F1 Myth Busting: Is sponsorship too expensive?

06/06/2019

The hidden inclusivity of the F1 Paddock

Nikita Herfet-Jones, Account Executive


True or False: Formula 1 sponsorship has, and always will be, expensive.
 
A simple statement. A simple choice (for many). But perhaps not.
 
Could Formula 1 be more affordable than brands have been led to believe?
 
Formula 1? Affordable? We hear the marketeers laugh.
 
Humour us for a moment.
 
What if we told you that the exclusive world of F1 team sponsorship is a little more inclusive and accessible than you might imagine. That over the past 15 years, the cost of entry to the F1 paddock has edged steadily closer within reach.
 
Now, wouldn’t that be worth knowing?
 
It is true that the sponsorship deals at the front end of the grid, those that have dominated headlines throughout F1 history, are valued at tens of millions of $$$ - and rightly so, generating unparalleled levels of reach, engagement and new business opportunities. We won’t deny that.
 
But dig a little deeper into the data, and the reality becomes crystal clear – these mammoth deals are just the tip of the iceberg.
 
Fact: 76.5% of F1 team sponsorship deals were less than $5 million in 2004.
Fact: 83.2% of F1 team sponsorship deals were less than $5 million in 2011.
Fact: 83.5% of F1 team sponsorship deals were less than $5 million in 2018.
 
(Fun fact: That’s deflation folks.)


SOURCE: Formula Money 

So, sponsorship within F1 is not as expensive as we have been led to believe. The perceived barriers to entry have crumbled, along with the costs - fantastic news. But why? Is this an uncovered opportunity for branding bliss, or an omen of a dying sport? 
 
Back to the facts:
 
Motorsport partnership revenue continues to grow year on year, averaging +3% between 2014-2017 (Source: IEG).
 
This indicates that despite it’s perceived ‘high’ price point, marketeers continue to see value in the platform, and are willing to maintain or increase investment in the sport.
 
Put simply - Motorsport sponsorship is alive and thriving.
 
The key question that brands should therefore be asking is: Could sponsorship within F1 actually offer value for money?
 
We have ascertained that the cost of entry has decreased, whilst revenue has increased. Time to explore why.
 
The days when brands were content with spending millions to simply see their logos appear as bumper stickers on cars are long gone. F1 teams - realising they can no longer rely solely on substantial eyeballs and media value to sell partnerships - have re-engineered their sponsorship strategies, evolving to meet the elevated demands of more progressive, performance led marketeers.
 
Think brand extensions and bespoke narratives, along with new asset types such as content formats to augment performance marketing, big data solutions and mixed reality propositions.
 
If the NBA can offer a courtside seat from the comfort of your own home, why not a virtual Paddock Club seat at the Monaco Grand Prix?
 
In addition to this, many teams have begun to consider the relative merits of Value in Kind (VIK) partnerships – the ability for (often technologically integrated) partners to place a cash equivalent value on their products or services. Such agreements both reduce the bottom line of partnership agreements, whilst also providing a fantastic B2B and/or B2C platform for brands to demonstrate their capabilities.
 


Not to mention the fruitful lure of original equipment manufacturer (OEM) deals - attracting brands that are looking for access to the major automotives and their partnerships, like moths to a flame. Such deals are typically constructed around sponsorship of a team in exchange for a more privileged relationship with the automotive, and the opportunity to co-develop products in partnership.
 
These increasingly sophisticated and fine-tuned packages are not only widening access to the starting grid, encouraging a more eclectic line-up of sponsors, but they are also, crucially, delivering more choice to partners - increasing creative freedom, boosting engagement and providing more measurable ROI.
 
Put simply – the F1 teams are re-branding, and the plethora of sponsorship inventory flooding the racetrack is making entry level partnerships more flexible, accessible, and cost-effective than ever before.
 
The average team sponsorship deal has decreased from $7.7m in 2004, to $5.6m in 2011 and $5.4m in 2018 (Source: Formula Money).
 
But how does this compare to the wider sport sponsorship landscape?
               
Time to provide a little context.
 
Focusing in on the lower $3-6m range, market intel suggests that the average F1 team partnership ($5.4m) sits alongside a partnership with the Ryder Cup (est. $6m), a partnership with the Championships of Wimbledon (est. $3m) and a partnership with the US Open (est. $5m).
 
These compatriots’ function at a regional level with limited frequency, all but dwarfed by Formula 1’s somewhat incessant global schedule – 21 races, 21 countries, 5 continents – with the season running 9 months of the year, every year.
 
Indeed, few sporting properties can compete with the global reach of F1 – broadcasting in more than 200 territories and attaining a cumulative TV audience of 1.8 billion (Source: FOM, Nielsen Sports).
 
So – ‘Formula 1 has, and always will be, expensive’?
 
Time to challenge convention and rethink your answer.
 
How can CSM help your brand?
 
Our Motorsport Partnership Development division work in collaboration with many brands and rights-holders within F1, on re-engineering their partnership strategies. This allows for increased creative freedom in developing bespoke partnership agreements – capitalising on, and advancing the creation of, the new sponsorship landscape.
 
Leading with curiosity and credibility, our team intend to be trailblazers in its evolution.
 
Intrigued? Sign up here to hear more from the team.