventually closes the tyre loophole. Brawn leaves Ferrari and becomes team principal of Honda in 2007, ahead of 2008. Then in 2008, in the financial crisis, Honda exits the sport. Brawn is one year in and out of a job, scrambling with no real prospects. So he goes back to Honda: you're worried about looking bad operating an F1 team? You'll look worse laying off a thousand people. Give me a few months to find a buyer; just keep everyone employed so there's something to sell.

David Rosenthal

He can't find anyone — the world's falling apart. So he goes back with: what about a management buyout? I'll take it off your hands, and when I say buyout, I'm not really going to give you money. What if you agree to fund people's salaries for a while, I give you one British pound, you get to tell your board you're no longer wasting money and you're not laying off a thousand people in England. Bernie gets wind of it — he doesn't like Brawn, and he really doesn't like a good deal going through without him — and tries to convince the Honda board to sell to him instead. Amazingly, Honda sticks with Brawn, selling for one pound, but says: we'll fund you for the year, but we're really out — no more engine.

David Rosenthal

So Brawn is desperate. Worth noting: every team makes their own engine, but at any time only a handful supply engines — Mercedes makes McLaren's, Ferrari supplies others, Cadillac will race a Ferrari engine. Brawn goes to Mercedes, out of F1 since the 1955 Le Mans disaster but supplying engines to McLaren. Mercedes says: we respect your work at Ferrari, we'll supply you an engine for 2009 so you can compete. The engine doesn't quite fit the Honda chassis, so they do some janky aftermarket work, and everyone thinks the car will suck.

Ben Gilbert

The team is called Brawn GP — they just looked at Ross Brawn and said, you're a leader, let's call it Brawn. They couldn't even line up a title sponsor, landing sponsors for individual races. Nobody expects anything.

David Rosenthal

But before the Honda engineers got pulled back to Japan, they'd come up with a new aerodynamic innovation, the double diffuser. I have no idea how it works, but it performs like a beast. Diffusers direct airflow from the bottom of the car up and out to shape the aerodynamics as it escapes the back; somehow they made a double version. Everyone challenges it as illegal at the start of the season, but it performs so well that by mid-season everyone else adopts it too.

Ben Gilbert

You're burying the lede — the first race of the season in Melbourne, these two Brawn GP Frankencars finish first and second, blowing away the field. Jenson Button wins six of the first seven races. It sends the sport into chaos. And I wish I'd known this earlier — we went to the Las Vegas Grand Prix with ServiceNow, and part of the weekend was a luncheon with Jenson Button telling the Brawn GP stories. This is the outlier of outliers. No team has been on this shoestring, with this Frankencar and this underdog story, and performed like that.

David Rosenthal

By a hair's width, Button and Brawn had built enough of a lead in the first half that even though they don't win a single race in the second half, once everyone else copies the double diffuser, they still win both championships. In one year Ross Brawn went from new Honda team principal, to nearly out of the sport, to owner of his own team for one pound, to world champion.

David Rosenthal

This is what makes F1 great. It's not really the races — there's not that much passing; after the first turn you kind of know who'll win. It's the act of heroics, teamwork, personality, perseverance, and engineering.

David Rosenthal

There's just one problem for the new champions: no funding for next year. Brawn has to sell. The logical buyer is Mercedes — they make the engine, they've just had success with Brawn. They dump their McLaren partnership and buy a 75% majority in Brawn for $200 million, renaming it Mercedes. The storied Mercedes team where Lewis Hamilton won six drivers' championships and the team won eight straight constructors' championships rises out of the ashes of Brawn GP.

Ben Gilbert

The first thing they do is hire Michael Schumacher out of retirement to reunite with Brawn. It doesn't work — everyone else had picked up the double diffuser, and that was the whole advantage. Mercedes thought they'd bought a durable edge, but the team hadn't really started on next year's car. So there's a realisation: we bought a lemon, and we need to put hundreds of millions in on top of the stake. To Mercedes's credit, they did, and built arguably the best F1 team ever across multiple decades.

David Rosenthal

After a couple of years they fire Brawn and Schumacher — who fires Michael Schumacher? — and make two key hires. As team principal, the Austrian businessman and former Williams investor Toto Wolff, probably the best F1 team executive in history, certainly by valuation increase. And to replace Schumacher as number one driver, a young British driver, Lewis Hamilton, alongside Nico Rosberg. They go on to win eight constructors' championships in a row, with Rosberg taking the drivers' title the one year Hamilton didn't.

Ben Gilbert

What's great for the sport is that it's not like the Schumacher era of one team blowing away the field. You now have the drama every season — Mercedes versus Red Bull, is it Vettel, is it Hamilton, is it the young Verstappen. And these two teams create the modern era. Horner at Red Bull, Wolff at Mercedes, Zak Brown at McLaren — a totally new breed of team principals, CEOs building businesses, not just race teams. Zak Brown is literally just the CEO, not the team principal.

David Rosenthal

Take Mercedes. Ross Brawn buys it in 2008-09 for one pound from Honda. Mercedes buys 75% a year later for 200 million pounds. Today the Mercedes racing team alone — not the carmaker — just did a minority transaction valuing it at $6 billion. That's twice as much as all the cash Bernie pulled out of F1 in its entirety during his heyday, just for one team.

David Rosenthal

Starting a few years after CVC and Bernie reacquired F1, CVC resells minority pieces to asset managers — BlackRock, the Norwegian sovereign wealth fund, Norges — at increasing valuations, loads F1 up with about $4 billion of debt, and pulls cash out. That's what private equity does. By 2016 CVC is down to a 35% stake, having pulled out a total of $4.5 billion through debt and equity sales — remember they and Bernie only put in 900 million to start. It's time for a full exit.

Ben Gilbert

What is Formula 1 at this point? It was the weird Bernie entities, then the holding company in his wife's name. Now it's a company owned by CVC. But that company doesn't actually own the sport. What it has is the key asset: in 2001 Bernie secured the 100-year commercial rights to Formula 1 from the FIA, in a no-bid process, for $360 million. The asset is the right to run the business of what the FIA defines as Formula 1 — all commercial activities except team sponsorships, which belong to the teams, and race tickets, which belong to the promoters.

David Rosenthal

In September 2016 it's announced that the American media company Liberty Media is acquiring F1 for $4.4 billion of equity value, assuming all outstanding debt for a combined enterprise value of $8 billion. Liberty, John Malone, and Greg Maffei are masters of financial engineering. They initially acquire an 18-19% stake from CVC — enough to be the largest shareholder — then rename Liberty Media itself into the Formula One Group and create a new tracking stock, FWONK, or Funk as the investment community calls it, and issue shares to the remaining holders including CVC and Bernie.

David Rosenthal

The fascinating thing about Liberty today is it sort of doesn't exist anymore. They spun off the Atlanta Braves, spun off Liberty Live around Live Nation, and at this point about 90% of Liberty is Formula 1 — the holding company is basically Formula 1 now. The plan announced was that former Fox and News Corp executive Chase Carey, who'd been president and COO of News Corp, would become chairman, with Bernie remaining CEO. Carey was a legend at Fox — he helped Rupert launch Fox Sports and built the whole Fox NFL programme.

David Rosenthal

Carey brings a team of Fox and NFL OGs, like Sean Bratches, who'd helped build ESPN. The thesis: F1 is an incredible sport with an incredible fanbase, and with what's happening at Red Bull and Mercedes, it's going to crush in the modern era — it just needs the right management to get out of the way. Bernie had systematically underinvested, which created opportunity. Almost no US market development, very limited storytelling and digital, no social media presence, mostly behind a paywall, and a demographic of old white guys with money. Low-hanging fruit everywhere.

David Rosenthal

It quickly becomes clear there's not room for two bosses. As long as Bernie's there, no one else can run anything. So on 23 January 2017, Liberty announces Bernie is stepping down as CEO — he becomes honorary chairman emeritus and an adviser, but not on the board. In other words, they fire him. There was no way to do what needed doing while he held the reins.

Ben Gilbert

This is a classic what-got-you-here-won't-get-you-there situation. Everything Bernie did built and created the sport, but he could do almost none of what it needed from here, and was probably holding it back. I did the math on his run — he started becoming the steward in 1972 and left in 2017. A 45-year run. I can't think of a sporting league in the world controlled by one person for almost half a century. The closest is Pete Rozelle, 30 years at the NFL.

David Rosenthal

Carey takes over as CEO with a four-point plan. Number one, most importantly, fix the relationships with the teams. Thanks to Red Bull and Mercedes, teams had become more business-minded, but the relationship with the league was still highly contentious. The obvious move is the cost cap — the very thing Bernie and the FIA couldn't get done, which caused the FOTA breakaway attempt. Without a cost cap, teams with independent funding go hundreds of millions into the red, so everyone has to match them, which means the bottom six on the grid keep churning because they can't run a viable business.

David Rosenthal

Liberty gets everyone to agree to a cost cap in the first Concorde Agreement they negotiate — $145 million in expenses on the car, not including driver salaries, the three highest-paid executives, marketing, or power units. It's gone from 145 down to 135 and back up to 170 with inflation and more races. Then there were teams spending 400 to 500 million before. This instantly makes every team at least close to break even, and for the top teams immensely profitable. They also add wind-tunnel restrictions and in-season testing limits.

Ben Gilbert

The numbers today, in 2026: average revenue per team is about $430 million, about 60% from sponsorship, next from Formula One Group distributions, then five to 15% from merch, engines, licensing, garage tours. With a 170 million cost cap plus drivers plus marketing, you can see how these become break-even or better. At the front, Mercedes does 800 million in revenue, Ferrari 670, McLaren around 650 to 700, Red Bull Racing 420. Fifteen years ago all four were operating at a loss.

Ben Gilbert

Red Bull could make much more but intentionally keep operating margin at 1% or less. McLaren now does about 70 million in profit, Ferrari about 80 million, and the real outlier, Mercedes, an estimated 200 million in operating income from F1 — the level Bernie made for the whole league a couple of decades ago. On top of that, Toto Wolff estimated in 2021 that Mercedes gets a billion dollars of advertising-equivalent value from the sport. So on $600 million of total spend, Mercedes generates a double bottom line — over a billion in marketing value plus 200 million in actual profit — and became a legitimate sports-car maker in the process.

Ben Gilbert

That $6 billion Mercedes valuation is real — the CEO of CrowdStrike bought into Toto's holding company for proxy ownership. Unlike other team principals, Toto is a major equity owner. When he joined in 2013 he negotiated to own almost a third of the team, worth about 165 million then and $6 billion now, making him a billionaire from his stake alone.

David Rosenthal

Priority number two: fix the relationships with the race promoters. Bernie had just been extracting from them, designing the whole calendar to maximise race fees, with zero thought at the league level about making the races themselves successful. There was so much mistrust that promoters shared nothing with the league — no attendance data, no marketing.

Ben Gilbert

Think how squeezed you were. You walk up as a promoter: I own a racetrack, I'd like a race. Okay — send back this contract and a payment. 20 million if you're a European track, 40 or 50 million for a new US one, 50 to 60 million for a Middle East sovereign wealth fund. And the Paddock Club and the trackside sponsorships belong to us. You can sell tickets and set up hot dog stands. No cameras — we've sold the media rights. You probably won't be profitable, so get your local government to kick in; it'll be great for the city, which it is.

David Rosenthal

So Liberty gets all the promoters in a room and says: we're partners, you're not competing with each other, let's share data. The vision, mostly realised, is that this is an opportunity for 22 Super Bowls a year in cities around the world. When F1 comes to your city, it's a whole weekend treated like the Super Bowl. Let us help with musical acts, celebrity attendees, social media. Austin has been really smart — the Circuit of the Americas landed Taylor Swift, Ed Sheeran, Sting, Eminem, Garth Brooks, turning it into a giant festival. It stems from an admission that the race might not be that good, so you provide an experience for everyone.

David Rosenthal

Number three: fix the relationship with the fans. F1 had a huge social media problem. Bernie controlled everything — TV, presentation, race fees, journalist access, who goes where in the paddock. It was so bad that Lewis Hamilton — the first real F1 driver to become a legit celebrity in America, the first Black superstar in the sport, and one of the most fame-savvy individuals — being a native millennial, wanted an Instagram account. And what he brought into Liberty's office was a stack of cease-and-desist letters Bernie kept sending him to take down posts, for 'illegally distributing F1's intellectual property.' That's how bad it was. Liberty immediately said: yes please, Lewis, post as much as you want.

Ben Gilbert

Then a whole basket of low-hanging fruit. Esports and video games — the studio making official F1 games gets acquired by Electronic Arts, and Liberty works with them. Coming from the NFL world, they know the NFL turned the offseason into marketable events like the draft; the F1 equivalent is the testing period, so televise it, make it an event, generate narrative. Right now sports journalists can't stop writing about how little track time the Aston Martin team has gotten with the new car Adrian Newey is designing — he's team principal there now. That was all falling on the floor before.

David Rosenthal

The last bucket: court Hollywood. The initial thesis was that racing is visually compelling and people like it. That thesis was actually wrong, but it was the place to start. What they end up with is the most impactful piece of sports media in history — Netflix's Drive to Survive.

Ben Gilbert

They go to Netflix and say, you should do a series. The initial idea is race cars are cool. But what it evolves into is a human drama. Remember there are three concurrent competitions — driving, the World Cup of Engineering, and the World Cup of Office Politics. The office politics turns out to be an amazing thing for effectively a reality TV show, especially when you layer in race cars going super fast, occasionally crashing, and attractive mid-20s guys in the most extravagant places on earth on yachts, partying the night before a race. But the human story is the killer unlock.

David Rosenthal

It was perfectly timed for what the sport needed. If you'd made Drive to Survive for, say, the NBA, hardcore fans would hate it as fluff. But F1 fans were so starved for access — any glimpse behind the curtain — that even the most hardcore petrolheads, who'd be first to say this isn't the sport, loved it too. They'd never gotten to peek behind the curtain.

David Rosenthal

Netflix and Liberty start talking, and F1 also pitches Amazon to get a bidding war. Amazon had something with Mercedes and Lewis Hamilton, but F1 controls the actual track rights, so Amazon couldn't film on track — which ruins it. Amazon bids the most for the league-wide thing, rumoured about double the Netflix bid, but based on how successful Drive to Survive became, you don't have to pay the sports leagues anything — Netflix doesn't pay leagues, not even the NFL, because it's a giant spotlight on your sport. These are small numbers, on the order of 5 million versus 10 million. Netflix says we're at our ceiling, but we're the best partner — our global audience will grow the sport. Liberty goes for the lower price, and at that time Netflix's US audience was about 2x Amazon's.

David Rosenthal

Netflix works down a list of production companies. Box to Box Films wins because they'd done the 2010 Senna documentary, and they'd already been working with Red Bull Racing on a documentary idea — the whole thing may have started as a Red Bull documentary. That idea and the Amazon-Mercedes idea get scrapped. F1 takes a leap of faith and gives Netflix and Box to Box complete creative control and final cut — important, so it's a highly opinionated version with full access, not controlled by the sport. And because Netflix makes highly produced content, Drive to Survive comes out right before the next season starts, always a season behind.

David Rosenthal

Mercedes declines to participate, partly because of their Amazon documentary, and partly because they're Mercedes — they've won everything, they're getting very profitable, why take a risk? Then Ferrari says, if Mercedes is out, we're out. So Netflix is left with the bottom eight teams — and creates something amazing out of Daniel Ricciardo. Seasons one and two were a slow burn; people loved it if they watched, but the algorithm wasn't surfacing it widely.

Ben Gilbert

Over time they realise it applies to far more people than expected. Young women across America and the world are into it, when they'd feared it would be 50-year-old petrolhead men. Season two does well, season three is a massive smash hit, and suddenly the Mercedes and Ferrari partners and sponsors are asking why they're not in it. So in later seasons all the teams join.

David Rosenthal

Seasons one and two were on Netflix when the pandemic hit — perfect for everyone getting trapped at home. And F1 reacted well: within months they were back racing, doing double-headers at the same track, creating bubbles. The pandemic was weirdly successful for the sport, because Drive to Survive was ready to watch and the sport could recover quickly. Eventually it becomes the number one Netflix show in 93 countries at peak. In the first week a new season gets over 500,000 accounts, and with password sharing call it a million and a half; over time a season is viewed in the low tens of millions of accounts, so generously 40 to 50 million unique people — a huge number for non-live content.

Ben Gilbert

A funny story: I was watching the most recent season with my wife and commented that Christian Horner isn't with Red Bull anymore, and she said, whoa, spoilers — and I said, that happened six months ago. Her mental model is that real life is irrelevant; Drive to Survive is canonical. That's the unique thing about this sport — how many more people are fans but don't watch races.

David Rosenthal

This is where the modern media business model Liberty embraced thrives, and Bernie's world never could have seen it: everybody still makes money even when fans only watch Drive to Survive. Why did the Mercedes and Ferrari sponsors pressure them to participate? All the impressions of the sponsor logos.

David Rosenthal

Bringing this sport to America was a big part of the strategy. In 2018, before Drive to Survive launched, about half a million Americans watched races. By 2021 that doubled to over a million. I don't know what share of that doubling is attributable to Drive to Survive, but it's not 10% — probably more like 80%. By 2024, viewership of the Miami Grand Prix was 3.1 million Americans. The idea that 3.1 million Americans would watch an F1 race before Drive to Survive is insane — that's more than most NBA games.

David Rosenthal

Globally, F1 added 73 million new fans between 2020 and 2021 alone — a 20% increase during COVID. The US now has 52 million fans, doubled since Drive to Survive. Most don't watch races — average Grand Prix viewership in the US is about 1.3 million, with Miami a giant outlier. And the most directly attributable stat: the percentage of the F1 audience that is women went from 7% to reports of around 40% today. One quote from research: Liberty helped F1 move away from the male, stale, and pale audience.

Ben Gilbert

On the America strategy, adding US races is a priority. The previous US track record is awful — nine different races historically, all defunct, typically lasting a year or a few. The longest-running was Watkins Glen in upstate New York. They raced in Phoenix, Detroit, a Las Vegas race confined to the Caesars Palace car park with tight turns, and Indianapolis, where one year half the teams refused to race and fans threw stuff on the track. Then Austin's Circuit of the Americas, built from scratch, does quite well.

David Rosenthal

Pretty quickly Liberty adds Miami, launching in 2022. Then a year later they launch Vegas, but a different type of race — no promoter. Rather than charging a fee, they forego the promoter fee and operate the race themselves, taking all the risk and reward. They even bought the real estate to build the Paddock Club. It hasn't been an obvious win; I don't think they'll pursue this model elsewhere. These take a long time to pay back — they've sunk over half a billion dollars in and shut down the city for a long period. It's much easier to say, you handle it, we'll just take the money. Bernie got some things right. Still, there are now six races in the North and South American time zones, and the US is the biggest media market in the world.

Ben Gilbert

The Paddock Club has totally transformed since Liberty's acquisition. We experienced it with ServiceNow in Vegas and left saying, F1 is a corporate sport, the consumer side must not be big. But it's the most B2B thing we've ever seen. Ben Thompson interviewed Mike Cannon-Brookes, the Atlassian CEO — they title-sponsor Williams — and Mike said they view F1 as a mobile executive briefing centre they can take around the globe, bringing customers to an amazing event with Williams as a live example of how they use the software. I don't think Atlassian has a physical briefing centre; F1 and the Paddock Club is their executive briefing centre.

David Rosenthal

The economics: a title sponsorship at the front of the grid can be a $50 to 100 million deal. Oracle's title sponsorship of Red Bull Racing is reportedly a hundred million a year; other big title sponsorships are more around 50 million. The LVMH deal with F1 is $100 million a year — Louis Vuitton banners, TAG Heuer as official timekeeper, the LV trunk, Moët sprayed on the podiums. You get wrapped in a blanket of LVMH watching a race. And Oracle's CMO said Drive to Survive was the reason they got into F1 — they weren't engaged before, started watching, and it led to a multi-hundred-million investment, rumoured 500 million over five years.

Ben Gilbert

The cheapest deal, a logo under a bumper on a back-of-the-grid car, is about a million dollars. The most valuable real estate is the airbox behind the driver's head, six to seven million, and the logo on a driver's chest, about a million and a half, especially toward the front. This is really how teams make money — about 60% of revenue from sponsorship, averaging about $200 million per team, though it varies wildly front to back.

Ben Gilbert

The other big thing is hospitality. At an NFL game you get three or four hours in a suite, most of it consumed by watching football. At an F1 race like ServiceNow brought us to, you spend three days together, and the race is only two hours with plenty of time for conversation. It's much more conducive to forming real relationships, in geographies where your business operates, not just a stadium near your office. Some sponsors said they didn't even bother with a logo on the car — it's about the relationships and hospitality. Ultimately the sport is a magnet for sponsors: global reach, humans pushing the limits in competition and engineering, bleeding-edge technology, premium if not luxury positioning in almost every market.

David Rosenthal

To put a bow on Liberty's come-to-America strategy: right after they take over in 2017, they do a deal with ESPN, much like Bernie's original European Broadcasting Union deal. Liberty says, please show all the races, we'll give it to you for zero dollars — and it was actually zero for 2018 and I think 2019 and 2020. ESPN, despite being cable not broadcast, has huge reach — the most valuable channel in every cable package. After Drive to Survive and COVID, ESPN comes back and by 2022 starts paying real money, a rumoured 80 to 90 million a year, up from zero.

David Rosenthal

The ESPN contract ends in 2025. Meanwhile Apple had their own F1 success with the movie — F1 the movie, to be precise, with Brad Pitt — which grossed $630 million worldwide, the highest for any sports movie ever and the highest-grossing of Brad Pitt's career. It was the same director and producer as Top Gun; people called it Top Gun on Land. Racing movies other than Ford v Ferrari were never big smashes, but nobody had made one like this. On roughly $630 million at maybe $30 a ticket, that's about 21 million tickets — a chance the movie reached more people than Drive to Survive has, or at least the same ballpark.

David Rosenthal

On the back of that, Apple comes in over the top for the US media rights, a five-year deal at a rumoured $150 million a year — probably close. Not NFL dollars, but real money for a geography that was zero when Liberty took over. And for Apple, this is probably just the tip of the iceberg. About 33% of F1's revenue comes from media rights, and that 140 million is only 13% of the total media rights worldwide, which is $1.1 billion — the bulk is outside the US. Apple's a global company; you could imagine F1 on Apple TV in many markets.

Ben Gilbert

The real bull case: in a lot of those markets you have vertically integrated broadcasters with no competitive bidder. With Apple, Netflix, Amazon, and YouTube buying media rights, you now have tech companies as viable bidders against the one or two broadcasters in a country, so you can more fully realise the value. But to keep listeners grounded: US viewership is only 1.3 million per race, with a peak of 3.1 million at Miami — half of what NASCAR averages. It's not even the number one motorsport in the US. International viewership is 60 to 70 million on a race weekend. If they crack the code, the US has running room ahead of it.

David Rosenthal

Quick update on new teams this year. The return of consumer carmakers — Stake becomes Audi, Honda partners with Aston Martin, Ford joins with Red Bull as an engine partner. Honda used to make Red Bull's engines around 2019, then left in 2021, so Red Bull took it in-house with Red Bull Powertrains, using Honda's technology, and now works with Ford. The Ford deal is more of a partnership than a straight engine supply — engineers flying back and forth. Some throw shade that it's just a marketing exercise.

Ben Gilbert

And Cadillac is entering the sport this year as a whole team — an equity owner. But it's a Cadillac that uses Ferrari engines and a lot of other components, the whole power unit and gearbox — a Cadillac with a Ferrari under the hood. Cadillac is shelling out $450 million as an expansion fee just to join the grid. It's great for the sport that manufacturers are coming back and the number of teams is expanding. And the GM Cadillac versus Ford case studies are fascinating — the rivalry is amazing, sniping at each other. GM owns their team and can build it into a powerhouse over time, but starts at the back. Ford comes in with Red Bull, one of the top teams, so they'll be on the podium from season one. GM unveiled theirs during the Super Bowl with a commercial and a Times Square activation; Ford unveiled with Red Bull in Michigan.

Ben Gilbert

The other big thing this year is a new Concorde Agreement with a full rewriting of the rule set by the FIA — a resetting of the field. But do I think Mercedes, Red Bull, and McLaren won't be three of the top four? No. There's excitement that the new rules enable more passing, which should make for more dynamic races. I do like watching F1, but they could learn from the NFL about making it a better pure sport. There's a lot of griping about the hybrid engines — what Max Verstappen called a souped-up Formula E car — from the noise to the confusing strategy of battery preservation, which might be tough for new viewers.

David Rosenthal

One thing we heard unanimously: it's a shame no one can experience the old cars anymore. Everybody says there's nothing like an early-2000s V10 going by — the sound, the power, the vibrations.

Ben Gilbert

I have a major beef here. There are two reasons they switched to hybrids. One is road relevance — a decade ago everyone thought electric or hybrid cars would take over, so investing in F1 would trickle into road cars; adoption has been much slower. The other is sustainability. And it's hilarious when people talk about the sustainability of the power units when they fly the whole circus around the world every week on seven 747s. The European races go by truck, but that's still 300 trucks — a convoy over five kilometres long. In the 2019 season, the logistics operation accounted for 64 times the emissions of the cars themselves, even including practice and qualifying. These cars have 30-gallon tanks, and there are only 22 cars. It's a rounding error. This is a complete farce.

Ben Gilbert

My general belief: let the sport be the sport, do whatever's best for the fan and driver experience. They're trying to cram too many things into F1 — let it be a sport, secondarily an innovation playground, but don't die on the hill of sustainable fuels. Just rearrange the flight calendar and put two races close together — that would do more than any power-unit compromise.

David Rosenthal

You know what would make a big impact on American viewership? If they stopped going head-to-head with the NFL on Sundays in the fall. In research we heard compelling arguments for a mini-season in the spring for US time zones — good for the carbon footprint, great for viewership because you get six races building on each other, and great for US ratings in the biggest media market. A win-win. And bring back the V10s — what do Americans love more than loud engines?

Ben Gilbert

The business today. Formula One Group does $3.4 billion in revenue — most recent numbers from 2024. The mix: media rights, broadcasting, exactly 33%, about $1.1 billion. Race promotion is next at 29%, about a billion — the fees from promoters. Advertising and sponsorship is the smaller bucket, 19%, or $630 million, and it's their fastest growing. That's advertising and sponsorship to the league, not the teams. The teams earn about $2 billion in total sponsorship across all of them, because the teams have more to sell — driver access, hospitality, speaking engagements, garage tours — and the best placements are on the cars and drivers, which the teams own. Then another 19% is hospitality, merch, and licensing.

Ben Gilbert

On costs, the biggest is the distribution to teams, which couldn't be more different from the NFL. The NFL splits league revenue exactly 32 ways, no questions asked — communist capitalism. In F1 the distribution is renegotiated in every Concorde Agreement, both the split with Formula One Group and the mechanism among teams. They currently distribute about 37% of Formula One Group's revenue to teams — $1.27 billion of their 3.4 billion.

Ben Gilbert

There are three components to the formula. First, equal participation. Second, the constructors' championship allocation — the drivers' championship has nothing to do with prize money, it's just constructors. Third, historical length in the sport — Ferrari. For a long time Ferrari was guaranteed at least 5% of the pool just for being Ferrari, being part of the series every year since inception and legitimising the sport. This has been negotiated down over time, but there's still a large chunk as a thank-you. And they're worth every penny — even today, 30% of all F1 fans say Ferrari is their favourite team.

Ben Gilbert

Blending the three factors, estimates are the top team gets around 14% of the pool and the bottom around 6% — roughly 140 million versus 60 million in prize money. This is a lot closer than it used to be. But it's holding the sport back, in my opinion. You get a positive feedback loop at the top and a negative one at the bottom, so the front four or five stay there and the back stays there. For every $10 million from the constructors' championship, you can probably find 20 or 30 million more in sponsor dollars. It's certainly not helping to penalise the back of the pack with fewer dollars.

David Rosenthal

There are 830 million people who identify as fans globally — different from viewers; there are 450 million global TV viewers. They last broke this out in 2021; it's become a state secret since. On team valuations, as of 2025 Forbes estimates about $3.6 billion on average, an 89% increase in the last two years — night and day since the cost caps. Every team is now north of a billion, with the least valuable at 1.5 billion, up to Ferrari at $6.5 billion — again, not the best business, but the most valuable asset — $6 billion for Mercedes, 4.4 billion for McLaren, 4.35 billion for Red Bull Racing.

Ben Gilbert

The multiples are very silly, because most teams except the top three produce very little profit. Mercedes trades at 30 times operating income. They trade at these values because they're scarce assets, not because they're cash-generative. People got excited when they stopped being horrible businesses, and pulled forward many years of growth into the valuations. Or they said, I don't care about the valuation, I'm a sovereign wealth fund or a deca-billionaire and this sounds fun. A lot of these owners, even if currently cash-flow negative, would make up all their losses from asset appreciation if they ever sold — it's almost like loaning money to the team for a while and then getting it back.

David Rosenthal

Formula 1's own market cap: Liberty bought in 2017 for 8 billion, 4.4 billion of it equity. Today in 2026 it has a market cap of 22 billion and enterprise value of 25 billion. So Liberty turned 4.4 billion of equity into 5x that in nine years — about a 22% compound annual growth rate. On top of the $25 billion for the series, the teams summed up are worth another 36 billion or so, not including Cadillac. So a grand total of about 61 billion of enterprise value between the teams and F1 — interestingly skewed toward the teams. And that values the races at zero; if each of the 22 Grand Prix is worth, say, half a billion, that's another 11 billion, so about 70 billion all told.

Ben Gilbert

Here's the key question. Ben and David are obsessed with the communist capitalism of the NFL, where the league is a thin, pass-through entity that retains no earnings. This is a fat league, like the UEFA Champions League or IPL — a company with its own earnings, profits, and enterprise value. So are teams getting their fair share compared to what Liberty gets? On the one hand, the percentage of F1 management revenue going to teams was 50% in 2018 and has shrunk to about 37% — F1 is getting leverage over the teams.

David Rosenthal

On the other hand, there's just not that much operating income left over. F1 generated 492 million in operating income on 3.4 billion in revenue. Even if we distributed all of it to the teams, that would only grow their share from 1.27 billion to 1.76 billion. In other words, the teams are already making about 72% of what they would make if they owned the league, because there's not much profit after all the costs — league-level sponsorship, overhead, and running the Las Vegas race. I suspect during the Bernie era that would be a very different story.

David Rosenthal

Liberty is investing in the sport; there'd be more operating income if Vegas weren't on their books. It's reached an interesting equilibrium — if the teams were making significantly less than 72% of what they could, I'd wonder whether they should break away. But this 28% they leave on the table seems about right. The series is complicated, expensive, and has to maintain a global footprint and logistics, and every time the Concorde rolls around it's a matter of how much leverage the teams have that year.

Ben Gilbert

That leads to maybe the most interesting question: did F1 require Bernie to get where it got? There's the NFL counter-example — arguably more complicated, with more teams to wrangle. It was heroes' work by Pete Rozelle to get them all to buy into communist capitalism.

David Rosenthal

I think you did need a Bernie, for two reasons. One, telling the Bernie story made me appreciate how unique what Rozelle did was — an N-of-one person doing an N-of-one job. Rerun that experiment a thousand times and you almost never end up with the NFL; the other major US sports haven't managed it. So at a minimum you needed a strong individual personality to emerge at the right moment. Two, the global nature and insane logistics. There's no way the teams could have hired an employee, like the NFL did with Rozelle, and incentivised them properly to negotiate with all these teams, tracks, broadcasters, and the FIA. Because of the multi-party complexity, you need the incentives of being your own entrepreneur with a company — and someone with Bernie's ruthlessness. You need a street fighter. Rozelle was many great things, but he was not a street fighter.

Ben Gilbert

Now the 7 Powers, but first, power between teams. F1 has become about exploiting tiny cracks in the rule book, and other teams usually copy what you did within a few races. Some advantages last a whole season, and there's real magic when something lasts multiple seasons — like Mercedes just being better at designing the car for eight seasons, or having a driver so much better than everyone, like Hamilton.

David Rosenthal

But those are operational excellence, not strategy. The drivers are the ultimate definition of not-a-power — anybody can hire them. Being good at aerodynamics and car design is that too. So skill or operational excellence is actually more important in building a successful F1 team than strategy, because most strategic advantages have a short window before other teams arbitrage the value away. Almost all durable advantages that last three or four seasons come from operational excellence.

Ben Gilbert

I could make an argument for scale economies too — even with cost caps, more financial resources let you find more loopholes and hire the best driver. If you have an extra hundred million versus your nearest competitor, you should be able to sign the best driver in the world. But there does seem to be persistence in the top teams that isn't related to power — they're just operationally better. Competency, skill, operational excellence, not a durable strategic differentiation. So the teams are largely powerless, which is what you want in a sport — you want the most talented team to win, not structural advantages.

David Rosenthal

Now the takeoff phase, different from scale. Why did F1 become the premier motor racing series, bigger than Le Mans or IndyCar? A few reasons. F1 is the only series where pretty much everything is custom-engineered by the teams, very little stock, which makes it more interesting. The prestige, luxury, old-world European royalty ties, plus the Hollywood crossover — once you have that, it's a cornered resource no other series can get. Rally racing may be cool, but Grace Kelly was never going to a rally race.

David Rosenthal

Probably most important is the FIA's explicit designation of Formula 1 as the pinnacle. The more or less global regulating body for many motorsports explicitly says this is the pinnacle — a regulatory-granted monopoly, the royal seal of approval. Normal capitalist forces aren't allowed to play out the same way. It's right there in the name: Formula One. That's a cornered resource in the power framework.

Ben Gilbert

Now the 7 Powers applied to Liberty Media's F1 today. Power is what enables persistent differential returns — being more profitable than your closest competitor on a durable basis. The seven are scale economies, network economies, counter-positioning, switching costs, branding, cornered resource, and process power. What's stopping someone eating F1's lunch? What's stopping the teams breaking away to start FOTA? The biggest thing is that your suppliers, at the track side and the car side, could build something and go around you — but it's expensive and annoying to do that.

David Rosenthal

F1 has inherent network economies within the boundaries of the sport, of the Grand Prix and the teams. There's real branding power — people tune in to watch F1 in a way they wouldn't watch FOTA. It's designated as the pinnacle, a cornered resource granted by the FIA. There are major switching costs for the teams and the circuits. And scale economies — this type of series is so expensive to operate that you have to amortise the overall costs across 22 races, all the teams, all the viewers, to generate the billion dollars in media rights. It really speaks to how powerful the F1 Group is that despite all the years of abuse from Bernie, the circuits and teams never actually broke away. Coming away, this is very defensible. The key to the whole thing is fans continuing to care.

Ben Gilbert

A table-setting exercise for the bull-bear. There are 830 million global F1 fans for a league that does 3.4 billion and teams generating another two billion — about five and a half billion in gross revenue across the whole sport for 830 million fans. The NFL generates $23 billion across just 180 million fans — four times the revenue on fewer fans. The NFL monetises a fan at $127 a year; F1 at $7 a year. What is going on?

David Rosenthal

One major issue, like IPL: they don't have anywhere near as much inventory — 22 races a year, and no path to a hundred, unless you start sending just Haas and Mercedes to one circuit while Red Bull is elsewhere, which isn't happening. So they're fundamentally limited by inventory. The flip is they have the opportunity to make 22 races into 22 Super Bowls, which they're well on their way to. The biggest thing is the US — the biggest media market with the highest revenue per consumer — and they don't have penetration yet. And you have to fix the race calendar; you can't go up against the NFL in the fall, especially not with two of the three big US races in the fall.

Ben Gilbert

Another bull case is more fully realising the European TV rights, where actual competition bids for them — since so many viewers are there, moving the needle a little is a giant revenue change. The last bull case is a US driver or team becoming world champion, which could kick-start fandom here. And a related one: a champion-level female driver emerging, which feels like it should happen, and given how much fandom has shifted toward women thanks to Drive to Survive and the movie, could be a further acceleration.

David Rosenthal

The bear cases. The biggest one I keep hearing: it's more of a parade than a race. Unlike NASCAR, with aggressive overtaking lap after lap, F1 is a beautiful competition but so much is strategy, engineering, qualifying, conserving resources, pitting at the right time. These are big cars because of safety, so it's hard to pass, and you're incentivised to conserve fuel and tyres — which puts a natural ceiling on the fervour. One bear case I think has been put to rest is that this was a COVID-driven fad; F1 has proven enough staying power post-COVID. I probably would have bet it was a fad — in the same category as Peloton and Tiger King — but of that set, F1 is one of the few that persisted.

Ben Gilbert

One reason an investor might not give it the multiple it used to have — Liberty bought it for 18 or 20 times earnings — is that it's kind of optimised now. A lot of the low-hanging fruit Liberty could pull has been pulled, so everything from here is more of a multi-decade slog than easy fixes. And the last thing I keep thinking about, bull or bear: the broadcasts leave a lot to be desired if you're not super into the sport. There's a bull case in bringing Drive to Survive storylines into the race — let us see the drivers more. After getting to know these people so well, it felt weird watching a race and getting no human sense of them; I could barely hear their voice, just a little radio chatter once or twice a race.

Ben Gilbert

And second, data visualisation to make the dynamic moments understandable to new fans. If we're likely to see an overtake five laps from now because someone has the right tyres and someone else has pitted, expose that, build toward it, help me visualise why it'll happen in five laps and not two — show that the person listed as first isn't really first because they haven't pitted yet.

David Rosenthal

This is part of the bull case for Apple's involvement. They developed special cameras for the F1 movie — basically an iPhone with the components rearranged to fit the standard F1 camera package — and are bringing those to their race coverage. It's not hard to imagine Vision Pro technology being a game-changer, and Apple has the resources to invest in helmet cams and driver facial reconstruction, like the avatar in a Vision Pro video call. It'd be hard — their faces are squeezed into helmets — but there are technology solutions, and this is a bull case for Apple becoming a major partner.

Ben Gilbert

Quintessence — where we land the plane. Here's mine. I'm astonished this is a sport that might be durably popular with a giant group of people who never watch it. I can't think of another sport where someone would say they're a big fan but watched zero games this year. But lots of people say they love F1, can name drivers, buy merch, purchase from sponsors, and can tell you who won last year, but will never tune in live — and that might be the majority of the US audience.

David Rosenthal

My contestant: this is by far the most complex sports business and league we've studied. It's more akin to boxing or UFC — a competition in a place at a time, no home stadium, a promoter — but with 10 teams instead of two fighters, $300 million race cars, and thousand-person teams behind each one. It'd be like if the equipment manager on an NFL team were the most important person and had 800 people working for them. Yet it's been durable, because nobody else could pull all these disparate parties together the way Formula 1 has. The activation energy to do something similar is prohibitively insane. The next Formula 1 isn't a direct copy — it's something completely different that starts small and grows organically.

Ben Gilbert

Nobody would ever draw up a league that looks like this on paper. It's wonderfully organic and chaotic. And it's funny — even though it's a fat league like IPL cricket, IPL came out guns blazing and burned hot from nowhere, and this is the opposite. It took 70 years.