Formula 1: Fast cars, celebrities, and B2B software (Audio)

I was just listening to the F1 theme song to get pumped up.

Me too. Were you really?

Yes. It’s so good.

I just got new speakers here in Acquired HQ North, thanks to a recommendation from a listener in the Acquired Slack, and it was bumping.

Amazing. Let’s do this.

Welcome to the spring 2026 season of Acquired, the podcast about great companies and the stories and playbooks behind them. I’m Ben Gilbert.

I’m David Rosenthal.

And we are your hosts. Today, we dive into a sport that started in the 1930s and began for the pure love of auto racing—extremely dangerous auto racing. Then, after World War II, Royal Air Force veterans and mechanical engineers joined the sport to push the limits of technology and physics.

It eventually became the sport of rich guys who wanted to own teams and gallivant around Europe, losing colossal sums of money along the way. In fact, since the sport began, more than 100 separate teams have entered and exited the competition, mostly because they went bankrupt.

Today, the sport has been dragged, kicking and screaming, into being professionally managed. It is now owned by the publicly traded U.S. 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, listeners, is on Formula 1, the world’s premier motorsport series. Woo.

I was going to save this for later in the episode, but among the hundreds of other companies that Liberty has owned, do you know what else they owned? You won’t guess it because there are so many: Excite@Home.

No way.

From our Google series.

Throwback. That’s awesome.

Well, listeners, what we’re doing here today with Formula 1 is three sports in one. It is, of course, the world’s best race-car drivers showcasing their skills, but it’s also the World Cup of Engineering. These days, it’s fair to say that the races are more determined by the design feats of the 1,000-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 its own car from scratch, which is an insane engineering feat just to enter the competition. As one listener put it to us, it’s also the World Cup of Office Politics. Or, as another one put it, it’s Real Housewives of the Garage, which makes for a fantastic Netflix show.

Oh, does it ever. We might talk about that toward the end of the episode here.

Yes. The sport itself is completely insane. It is a grid of 20 drivers competing at more than 200 miles per hour 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, and the hospitality—onto a fleet of 7 Boeing 777s between races, and they set up shop in 24 different cities, from Monaco to Bahrain to Melbourne, Australia. Each car costs $20 million to make and hundreds of millions of dollars to develop. The cars have 300 to 600 sensors on them.

Shockingly to me as an American, David, I don’t know if you knew this before we started researching, it’s actually the world’s most popular annual sporting series, with more than 827 million viewers.

Yeah, I had no idea until we started researching, because we’re Americans.

And you know, the Olympics and the World Cup don’t count because they’re held every 2 and 4 years, respectively. So, pretty crazy.

Listeners, starting in just 5 days, a season is going to kick off that will see some of the biggest changes in the sport in decades. We’ve got new regulations, which means all-new car designs; an expansion to an 11th team with Cadillac; Audi and Ford also entering the sport; and a brand-new broadcast partner in the U.S. in Apple TV.

And, well, everything got much more professionalized. It’s still owned by a bunch of rich guys who love auto racing.

They’re just no longer money-losing rich guys.

That’s right. So, listeners, just like our NFL, NBA, and IPL cricket episodes, this show is about the business of F1. We apologize in advance if we don’t spend time on your favorite rivalry, regulation detail, or the V10 engine sound.

David Rosenthal, where do we dive in?

First off, we owe a huge thank-you to Joshua Robinson and Jonathan Clegg, who are the sports editors over at The Wall Street Journal and recently published, I think, the best business history book of Formula 1, The Formula. It was one of the main sources for this episode, and they both actually helped us with the research. So, thank you, guys.

Yep.

So, Ben, Formula 1 as we know it really started after World War II, in 1950. But unlike a traditional company, or even many of the sports leagues that we’ve studied over the years, it doesn’t have an exact founding moment. Its origins are really part and parcel with the beginning of motor racing itself.

It didn’t take long after the invention of the modern automobile, which is generally agreed to have been by Karl Benz in Germany in the late 1800s, for people to get the idea to start racing.

Racing. After all, people raced horses. Why wouldn’t they race cars, too?

Yeah. So, throughout the first few decades of the 1900s, various automobile clubs popped up across Europe, and they would host these 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 these races.

In 1906, the Automobile Club of France, which was the largest in Europe at the time, hosted an inaugural race just to the southwest of Paris called Le Mans. This group of organizers decided to give this Le Mans race a very literal name in order to attract spectators and participants. They called it the Grand Prix de Le Mans, literally translated as “the big prize.”

It’s great. It carries all the way forward to this day.

Yes. The names in this sport are very literal. The success of this Le Mans Grand Prix caused a bunch of similar races to pop up across Europe throughout the teens and 20s, copying the same rules, or formula, as the Automobile Club of France.

You had Monza pop up in Italy. You had the Monte Carlo race in Monaco. You had the Nürburgring in Germany, and so on. You’ve probably heard of all these places.

Yep. Eventually, in the 1920s, all the major European automobile clubs got together in Paris and said, “Why don’t we centralize oversight of this formula into one international organization?”

That became, after a series of name changes over the years, the Fédération Internationale de l’Automobile, or the FIA, which still exists today and still administers the rules of Formula 1. As Josh and Jonathan point out in the book, the sport is literally named after the rulebook.

There’s a lot of fighting about the rules in this sport, both when they’re setting the rules every few years and during races, when they’re going up to yell at the race stewards: “This is illegal. This is not illegal.”

Anyone who is complaining that this sport is too into the rules needs to remember that it is named after them.

It’s named after the rulebook.

Yes.

Okay. So, at this point, you’ve got all these Grands Prix and these famous racetracks that you know today, and you have the FIA as this sort of rules body overseeing the common regulations among them. But they’re all independent events. There’s no championship series, and there’s no league. There’s one winner at the end of each race, and then you go to the next race.

Yeah.

There were a couple of attempts before World War II to create a championship series, but they all fizzled, and then, of course, the war disrupted everything. After the war, however, there was renewed interest. Everybody wanted to have a world drivers’ championship.

In 1949, the FIA announced the inaugural Grand Prix World Championship for Formula 1 drivers: a global drivers’ competition consisting of 7 of the most prestigious Grands Prix, set to begin the following May 13 with the running of the British Grand Prix at the Silverstone Circuit in England. That became the first race of the first official season of F1.

1950.

Now, there really are three foundational pillars of this early era of the sport. There’s one in the U.K., there’s one in Monaco, and there’s one in Italy.

Taking them in turn, first in the U.K.: Britain was and is the heart of the sport, both in the early days and all the way through today. Today, 70% of the F1 teams are based in the U.K. The only notable exception is Ferrari, which, of course, is in Italy.

Yes. All of these teams, despite having such different cultures, opinions, and rivalries, have a giant number of their employees—at least on the technical side—working in a very small area in the English Midlands, within tens of miles of each other.

Yes. It's seemingly random. Why was the U.K.—and this weird part in the middle of the country—the natural home of F1? If anything, given the protohistory, it should have been France or maybe Germany. Well, after World War II, Britain had been, as you alluded to in the intro, absolutely the right set of circumstances for this all to come together. Yep.

One, unlike Germany, they'd actually just won the war, but the country was in bad shape and in desperate need of entertainment and redevelopment. Then, unlike France, Britain had a ton of empty airfields and lots and lots of newly unemployed British fighter pilots and mechanics. What better way to redevelop the infrastructure in the heart of the rural area of the country than to put all of these people and abandoned airfields to work racing fast cars?

Much like the development of Silicon Valley, which we talked about in our Lockheed Martin episode, there's sort of this positive feedback loop that keeps that area the main area for this. So there are universities that specialize in aerodynamics, engine design, and mechanical engineering. It's still the best place to source talent to build an F1 team.

Yeah. Even the teams that are owned and nominally operated by companies in other countries, most of them still base their actual operations in the countryside in the UK for this reason.

Yep. So, one of these newly unemployed Royal Air Force pilots was a man named Colin Chapman, who also happened to be a mechanical engineer in addition to a former pilot and 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 British pounds as his initial startup capital in a set of empty stables in North London. Even then, 25 British pounds was not enough to build a car capable of racing in F1. So he had to have another way of making money.

In parallel, he also started the Lotus road-car business, which quickly became—look, hey, it's not Ferrari, but decently successful.

In fact, the first Tesla Roadster was based on a Lotus Elise chassis.

That's right. So, in 1958, Chapman finally had enough capital together to build an F1 car. He entered his first car in Formula 1, and he revolutionized the sport. Today, teams are superprofessional operations with hundreds of engineers and tons of equipment. Back then, it was much more like the early days of the NFL: you had 1 or a couple of people who were team owners, managers, coaches, and sometimes also players or drivers.

Yes. And it says a lot that there actually wasn't a Constructors' Championship when it first got started. That wasn't until 1958.

Yes. It was just about the drivers—

Right? It was just the Drivers' Championship—

Because often these were the same people—

Right. So, for anybody who follows the sport today, there's sort of 2 different things you're competing for. Can the driver individually win the season, or can the team, between its 2 drivers, win the Constructors' Championship? Of course, it's called the Constructors' Championship because each of these teams is required to construct its own vehicle.

Yep. And enter 2 cars, and thus 2 drivers, in the competition. So Chapman was the first constructor to realize that building a winning race car wasn't just about adding more horsepower to the engine—

Which was kind of the prevailing Ferrari philosophy at the time.

That was Enzo's. Arguably, until he died, what he really cared about was power. Chapman had a great quote on this. He said, "Adding power makes you faster in the streets. Subtracting weight makes you faster everywhere."

So he realized that being lighter is better and having better handling is better, because it's not like these racetracks are NASCAR racetracks where the cars just go around in a circle. There's all these technical corners, hairpin turns, chicanes, and double apexes. It's a very technical sport, not just from the engineering for the cars, but also for the drivers.

Yep. There's one other very important element that Colin Chapman introduced to the sport during his time in F1: sponsor logos on the cars. Until Chapman added sponsorship to his cars, all the F1 cars had just been painted whatever color the FIA assigned to their country.

Yes. And that's how you have silver with Mercedes, British racing green, and, of course, Ferrari red.

And they stick to this day. So, when Chapman went out in the '60s and found a sponsor to finance his building activities, he painted his Lotuses red and white in the corporate colors of his new sponsor, Gold Leaf Tobacco. And this was the start of one of the most important partnerships in F1 history: fast cars and cigarette companies.

Yes. And this was illegal for a long time. The FIA did not allow you to have sponsorship. Then they realized, "Okay, we're being too much of a purist about this. These teams are all going to go out of business, but there are companies lining up to try to pay them to put the logo on it. Okay, this is the way to make the sport viable."

Yep. Ironic, because then the EU would legislate tobacco advertising and sponsorship out of existence in the early 2000s once again. But it's actually really weird. Go look at any of the sport's historical greats, like Senna, Michael Schumacher, or Alain Prost. They all had the Marlboro logo all over them—

Or John Player Special. I mean, there were these cigarette companies, some of which I'd never even heard of, but they were so dominant on the cars for a long time that you actually didn't see the team name. At least on the liveries now, you see the team name and their big sponsors. This looked like it was Team Marlboro Racing or Team John Player Special, not McLaren or—

Yeah. I mean, they actually painted the cars to look like cigarette boxes going down the track. Yep.

Unfortunately, his story has a sort of strange and sad ending. Did you find this, Ben?

Oh, yes.

Yeah. So, in the late '70s and early '80s, he got tied up in an embezzlement scheme with John DeLorean. Chapman designed the chassis for the DMC-12—you know, the Back to the Future car—

Which would be awesome if the car didn't suck and the company didn't end in a giant scandal.

Totally. The company collapsed, and British prosecutors accused John DeLorean and Colin Chapman of each embezzling $8 million in government incentives that they supposedly were going to use to build the factory. Chapman died of a heart attack once this came out, at age 54. Truly sadly. And then DeLorean went on to be arrested in an FBI sting in L.A. attempting to buy 220 pounds of cocaine with the intent to distribute it, to pay off his debts for DeLorean. Man, you can't make this stuff up.

He was a man with a dream, David.

Yeah.

Through all of this, though—the cowboy nature of the teams, the individual iconoclastic owner-mechanic-designer-drivers, the cigarette money, the vague or not-so-vague whiff of fraud—totally embodies the early era of F1. It was the Wild West in Europe.

Yep. And just so people can really picture it, I think you kind of know what an F1 car looks like now: an open-wheel car with a giant spoiler or rear wing. It's got a front wing. When we first started here in 1950, and really even into the '60s, too, these cars didn't look anything like that.

They looked like soapbox derby cars.

That's exactly right. Almost like little bullets.

Yep. So the UK contribution and the Chapman story really reflect this Wild West aspect of F1. If that's all there was in the beginnings of the sport, I don't think we'd be doing this episode today. Right around the same time that Lotus was coming into the league, there was another very different founding pillar, number 2, of F1 taking place in Monaco, which is that, in 1956, the sovereign Prince Rainier III of Monaco, as we talked about at great length in our Hermès episode, married the American movie actress Grace Kelly and brought her to live in the Prince's Palace of Monaco.

This brought together all of the old-world luxury, heritage, and legitimacy of Europe with the glitz and glamour of Hollywood and the New World in a way that's still very much part of F1 today. Basically, this marriage was the 20th century's version of Travis and Taylor—the NFL and, you know, Swiftie crossover. It was the crossover event of the century.

So, as we said a minute ago, there had been Grand Prix races on the streets of Monaco for many years, going back to before World War II, and the track and the location were already quite prestigious. But when Princess Grace came to the party, things went to a whole new level. All of her Hollywood circles started coming out to the race to visit her.

Conveniently, on the race calendar, it just happened to coincide with the Cannes Film Festival right up the road in Cannes, France. So Frank Sinatra became a regular attendee at the Monaco Grand Prix, along with the Beatles, the Rolling Stones, and so on. Eventually, many, if not most, of the F1 drivers started moving to Monaco and becoming stars themselves. Today, Lewis Hamilton, Max Verstappen, Charles Leclerc, and Lando Norris all live in Monaco.

Well, it also has some tax benefits.

Yeah, it also has some tax benefits. But for anybody who has been to Monaco or seen pictures of Monaco—or really any towns on the French Riviera in that area—you might think, "Wait, but it's cliffside, and the streets are all really narrow and old and winding. These cars that we were talking about at that time, it kind of made sense to race those cars in these types of environments. It makes a lot less sense now. There's no chance they would add Monaco, with the cars being the size that they are today, to the race calendar."

Yep. But there's also no chance that they would ever get rid of Monaco. This is what brings luxury into the sport. Today, again, this doesn't seem that radical. It's part of the sports league setup playbook 101. Look at our episode on the IPL. This was so far ahead of its time back in the 1950s and also totally by accident.

Which leads us to the third Italian founding pillar of F1: Ferrari. Undeniably, the most important team, company, and person of this first age of F1 was Enzo Ferrari. Enzo actually founded the company before World War II purely as a racing company.

Yeah. Wasn't he racing Alfa Romeo cars?

Yes, that was the purpose of the company: to race Alfa Romeo cars.

Also a red racing team because they were Italian.

Yes, indeed. Ferrari itself didn't start making cars until after World War II. But, of course, when the F1 championship series starts in 1950, Enzo has to join. This is the pinnacle of racing. Ferrari is the only team that's been part of every single F1 season, going all the way back to the beginning.

There's a funny thing here where you might think, "Oh, Formula 1, that's the big established series that legitimizes an automaker by being a part of it." It actually works the other way with Ferrari. Ferrari participating in Formula 1 legitimizes the series. If Ferrari ever decided to stop racing in Formula 1, people would go, "Oh, so what is the big racing series?"

Unlike just about every other sport out there, the teams and the racetracks are separate entities. It'd be like if the Seahawks were a team that would play wherever and whenever they could get a game going, and they didn't have any relationship with Lumen Field in Seattle. What Formula 1, the organization, is doing is bringing this set of teams and this set of racetracks on the calendar—the set of Grands Prix—together.

And in the early days, it was kind of a different set of teams and drivers at each of the Grands Prix. Who can we get to come race at this track, and when? It would come together in a very haphazard way.

So, back to Enzo and Ferrari. Unlike Colin Chapman, Lotus, and the Brits, Enzo actually had business sense. He was an entrepreneur, and he was the first person who realized that there was an absolutely incredible business opportunity at the intersection of these really fast cars, this sort of legitimizing racing heritage, and all the glitz, glamour, wealth, and celebrity represented by Monaco.

That opportunity was selling fast cars to the rich and famous.

Yep. So Ferrari pretty quickly after World War II becomes a legitimate luxury brand. I think you could maybe even argue they are the only legitimate luxury brand established in the second half of the 20th century.

Oh, that's interesting. And it's very impressive how fast it happened.

Before the war, it was Enzo racing a bunch of Alfa Romeos—

And then suddenly it's Ferrari.

Right? Because as he's participating in F1, Enzo is also hand-making cars for all the European royalty and all the American movie stars flowing through F1. Just like the equestrian heritage serves as the legitimizing soul of Hermès, motor racing in F1 serves as the legitimizing soul of Ferrari. It's just that they were co-developed together here in the '50s and '60s after World War II.

So, we need to talk much more about Ferrari on another episode of its own.

Oh, yeah. We should do a Ferrari episode.

For the purposes of F1, they really were that unifying factor that pulled together the glitz, glamour, and luxury with the hardcore racing. The Ferrari cars became this tangible way that fans, even though they couldn't afford to buy them, could relate to what was happening on the track by dreaming about buying these road cars that they saw their favorite celebrities or royal monarchs driving around. A lot of these other teams are building 1 or 2 or 3 cars, period, and they're racing them, and then that's it.

Yep. Totally. Whereas with Ferrari, probably every boy growing up around the world, myself included and probably you too, has had a poster of a Ferrari or a model of a Ferrari in their bedroom.

Okay. So, you might be wondering: where are the Germans in all of this? We've talked about the Brits with Colin Chapman. We talked about Monaco. We talked about Ferrari. In the '50s, Mercedes actually was a major player in Formula 1 and auto racing.

In the '50s, Mercedes actually was a major player in Formula 1 and auto racing. But while they were racing one of their cars in Le Mans, it actually crashed and killed 82 people.

Oh, yeah. It was one of the worst disasters in motor racing history.

They actually pulled out of, I think, all racing, and they didn't return to Formula 1 for another 40 years. That accident was so devastating that 4 of the remaining Grands Prix were canceled. Racing was just so dangerous at this time. There were 14 deaths in F1 alone, not even counting other racing series or spectators across this first decade.

Totally. Mortal danger was actually, I think, a core part of the appeal of the sport in those early days. What better to go along with all your glitz and glamour than an element of mortal danger? These guys were gladiators. They were risking their lives every time they got in a car.

In the 1950s, you had 14 deaths, so that's 1.4 a year. In the 1960s, you also had 14 deaths, plus 15 spectators in the 1961 Italian Grand Prix crash. The 1970s didn't get much better. You had another 12 deaths. It starts to get safer from there, and we'll talk about all that later. But in the first 3 decades, you were at about a 1- to 2-death-per-year rate.

So that's 5% to 10% of the entire racing field dying every year.

Yep. And there were many, many more crashes and many, many more injuries. These were just fatalities. Famously, Niki Lauda's head caught on fire, and he was scarred for the rest of his life.

Yeah. And then he was back out racing several weeks later. It's insane.

It's unbelievable.

So, back to Ferrari, though. He's really the entrepreneur who figures out how to build a real big business at the intersection of everything that's going on here. He's just doing it through his road-car business. There's a great quote from another team owner during this era, and it goes, "Formula 1 is Ferrari and Ferrari is Formula 1. It's that simple." This is another team owner saying that about a competitive team to Ferrari. And you might know who the team owner was who said that quote.

Oh, it's Bernie.

Yep. It was the person who would quite literally replace Enzo in that quote: Bernie Ecclestone, the supremo impresario, owner of F1.

Owner of some part of F1, but controller of all of F1.

So Joshua Robinson and Jonathan Clegg, in their book The Formula, have a great quote about Bernie and Ferrari: "As it turned out, no one would get richer off the Ferrari mystique than Bernie, a man who has never once been employed in Maranello."

Yep.

And that will be our protagonist today.

Okay, so David, enter Bernie Ecclestone.

Bernie Ecclestone.

Bernie was born in 1930, and he was a hard-scrabble kid. He grew up in Suffolk, which is to the northeast of London. His dad was a commercial fisherman, and his mom was an authoritarian homemaker, according to many biographies about him. You never really know what the legends about Bernie are, but that's the story, at least as he wanted it told.

Yep. After the war, Bernie ends up getting into the wheeler-dealer business in London with surplus cars and motorcycles from the war. He opens his own showroom on the outskirts of London, where he starts to specialize in selling luxury automobiles to the newly rich and famous.

Basically, he becomes the London celebrities’ car guy. You’ve got your jewelry guy, your clothes guy, your drugs guy in the ’60s, and your car guy. Bernie’s the car guy.

People refer to him as a former used-car dealer, but that’s not really right.

Yeah, well, I mean, it is right. He started that way.

It’s like calling someone else’s puzzle-dial Rolex a used watch. It’s not really used.

No. It’s like, you want a Ferrari or you want a Bugatti? Hold the phone. Let me make some calls and see if I can get you one.

Right. There’s also always been plenty of gossip over the years that Bernie was involved in more underground activities, shall we say, at the time. Bernie himself would encourage this. Specifically, there was a long-standing rumor that Bernie was the mastermind behind the Great Train Robbery of 1963, where £2.6 million was stolen from a British Royal Mail train. This is one of the most famous train robberies in history. Bernie loved this speculation, so in 2005, a long time later, he finally addressed it.

When he’s, what, 70 years old or something?

Yeah, 75 years old. He gives a quote to the media when asked about it: “There wasn’t enough money on that train for me to be involved. I could have done something bigger.”

Which actually is correct, given what he would go on to do.

Very correct. £2.6 million. That’s chump change.

Criminal mastermind or not, Bernie is smart. Once he gets into hawking cars to the new-money rich folks in London, he doesn’t just sell them the cars. He also steers them into financing, which I think is basically how car dealers make money. They mark up the cars a little bit, but then they really get you on the financing and the servicing fees, et cetera. And when you’re selling really expensive cars, the financing fees start to add up.

So this nets Bernie his first small fortune. Now, the deeper that he gets into this luxury auto world, Bernie has the same realization that Enzo Ferrari had a decade or 2 earlier, which is that motorsport and racing is the legitimizing heritage of all of these fast luxury cars. Just like Enzo himself, Bernie wants to have his dealership and his brand associated with Formula 1.

So, in the mid-1960s, Bernie starts hanging around with F1 drivers. And being the wheeler-dealer that he is, he pretty quickly becomes the agent for a few of his pals, negotiating better deals for them with their teams for their salaries, for a small fee, of course.

Yes, of course. Eventually, he cooks up a scheme with one of his star clients, who actually drives for Colin Chapman at Lotus, a driver named Jochen Rindt, to leave Lotus and buy a team together for themselves. They’re going to become not just the talent; Jochen’s going to become an owner.

Jochen, at the time, is one of the best drivers in the world. He’s on top of the standings in F1. He’s blowing away the field throughout the 1970 season. Then, tragically, during his practice session at the fourth-to-last Grand Prix of the season, he crashes and is killed. Rindt and Chapman were constantly fighting about the safety of the Lotuses that he was driving.

Rindt was so far ahead of the pack in the standings when he was killed that he would actually win the Drivers’ Championship that year.

Oh, he still won, right?

Yeah, posthumously. He’s the only driver ever to win a championship posthumously. He got 0 points in all of the races after his death, but he was so far ahead that he still won.

Bernie, as the story goes, is devastated after Rindt’s death. To honor the memory of his friend, he decides that he’s going to carry through on the plan that they had together, the dream they had.

In 1972, Bernie buys the Brabham F1 team for £100,000, which would be about £2.3 million today. Today, I think every single F1 team is worth at least 1.5 billion. I think that’s the floor.

That’s exactly right.

Bernie doesn’t make that much money on the Brabham team, as we will see.

He sells it for, what, £5 million later?

£5 million a couple of years later. Yeah, a nice return, but definitely the fact that team valuations go from £100,000 to a floor of 1.5 billion is thanks to Bernie.

Well, thanks to Bernie for part of it, and then specifically thanks to Bernie leaving after that.

Yes, for the other part of it, as we will get into. So, when Bernie buys the Brabham team in 1972, along with it, he also gains membership in the Formula One Constructors Association.

Now, this is a very loose organization. “Organization” is being generous here. It’s an organization of all the team owners that Colin Chapman had actually taken the lead in pulling together back in 1963, with the original purpose solely of coordinating joint travel and transport logistics to get their teams and cars to all the various races around the world.

It’s like: Hey, you’re my bitter rivals. I never want to associate with you. I battle to the death with you out on the tracks, but—

We are going to the same place.

We’re going to the same place. Why don’t we share a ride, so to speak?

And today, Formula One Management does handle all this. I think they make a little bit of profit on it. It’s a service that they sort of sell to teams—a tiny amount of profit relative to the rest of it—but they handle the logistics of moving the whole circus around the world.

Yep. Well, one thing I can guarantee is that once Bernie takes it over, he’s definitely making a profit on it.

So, Bernie, when he joins this owners’ table, shall we say, pretty quickly realizes a couple of things. One, except for Enzo Ferrari, none of these other guys have a lick of business sense. All they care about is fast cars and winning races. Whatever money they have or don’t have, it’s all going down the tubes in pursuit of victory.

The second thing he realizes is that, except for Ferrari—and by this point in time, Enzo has sold half the company to Fiat, so he has major resources behind him in Italy—none of these other guys actually have any real money.

I mean, for God’s sake, Colin Chapman is about to nearly go to jail over an $8 million embezzlement case with DeLorean. $8 million went a lot farther back in the ’70s. But these cars are quickly becoming very expensive, and the teams are becoming very expensive to run. There is no sustainable way to run a team.

I think the average tenure over the entire existence of Formula 1 is about 6 years for a given team. Just to make this exact point, here is the list of F1 teams in 1972, the year that Bernie buys into the league: Lotus, Tyrrell, McLaren—you probably know them. Ferrari, you definitely know that one. Surtees, March, BRM, Matra, and Brabham.

So there are 2 that exist today.

And at that point in time, only 1 of them is a real business. So Bernie sees this and he’s like, “Dang, there’s an opportunity here. All these other guys are focused on winning races. Yeah, I’d like to win, but I really care about getting rich. And there’s quite a power vacuum here that I can insert myself into.”

So, just to paint the picture of the business state of F1 when Bernie came into the league, each individual team negotiated their appearance fees with each individual Grand Prix separately. There are a whole bunch of Grands Prix, each with their own race promoters and organizers. There are a whole bunch of teams, 9 of them to be exact, and they’re all negotiating separately with each other.

Assuming there are, I don’t know, 15 races or something, that would be 135 distinct agreements between teams and local races.

Everybody’s getting paid wildly different amounts, and usually not very much. And these things need to depend on each other, because how valuable is a race to go to if the other teams aren’t going to show up to that one, right?

Right? I mean, this is the sports-business world’s worst practice number 1. Not only is it bad for overall revenue—you have no centralized leverage over the tracks if you’re all negotiating separately—but to your point, Ben, it’s just plain bad for the sport.

How are you supposed to sell tickets and tell fans they should come if—

Right. You don’t know if Ferrari’s going to show up or if McLaren’s going to show up. There’s no way to know as a fan until you actually show up at the racetrack who’s going to be there.

The other aspect of the sport that I would say was in shambles—but wasn’t even in shambles because it didn’t exist—was broadcasting, television, and promotion. There was none of it.

Yeah. Thankfully, Bernie came along before that became too big. I mean, can you imagine if each of these racetracks was trying to do their own media-rights deal?

I mean, he came along at the perfect time. It was already criminally too late that F1 and the Grands Prix hadn’t gotten to television. We’re talking about the mid-1970s. If you look over at the NFL in America, they were already making $50 million-plus a year in broadcast rights.

Yeah, it was 10 years into their—I think 1961 was their first national broadcast deal. They had already launched Monday Night Football in 1970. It’s not like there wasn’t a playbook for this out there.

Yes.

F1, meanwhile, is just as popular, if not more popular, is a global sport, has great demographics, and is making $0 in media rights. So Bernie shows up. He’s hardly a media professional here, but even he can see that there’s room for improvement on both of these fronts.

Even before realizing, “Hey, media rights are going to be super valuable,” the thing that he clearly sees is that centralizing these negotiations is going to be the way to extract the most value.

Yes, there are 2 opportunities here. The near-term, easy one is to centralize the negotiations with the racetracks, extract the most value, and capture a bunch of it for myself.

And then there's a longer-term play: What can I do about these television deals? I think it's actually worth one more quick pause here to compare and contrast Formula 1 and the NFL, and Bernie and Pete Rozelle, because these are sort of happening at the same time. But Bernie is the anti-Pete Rozelle. Pete Rozelle was this consummate manager, a professional media guy from Los Angeles. He started as the Los Angeles Rams' PR guy, and then he gets drafted by the owners of the NFL to be an employee of the league, to serve them and their interests as commissioner. The league is owned 32 ways by the owners of the teams.

Right? So, Rozelle's unifying vision to the NFL owners was communist capitalism, as we talked about on that episode: “Hey, this is league first. We're all in this together. Let's centralize our negotiations and our media rights so that we can all grow the pie and share the spoils evenly.” Bernie's MO isn't league first; it's me first. He does centralize things, but it's not like Formula 1 becomes owned by all the teams equally. It's more like he says, “Okay, I'm going to start a company, and that company is going to go sign agreements with racetracks, and then you're all open to doing business with me to figure out what it's going to be like for you to race at those racetracks.”

Yep. So, the way he does this, he proposes to the other team owners: “Hey, obviously we need to centralize our negotiations, and I can tell that you guys don't want to do this, or you would have already done it. Why don't you just leave it to me? I'll take care of everything. You give me the rights to your team's appearances, and I will go fight with these race promoters, many of whom are probably gangsters themselves, and I will get us the best collective deal. I'll tell you what: I will even take all the risk and guarantee to all of you other guys up front that you're going to get paid at least as much as you're making now.

“And you must come to the races.” That was the teeth. No more of this “I might show up, I might not.”

Yes, that was also part of the motivation: We’ve got to fix the sport. Nobody says, “So, I'll do all this and I'll just take a small fee off the top for my services.” Supposedly, at a meeting of the Constructors' Association, he verbally says that he will only take 2% of the total race-fee revenue off the top for his services.

Really? But of course, nobody writes anything down because Bernie never writes anything down. And when the dust finally settles, many decades later, all of the books and stuff become public through a whole series of court cases. It turns out Bernie's actually taking 8% off the top for his fees, which is a healthy amount. In addition, he's also an owner of one of the teams, so he's getting his owner split. Honestly, 8% is not bad. If you are massively increasing the amount that every team is getting paid by doing this, and you are organizing and orchestrating the sport, taking 8% for those services seems quite reasonable.

Absolutely. Great point, and you are 100% correct. Bernie is doing a great service for all the F1 teams and owners. He is instantly making the sport a lot more valuable—

And sustainable.

And sustainable. Totally.

Every single team would go bankrupt except Ferrari otherwise.

Yep. So, before Bernie gets there, the average prize purses and payments that teams would get from a Grand Prix obviously varied wildly, but on average it was like $10,000 per team. So, like, nothing. In Bernie's first year running the show, he takes the average prize and fee payment up to $40,000 a year. So, 4× in 1 year. Then, a couple of years later, by the mid-'70s, it's up to $150,000 per race. And then, by the end of the decade, he's gotten it up to $200,000. So, like, massive improvements—

Per team, per race. Yeah. So suddenly you can start to actually fund your operation if you know that every time you show up to the track, you're getting $200,000 to do it.

As Bernie would never fail to point out, all of the other team owners should be massively grateful to him for essentially saving their asses here and funding their teams. And back to the original purpose of the Constructors' Association—coordinating travel costs—Bernie also goes out and negotiates competitive rates with freight providers and massively improves travel costs on the logistics side of the business for the teams. Basically, Bernie's first act in F1 reminds me of one of my favorite sayings that I heard earlier in my career from a mentor: “He may be a thug, but at least he's our thug.”

Yes. So, it's worth taking a pause to say the FIA is still the governing body of this sport, this racing series. Bernie takes over this thing called the Constructors' Association, but really, the FIA and its set of rules are still governing what happens between these teams at the racetracks. He's just the one organizing the commerce through the Constructors' Association.

Yes. And importantly, the FIA is the one that blesses each of the racetracks with being a Grand Prix, as part of Formula 1.

So, what happens next? As you might imagine, these race promoters are none too happy about this little guy from England coming and beating them up—

Right? Someone's aggregating all this power in the ecosystem, and they're negotiating with us, and it doesn't feel good because they've got all this leverage now.

Yep. They go to the FIA and say, “Hey, you've got to do something about this Ecclestone guy. He thinks he's running F1.”

Yep. This results in a whole series of protracted negotiations between Bernie and the Constructors' Association and the FIA that finally get hammered out in 1981 with the first Concorde Agreement, which is still the name of the roughly 5-year agreements that govern F1 to this day. Do you know why they're called the Concorde Agreements?

I do. That is the physical location in Paris where they were negotiated, right?

Yes. The FIA headquarters are at the Place de la Concorde, which gives you a sense here: the Place de la Concorde in Paris is one of the ritziest, most famous parts of Paris. It was a bunch of stuffy bureaucrats.

And so, what is the FIA? Is it a nonprofit? Is it a government body? Is it like an NGO?

It is an NGO. That's exactly what it is. It is an international organization that was formed by all of the respective European countries' motoring clubs. So, the FIA also regulates rally sports, endurance racing, et cetera, et cetera. It's not just Formula 1. It's a standards body.

Yeah. Exactly. So, in this first Concorde Agreement, the 2 sides—Bernie and the Constructors' Association on one side, and the FIA and the racetracks by proxy on the other—agree on 4 things.

1. The FIA will have full, unilateral, and unchallenged jurisdiction over the rules of the sport going forward. The Constructors' Association and Bernie have no say over the technical rules of the sport.

2. The Constructors' Association teams will commit to showing up and participating in every official Grand Prix race.

3. In return, all of the race fees and prize money must now contractually be paid centrally to Bernie and the Constructors' Association.

4. Bernie and the Constructors' Association will control all rights and income from any future televising of F1 races for the next 5 seasons.

No rights to the race organizers, no rights to the FIA, all the TV money flowing through Bernie—

Which, if you look today, is the single largest revenue stream of the whole thing. Of course. How could it not be?

Yep. So, what's interesting is both sides here actually feel like they're getting a pretty good deal. And to be fair, the reason that they thought that was the TV media rights weren't actually worth anything yet.

Well, did they put in that when the TV media rights do happen, Bernie still only gets 8%, and the teams get the rest of the 92%? Or is that yet to be negotiated?

Gray area.

Okay. Bernie thrives in the gray zone.

So, at the time, European and British television was mostly state-controlled, with organizations like the BBC and its peers across Europe all behind the US in terms of monetization and sophistication of televising sports, especially, but any kind of media. Again, these are mostly the equivalent of PBS in the US. They're public broadcasters. There's not a competitive ecosystem. There's really 1 party to go to.

Yep. So, the teams and the FIA and the tracks—even though they're giving up all the TV rights to Bernie, they don't look that valuable to them. They're like, “All right, you want to go have a boondoggle and see if you can figure this out? Good luck to you.”

Right. And to be honest, it sounds hard to film. You've got these racetracks with 15 turns and cars that whiz by real fast, and crappy technology at the time to try to film them, and you want to go do business with the government to try to get them to broadcast. Okay.

Yep.

Have fun.

So, it's unclear whether Bernie had a vision for this all along or if he was like, “Ooh, here's something I can grab. Let me go see what I can do with it.” Either way, he basically executes it perfectly. So, once he gets the TV rights, he goes to an umbrella group of all the public broadcasters across Europe called the European Broadcasting Union. It represents 92 different countries' national public broadcasters, including the BBC in the UK, and he says, “Hey, you have a lot of F1 fans in your respective countries. That's a big sport in Europe. I now have the rights to broadcast this sport. How about I'll sell them to you for super, super, super cheap—a couple million a year for all 92 countries. So, like, amortized, in aggregate, basically nothing—”

For any individual broadcaster to take these rights. The only thing I want them all to do is promise to show every single race on the calendar, not just the ones that are in their home country.

So, seems like a pretty good deal, right?

So, he’s in grow-the-sport mode, right? Not capture value right here. This is a growth opportunity.

Yep. This is a long game. So, they all say yes. And then, Ben, as you were saying a minute ago, it pretty quickly becomes clear: Hey, all 92 public broadcasting entities don’t really have the expertise or the interest in figuring out how to televise this sport. Seems hard.

It’s still true today. The way that most of the broadcasters around the world take F1 is they take one main feed that is produced, and then they do more stuff on top of it.

So, this is when that starts. Bernie says, “All right, no problem. I’ll take the risk. I’ll fund the investment upfront personally to create a central, single television feed for each race that Formula 1—quote-unquote, slash me, Bernie—produces.”

Yeah. What is Formula 1 at this point?

Yeah. What is Formula 1? So, we should say Bernie loved to operate without contracts. Here’s his exact quote:

“I carry out my business in a very unusual way. I don’t like contracts. I like being able to look someone in the eye and then shake them by the hand rather than do it the American way with 92-page contracts that no one reads or understands. If I say I’ll do something, I’ll do it. If I say I won’t, I won’t.”

Yeah.

And who owns these things? I don’t know. I’m making sure it happens. So, Bernie goes and sets up a new company, Formula One Promotions and Administration, or FOPA—

It’s not to be confused with FOCA, which was the constructors’ association that had just done that deal with the FIA, right?

That Bernie is now the de facto head of, but doesn’t have any legal ownership of, right?

The first thing that he has FOPA do is create this centrally produced TV feed from England and then distribute it out to all the various broadcasters all across Europe.

He just keeps running this playbook over and over again: “Okay, cool. I’ll centralize something. I’ll aggregate something, and now I have leverage to go and do business with the rest of the ecosystem.”

Yep. And his plan has been, as you identified, “I’m going to get all these public broadcasters across Europe to basically go develop the market for me,” right? They’re making the next negotiation much more favorable to me. They’re out there right now. Sure, we didn’t really exchange much money, but they’re out there building the brand, getting people excited, and then as soon as that agreement period is up, then I’ll go to them and say, “Okay, it’s really expensive, and I am the one who you have to pay.”

Yes. I’m going to be sitting in the middle as the choke point for what will now be a hugely in-demand television product, which is exactly what happens. Now Bernie also gets really lucky here because, in the intervening years, the pay-TV ecosystem in Europe finally comes online.

So, one of the reasons why America was farther ahead in developing the television market is that cable and pay TV had become a thing earlier in America. And so, there were just a lot more bidders for content out there in America. When Bernie started this adventure, it wasn’t clear that the same thing was going to happen in Europe, but it did.

Yeah. And there was one other element that developed in all this, too. In addition to these agreements that Bernie was having everyone sign, race organizers were required to surrender income from trackside advertising and corporate hospitality to Formula One-owned entities. So, this now means that the race organizer—the track business model—is really just ticket sales.

Yep. So, as it’s becoming clear that TV rights are now going to be really valuable, the original 1981 Concorde Agreement term comes up, and Bernie now needs to go negotiate a new deal.

Oh. Because FOPA and the TV rights actually weren’t parties to the previous Concorde Agreement.

Right. Exactly. It didn’t exist yet. Bernie created it in the interim. TV rights are a thing. We’re pretty sure they’re going to be valuable going forward. We deserve a cut. No teams, no tracks, no races. We want in on this.

Yep.

So, Bernie says, “Okay, okay.” He starts with, “Why don’t we just divide it all up a third? A third, a third. FOCA and the teams, you’ll get a third. FIA, you guys can get a third. But then a third really should officially go to FOPA. I’m the one that created this, and we’re producing the broadcast.”

After a whole bunch of negotiation, it ends up splitting out that the FIA gets 30%. FOCA and the teams get 47%. And FOPA, Bernie’s company, gets 23%.

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

Yes, this company that I created. Bernie is a master at playing everyone off here. This split gets negotiated before Bernie really ramps up running bidding processes in each country for the TV rights. So, he actually renews the European Broadcasting Union deal for another 3-year term to sort of keep growing the sport and not value-maximize just yet, because he doesn’t want a lot of money to start going to the other organizations.

So, that was the second Concorde Agreement. When the third Concorde Agreement comes up for negotiation in 1992, Bernie goes to the FIA and he’s like, “You guys, you’re getting the TV money, but you can’t be happy because it’s really not that much, you know, and there’s a lot of complexity here. You’re an international organization. What if I just make this easy for you? I’ll pay you a flat fee. Rather than you taking 30%, I’ll pay you $5 million a year, going up by $1 million every year up to $9 million at the end of this term, in exchange for your percentage of the TV rights. This will be way easier for you.”

And the FIA is like, “Great, that sounds like a great deal. Let’s do that.” So, Bernie now has the 23% he originally had, plus another 30% that used to belong to the FIA, for which he has to pay $5 million to $9 million a year.

And you can actually imagine, if you’re an international regulatory standards body, the fact that a guaranteed payment is being made available to you so you’re not taking risk anymore might actually be great.

Of course, and this is the justification that they all give to the press when the deals are done. So, the deal gets done. Bernie’s now got 53%, plus all of his cuts that he’s taking from the constructors’ association for his services, plus his team ownership, et cetera, et cetera.

The deal gets signed. He goes out, runs auctions across Europe and really across the globe with any TV provider who’s interested in showing F1. All of a sudden, TV rights go from small single-digit millions in aggregate for F1 to over $25 million a year, just flowing into FOPA and Bernie from the TV rights.

Oh, wow.

But call it $40 million to $50 million a year. So, a big, big step up.

Okay. So, how do the teams feel about this? I mean, suddenly there’s this guy that’s getting half-ish of the revenue from the broadcast of their sport.

That is the key question. You would think that the other owners would be pretty pissed, and some of them were, to be fair. One of the other owners, Ken Tyrrell of Tyrrell—which, fun fact, is actually the forerunner of the Mercedes team today—publicly accuses Bernie of, quote, “stealing F1 from the teams.”

But that’s kind of a minority opinion. By and large, they’re all still pretty grateful to Bernie at this point, because turning F1 into this major TV sport meant that all of their individual team sponsorship deals just got way, way, way more valuable.

Ah, that makes sense. Before F1 was televised, all sponsors were getting when they got their logos on the cars was exposure to whoever happened to show up at any given track for any given race. And really, it wasn’t even the totality of the fan base that showed up. It really was only fans who were sitting close enough or at the right angles where they could actually read the logos on the cars.

It’s interesting because, at this point in time, the more valuable real estate would probably have been the trackside advertising, whereas today the trackside advertising is not nearly as valuable as the space on the car, because the cameras stay fixed on the cars and on the drivers. That’s the valuable space that people are after. And unless you’re televising it, the cars are the thing in motion, whizzing by.

Right? Yeah. There’s no way you’re going to be able to read what’s on an F1 car when it’s whizzing by live.

Right.

So, this is when sponsorship money, and in particular tobacco money, really starts funneling into the sport. In aggregate, until it finally gets banned by the EU in 2006, tobacco company advertising poured $4.5 billion into team sponsorships in F1 over the years. That is a lot of money. And that was just one category.

In particular, part of the reason why tobacco was so interested here is that there was sort of a loophole: as there was all this pressure to ban tobacco advertising on TV and on radio and on billboards and in newspapers, putting it on a car that happened to show up in a TV broadcast—oh, that was a sponsorship of a team. It was sort of this way that the tobacco companies got to stay on TV, and it was heavily associated with a brand image that they wanted to cultivate. It’s glamorous. There’s speed. It’s risk-taking. They get to do these full takeovers of the liveries of the cars. I mean, it is a full-screen ad. It’s just not classified as a TV advertisement.

Okay. So, finally, thanks to tobacco companies, TV rights, and Bernie, there’s all this money flowing into Formula 1 to fund these increasingly expensive operations. And of course, the question then is what do they do with all this money? These teams want to just go out and beat each other. And so, they’re going to spend to an infinite limit to attempt to do so.

Oh, yes. And of course, they come up with some pretty clever ways to invest-slash-burn that money and make the cars go faster on the grid.

Hello, Colin.

What is one of the F1 tidbits that you shared with us when we were in the Paddock Club together? What is one of the things that you think most people don't know about the sport?

Colin Fleming

Thanks for having me, guys. Everyone talks about the technology and speed, but the underdiscussed component is the human side. An F1 driver is operating at a fighter-pilot-like cognitive load for 90 minutes straight. They're experiencing 6 Gs of pressure, which means their head weighs like 80 pounds at that moment.

Their heart rate is 180 beats a minute or more, and they've lost 5% of their body weight during the course of the race. They're doing this while making thousands of microdecisions, with no timeouts and no commercial breaks, and I don't think there's another sport like it.

We're talking a lot this episode about the specific technologies that were leaps forward in different F1 eras. What do you think was the most significant over the years?

Colin Fleming

For me, it was the hybrid introduction. I think it was 2014. It moved the sport from being about pure horsepower to being about energy management. As a result, the drivers' lives got way busier.

Now they're managing battery deployment, harvest modes, engine maps, and they're doing this at unreal speeds. Mercedes cracked it first. They won 8 straight championships.

Okay. Now, from the ServiceNow angle, I'm very curious why you decided to sponsor an F1 team in Aston Martin. What is the business case?

Colin Fleming

Three things that are really critical for us. Storytelling, hospitality, and brand. It's a super complex sport and as we know logistics, technology everywhere, and that is the life that our customers live every single day. So we didn't just slap a logo on it. We deeply embedded our technology into the organization to help them really find that one-tenth of performance they're all looking for. The hospitality gives us the opportunity to tell that story and the brand is truly a lead. We're thrilled to be part of it.

Okay, last question while we have you. What's the latest in the world of ServiceNow?

Colin Fleming

Well, anybody that's deploying AI today knows it's absolute chaos. Companies don't know what's running, what's working, what's not. And that's why we've built the AI control tower. It helps companies turn that chaos into control, giving them visibility, governance, orchestration, and to really understand what value it's bringing together. So, we think the answer is ultimately this incredible probabilistic intelligence with deterministic controls and that orchestration layer from ServiceNow. And in May, we're going to show it all off at Knowledge.

We'll be there.

Colin Fleming

Amazing. We hope all of your listeners will join us. Well, a huge thanks to Colin for joining us today and to our friends at ServiceNow. You can go to servicenow.com/acquired to learn more.

Okay, so we're in this era now where team owners have a lot more resources at their disposal, and boy, are they deploying it? Ben, what are some of the crazy things that they start doing during this time?

In 1968, Colin Chapman from Lotus had become a really big believer that the way his drivers could go faster in the turns was by applying more downforce so they'd have better traction on the road. They put the first airfoils, or wings, on the car. In 1968, they were just really small wings. They almost looked like early Formula 1 cars—the cars that were just these long tubes—but with little hints of what Formula 1 would become on them. It's this kind of amazing transitional period. We'll link to it in the show notes.

And then don't they go to big wings before the FIA regulates those out of existence?

There is a lot of experimentation that happens in this period. It's really fun. In the email, we'll put a bunch of pictures of crazy F1 cars that were technically within regulation when they were first tried, before all these tactics were made illegal.

But it's probably time to stop and do a little physics lesson here. I never really understood this, so this is listeners' education for me. Lighter cars are faster, so why would you want to put a spoiler on a car that pushes it into the ground harder? You don't want a heavier car, and so you sort of have to separate this idea of downforce pushing down on the ground from just weight. There are ways to get downforce, which can be good, that are different from a heavy car.

Yeah. It's funny. Before doing this episode and learning all this alongside you, I always just assumed that at least road-car manufacturers put this stuff on cars to make them look cool, not to actually do anything, right?

Right? But you want downforce to make it stick to the road better in turns. The issue, of course, is that with a big spoiler, yeah, you're creating downforce, but you're actually creating a ton of drag, too. So the car is facing resistance to going forward as a byproduct of what you're attempting to really do, which is force the car down.

If you focus too much on optimizing for downforce in the turns, you end up slowing yourself down in the straightaways. So the takeaway from lesson number 1 here is: downforce good, drag bad.

Yep. So let's flash forward 9 years from that 1968 initial aerodynamics experiment. We're now here in the late 1970s. Lotus is still working on this issue. They were trying to figure out a way to produce downforce that doesn't produce a lot of drag, and what followed is the stuff of F1 lore.

You will hear racing nerds talk about the Lotus 78 and the Lotus 79 as if these are gilded vehicles.

Mythical beasts.

Yes.

Yeah.

So the first breakthrough is: well, wait, what if we can turn the whole car into a wing? Rather than our traditional-shaped car with a wing slapped on top, what if we made it actually part of the body style itself? So the whole thing gets pushed down.

When you look at the Lotus 78, it really does look like one big wing. Google it. We'll put it in the email. It's really cool.

The second breakthrough is a fun one from the world of fluid dynamics. Everyone listening is probably familiar with how airplanes generate lift. The wing is shaped in a special way such that when the plane moves forward, it generates high air pressure underneath the wings, low air pressure over the wings, and thus the airplane is pushed up into the air.

Well, what if you did the opposite? That is what the Lotus team did. They shaped a car like an upside-down airplane wing. The bottom of the car had a special skirt on it that shaped the airflow to speed it up under the car, squeezing air into a very small space since it's super close to the road.

As the air molecules move along at high speed under the car, that creates a low-air-pressure zone. The team then carefully controlled the air with a gradual upward slope and a diffuser to guide how the air comes out from underneath the car in the back.

The effect this had was to create low air pressure under the car, high air pressure over the car, and essentially suck the car onto the ground. In physics, this is called the Venturi effect. The areas under the car are called Venturi tunnels.

That's why it was funny when you and I were at the Las Vegas Grand Prix and we kept saying, "Oh my God, these are like fighter jets on the ground." They actually are like fighter jets on the ground.

Yes, they really are like upside-down fighter jets. So did it work? Absolutely. Mario Andretti, upon driving it, said that it cornered as if it was painted to the road, and he won both the Drivers' Championship, while Lotus won the Constructors' Championship, in 1978.

Interestingly, by the 1980s, it was producing so much downforce that the drivers could take these corners at super-fast speeds, and it actually became a safety hazard. Especially if the car would go up on a curb or the skirt slipped in any way, the cars were then going way faster than they otherwise could have without that sort of sucking to the ground—the ground effect—to cause the traction.

In 1983, these ground effects were outlawed, and regulations were updated to say that you must have a flat-bottomed car.

Interesting.

Yes. But for fans of ground effects, they would make their way back for the 2022–2025 regulations, which is what we saw in Vegas.

Yeah, the rooster tails, as they call it. And I think it was 2 years before we went to Las Vegas, one of the cars even sucked up a drain cover that had been welded shut and basically wrecked the car. These cars produce so much downforce that if you drive over even a welded-shut manhole cover, it sucks it right up.

Wild. Yeah, ground effects are very, very powerful. There are a few other giant leaps forward that would happen in areas other than aerodynamics, too.

So engines over the years have gotten way more fuel-efficient, with only 50% of the energy in an F1 engine lost to heat, compared to 70% or 80% in a road car. F1 teams care a lot about this because if it's more efficient, you can carry less fuel, have a lighter car, and go faster. So it's a huge advantage. They've also gotten a massive increase in horsepower, tripling from 300-something-horsepower engines when we first started in the 1950s to 1,000-ish horsepower coming out of these engines today.

Insane. In cars that are light enough that you could basically pick them up—half to a third as heavy as an average road sports car.

The F1 cars were that light because of all the carbon bodywork.

Yeah. So, 1,000 horsepower in something that's basically light as a feather as far as cars go.

And then, of course, there are turbochargers, which are an insane invention. This harnesses the unused energy from the exhaust gases to spin a turbine and then use that to compress the air going into the engine, which ultimately means there's more oxygen in each engine cycle. So you can have more powerful combustion every single engine cycle, and thus more power again in the car.

Which actually raises an important point, too. It's not like any of these teams, even the ones that were backed by actual car manufacturers, were doing this with the goal of advancing technology for consumer road cars. But as a byproduct, a lot of this technology over the years did make its way into the consumer landscape. It did become an intentional strategy over time, and it provided air cover for a lot of spending, especially for these constructors that were also consumer carmakers, if they could say, “Oh, this is R&D, and stuff's going to go into cars.” And it did. I mean, you had paddle shifters and carbon—

Or even just turbos. So many cars, even not sports cars, are turbos these days, and a lot of that technology got perfected in F1.

Yeah. I think people overstate this when they say there's all this technology that came from F1 cars, but I think it's more like the technology was iterated and perfected, or they would explore new material science or something in F1 cars that would eventually go into road cars.

Yep.

So that's engines on top of aerodynamics. Then there's this whole third category where they really had a breakthrough in electronics. All the cars we've been talking about at this point were very manual and analog. In the early 1990s, the Williams team comes along and realizes, “Oh, this technology is finally good enough for us to try to automate some of the systems in the car in real time.”

Let's add software, baby.

This is the early 1990s. I mean, this is pre-Internet. So they come up with this whole crazy, broad set of ideas and, remarkably, they implement basically all of them, and they work very well. The systems are traction control, anti-lock brakes, active suspension, and a semi-automatic transmission. Speaking of road relevance and transferability to consumer cars, David—

Yeah, totally.

All of these worked together, and the car even automatically adjusted its ride height, customized to each corner of each racetrack. So competitors saw this and got so mad and accused Williams of making a car that drove itself. But for a couple of years, this was legal, and they won both the Drivers' and Constructors' Championships in 1992 and 1993 with Nigel Mansell and Alain Prost.

In fact, the car was so dominant that Prost's old teammate and rival from McLaren, the great Ayrton Senna, who we have not yet talked about in this episode—the three-time world champion—wanted to jump ship from McLaren to join Williams. Prost was actually retiring after that 1993 season, so a spot did open up for Senna to join Williams in 1994. But then the FIA made it illegal to do all this software stuff—

They changed the rules as soon as he got there and said, “Hey, you can't have all these electronic driving aids.” I mean, I know it makes the car really desirable, but no, this is not the same sport anymore because it decreases how much the driver matters so much that we aren't really willing to go there.

Senna was then left on a new team with a car that was just on par with, or quite possibly behind, the rest of the grid when they had to take out all these electronic innovations. And sadly, early in that 1994 season, the racing world would witness its most infamous and fatal crash in that Williams car.

Yeah, which was obviously Senna's death in 1994, which becomes this global moment. I believe still to this day Senna's funeral in Brazil is the largest-attended public funeral in history.

I think 3 million people showed up in the streets—

That's right.

—for his funeral.

It's this horrible tragedy. He had just sort of gone from rising star to clearly the best race-car driver in the world. Just this natural talent. There's a beautiful documentary released in 2010 for anybody who's interested in learning about his life and this crash.

I mean, one, it shone a light on the sport in general in a way that hadn't happened since the modern television era began.

Yeah.

Two, it specifically shone a light on how unsafe it still was.

Yeah. So it's interesting because by this time, the fatalities had really dropped off. I'll just go through the counts here by decade. In the 1950s, there were 14. In the 1960s, there was another 14. In the 1970s, there were 12.

Yeah, more than 1 a season.

Yes. So then they start implementing a bunch of obvious stuff. The FIA has to inspect every track and make sure it is complying with all the rules before every race. You can't have straw bales anymore.

That's right. The barriers used to be straw bales. Now you need these guardrails, and they have to be double-reinforced. You need separation on the pit walls. There was a lot of stuff going on near the pits where drivers were going too fast or accelerating too fast. Finally, you get fireproof overalls in the 1970s. You get fuel safety cells, mandatory seat belts, and multi-point harnesses. So, big steps in the 1970s.

Yeah, this is one of the craziest things to me in doing the research: for a long period of time, F1 drivers actually refused to wear their seat belts because they wanted to get thrown out of the car so they didn't catch fire after it crashed—

Right?

Insane.

They didn't want to limit their options in a dangerous situation.

So after all that, in the 1980s, you have 4 deaths, a lot better than 14 or 12. And in the 1990s, the only 2 deaths were that one weekend: Roland Ratzenberger and Senna. So it did kind of come as a shock because I think people felt like, “Oh, we're through this era. Things are a lot safer,” but obviously they still had a long way to go.

So what happened after Senna's death from a safety perspective? And what impact did it have? The biggest one is they just slowed down the cars, right? I mean, all this R&D and sticking to the road and getting crazy traction and taking high-speed turns—the faster you go, the more dangerous it is.

Interestingly, F1 racing today is not that much faster than it was in 1950. The top speed is about 40 mph faster than the old top speed. I would have thought, “Oh, all this R&D—these cars are probably 2, 3, 4 times faster.” No, they're not.

Right after Senna's death, they limited the aerodynamics of the cars. You couldn't use wings that were as big. You couldn't use diffusers that were as big. In 1998, a few years later, they grooved the tires to reduce cornering speed. So they actually looked a little bit more like the tires we use on the roads instead of the flat slicks that you see on real race-car tires.

There were also some structural things they put into the cars: deformable crash structures, survival cells, front-impact testing, and higher sides on the cockpits. They changed the tracks, too. A lot of corners were given larger runoffs and upgraded barriers. So that all did help. But in the 2010s, there were also 2 fatalities, and this is when the really big, noticeable change happened.

The halo.

The halo. So in 2018, in response to the 2014 crashes, the FIA said, “Enough is enough. We are going to mandate that every car has this really rigid, robust, heavy thing that you put right on top of the driver.” And there's a giant bar directly in the center of the driver's field of view.

So there's a giant compromise here, but it has saved at least 3 people's lives since then because it can protect a driver even when a car is upside down and skidding. These innovations have made it so we've had 0 fatalities since 2014. It's, I think, the longest stretch in F1 history without a fatal accident.

Yep. It certainly seems like this sport is a lot safer these days. Yeah, it's still dicey, but over the last 70 years, they've addressed all the lowest-hanging fruit in terms of ways that they can protect the driver.

Yep. So, to bring it back to the business narrative here, one of the great ironies is that the obvious right decision to focus on safety and slow the cars down just further fuels this sort of spending spiral among the teams. Because the harder you make it to go fast, the more they're going to be incentivized to spend every last dollar, look in every last little corner, and find every last little loophole to get an advantage.

Yeah. I mean, when the sport first started, there were giant gains to pick up left and right, and you could do all sorts of crazy stuff. We were talking about all the different car designs with spoilers that were up on giant poles. I mean, truly wacky ideas. There was a six-wheeled car at one point, right? Because it wasn't in the rules that you had to have only 4 wheels.

And over time, as they start adding more and more guidelines for safety and for all these other reasons, the way to succeed in Formula 1 shifted from making a more powerful engine or figuring out the very best aero to figuring out how to exploit the rules.

Yeah. And do more and more exotic stuff.

Yes. What is left unclear in the rules? Where can I see a little bit of daylight between what they intended to write and what they did write? What can I catch that the other teams won't catch? How do I sink $50 million of R&D into achieving some speed outcome with that?

It's really funny—I hadn't thought about this till now—but actually, the right analogy is the semiconductor industry and Moore's law. It's like a different set of rules. It's like the rules of physics instead of the rules of the FIA.

As you progress, companies like TSMC and ASML have to spend incrementally more and more capex and R&D every year to push the boundaries farther and farther. All the low-hanging fruit is gone, and they get more and more exotic with lasers melting tin just in time, et cetera, et cetera.

Good point. Yeah, I had thought about it that way.

Meanwhile, while the teams are spending themselves into unprofitable oblivion, Bernie, starting in 1993, becomes the highest-paid corporate executive in Britain, taking home $44.5 million in cash in 1993. And that's only what's reported to Her Majesty's Crown in that year, as we'll get into. He's also getting older by this point. He's in his late 60s.

He's on his second marriage, and he has 2 young daughters with his second wife, Slavica. He starts to think about estate planning and maybe some liquidity for his family and his estate. But in doing so, he just about causes the whole thing to fall apart.

Because even though he was the highest-paid corporate executive in Britain, that didn't necessarily mean that he was running FOA and F1 like any kind of professional organization. He did everything himself and intentionally didn't keep any records. He minimized the number of contracts that he would sign intentionally. He kind of operated F1 like a sole proprietorship, shall we say? The whole corporate operation was run out of a building in London that was also his house.

Seriously, the bottom 4 floors of the building were F1 offices, and then he had the floors above. Supposedly, he had all the rooms in the offices bugged so he could listen to what everybody was saying at every point in time. And famously, he would kick everyone out at 6:00 p.m. He'd be like, “All right, leave my house now. It's time for y'all to go home.” Yeah.

Wow. This continued until Liberty took over in 2017. He had a few lawyers and finance people to make it all function. But there was no marketing department for F1. There was no research or data department. There was no sales department besides Bernie.

Well, there weren't actually that many things to sell. They weren't selling a lot of sponsorship at the league level at that time. That was pretty much all teams. I guess TV rights you have to sell.

Exactly. On the sponsorship side, yes, but TV rights—they're in 90, soon 100, 120, 130 countries, all with different contracts and different providers. Bernie's just out there doing this more or less all by himself, though we should say he also had a right-hand man and essentially number two in the business: a former Formula 2 driver and also owner of another team in the league, the March team, a man named Max Mosley, who happened also to be a lawyer. Very useful for Bernie's activities.

There's this great quote that Bernie recalls saying to him when they first started working together: “Your problem, Max, is you always want things absolutely clear, and sometimes it's better if things are not clear.” So he gets with the program, and they pretty quickly become 2 peas in a pod. In 1993, that same year that Bernie becomes the highest-paid executive in the UK, he kind of shadow-arranges to get Max installed as the new president of the FIA.

Meanwhile, he had already somehow connived to get himself—Bernie—an official role at the FIA as the vice president in charge of promotional affairs. In addition to all this, at one point along the way, he also took over as the promoter of the Belgian Grand Prix at Spa.

Oh, so he was paying a race fee to himself.

Yes. So at various times, Bernie was serving in a principal role in all of the major F1 stakeholder categories: team owner, race promoter, official FIA representative, and, of course, CEO and owner of FOA and de facto the league itself. And I think at every point in time, he was always in at least 2, if not 3 or 4, of those roles simultaneously.

Unbelievable.

He really takes the “no conflict of interest” phrase to new heights.

Absolutely unbelievable. There's a great quote from Eddie Jordan, who is a Formula 1 legend. Do you know this quote?

Uh, no. No, no. He said that Bernie Ecclestone was someone who sold Formula 1 4 times, has never bought it back, has never lost its control, and still owns it. And do you know the most important thing? He never fucking owned it in the first place.

Yes. So, let's tell that story about how he sells it 4 times, never buys it back, and still owns it and never owned it in the first place. That is such a great quote. I hadn't found that. I love it. I love it. Yes.

Okay. So, Bernie's many sales and monetization opportunities. Here in the mid-1990s, he starts exploring liquidity options for himself. In particular, he wants to funnel that liquidity into a new set of offshore vehicles to avoid British estate taxes for his family after he dies. And this is a natural activity for somebody approaching their 70th birthday.

What Bernie didn't foresee, or anybody else, was—

He had another 25 years at least in him. At least, because he's still alive in 2026.

Yep. Now, also to be somewhat fair here, protecting his estate from the heavy British inheritance taxes is a legitimate concern, because otherwise there would be no way that his family could keep control of F1 after his death. It would have to be broken up and sold purely to fund the estate taxes. So, if you actually are a team, this is starting to become kind of an existential risk: What if Bernie dies suddenly and then they have to sell F1 off into different parts with different owners?

And you say, it's not just if you're a team owner. If you're a team owner or a race promoter, you want to play on here. So it just so happens here in the mid-to-late 1990s that we're at the height of the dot-com era.

Wait, that plays into this?

Oh, yeah. So what's the natural thing to do? Bernie's going to IPO F1.

Oh, I've totally missed this.

Oh, yeah. There is so much delicious chaos that gets unleashed here. By this point in time, Bernie's various companies—and there are even many more than we have talked about on this episode, just for simplicity—collectively are earning about £250 million a year in revenue. And they have 50%-plus EBITDA margins. Remember, this is at a time when the British pound is worth, call it, 60% to 70% more than the U.S. dollar. This is a very IPO-able business if it were a regular business.

Yes. Nonetheless, times are so crazy that Bernie hatches a plan with his bankers at Salomon Brothers to consolidate all the various F1 companies that he owns into a single holding company called SLEC Holdings. He's going to transfer his ownership of that new company to his then-second wife, Slavica, for tax reasons. So SLEC was short for Slavica Ecclestone—

and float it in a dual-listed IPO in the U.S. and England with an anticipated valuation of around $4 billion. We should also note here, too, we've been a little glib in this episode.

In 2023, Bernie ultimately pleaded guilty to tax fraud as a result of all the machinations we're about to talk about. He had to pay a £653 million payment to the Crown in back taxes and fines, and he also received, I think, a 17-month jail sentence, which was then suspended, probably in large part because of his advanced age.

Crazy. All of this lurking in the background may have been part of the reason that, famously, he turned down several offers of a knighthood throughout his life.

Yeah. Although you'd think it would actually bode better for you if you're a knight going into some lawsuit with the government over owing the government money.

Good point. Does the Crown sue one of their own? I don't know.

Anyway, as he starts formulating all these plans with Salomon Brothers, they're like, “Well, I see your revenue. I see your EBITDA.”

And what were those again?

£250 million of revenue, and call it 50%-plus margins on that.

Good business.

Yeah, great business. What they don't see is any sort of formal legal control or document that he has from anybody giving him the actual rights to a lot of this. He's got the actual rights to the TV stuff, but the promoter-fee stuff, the transportation—we haven't even mentioned the Paddock Club that gets set up along the way here. There's a lot of money flowing through that.

To be clear, these are all income streams to Bernie. Of course, we've talked about the media rights, but what a race promoter does is, if F1 is thinking about going to a racetrack, the person who owns the racetrack, a company affiliated with the racetrack, or a government affiliated with the racetrack pays a giant amount of money to Bernie for the privilege of having a race there. That's a promoter fee.

Yep. So, conveniently, right at this same time as they're doing IPO preparations, it comes time to negotiate the fourth Concorde Agreement with the teams and the FIA. In this new agreement, Bernie swaps in a new entity called Formula One Constructors Association Administration Limited—a new company owned by Bernie—for the original FOA, so that he can now legally have all the rights to everything he's doing.

And remember who the new president of the FIA is who just got installed.

Max Mosley.

Yeah.

So he's just going to rubber-stamp it, of course.

Or that's at least the belief.

Yeah. Well, it passes. Let's just say that the path is now paved to an IPO. Except there's one snag that comes up: news of the plans, as well as Bernie's recent consolidation of legal power, gets leaked to the press. This causes the European Union's antitrust investigators to start poking around.

You don't say.

Bernie is doing so much self-dealing here that there's no way he's going to survive an investigation.

So Bernie shelves the IPO idea and also resigns from his official role as a vice president of the FIA. The combination of those 2 things is enough to at least get the EU off his back for the moment. But he needs another plan for getting liquidity.

He switches banks to Morgan Stanley and convinces them that, instead of IPOing, they should issue debt on F1 and use the proceeds from the debt to pay himself and his new offshore entities a special $1.4 billion dividend.

What? Secured by the future TV-rights streams—the revenue streams from the future TV rights?

This deal actually happens. It's called the Bernie Bonds.

It is always something you should be a little bit worried about if a company is raising a giant amount of debt principally to pay out its primary shareholder a special dividend.

Yes. Especially if it's Bernie.

Why would you buy that debt?

That's a really good question. The offering, I believe, was intended to be $2 billion.

But there was not enough demand, and Morgan Stanley could only rustle up $1.4 billion from investors willing to do this deal.

Either way, the deal happens on a Friday. Everything gets done, the debt is issued, Bernie gets his dividend, and money gets transferred to the offshore entities.

On the following Monday, Bernie calls up his bankers and says, “Oh, there was something else that I didn't tell you. I'm having triple-bypass heart surgery today.”

Today? They just did the debt deal, just issued the special dividend, and took $1.4 billion out. Three days later, Bernie is having triple-bypass heart surgery. The entire future success of this thing is heavily dependent on Bernie being in the seat.

Yes. Fortunately for him and everybody else, he survives the surgery and gives a quote to the press from the hospital room: “I have disappointed so many people.” One of his principal bankers would later recall her response being, “If you make it out alive, I'm going to come kill you myself.”

Oh, man.

Well, Bernie survives. Later that year—we're in 1999 now—his wife, Slavica, meaning really Bernie, starts selling off equity stakes in SLEC to various private equity firms. I cannot make this up: in February 2000, they sell a 37% stake in F1 to Hellman & Friedman, the giant private equity firm based in San Francisco.

H&F then goes and buys out some of the other minority owners that Slavica and Bernie had been selling stakes to. Hellman & Friedman collectively gets a 50% ownership stake in F1, and then they negotiate with Slavica and Bernie an option to buy another 25% from them for £600 million and gain 75% majority ownership of F1.

They get the option. The option is papered 1 month later, in March 2000.

This was in March 2000, right when the dot-com crash happened.

The dot-com crash is about to happen, but it gets crazier before the bubble bursts.

Really?

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 in SLEC immediately. This is the height of dot-com craziness, right before the crash.

EM.TV had just previously bought the Jim Henson Company in the US, which, of course, made the Muppets. They were trying to roll up all of these media properties and bring them into the digital era, or something—a sort of dot-com fever dream.

H&F hits the bid. They sell out.

So, how long did H&F own Formula 1?

1 month.

H&F owns Formula 1 for 1 month. They make an immediate £241 million profit in 1 month. On how much invested?

£1.1 billion, £1.2 billion invested.

Oh, my God.

So, a 20% return, but—

In a month.

I got more. So, 50% of F1 is now in the hands of EM.TV. They want to exercise the 25% option that H&F had negotiated, but they don't have any more cash. They blew it all on the first transaction.

And the Muppets.

The Muppets. So, EM.TV goes out and does another €1.6 billion debt deal to raise the money. They take €600 million from JPMorgan and Lehman Brothers, and they take €1 billion from a local German bank called BayernLB.

They use this debt to exercise the option. They now own 75% of F1, and Bernie and Slavica hold the last 25%.

Wow.

And then the bubble bursts.

And wow. So, all that was done in days, weeks—right up to the end times.

The music is ending as this is all happening. Bernie, meanwhile, is just getting tons of money into his bank accounts. The bubble bursts. EM.TV misses its interest payments.

Shocking. Shocking.

Another German media mogul named Leo Kirch comes in and saves the company. His company, Kirch Media, takes over EM.TV. They now assume F1 ownership. Eighteen months later, they go bankrupt.

So, in 2002, the net result is that ownership of the 75% stake in F1 transfers to the debt holders.

Which is who?

BayernLB, the German bank, JPMorgan, and Lehman Brothers.

Oh, my God. Crazy.

Okay, so it all comes to a head in 2004, when the banks are super frustrated because Bernie's still running the thing as he always did, paying himself everything. The banks keep trying to tell Bernie what to do. They're issuing him directions as if he's their employee, and Bernie just keeps ignoring them.

So, the bank consortium sues Bernie for control of the sport. The judge rules in favor of the banks. However, Bernie addresses the media after the court proceedings and says that the verdict would mean, quote, “nothing at all,” and that he's planning to continue business as usual because he's got an ace up his sleeve.

Separately, he has been negotiating with CVC Capital Partners, the large European private equity firm. The deal gets done with CVC. They buy out the banks, and they also buy out Bernie and Slavica's 25%. So, more money going to Bernie here.

Whoa. But Bernie will remain CEO.

He's just an employee. He's hired by CVC to continue being Bernie, and he gets the opportunity to use some of his proceeds to invest with CVC alongside them in the deal.

Amazing.

All told, CVC and Bernie, for his portion, spend about $2 billion acquiring 100% ownership. They finance $1.1 billion of it with another set of debt, so they put $900 million of cash equity into the deal.

Compared to, I believe, over $3 billion that Bernie and his trust had pulled out of the company through all the debt and equity machinations that we discussed earlier.

Unbelievable.

Oh, my goodness. This is important to know: the CVC-Bernie buy-in to this new F1 entity is about $900 million of equity.

Yes.

$2 billion total purchase price, including the debt. Bernie resumes his job with renewed vigor, now that he is newly incentivized to grow revenue and profits again.

So, the first thing that he does after CVC cleans up the ownership is he goes right back to his original bag of tricks, which is extracting more money from race promoters.

So by this point in time, 2005-ish, there are basically 3 types of Grand Prix races. You have the prestigious historic ones, like Monaco, Monza, and Silverstone. They’re not going anywhere.

The European heritage tracks, if you will.

Exactly. They don’t pay nearly as much in race fees to F1, but they’re sort of there to build and maintain the brand.

Yep.

Then you have a new set of races, like Bahrain and China, that had just come on.

The flyaway races.

They are paying huge fees to F1 in order to have their races on the calendar.

We’re talking 2–3×.

Yes. $30 million, $40 million, $50 million a year-ish.

And today, even into the $60 millions.

Yes. The problem-opportunity at this point in time is that you had a whole bunch of races in the middle: Canada, Australia, Spain, Belgium, the second race in Germany that wasn’t the Nürburgring, the second race in Italy that wasn’t Monza, etc., etc., etc. Those other races actually made up most of the calendar, but they neither brought in a lot of revenue nor were they any sort of strategic value. Nobody got excited.

Right? They weren’t an expansion opportunity for the sport. They weren’t a way to find a new audience.

Yep. So Bernie goes out and courts Abu Dhabi, Singapore, and India to come in and displace some of those middle races and be new Grands Prix. Just like Bahrain and China, these are big-money deals. India is $40 million a year just in race fees to F1. Abu Dhabi is the biggest: They commit to a $1 billion total F1 investment over the coming years, including constructing a whole new track from scratch in the desert outside the city.

So Bernie’s on a roll with these new races. Then, in the early 2010s, Bernie lands the big one: Russia. He’d been trying to get a Russian Grand Prix for a long time. Russia had just won the 2014 Winter Olympic bid for Sochi and put $50 billion into the ground in infrastructure there for the Olympics.

Bernie and F1 convince them that the best way to amortize the cost of this investment in Sochi is to put a race there after the Olympics.

Probably not wrong.

Totally not wrong. So they sign a deal with Russia, and of course it’s a deal with the state. Anytime you’re negotiating with Russia, you’re negotiating with the state.

Increasingly, a lot of these flyaway races are.

Yes. This is not unique to Russia.

It’s not a local entrepreneur or race promoter with a racetrack. These are sovereign deals.

Yes. They agree to construct a new $270 million F1 track around the Olympic Park and pay F1 $50 million a year for 7 years to host the race.

There’s an amazing Bernie-and-Putin story. As they’re in final negotiations for the deal, the Russian contingent asks Bernie to fly over to Sochi and sit down with Putin to finalize it. To which Bernie responds, “Do I look stupid? If they think I’m going to go negotiate this contract with Putin, no way. If they want me to go, they can send back the contract first.”

Signed, which they do. Then Bernie goes to Sochi, sits down with Putin, and does a press conference announcing the whole thing.

Wow.

I guess that’s how you negotiate with Putin: You don’t negotiate with Putin. So ultimately, the Russian Grand Prix would get canned early in 2022, after Russia invaded Ukraine.

I was going to say, it’s not on the calendar I saw.

No. No. Bernie would get asked on a British morning TV show after the Ukraine invasion what he thinks about all this, and he famously says that Putin is a “first-class person” and that he, Bernie, would take a bullet for him.

Wow. Okay.

Yeah. Okay. I did hear from some folks that I talked to—and I’d always ask the question, “What was it like working with Bernie?” Overwhelmingly, people said delightful.

I could believe that.

That when all the dust settled, you kind of looked at the terms and went, “Oh, whoa. There’s actually not much here for me.”

Yeah.

But he was just delightful to work with.

He’s a very loyal partner.

Yeah. So anyway, that’s the racetrack side of things under the reinvigorated Bernie and CVC. The other big piece, of course, is the team-relations side of things. We previewed this earlier, but at this point, the whole shtick of “Hey, I’m getting rich, but you’re getting rich, too,” has worn out its welcome.

There’s also the fact that now it’s not just Bernie getting rich; it’s the private equity firm that’s also getting rich on the backs of the teams and all the investments that they’re making into the cars and R&D. By this era, in the mid-to-late 2000s, it’s truly gotten out of control. The top teams are spending like $400 million to $500 million a year on their cars. And the race calendar is insane, because it started in the 1950s and 1960s with, “Hey, we’ll go wherever we can get enough teams to race,” and then it turned into, “We’ll go wherever anybody will write a $40 million or larger check.”

Let’s put this circus on a plane to Russia and China.

And now, by this point in history—the mid-to-late 2000s—the broadcast calendar makes no sense. You’ve optimized only for who will pay us the biggest race-promotion fees. These races are being run at all hours of the day and night.

Yes.

So team relations are pretty bad. And then 2008 hits. The biggest teams with the biggest budgets, yes, they’re spending themselves way into the red, but at least they were sort of backstopped by actual consumer car manufacturers that owned them and were investing in them for all sorts of strategic, R&D, or brand-marketing purposes. So you had Honda in the sport, Toyota, BMW, obviously Ferrari—

Renault.

Yeah. As we hit 2008 and the financial crisis, the consumer-car businesses for all of these guys except Ferrari just fall off a cliff. So all of a sudden, it becomes no longer tenable, either financially or from a public-perception perspective, for Honda or BMW, etc., to keep operating these money-sinkhole F1 teams.

Yep.

So, as they get into 2008, Bernie, CVC, and the FIA all team up and float a solution—a lifeline—to the teams. “We are going to help you guys institute a cost cap on manufacturing, and we’ll help you design it. Let’s get it approved by all the teams. This will save you.” Basically, what they’re proposing is the F1 equivalent of a salary cap in other sports, like the NFL or the NBA, except instead of on the players, the salary cap is going to be on the investments into the cars.

Yes. And there are some teams that are fans of this, and there are other teams who hate this more than anything they could possibly imagine.

Yes. Specifically Ferrari and McLaren. Ferrari would like nothing more than to lose half a billion dollars a year making their F1 cars, as long as they get to win. They do not care. It pays back infinitely in brand marketing if they are just a winning F1 team for their particular line of business.

You know what car manufacturer is basically unaffected by a global financial recession? Ferrari.

Yes. Their customers are staying on the waitlist no matter what the financial climate is out there. So Ferrari and McLaren have a lot of the same dynamics. They threaten to pull out of the sport, and ultimately they bully all the other teams into joining them in opposition to the cost cap.

There’s also all of this pent-up bad blood against Bernie, all these deals that have happened, CVC, the FIA, etc. In 2009, 8 of the 10 teams threatened to pull out of the sport and start a rival breakaway league called FOTA, the Formula One Teams Association.

Yeah, and they announced that they’re doing it and they’re creating their own series starting in 2010.

Yeah. So the Formula One Teams Association, or FOTA, was really 2 things in 1. One is: Can we band together as teams to negotiate as one and get leverage in whatever we’re negotiating over? In this instance, it’s that we don’t want a cost cap. The other thing is that it is a legitimate breakaway series.

Yeah.

Which would be a really hard thing to start. I mean, to go figure out how to sign all these new deals with the best tracks in the world and media-rights deals. There’s a lot of value in what Bernie and the series are actually doing.

Yeah, so it works. The cost caps didn’t happen. They did impose a 10-year freeze on engine development. And so, in the short term, this is kind of how these negotiations go: The teams got what they wanted without actually having to leave by having a credible threat to leave.

Yep. And specifically, what they got was Max Mosley’s resignation from the FIA, or at least agreement not to stand for reelection.

It’s hard for them to actually link arms for too long because there are 2 reasons. One, Bernie and Max could offer different things to different teams to get them to individually cave. So they can go to the Brawn team—and we’ll talk about the Brawn team in a minute—but there was this shoestring-budget team, a scrappy upstart. Bernie had been withholding their payments from the previous year, when they had raced as Honda, because Bernie’s opinion was, “Well, you’re not the same team, so you don’t deserve your payout.”

Save it.

Brawn really needs the cash. So it’s very easy to go and get them to capitulate when you owe them a few million bucks and you’re going to wire the money immediately as long as they break ranks with the other teams. It’s a great way to bust a strike. But the biggest thing is just this kind of misaligned incentives, where all these constructors actually have very different reasons for racing and different incentives, and so it’s hard for them to be unified on anything, given the wildly different incentive set.

Yep. So, I don’t know if you knew this, Ben, I talked to Zak Brown, the CEO of McLaren Racing, to prep for this episode, and I specifically asked him why teams don’t form a breakaway series now.

And we'll talk about the economics of what the business looks like today. He had a great answer. So he said, “Prior to Liberty’s acquisition of F1, there had been many discussions and even attempts at a breakaway series. Of course, the teams would unite around the sport themselves, but it always fell down when the teams had to discuss how to share the pie. And it’s one of these things where Ferrari is going to say, ‘We’re entitled to this and our heritage for the sport.’ And McLaren and Mercedes, they’re going to say, ‘Oh, we’re really good, so we deserve more.’ So, yeah, they just never would agree on how to divide up the pie.”

Yeah. The net of this is that team and league relations in F1 are at an all-time low.

Yes.

Here at the end of the 2000s.

Yeah. And we didn’t even talk about—if you’re a fan of F1 during this time period, you know about Spygate and Crashgate. In Spygate, McLaren magically wound up with a giant binder full of the complete specification of Ferrari’s car for that year, and there was this giant hullabaloo, court hearings, and everything about these stolen documents and whether they used them to win. At the same time, you have Crashgate.

Yeah, this is bad. It ended up looking pretty conclusive that a team intentionally had one of its drivers crash in order to get a safety car to come out, which would advantage its other driver to do better in that race, putting one of its drivers’ life at risk.

Not just one of its drivers—other drivers, too, could be involved in the crash. And they’re covering it up.

These are major sports-integrity issues.

Public trust is at an all-time low.

Yeah. So, ironically, miraculously, and certainly despite all of Bernie’s best efforts to the contrary, pretty much this whole situation gets fixed by 2 new teams that enter Formula 1, whom nobody saw coming. One was an auto manufacturer and a dark-horse reentrant into the sport.

Yep.

The other was a—well, I was going to say energy drink manufacturer, but I don’t think we can say manufacturer because they don’t actually make the drink.

An energy drink company.

An energy drink marketing company named Red Bull.

All right. So, David, you mentioned an energy drink company.

Yes. So let’s start with Red Bull. The Red Bull company story itself absolutely deserves its own Acquired episode someday because it is truly insane. So, briefly, Dietrich Mateschitz was an Austrian toothpaste salesman for Unilever and P&G who went on a business trip to Thailand in 1984, decided to radically change his life, and brought back a local Thai energy tonic to start selling—or, again, I can’t even really say that because he outsourced manufacturing—and turned it all into a company that now does over $10 billion a year in annual sales. Astonishing.

Red Bull’s entire business model is, “Yeah, we sell these drinks, but really you’re buying the drinks to associate with a lifestyle, and we need to educate you about the lifestyle that you are associating yourself with.”

So, in 1989—which is actually 5 years, pretty quickly after Dietrich starts the company—Red Bull sponsors its first F1 driver. Then they steadily grow their investment in the sport until ultimately they become the title sponsor of the Sauber team in 1995.

Is that the team that’s now Audi?

Yes.

Sauber?

Sauber. Yep. Yep. Yep. This is where Red Bull starts.

Huh. The Red Bull entrance into F1 was so perfectly timed because this is right as the EU regulations are coming online, forcing tobacco finally out of the sport.

And so the great irony is that it’s actually an energy drink company that replaces the cigarettes. There’s a great quote that Josh and Jonathan have in The Formula: “Two decades after Marlboro executives looked at F1 drivers and saw the heirs to the American cowboy, Mateschitz recognized them for what they really were: over-caffeinated adrenaline junkies with scant regard for their personal safety. It was a match made in marketing heaven.”

Perfect.

Perfect. So Red Bull totally breaks the mold of what an F1 sponsor should be doing. Previously, the sponsors were all leaning into the prestige aspect of the sport—the luxury, the aristocraticness of it, all the Monaco stuff, the oil companies, the watch companies. None of these sponsors are rocking the boat, right?

And importantly, just like F1 and Bernie himself, none of these sponsors—except maybe the cigarette companies—are interested in younger audiences. Bernie has a great quote about this when he’s asked about the challenges F1 faces with its aging demographic. He says that younger audiences are not a priority because they “don’t buy Rolexes.”

Yet—that is the key thing, Bernie.

Anyway, Red Bull, though, is the opposite of this. They are all about young people and the extreme lifestyle. They don’t just sponsor F1; they sponsor all these extreme sports, like jumping out of planes in the stratosphere—

Balloons.

Yeah, they are unique among the F1 sponsor set. The problem, though, for Red Bull is that Sauber isn’t very good. So there’s another great quote from Mateschitz in The Formula: “If an insurance company sponsors a team and that team loses, people don’t change their insurance company. But when Red Bull loses, people get a new drink.”

Yeah.

In 2004, Red Bull dumps Sauber and makes the radical decision that, rather than sponsoring another team, they are going to directly get into the business. Mateschitz and Red Bull buy the failing Jaguar Racing team, which was at this point owned by Ford because Ford had acquired Jaguar and, with it, came the F1 racing team. Jaguar was going through all sorts of trouble, as was Ford, during the financial crisis and the lead-up to it. Things are so bad for the team that Ford is willing to sell the whole team to Red Bull for 1 British pound.

Really? I didn’t realize that.

Yep. The purchase price that Red Bull paid was 1 British pound to establish Red Bull Racing.

Now, the problem is they still have to make the team good. But can we talk about the amazing full-circle moment of this year, now that Ford is partnering with Red Bull on their power units?

Yes—partnering with Red Bull on their power units.

Yes. Yes. It’s so full circle. It’s amazing.

Also, Ford actually did make engines for F1 for a long time. So it’s interesting that their exit from the sport was when they were no longer an engine manufacturer. Then they had this weird team with Jaguar. They divested that, and then they were dormant in the sport for 20 years.

Yeah.

Back to Red Bull taking over: yes, they need to make the team good. Obviously, that’s not going to happen overnight, but they start putting steps in place. What they can do now that they actually own a team instead of just being a title sponsor is act however they want within the paddock.

So when Red Bull rolls up to the paddock the next year, in 2005—which, remember, is the first year of CVC’s ownership and the new Bernie regime—they bring, no joke, a mobile nightclub named the Energy Station as their team paddock facility to all the Grands Prix around the world. And they have a radical open-door policy.

Previously, the paddock was a sacred place, and access to the Paddock Club for corporate sponsors and high rollers was very limited.

Red Bull rolls in, and they're like, “The door is open all the time. Anybody who is in the paddock can come into our Energy Station. You could be from any other team, any other sponsor, or a guest. Just come on in and party with us.” So they have DJs at all hours. They have a team of girls—the Red Bull Formula Unas—who are there as hostesses. They have a swimming pool on the roof.

Do you know what they did in Monaco?

I read about this, but I can't remember.

There's not room for the Red Bull Energy Station because it's Monaco, and there's not room for anything. So they constructed a temporary building, put it on pontoons, and had it out in the harbor.

Amazing. Amazing. Yeah, they're just like a giant middle finger to the whole establishment.

Yes.

There's alcohol everywhere. Drinks are flowing, and of course, there's free Red Bull for all. It's genius. It's absolutely genius. So all of this is masterminded by Dietrich, and the young team principal that he hires and takes a chance on to run the team is Christian Horner.

Yep.

If you watch Drive to Survive, you probably know all about Christian Horner.

Yes.

The other team owners and principals—and Bernie—hate this. They hate it so much. They're trying to control everything. This is a serious sport. This is a serious enterprise. And here's Red Bull just partying.

Red Bull got much better as a racing team, but the essence of the strategy is basically still the same. They generate zero profit, despite being one of the best teams and the highest-revenue teams—or near-zero profit, very thin—to create the biggest marketing spectacle they can to sell energy drinks. It's just a super-different business model than anyone else in the—

It's almost like Amazon and streaming, like Prime Video, which we'll talk about later. The business model is not the streaming, it's—

The retailer.

Anyway, obviously, all the other team owners hate it, but the drivers and the staff love it. These are all mostly young people who are driving the cars and working on the engineering as mechanics. All of a sudden, there's a 24/7 party following them around the world. Like, “Hell, yeah.”

Yeah.

McLaren goes so far as to forbid all members of their team from entering the Energy Station. It's like a fireable offense if you're caught.

No fun. And honestly, you're going to go have drinks, you're probably going to share team secrets. It's probably a good policy.

Exactly. Exactly. So one night, back to Christian Horner and the strategy of how to actually start building a winning team, he clandestinely invites McLaren's legendary technical director over to the Energy Station for a chat late at night, against the rules. That technical director just happened to be a man named Adrian Newey, the single most legendary—

Car designer, probably in history.

The way people talk about Adrian Newey is basically the same way they talk about Kelly Johnson from Skunk Works, from our Lockheed Martin episode. I've heard the comment from more than 1 person: “He can see air.”

Yes, he is a savant of aerodynamic design.

And Adrian's book is great, talking about his career in F1 and what he's learned. He still draws by hand.

Yeah. Yeah. In the age of CAD and AI and everything.

He just envisions the physical forms of cars, how air will flow around them, and then draws with a pencil.

Yep. So Horner and Dietrich lure Newey into joining Red Bull. And this is how they build a winning team. It takes a couple of years to ramp, but starting in 2010—what's that? 5 seasons after they enter the league—Red Bull starts a run of 4 consecutive drivers' and constructors' titles—

From 2010 to 2013. And importantly for the product on the field, up until this point, the racing had gotten pretty boring because Ferrari had been on this huge run where Michael Schumacher was just dominating the sport and blowing away all competition.

Well, I mean, there were some years where it really came down to the wire or didn't go Schumacher's way. But if you were an F1 fan in the '90s and early 2000s, it is totally fair to say there was Schumacher and then there was everyone else.

Yeah. And that had started to fade, as we'll get into in a minute.

And was this Sebastian Vettel in 2010 that kicked off the Red Bull run?

Yep. This starts a new dynasty within F1 of an energy drink company.

I know. And it's so fun watching. They're truly a central figure of the Drive to Survive narrative. Starting with Sebastian all the way through, Max Verstappen is arguably the best driver in the sport today. It's so fascinating that he's on an energy drink team—

Right? The most insane thing about Red Bull, I think, is I used to think they were just a sponsor. Like, “Oh, this energy drink company uses F1 for marketing.” But they have developed so much competency in actually being a constructor that—

They're building a car, right? Like a road car.

Yeah. They're like a real car company now.

Yeah.

Not technically a road car, but a track car. So they're building a supercar, limited production and all that, but a car that you can go buy and race on a racetrack. I think it's the RB17. It's the last thing Adrian Newey did when he was there—design this car. You look around and ask, “What does a car company do?” It makes the body. It makes the power units. Red Bull has Red Bull Powertrains, which has a lot of former Honda people they've hired, and now they're working with Ford. They do a lot of the things that a car company does.

Yep. It's an incredible story. And as you start to think about dragging this sport, kicking and screaming, into the 21st century and positioning for the social media era, you could imagine that this is a really good thing. So meanwhile, during this era, as we alluded to earlier, there is another hugely successful team that builds its own dynasty—

That comes out of nowhere—

Also gets purchased for 1 British pound. And listeners, I suspect unless you are a hardcore F1 fan, you probably will not be able to guess what team this is, but see if you can figure it out as we go along.

But who is it in 2006, David? What does the team start as?

So we talked a second ago about Michael Schumacher's dominance of the league in the late '90s and early 2000s at Ferrari. Side note: did you know he was 1 of the first athletes to pass $1 billion in career earnings? It was apparently right around the same time as Tiger Woods.

No way. I didn't know that.

Yes.

How?

Michael Schumacher was getting paid $60 million a year.

Wow.

In that era. That's what Max and Lewis make today.

Today.

And with all the inflation that's happened and the growth of the sport, this illustrates just how much Ferrari is perfectly willing to burn money to win. They will generate an infinite amount of losses in order to win in Formula 1. You had the driver of his generation, the person who took the torch post-Senna, and who is so obviously the best driver.

And obviously, most athletes that you would think of who have become billionaires didn't become billionaires because of their sport salaries, right? It was off the field, but—

Schumacher had a lot of off-track stuff, too. Interesting. Interesting. Huh. All right. Well, one thing we didn't talk about in Schumacher's dominance at Ferrari was that, yes, it was him. He was the driver of his generation, but it was also the engineering team behind him, and specifically the engineering team led by Ferrari's technical director at the time, Ross Brawn.

Okay. And the whole tires thing. We have to talk about that.

Okay. Well, I'm going to get into it. So what Brawn realized, maybe not first, but I think better than anybody, was the dynamic we talked about earlier: after the FIA started clamping down so much on the rules, the way to win was to exploit loopholes. Brawn figured out a whole bunch of stuff together with Schumacher—

And Schumacher's work ethic was unbelievable. There's another great documentary that people should watch, Schumacher, on Netflix. He was like a driver and an engineer, or a driver and a mechanic. He was always in the garage. He was there at all hours. He was getting as many test laps in as he could. And this was an era where you could do that. If he wasn't on the track and he wasn't in the garage, then he was working out. His work ethic was just unbelievable.

Yeah. He's an animal. He's like the Max Verstappen of his era—

But he's got a wrench in his hand, and he's also the ultimate collaborator for the engineers.

Yes. So they figure out that there's a loophole with the way tires work in F1. For a brief period of time, you could pick between 1 of 2 tire manufacturers. Bridgestone had a big issue, so almost everyone said, “Oh, we're going to move away from Bridgestone to Michelin.” Ferrari and Ross Brawn, in particular, realized, “Well, wait a minute. If we're the only ones that stick with Bridgestone, yeah, it's counterintuitive because these tires apparently have a big problem. But if we send a bunch of engineers over there and they send a bunch of engineers over here, we can effectively have custom-made tires just for our car and just for Michael's driving style.” They spent a year working together, basically developing their own custom tires, whereas everyone else on the Michelins had to use this common-denominator tire that worked with all the cars and all the driving styles.

Yep. It’s important to note here for folks who are not deep F1 fans: the one—I think maybe the only part of F1 cars that’s mandated in common across the whole league—

Tires and the halo.

Tires and the halo. Yep, yep. Whereas if you look at NASCAR or other motorsports, a lot of stuff is mandated to be common, and the degrees of freedom of parts of the car that you can actually engineer is much, much, much narrower. It’s part of what makes F1 unique and so expensive: every car truly is custom-engineered except for the halo and the tires.

Yeah. Teams are designing their own bolts.

Yes, yes. So here, Brawn, Michael Schumacher, and Ferrari are like, “Oh, wow. We just found a way to custom-engineer our own tires.” Like, “Hell yeah.” So that was a big part of Schumacher and Ferrari’s dynasty.

So the FIA eventually closes the tire loophole. Brawn leaves Ferrari and becomes the team principal of Honda, which he joins in 2007 ahead of the 2008 season. Now, remember we said a minute ago that in 2008, with the financial crisis, Honda exits the sport.

Yep.

So Brawn is 1 year into the job, and they come to him and they’re like, “Ah, sorry, we’re going to shut the team down. We have to get out of the sport. This is untenable in this environment. We can’t be operating an F1 team.” Brawn is scrambling. He just went from the top of the world at Ferrari to becoming team principal at Honda, and now he’s out of a job, with, as good as he is, no real prospects for another one because these are bad times for the sport.

And there are very limited chairs in this world.

Yes. So he’s scrambling, and he’s like, “Wait, wait, wait a minute. Honda, you’re worried about looking bad to the public and shareholders by continuing to operate an F1 team in this climate. You know what’s going to make you look even worse? If you lay off the 1,000 people who are part of this team. So how about instead—”

You just give me some time. Yeah, I understand you might need to lay everyone off. Look, that’s the business reality. Give me a few months, and I will find a buyer for the team. I just need you to keep everyone employed so that there’s something to sell.

Yes, yes.

He looks around and can’t find anything, as you would expect. Come—

2008, the world’s falling apart.

He comes back to Honda and says, “Look, I know we have very limited time left. We’re not going to find another buyer.”

What about a management buyout?

Yeah, I’ll take it off your hands. And when I say buyout, I’m also not really going to give you any money.

Yeah.

But what if there’s some period of time where you agree to keep funding people’s salaries? I’ll give you 1 British pound. Yep.

You give me the team, and then at some point you’re fully out, but we have some sort of consulting agreement in the meantime, some contract—

You know, some runway to do a soft landing here for the team and these people.

But you get to tell your board and the shareholders that you’re no longer wasting money on this extraneous thing—

And you’re not going to lay off 1,000 people in England.

Yeah.

So, apparently—I don’t know if you read this—Bernie, of course, gets wind of what’s going on.

Oh, Bernie does not like Ross Brawn.

He does not. No, no, no. He doesn’t like Brawn anyway. He definitely doesn’t like somebody else buying a team for 1 pound. He tries to swoop in and convince the Honda board that they should sell it to him instead.

Oh, I didn’t realize that.

Yes, yes, yes. Never mind that he’s the head of F1.

Yeah, well—

He’s still willing to buy the team.

He just generally doesn’t like the idea that there’s a transaction that doesn’t go through him.

Yes, or that there’s a good deal to be had and he’s not getting in on it. Great drama. If only this drama could be televised.

In fact, there is a great Keanu Reeves documentary.

Yes, yes. It’s called Brawn: The Impossible Formula 1 Story.

Called Brawn: The Impossible Formula 1 Story, about this team. It’s awesome.

Anyway, back to the story at hand. Amazingly, Honda doesn’t go with Bernie. The board decides, “You know what? We’re going to stick with who brought us here. We’ll sell the team to you, Ross, for 1 pound. But when we say we’re out, we’ll fund you for the year, but we’re really out. We’re not going to give you an engine anymore.”

Right. That’s why Ross is like, “But surely I can just enter into a commercial agreement and pay you $15 million or whatever it is to be the engine supplier, and you’ll give me an engine. You’ve already made the engines in the years past. They’re going to be the same or similar.”

This used to be your team, right?

Nope. They’re like, “This is where we draw the line. We can’t be putting any more money besides the salaries of these people into F1.”

So, quick pause. It is worth noting that every team makes its own engines. There are only a handful of engine suppliers at any given time. Mercedes today makes the engine for the Mercedes car, but McLaren also goes and buys the engine from Mercedes. So this is reasonably common.

Yeah. Ferrari will supply engines to other teams.

Cadillac is racing with a Ferrari engine.

Yep, yep, yep. Exactly. So Ross is desperate. He goes and chats with Mercedes, who, as you said, Ben, had been out of the sport since 1955 or whatever we said earlier.

Yeah, they at this point in time do not have a team, and since that horrific crash all those decades before—

Not in F1.

Not in F1, but they had been supplying engines to McLaren.

And it sort of doesn’t fit in the chassis that Honda had developed. They had to do some real aftermarket, janky stuff. So everyone thinks this car is going to absolutely suck.

Suck. Yes. Suck.

Oh, by the way, the team is called Brawn GP. It’s not even a real company. The team just looked at Ross Brawn and they were like, “You’re a leader, so how about calling it Brawn?” The whole—

Yeah. They couldn’t even line up a title sponsor.

And they were even landing sponsors for individual races because they couldn’t actually land a sponsor for the whole season—

The financial crisis. Nobody wants to—yeah, exactly.

The whole thing. Nobody expects anything performance-wise

Out of this team.

Yes.

Well, it turns out that before the Honda engineers got pulled away back to Japan, they had come up with a new aerodynamic innovation called the double diffuser.

Oh, yes.

I have no idea how this thing works. I just know that it performs like a beast. Most things you read about it really don’t explain how it works, either. In general, what diffusers do is direct the airflow coming out from the bottom of the car up and sort of out of the way, ideally shaping the aerodynamics as the air escapes the back of the car.

Somehow they came up with a double version of it.

But everyone’s challenging it at the beginning of the season, going, “Wait, wait, wait. This isn’t legal.” It performs so well that by midseason, everyone else has adopted the double diffuser, too.

Yeah. I mean, you’re burying the lead, which is that in the first race of the season, in Australia in Melbourne, these 2 Brawn GP Franken-cars roll out and win 1st and 2nd place.

Like, they blow away the field.

Yes. And I wish I had known this, David. We had just started our research on F1.

And we met Jenson.

We met Jenson. We went to the Las Vegas Grand Prix with ServiceNow. Part of the whole weekend of festivities they had planned for us was a luncheon with Jenson Button. He was telling the stories of Brawn GP. I did not appreciate that this was the outlier of outliers. No team has been on such a shoestring budget, with this type of Franken-car and this real underdogness, and performed with such spectacular success the way they did.

Yeah. Usually it’s either you’re Ferrari and you invest hundreds and hundreds of millions of dollars, or you’re Red Bull and you hire away Adrian Newey. Even then, it takes several years to develop a winning car. This just doesn’t happen in F1.

No. And so, David, how does the season end? By a hair’s width, Jenson and Brawn had accumulated enough of a lead in the first half of the season that even though they don’t win a single race in the second half of the season, after everybody else also figures out the double diffuser, they still end up winning both the constructors’ and drivers’ championships. So, in 1 year, this team and Ross Brawn went from new Honda team principal to nearly out of the sport, to owner of his own team for 1 pound, to world champion.

This is what makes F1 great. It’s really not watching the races. The races are fine. There’s not that much passing. Once you get through the first turn, you kind of know who’s most likely to win, and it’s probably from 1 of the top 4 teams anyway. It’s not any given Sunday the way an NFL game is.

But this act of heroics and teamwork and personality and perseverance—

And engineering—

And engineering like this is what makes F1 great.

So there’s just one problem for the new world champions: They don’t have funding for the next year. There’s no way, as cool as it would be to continue the Cinderella story, Brawn GP in its current financial state and ownership can continue for the 2010 season.

Yeah.

There’s just not enough money to invest in developing the next car. So Ross knows that he has to sell the team. Of course, who’s the logical buyer now? Mercedes. They don’t currently have a motorsport team, and they’re clearly interested.

They make your engine.

They make the engine. They’ve just had all of this success with Brawn. They have the strategic partnership with McLaren, but what’s McLaren compared to an opportunity to own their own team? So, they announce in the offseason that they’re dumping McLaren. Mercedes is buying a 75% majority share in Brawn for $200 million and renaming the team to Mercedes.

The storied Mercedes team that you know of today, where Lewis Hamilton won 6 drivers’ championships and the team won 8 straight constructors’ championships, is the team that rises out of the ashes of Brawn GP.

Incredible. Just incredible. The first thing they do after they buy their team—they’re so excited—is hire Michael Schumacher to come out of retirement. Lewis Hamilton is still a young kid at this point in time. They hire Schumacher out of retirement to come reunite with Brawn, the dream team, and drive this monster car. It doesn’t work out.

It’s like Jordan on the Wizards.

Yeah. This is the Jordan-and-the-Wizards era.

Although, I was going to say it’s like Tom Brady, but Tom Brady won a Super Bowl with the Bucs.

Yeah. No, Schumacher and Brawn and Mercedes do not win another Super Bowl. Everybody else had picked up the double diffuser, and that really was the advantage that they had. It wasn’t any more than that.

And I think Mercedes thought they were buying something that had somewhat of a durable advantage. They thought, “Oh, maybe you’ve started thinking about next year.” The team really hadn’t, and so there’s sort of this realization at Mercedes of, “Oh, crap. We bought a lemon.”

Yeah. We need to put hundreds of millions of dollars into this on top of that stake that we already bought. To Mercedes’s credit, they did. They could have cut their losses and said, “Ah, this doesn’t make sense for us.” Instead, they built arguably the best Formula 1 team to ever exist across multiple decades.

Well, they bring on a partner.

Yes. So, after a couple of years of Schumacher and Brawn—

Brawn, by the way, who bought the team for a pound and then sold 75% of it for £200 million.

Yeah, he’s doing just fine. But after a couple of years, Mercedes decides this isn’t working. They fire Brawn and Schumacher, which is crazy. Who fires Michael Schumacher?

Right?

Mercedes F1. This is what happens. They make 2 key hires in each of their places. As team principal, they bring in an Austrian businessman who had previously been an investor in the Williams F1 team named Toto Wolff. Again, if you watch Drive to Survive, you definitely know Toto.

Yep.

Probably the best Formula 1 team executive in history. Certainly in terms of valuation increase.

Yes. I’ve got some numbers for you later on why.

Yes. Okay, so put a pin in that. Who could you possibly hire to replace Michael Schumacher as your number-one driver on the Mercedes team? Well, obviously, you know the answer: a young British racing driver, Lewis Hamilton.

Yep.

Yep. So Toto, Lewis, and then the other driver they bring on, Nico Rosberg, as you said, Ben, would go on to win 8 constructors’ championships in a row. Nico won the drivers’ championship one of those years, as Lewis’s teammate.

So it’s not even like, “Oh, well, they had Lewis Hamilton, so how good was the car really?” It’s like, no—

No, no, it was the car.

The one year that Lewis didn’t win, Nico won.

Yep. Certainly the most dominant run in the history of the sport. This ended Red Bull’s own run. But what was so great for the sport during this period is that it’s not like the Schumacher era, where the top team is just blowing away the field. You now have this great drama of the fight every season between Mercedes and—

Is it Vettel? Is it Hamilton? Is it the young, up-and-coming Verstappen?

Yes. Yes. It’s these epic dramas that are playing out on the track, and really, it’s these 2 teams that create the modern era for the teams and for the sport. Christian Horner at Red Bull and certainly Toto at Mercedes—they are a totally new breed of team principals. These guys are CEOs, and Zak Brown at McLaren is also—he actually is the CEO.

He’s literally not the team principal. He is just the CEO.

He’s just the CEO. They’re playing roles that nobody at the team level had ever played before, except Enzo Ferrari and Bernie. Bernie, of course, had greater aspirations.

, Ross Brawn buys it in 2008–2009 for 1 pound from Honda. Mercedes buys it a year later, 75% of it, for $200 million pounds. Today, Mercedes is worth $6 billion under Toto. Not Mercedes, the car company—the Mercedes racing team alone just did a minority transaction valuing the team at $6 billion.

Yes. That is twice as much as all the cash that Bernie pulled out of F1 in its entirety during his heyday, just for 1 team.

Yep. And speaking of valuations and Bernie and cashing out, in 2016, as all this is taking place, F1 finally lands in the right set of hands to shepherd the sport going forward.

And the cash flows are growing at F1, thanks to the new races and the increasing TV contracts. But by 2016, CVC is now down to a 35% ownership stake. They’ve pulled out a total of $4.5 billion of cash through a combination of the debt and equity sales. Remember, they and Bernie only put in $900 million to start. They still own the largest single stake, at 35%, in the league. But it’s time for a transition of power, shall we say—a full exit.

And we’ve checked in a few different times along the way. What is Formula 1 at this point? Because it was the weird Bernie entities, and then it was the holding company in his wife’s name.

Yeah.

At this point, it is a company that is owned by CVC.

But interestingly, a thing to know is that company doesn’t actually own the sport.

But what it does have—did you find this, David?—is the 2001 deal.

The 100-year management rights. The key asset that this company owns is that, in 2001, Bernie had secured the 100-year commercial rights to Formula 1 from the FIA—

In a no-bid process.

In a no-bid process, for $360 million. When you think about what the asset really is, the asset is the right to run the business of what the FIA defines as Formula 1.

Yeah. So basically all the commercial activities, except team sponsorships, which are the province of the teams, and race tickets, which are the province of the promoters.

And there are some other little things that the teams make money on and that the promoters make money on, but basically, yes.

So, in September of 2016, it finally gets announced that the American media company Liberty Media is acquiring F1 for $4.4 billion of equity value and assuming all of the outstanding debt that the company has, for a combined total enterprise value of $8 billion.

The way they do it is interesting. Liberty and John Malone and Greg Maffei—we’ve talked about Liberty many times over the years on Acquired. They are masters of deals and financial engineering. They initially acquire an 18% or 19% stake in F1 from CVC, enough to make them the largest shareholder. Then they actually change the whole name of Liberty Media, the publicly traded company, into the Formula One Group and create a new tracking stock to track the value of the F1 Group—

FWONK, or “Funk,” as the investment community refers to it.

I know. It’s so great. And then they issue FWONK shares to the remaining equity holders, including CVC and Bernie, such that 100% of the company is now liquid and publicly traded.

The completely fascinating thing about Liberty Media today is that it sort of doesn’t exist anymore. They bought F1, then they did enough other spin-offs—the Atlanta Braves spin-off, Liberty Live, the Live Nation spin-off—that at this point, like 90% of Liberty itself is Formula 1, and the stock is actually Formula 1. It’s like they spun out everything else that was left, and so the holding company is basically Formula 1 now.

The plan that they announced is that former Fox and News Corp executive Chase Carey, who had been president and COO of News Corp, would become chairman of F1, but that Bernie would remain as CEO.

Now, Chase Carey had been a total legend at Fox. I remember him when I worked at News Corp and at Dow Jones. Chase helped Rupert launch Fox Sports and built the whole Fox NFL program.

Like, that was Chase.

So he’s the right man for the job. He brings over a team of the NFL OGs—a whole group of Fox and NFL OGs. Sean Bratches, who had been one of the key people who built ESPN during its parallel rise with SportsCenter, comes and joins the team. The whole thesis is that Formula 1 is this incredible sport, with an incredible fan base and an incredible asset, and we can see with what’s going on at Red Bull and Mercedes that it’s going to crush in the modern era.

They’re building these businesses. They’re not just building race cars and race teams.

Yep. So, just to quickly take the Mercedes example, Ross Brawn buys it in 2008–2009 for 1 pound from Honda. Mercedes buys it a year later, 75% of it, for £200 million. Today, Mercedes is worth $6 billion under Toto. Not Mercedes, the car company—the Mercedes racing team alone just did a minority transaction valuing the team at $6 billion.

It just needs the right management to get out of the way and let this happen.

And Bernie had systematically underinvested, which created opportunity.

Yes.

There was almost no U.S. market development. By this point, they had Circuit of the Americas in Austin, but no other U.S. races yet. There was very limited storytelling around the sport and digital investment. There was no social media presence.

The property was mostly behind a closed paywall with restricted access, especially in the U.S., and the demographic was mostly old white guys with money.

An asset just waiting to be unlocked.

Yes. So, pretty quickly, when Chase and Liberty come in, it becomes clear that there’s not enough room for 2 bosses in F1, with Chase being chairman and Bernie remaining as CEO. Really, as long as Bernie’s there, there’s not room for anyone else to run anything.

Mhm.

So, on January 23, 2017, after they had announced the acquisition the previous fall, Liberty announces that Bernie is stepping down as CEO. He will become honorary chairman emeritus and an adviser to the board of directors of F1, but not actually on the board.

So, in other words, Liberty fires him. They had to. There’s no way they could do what they wanted to do, and what needed to be done, as long as he was still there holding the reins.

This is a classic “what got you here won’t get you there” situation.

Yeah.

All that stuff that Bernie did no doubt built the sport and created the sport in the way it needed to go from here. Bernie could do almost none of those things and was probably holding it back at this point.

Yep. Yep. So, I was doing the math on his run. What year did he start becoming the steward of Formula 1?

1972.

And he left in 2017.

Long run.

45-year run. I can’t think of a sport—a sporting league—in the world that was basically controlled by a person for almost half a century like that. The closest that I can think of is Peter Rozelle, 30 years at the helm of the NFL.

Yep.

Yeah. So, Chase takes over as CEO, and he and Liberty know they have their work cut out for them. They come up with a 4-point plan.

Number 1, most importantly, they need to fix the relationships with the teams. Thanks to Red Bull and Mercedes, teams had started to become more successful financially and more business-minded on their own, but the relationship with Formula 1, the league, was still highly contentious through all of this. Arguably, it was even more so as they were growing in power under Bernie.

So, the cost cap is the obvious thing to do. Like we said, it was really an indication of how broken things were before that Bernie and the FIA couldn’t get it done, and it resulted in the FOTA breakaway attempt.

Because if you don’t have a cost cap, you’re just going to have teams that have either independent funding or some other business that lets them go hundreds of millions of dollars into the red, which basically means everyone needs to compete with them.

That means that other than those 4 teams, you’re just going to keep churning your bottom 6 on the grid over and over again because they can’t run a viable business.

So, the number 1 priority is that they have to fix the teams, which they do in the first Concorde Agreement that Liberty negotiates. They get everyone to agree to a cost cap of $145 million in expenses on the car, not including driver salaries. That’s separate. This is huge.

And not including the 3 highest-paid executives, not including marketing spend. Power units are outside the cost cap, too. So, it’s a cost cap for sure, and it gets some of the job done, but if you spit off a lot of cash, there are still plenty of ways to spend that cash to become more successful.

Yes, that is definitely true. But I think it really does end up functioning kind of as intended, like a salary cap in other sports. The Cowboys can spend a lot more on marketing than the other teams—

But they haven’t been to the Super Bowl in a while.

Yeah. Right. Right. Right. The amount that they can spend on the equivalent of the car on the field—in that case, the players—is the same as everybody else.

And they also implement wind-tunnel restrictions. You can only spend so much time in the wind tunnel. We already have restrictions on testing in season, so there really are heavy restrictions at this point.

It’s gone from $145 million down to $135 million, but then it got adjusted now up to $170 million with inflation and with adding more races, because you get to add more to the cost cap for that. Every team is now spending under $170 million. There were several teams that were spending $400–$500 million before.

This is huge. It instantly makes every team at least close to break-even. It doesn’t make every team profitable, but it makes a lot of teams profitable. For the top teams, this overnight makes them immensely profitable.

So, when we talked about Mercedes going from being worth £1 to $6 billion, this is why the Mercedes team is a great business now—like an NFL-level business.

Yes. And Ferrari obviously hasn’t traded, but certainly is worth more than that. Every team, as we talked about at the top of the episode, is worth at least $1.5 billion now.

Yeah. So, the numbers on this now are that the average revenue per team today, in 2026, is about $430 million. About 60% of that comes from sponsorship, and the next-highest source comes from the distributions coming from Formula 1 Group. We’ll talk about how those distributions work later, but that’s their share of media rights and everything.

Then they have roughly 5% to 15% that comes from selling merch or engines or licensing or garage tours or what have you. But 60% is sponsorship.

If your average revenue per team is around $430 million and the cost cap is only $170 million, plus your drivers, marketing expenses, and everything else, you can see how these become pretty quickly at least break-even or close-to-break-even businesses.

Now, there are some outliers toward the front of the grid. Mercedes does $800 million in revenue now.

Wow. Ferrari does $670 million. McLaren is somewhere right in that neighborhood, too, around $650–$700 million. Red Bull Racing does $420 million.

15 years ago, all 4 of those teams were operating at a loss, and 10 years ago, most of them were operating at a loss.

Yeah, it’s interesting, back to your point earlier about Red Bull’s strategy. They could be making much more, I think, and they intentionally choose not to.

That’s exactly right. They try to keep their profit margin— their operating margin—at 1% or less.

Yeah.

So, McLaren now does roughly $70 million in profit. Ferrari does about $80 million. But the real outlier is Mercedes, which does an estimated $200 million in operating income from Formula 1 now.

Wow. I mean, that’s the level that Bernie was making for the whole league a couple of decades ago.

Right? That’s 25% operating income.

Yeah. And on top of being phenomenally profitable, Toto Wolff estimated in 2021 that Mercedes gets a billion dollars of advertising-equivalent value for being involved in the sport.

Yeah, easy.

So, on $600 million of total spend last year, Mercedes generated a double bottom line of over $1 billion in marketing-equivalent value plus $200 million in actual profit.

I mean, think back to 10 or 20 years ago. Mercedes was just luxury cruisers. They had AMG, so you could get more horsepower in your S-Class, but nobody thought these things were Ferraris.

Yeah.

Now they’re a legitimate sports car maker.

Yep.

We should say Toto Wolff is just so unbelievably impressive. They’re an extreme outlier in doing $200 million a year in operating income, and this isn’t like they’re underinvesting. They are a competitive team at the front of the grid, so they’re not holding back on R&D investment.

That $6 billion number that you cited, David, is real because that is a transaction that happened where the CEO of CrowdStrike bought into Toto’s holding company to get a sort of proxy ownership in the team.

So, why does Toto have a little holding company of his own? Unlike all the other team principals, Toto is a major equity owner in the team. When he joined the team in 2013, he negotiated to own almost a third of the team, which at the time was worth about $165 million. It’s now, 13 years later, worth $6 billion.

So, he’s now a billionaire from his team ownership, even though the main owner is Mercedes. He just managed to become a major equity owner, and that is really unique among team principals.

Yeah. So, that’s obviously priority number 1 for Liberty: They have to fix the teams to fix the sport. Less obviously, priority number 2 was that they had to fix the relationships with the race promoters and the tracks.

Talk about a stakeholder that Bernie had just been extracting from. The whole calendar, as we talked about a minute ago, was designed to maximize race-fee payments to F1. There was zero consideration or thought at the league level about how to make the races themselves successful—how to market each one and grow the pie and avoid a situation where you have this huge middle of the pack of races that nobody cares about.

That’s not good for the sport. When Liberty came in, there was so much mistrust with the race promoters that, other than the straight economic fee payments, none of the races shared anything with F1, the league.

So, no data on fan attendance, no marketing strategies, nothing. Think about just how squeezed you were getting. You walk up to F1 as a race promoter and say, “Hi, I’d like to have a race, please. I own a racetrack.” And they say, “Okay, well—

Send back this contract and a $50 million payment—

Right? Pay us $20 million if you’re one of the European tracks. Pay us $40 or $50 million if you’re one of these new U.S. ones trying to come online. Pay us $50 to $60 million if you’re a Middle Eastern sovereign wealth fund. Oh, and your revenue streams, right? The Paddock Club—that’s all going to belong to us.”

Yeah. And the sponsorships on the racetrack, that’s going to belong to us, too.

I guess you can sell tickets.

You can sell tickets. You should set up some hot dog stands.

Oh, yeah. But also food and beverage for Paddock Club. We’re doing that.

No cameras because, of course, we’ve already sold the media rights, and that exclusively flows to us. You don’t get to participate in that.

So, you probably aren’t going to be profitable on this. And if you are, certainly not in the first few years. You might want to get your local government to kick in. This is going to be great for the city, which it is. So, my advice on getting profitable on this thing would be: go get some tax help. Find other people’s money.

Yeah. Exactly. Exactly.

So, one of the first things they do is get all the race promoters together, you know, in a room, and say—

They’re business partners. They should be.

Yes. We’re partners. We’re partners.

They’re not competing with each other.

We’ve got to work together here and let’s share data. Like, hey, there are a lot of hardcore fans who like to travel race to race. Shouldn’t we all be sharing data and marketing to those people and getting them to come to more races in more cities? Just no-brainer stuff. Ultimately, the vision here, which has mostly been realized, I think, is this is an opportunity for 22 Super Bowls every year—

In cities and countries around the world. When F1 comes to your country, comes to your city, it is an entire weekend that should be treated just like the Super Bowl. So, let us help you make that happen. Let us help you get musical acts. Let us help you coordinate the celebrity attendees. Let us help you coordinate social media.

Austin has been really smart about this. The Circuit of the Americas has landed Taylor Swift, Ed Sheeran, Sting, Eminem, and Garth Brooks. They really do turn it into this giant festival. And it all kind of stems from an admission that the race might not be that good, so you need to provide an experience for everyone.

I think they would argue that the whole weekend needs to be great, right?

There’s one of 4 teams who are going to be on the podium, and after you do the qualifying, whoever’s in pole position has a very good chance of winning. After the first turn, if there are no crashes, and after the first lap, then we pretty much know. So, I hope the rest of the activities are fun.

Yeah. So, fix stakeholder relations with the tracks. Number 2.

Number 3—

Fix stakeholder relations with the fans. We’ve alluded to this a little bit, but Red Bull, Mercedes, and Lewis Hamilton were starting to push the edges. F1 had a huge social media problem. Bernie and F1 had been doing everything they could to keep the sport in the mid-’90s heyday state for them, where he controlled everything. It all flowed through Bernie.

Control over growth. If you have to pick between those 2 things, control.

Yes, I control TV. I control the presentation. I control the race fees. I control journalist access. I control who gets to go where in the Paddock Club and when, who gets to see what, et cetera, et cetera, et cetera. It was so bad that Lewis Hamilton, when he came into the sport as this incredible star who had global appeal, was the first real F1 driver to become a legitimate celebrity in America—

The first superstar Black athlete in Formula 1—

The first Black athlete, period. There were no other Black athletes before him. He is all the things that Lewis Hamilton is. Being a native millennial, he wanted to have an Instagram account—and that’s underselling him as one of the most media-savvy individuals.

That, too.

And what he had that he brought into Liberty’s office was a stack of cease-and-desist letters—

That Bernie kept sending him to take down posts on his Instagram because he was “illegally distributing F1’s intellectual property.” That’s how bad this was.

Nothing sums it up better than that.

Yeah. So, Liberty immediately is like, “Yes, please, Lewis, post as much as you want on your Instagram.”

Yep.

And then finally, and related, there was also just a whole basket of low-hanging-fruit opportunities to grow the sport. One of these was esports and video games. There had been an independent video game studio in the U.K. that had been making official F1 video games for several years. Shortly after Liberty acquired F1, that studio got acquired by Electronic Arts, makers of Madden and FIFA, which do billions of dollars in revenue for EA and their league partners every year. Liberty works with them.

Medium popular.

People like them. I mean, especially for the budgets that they’ve been made for in the past. Certainly, this is a sport that lends itself to visually compelling narratives.

I think you’re right that the initial thesis was, “Oh, yeah, people like racing and this is visually compelling.” That was actually wrong. That is not the correct thesis, but it is the place to start.

Yep. Of course, what we’re getting at is they end up with, I think, the most impactful piece of sports media in history—

Ever, across any sport. Absolutely. And that is Netflix’s Drive to Survive.

Oh, yeah.

All right. So, they go to Netflix, these clever F1 guys, and they say, “Hey, I think you should do a series.” And the initial idea, David, like you’re saying, is race cars are cool, visually compelling, and people like racing.

Seems like a no-brainer.

And what it would evolve to, really, is a human drama.

Yes. It’s about when we said there are 3 concurrent competitions. There’s a driving competition, there’s the World Cup of Engineering, and there’s the World Cup of Office Politics.

The most compelling television product—

When you then, as secondary flair elements, layer in race cars going super fast—

Occasionally crashing.

Yes. Attractive mid-20s dudes in the most extravagant, amazing places on Earth, swimming and being on yachts and partying the night before your big race—it’s just perfect.

It’s incredible. But the human story, that is the killer unlock of Drive to Survive.

And it was so perfectly made for what everybody in the sport needed at the time. Because if you had made Drive to Survive for, I don’t know, let’s take the NBA, sure, it would have succeeded on a lot of the dimensions you just mentioned, but the hardcore fans would hate it because they’d say, “This isn’t basketball. Come on.” Right? This is just fluff for attracting new audiences. The thing about F1 at this moment is everybody was so starved for access. Any glimpse behind the curtain—even the most hardcore petrolheads, who would be the first to say, “Yeah, of course this isn’t the sport. This isn’t F1”—they loved it, too. They’d never gotten to peek behind the curtain.

All right. So, how did it come to be? Netflix and Liberty start talking. F1 was also pitching Amazon on doing something, trying to get a little bit of a bidding war here. Who’s it going to be: Netflix, Amazon, or someone else? Amazon already had something in the works with Mercedes and Lewis Hamilton that was just focused on them. But hilariously, F1 and Liberty controlled the actual track rights. So, even though Amazon was going to get the rights to Lewis and Mercedes, they couldn’t film the documentary on track. It kind of ruins the whole thing.

Ultimately, you do need F1 to play ball. So, Amazon ends up bidding the most for the league-wide thing, the thing that would become Drive to Survive. Liberty comes back with that bid in hand to Netflix and says, “Hey, can you guys match this?” Rumors are that it was about double the Netflix bid.

This is the rights payment that Netflix or Amazon would pay to F1 for the right to go make this series.

That is the way it used to work. But based on how successful Drive to Survive has become, you don't have to pay the sports leagues anything.

Netflix doesn't pay those sports leagues. Even the NFL—they don't pay them anymore.

It's such a giant, giant spotlight on your sport. Yeah.

They're small numbers. I think it was on the order of 5 million versus 10 million or something like that. But Netflix comes back and says, “You know what? We're at our ceiling, but we do think we're the best partner for this. So our offer remains the same. If you guys are really focused and really mean it that growing the sport is the priority here, our global audience is going to grow the sport.”

So Liberty goes for it. They say, “Yep, we're in for the lower price.”

Yes. So ultimately, the Red Bull idea gets scrapped, along with that Lewis and Mercedes idea that Amazon was working on, which also gets scrapped. Although, listeners, we have heard rumors that that one is back in the works now with someone else.

And they ended up creating something really amazing out of Daniel Ricciardo. I mean, that first episode just hooked a lot of people after the success of seasons 1 and 2, which we heard was kind of a slow burn. People loved it if they watched it, but the algorithm wasn't surfacing it to that many people.

Over time, they realized, “Oh, wow, this is actually applicable to many more people than we thought.” Young women across America and the world are into this. We thought it was going to be 50-year-old petrolhead men, or at least we feared that it might be. So we started in that narrow circle. As it grows and grows and grows, and season 2 is doing well, and season 3 is this massive smash hit, suddenly all the Mercedes and Ferrari partners and sponsors are coming to them and going, “Why are we not in Drive to Survive? Why aren't we getting these impressions?”

And so then, of course, in the later seasons, all the teams are in it.

Yeah. Amazing.

So, the other thing you may remember is that seasons 1 and 2 were fully filmed, released, and on Netflix when the pandemic hit.

Yep.

But it was the perfect thing for everybody to get really into just when they were starting to get trapped at home. F1 actually did a pretty amazing job of reacting to the pandemic. Within a few months, they were back on the track racing. They were doing these clever double-headers where they would race twice in a row at the same track. They were creating bubbles, just like other sports were creating bubbles.

But the pandemic was weirdly very successful for the sport because Drive to Survive was ready to watch, and the sport lent itself to its ability to recover quickly.

Remember when everyone was building an F1 simulator and playing the esports too?

Yes.

So eventually, it would become the number 1 Netflix show in 93 countries at its peak. When you try to walk through some of the numbers to figure out what the impact actually was in the first week—and this is an officially reported number—there tend to be over 500,000 accounts that view the new season in that first week.

With the Netflix stuff, it's always reasonable to multiply it by 2 or 3 because of password sharing. So call it 1.5 million people who watched just in that first release week. We heard elsewhere that, over time, a season of Drive to Survive is viewed in the low tens of millions of accounts. So again, with password sharing, you could generously assume that 40 to 50 million unique people would watch the show.

Which, by the way, is a huge number of people watching a single piece of non-live-event, non-sporting-event content.

In fact, here's a funny story. I was watching the most recent season of Drive to Survive with my wife to prep for this episode. While we were watching Christian Horner getting interviewed, I made a comment like, “Yeah, it's crazy. He gets fired. He's not with Red Bull anymore.” And she's like, “Whoa, spoilers.” And I was like, “That happened 6 months ago.”

Her mental model is that real life is irrelevant. Drive to Survive is canonical. That's the really unique thing about this sport: how many more people are fans of the sport but don't watch races.

Yeah. And this is where the modern media business model that Liberty came in and embraced thrives, and Bernie World never could have realized or seen this. Everybody still makes money even when fans only watch Drive to Survive. Why did the Mercedes and Ferrari sponsors pressure them to participate? It's all the impressions of the sponsor logos.

Yeah. Okay, so impact. Obviously, Drive to Survive worked, but how do you slice it? How much? What stats did you find, David?

So, one part of the Liberty strategy that we hadn't hit yet because we were saving it for Drive to Survive was bringing this sport to America.

Yes. It feels like it should have an audience here in a way that it never had under Bernie. Drive to Survive was a big part of that strategy.

So, if you look at F1 viewership in the US in 2018 before Drive to Survive launched, about half a million Americans watched races. In 2021, that has doubled in three years to over a million Americans watching F1 Grand Prix. I don't know what percentage of that doubling is attributable to Drive to Survive, but it's not 10%, it's probably more like 80%.

So then, 3 years later, in 2024, once there are more US races on the calendar, which we'll get to in a second, viewership of the Miami Grand Prix in 2024 was 3.1 million Americans. Granted, that's an optimal US time zone and a US race, so there's natural interest and so forth. But the idea that 3.1 million Americans would be watching an F1 race before Drive to Survive is totally insane.

It's more than most NBA games.

So that's just in America. Globally, F1 added 73 million new fans between 2020 and 2021 alone during the COVID period. That's a 20% increase in fans during COVID.

Yeah. The stat on that in the US is that the US now has 52 million American fans, which has doubled since Drive to Survive came out.

Most of those fans don't watch the races.

Right? The average viewership of a Grand Prix in the US is about 1.3 million people today. Miami is a giant outlier at 3.1 million US viewers.

But there are all sorts of other ways that fans can engage with F1 beyond the races. And then probably the most obviously directly attributable stat to Drive to Survive: the percentage of the F1 audience that is women went from 7% to—there are reports out there that it's like 40% today.

Of F1 fans are women?

Of F1 fans, again, not necessarily watching the races, but following the sport and interested in what's happening.

Yeah. One quote I heard in research was that Liberty helped F1 move away from the male, stale, and pale audience.

Yes, that it certainly did. Thank you, Daniel Ricciardo.

Yes.

So, staying on the American strategy for Liberty and F1, obviously, adding races in the US is a big priority here.

I think Austin went much better than they thought it was going to.

Yeah. And Austin obviously launched before Liberty bought the sport, but they made it a priority. Do you know about the previous US track record with F1?

Oh, it's awful. It's so bad.

They raced in Long Beach at one point, right?

Yeah. So, anyone who's familiar with F1 today probably doesn't realize there were 9 different races historically that attempted to run in the US, all of which are defunct. They typically only lasted a year or a few years at a time.

So bad. The most successful one, the long-running one, was in upstate New York.

Yeah. Watkins Glen, right?

They held Grands Prix in Phoenix. They did have one in Las Vegas before, but it was confined to just the Caesars Palace property, and it was just tight turns back and forth and back and forth and back and forth.

They were in Detroit, and they were also at the Indianapolis Motor Speedway, where the Indy 500 is, but they never really made a good impression.

Yeah. Well, there was a horrible thing where half the teams refused to race one year there, right? And the fans revolted and threw stuff on the track and—

Yeah.

It was bad.

Yeah.

So, the U.S. track record was not good. And then they come in and do a brand-new, from-scratch-built track for Circuit of the Americas in Austin, and it does quite well. You now have that. You've got, in the similar time-zone window in the Americas, Mexico City, the Canadian Grand Prix in Montreal, and the São Paulo race. So, you now have sort of 4 in this time-zone window, and Liberty and F1 really go for it at this point.

Yes. So, pretty quickly after Liberty buys the league, they start working on adding another race in the U.S., and that becomes Miami, which launches in the 2022 season.

And then, just 1 year later, they launch the Vegas race. But this is a different type of race. There is no promoter. Rather than charging a fee and having someone else run the race, they say, “Okay, we're going to forego the promoter fee, and we're just going to operate this race ourselves. We're going to take all the risk and get all the reward.”

But it's a pretty big bet because they actually bought the real estate to build the Paddock Club. So, after talking to a lot of the different folks around F1, I would say it hasn't been an obvious win. I don't think they will pursue this model elsewhere. If I'm reading the tea leaves right now, these things take a long time to pay back. And I think they've sunk over half a billion dollars into building this out. They really shut down the city for a long period of time and block off a lot of stuff to make it happen. It's much easier to run a business where you say, “You know what? We're not going to keep every little bit of upside for ourselves.”

You guys handle that. We'll just take the money.

Yes.

Bernie had some things right, right?

Yes. He got a lot of things right.

Yeah. But there are now 6 races in the North American–South American time zone, and the U.S. is the biggest media market in the world. So, they're leaning in hard.

Yep. Well, speaking of the Paddock Club you mentioned, it has totally transformed since Liberty's acquisition of F1. You and I got to experience it with ServiceNow in Vegas. We were just beginning our F1 research at that phase, and we spent weeks afterward saying, “Oh, F1 is a corporate sport. The consumer side must really not be big at all.” But, man, it's the most B2B thing we've ever seen.

There's a strategy interview that Ben Thompson did with Mike Cannon-Brookes, the Atlassian CEO, last year. They're the title sponsor of Williams. And Mike says this. He says, “Hey, we view our Williams sponsorship and our F1 participation as—we get to have a mobile executive briefing center—

that we can go around the globe throughout the year and bring our customers to this amazing event and have an amazing customer example to show them in Williams of how they use our software.” Like, I don't think Atlassian has a physical executive briefing center. I think F1 and the Paddock Club is their executive briefing center.

It's funny. Yeah. Since this was our first experience with it, it was shocking to me, realizing how large the consumer element of the sport was globally, because in America it feels like this little enterprise software conference.

Exactly.

Okay. So, what are the economics of all of this, and how does that play into F1 as a business? So, apparently, the title sponsorship at the front of the grid now can be a $50 million to $100 million deal, and Oracle's title sponsorship of Red Bull Racing is reportedly $100 million per year.

Other places cite that the big title sponsorships are more around $50 million.

But either way, I mean, really big numbers and right in line with the biggest deals that F1 itself does. So, the LVMH deal is $100 million per year, and that's the Louis Vuitton banners everywhere, TAG Heuer being the official timekeeping sponsor, the LV trunk, and, of course, they spray Moët all over each other on the podiums. So, you get wrapped in a blanket of LVMH now when you watch a race.

Yes. And back to the impact of Drive to Survive for a minute. Oracle's CMO said, I believe on an earnings call, that Drive to Survive was the reason that they decided to get into F1 and do the big Red Bull sponsorship.

Really?

Yes.

Fascinating—

that they weren't engaged with the sport beforehand and then started to watch Drive to Survive, and that led to—

Wow.

ultimately, a multimillion-dollar investment over several years. $500 million over 5 years is the rumored value. So, thank you, Netflix, for that gift.

The cheapest deals you can get—let's say you want to slap your logo on a car somewhere, a little under a bumper or something—the cheapest deal is about $1 million, and that's a back-of-the-grid car. The most valuable real estate—I thought this was interesting—is an airbox on the car that sort of sticks up behind the driver's head and that you can see from the side. Those go for the sort of $6 million to $7 million range.

And the logo placement on a driver's chest is also very desirable. That's about $1.5 million, especially toward the front of the grid. And this really is the way that these teams make money. About 60% of the revenue comes from sponsorship. The teams are now averaging about $200 million of total sponsorship per team. But average is kind of the wrong way to look at it because it varies wildly from the front of the grid to the back of the grid.

Yeah.

The other big thing is that hospitality is rolled in. So, if you're entertaining a client at a football game—let's say you do a big sponsorship deal with an NFL team and you get a suite—you get 3 to 4 hours together. Most of that is actually consumed by watching football because you care about it. It's an exciting game. Anything can happen.

If you bring a client to an F1 race, like ServiceNow brought us, you spend 3 days together, and the race is only about 2 hours. Actually, in the race, there's not that much you need to pay attention to most of the time. There are some really exciting moments, and you pay a lot of attention then, but there's plenty of time for a conversation otherwise. So, it's much more conducive to forming real relationships versus a traditional 2- to 3-hour sports game.

And you get to do it in geographies where your business operates all over the globe, not just a stadium near your office. I even heard some comments from sponsors saying, “Oh, we didn't even bother with a logo placement on the car. It's actually more about the relationships and hospitality.”

Totally. So, I can totally see why, if your strategy is something like Atlassian's and this is our mobile briefing center, it's really only F1. I mean, maybe tennis or golf or something like that that you could think about as an alternative.

Here's my last bullet point on this. Ultimately, this sport is a magnet for sponsors because it is a global reach for brands. It's humans pushing the limits, both in physical competition and engineering cleverness. It's bleeding-edge technology, and the sport is premium, if not luxury, in its positioning in almost every market around the world.

Yep.

All right. Media rights.

Media rights. Well, to put a bow on the Liberty strategy—or at least the come-to-America part of it—right after Liberty takes over in 2017, they do a deal with ESPN, much like Bernie's original European Broadcasting Union deal. Liberty says, “Will you please show all of the F1 races on the calendar on ESPN? We will give it to you for $0.”

Was it actually $0?

It was actually $0 for the 2018 season, and I think maybe 2019 and 2020 as well. We just want to grow the sport.

Yep.

Get something going, some traction in America.

And ESPN, despite being a cable company, not a broadcaster, does have huge reach. It's the most valuable channel in every cable package.

Yeah. If you're a sport and you want to grow in the U.S., you need to be on ESPN. Previously, F1 had bounced around for a while. It was on the SPEED Channel. It was on NBC for a while, but only certain Grands Prix. They didn't show the whole season.

Anyway, after Drive to Survive and COVID, those rights become a lot more valuable in America. So, ESPN comes back in for another 3-year round of rights. In 2022, after the sport has grown so much, ESPN does start paying real money for the rights. It's rumored to be $80 million to $90 million a year for a 3-year deal for the U.S. TV rights—

up from $0. That's huge.

The ESPN contract ends in 2025. In the interim, Apple had their own F1 media success on their hands this past summer with F1 The Movie with Brad Pitt.

F1 The Movie, to say the title precisely, David—

which grossed $630 million worldwide at the box office. The highest amount not only for a racing film, but for any sports movie ever, and the highest-grossing box-office movie of Brad Pitt's entire career. That's wild. And this massively exceeded people's expectations.

Yeah. I mean, you can't go wrong, right? The only thing working against it, really, is that it was a racing movie, and racing movies, other than Ford v Ferrari, haven't ever really been big box-office smashes.

Yeah.

And even that was fine.

Well, nobody had ever made a racing movie like this before, right? So, if you do the quick math on that $630 million and call it, I don't know, $30 a ticket, you come to the number of 21 million tickets sold at the box office. And depending on which estimates you believe from our Drive to Survive conversation earlier, there's a chance that the movie actually reached more people than Drive to Survive has.

Or at least it's kind of in the same ballpark.

Yes.

Either way, both are home runs. So, on the back of that, Apple comes in over the top for the US media rights negotiations with a 5-year deal at $150 million a year.

Rumored.

Rumored, but probably close.

Probably close for the media rights. On the one hand, sure, this is not NFL dollars yet, but this is real money for, again, a geography that was zero when Liberty Media took over. It was a huge deal to get ESPN up from zero to, call it, $80 to $90 million. Now you're talking about almost double that. And for Apple, this is probably just the tip of the iceberg of what they can do with F1.

Yeah. So, if you think about the bull case for F1 here, 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 total. So, this is important to F1, but this is not the bulk of their consumption, and the bulk of their media rights dollars are outside the US.

And hey, Apple's a global company. Sure, they love their US Apple TV subscribers and Apple customers, but they love their European, Asian, and Middle Eastern customers just as much. They'd love—

—to show them, you could imagine—

—F1 on Apple TV someday. And the real bull case—for, I know we'll do the bear and bull case later, but just to pull this one forward for F1 here—is in a lot of those markets, like we were talking about earlier, they've got these vertically integrated, sort of, “the channel is the broadcaster is the network” thing, and they don't have a competitive bidder.

And so, with Apple, with Netflix, with, more likely Amazon, I think, than Netflix, but with streamers and with YouTube buying media rights, now you have these tech companies as real, viable bidders against the 1 or 2 broadcasters in the country. So, you actually can sort of more fully realize the media rights when there's a real market for them.

Yep.

But I will say, just so listeners are really grounded in this, US viewership is only 1.3 million people actually watching any given race, with a peak of 3.1 million at the Miami Grand Prix. That is half of what NASCAR averages. This is not even the number-one motorsport in the US, and actually quite far from the number-one motorsport in the US.

International viewership is 60 to 70 million people on a race weekend. So, the US—if they crack the code, man—the US has running room ahead of it.

Yep. And I mean, hell, clearly it's working so far.

Yes. All right. Before we catch up to today, should we do the quick update on the teams that are hitting the grid this year?

Yeah, we've got some new teams coming in. So, we've got the return of consumer auto manufacturers. Stake has become Audi. Honda is partnering with Aston Martin. Ford has joined with Red Bull as an engine partner.

Honda used to be the partner that would make Red Bull's engines back in around 2019. And then in 2021, Honda left the sport. Red Bull, instead of picking another engine supplier, actually took it in-house and started Red Bull Powertrains with Honda's technology and technical support. I think they hired a bunch of the people away from Honda.

Yeah. This Ford partnership is actually more of a partnership, right, with Red Bull, and less of a straight, “We're supplying you the engine”?

Oh, Ford is very much not supplying the engine to Red Bull. They are sort of an engineering partner on Red Bull Powertrains, and I know there are engineers flying back and forth between multiple Ford sites that are collaborating with Red Bull on building their engines.

A lot of shade has been thrown at Ford, saying that this is just a marketing exercise. And hey, Red Bull was all prepared to take engine manufacturing in-house, so why do they need Ford's help?

But speaking of a marketing exercise, Cadillac is entering the sport this year. You might say, “Well, that's a whole team. That's not just marketing. They're really an equity owner and putting their best foot forward.” This is a team called Cadillac that uses Ferrari engines and a lot of other components, too—the whole power unit, the gearbox.

I mean, it's still a major deal that a major American manufacturer is joining the sport, but this is a Cadillac with a Ferrari under the hood. And Cadillac is shelling out $450 million in an expansion fee, effectively, just to join the grid.

It's just great for the sport that all of this is happening, and it really reflects how far things have come with relations with the teams. It's so healthy that manufacturers are coming back and the number of teams is expanding. Dude, the GM and Cadillac versus Ford kind of opposing case studies are really interesting.

I kind of love the rivalry, though, right?

Yeah, the rivalry is amazing. Sniping at each other. They're really getting in the F1 spirit.

And it's really unclear what you should do and what the better strategy is. You pointed out some of the downsides in both. The upside for GM and choosing to use Cadillac as the brand is that they own the team. They can, over time, invest and build this into a powerhouse, or, if they can, that would be great.

They're certainly going to start at the back of the pack. It would be a real coup if they didn't. Whereas Ford is coming in with Red Bull, one of the top teams. They're going to be on the podium from season 1.

I know. It's kind of genius. Yeah, a real big blue oval on that car. They announced and unveiled the car in Michigan. It was a Ford-Red Bull event.

Yeah.

Meanwhile, GM and Cadillac unveiled theirs during the Super Bowl, right?

They did, with a Super Bowl commercial and then with an activation in Times Square.

Yep.

But I love it. I love to see it.

Yep. And the other big thing for this year is there's a new Concorde Agreement, complete with a full rewriting of the rule set by the FIA.

So, there's a resetting of the field.

And people always say these things come with a big reset. But do I think Mercedes, Red Bull, and McLaren are not going to be 3 of the top 4 teams? No. I think that's going to stay.

Have we seen anything in preseason from any of the teams at the back of the grid where they have some magic car that they've developed? Not really. I mean, the biggest thing I think we've seen is Ferrari, which is a front-of-grid team, doing something very clever to create downforce with its exhaust. But we'll have to see how that actually plays out.

Yeah, we should say there's some excitement around this new rule set. It's going to enable more passing, which should make for more dynamic races, which I've been ripping on the whole time. I do like watching F1 races, but I also think they could learn something from the NFL and figure out how to make it more competitive and a better pure sport—

—more exciting. Yeah, a better product on the field.

On the cons, man, there's a lot of griping about these hybrid engines. Max Verstappen called it a souped-up Formula E car or something, which is perfect Formula 1 drama: He's out there making fun of the cars even before the season starts.

But everything from the noise to Max Verstappen's comment about how they drive, to the confusing nature of watching the sport and trying to understand the strategy behind battery preservation on top of everything else—that might be a little tough for them to overcome in presenting the sport to the viewer, especially new viewers.

Yep. One thing that we heard kind of unanimously from folks who've been around the sport for a while is that it's just sort of a shame that no one can experience the old cars anymore. You can watch videos, you can listen to audio.

Early-2000s V10s. You just had to be there.

But everybody says there's nothing like having one of those old big engines go by you—the sound and the power and the vibrations. It's something you would never experience anywhere else. Certainly kills any sustainability angle that Formula 1 is trying to push these days.

Okay, I have a major beef with this. There are 2 reasons why they switched to hybrid engines. One is road relevance, because 10 years ago or whatever, everyone thought that electric cars were going to take over the world, or at least hybrid cars were, and it was good to start investing in Formula 1 in these technologies so they could trickle into the cars that everyone's driving. Adoption has been much slower than we expected there.

The other reason is this sustainability push. Look, I'm all for sustainability. The carbon footprint of Formula 1—it is absolutely hilarious to me when people talk about the sustainability of the power units, like the engines in the cars, when they are flying the whole circus around the world every week on a fleet of 7 Boeing 777s.

I mean, okay, the European races—everything goes by truck, which is a little better, but it's still 300 trucks. If you line these up, it would form a convoy over 5 kilometers long. And so, I was trying to do some math: How much of the carbon footprint is actually from the power units themselves when they're driving on track?

During the 2019 season, the logistics operation moving these cars and the circus around accounted for 64 times the emissions of the cars themselves, even when you include practice, qualifying, and races.

I mean, these F1 tanks have 30 gallons of gas max, right? It's three 30-gallon tanks over the course of a weekend, and there are only 22 cars. It's a rounding error. This is a complete farce.

I think I'm hearing a passionate argument from you to bring back the V10s.

Bring them back. I've never heard one and I want to hear one. I don't know. My general belief on this is: let the sport be the sport and do whatever is going to be the best fan and driver experience.

I think they are trying to cram too many things into F1. Let it be a sport. Secondarily, let it be an innovation playground for auto manufacturers, but don't die on the hill of sustainable fuels. How about just putting two races really close to each other and rearranging the flight calendar a little bit? That would do so much more—even if you just change one race—than any compromises you're making on power units.

Well, you know what would make a really big impact on American viewership of F1 races and adoption of the sport? If they stopped going head-to-head with the NFL on Sundays in the fall.

Yes. In research, we heard some strong and very compelling arguments for creating a mini-season in the spring for U.S. time zones and kind of staying over here. It's good for the carbon footprint, and it's great for viewership because you get six races that all build on each other in excitement.

It's great for U.S. ratings—the biggest media market in the world. I'm amenable.

I think it's a win-win. And bring back the V10s. What do Americans love more than loud engines?

That's right. That's right. All right, the business today.

Tell us about the business today.

Yes. All right. So, Formula One Group does $3.4 billion in revenue. The most recent numbers here are from 2024. The revenue mix is media rights, which is broadcasting, at exactly 33%, or about $1.1 billion. Race promotion is the next-biggest bucket at 29%, or about $1 billion. Those are the fees from the race promoters.

Exactly. Advertising and sponsorship is the smaller bucket, at 19%. That's $630 million. It is their fastest-growing.

And to be clear, that's advertising and sponsorship to the league, not to the individual teams, which you'll notice: that $630 million is pretty small compared to the sum of all the teams.

The teams earn about $2 billion in total sponsorship across all of them, which makes sense because the teams actually have a lot more to sell in the way of driver access, hospitality packages, speaking engagements, and garage tours. Also, the best sponsorship placements are on the cars and the drivers, which the teams own. The camera is actually focused on those while the walls of the track just go whizzing by, which is why they need to repeat the same logo 1,000 times on the wall of the track for you to get an impression of it.

So, the best assets that are sponsorable actually belong to the teams. This is one of the really unique aspects of F1 as a sport that allows it to operate in this really weird way, where the league is not owned by the teams because so much of the media-rights value de facto will go to the teams. As the media reach grows, the value of team sponsorship grows, and that's their primary revenue driver.

Right. Yeah. It's a funny way to think about it. Their exposure grows, therefore their own direct sponsorships can grow.

Yeah.

So, back to the revenue mix we talked about for the parent company: 33% broadcast, 29% race promotion, 19% advertising and sponsorship, and then they've got this other bucket at 19%. That's hospitality packages, merch, and licensing.

So, that's on the revenue side, totaling $3.4 billion. Now let's look at costs. The biggest cost is the distribution to teams, which we haven't talked that much about how this works yet. This couldn't be more different from the way it works in the NFL.

The NFL splits the league revenue exactly 32 ways, with no questions asked. Communist capitalism is delightful. The distribution to teams is renegotiated in every Concorde Agreement. Both the split with Formula One Group is renegotiated and the—

—distribution mechanisms among the teams.

Yeah, exactly. They currently distribute about 37% of Formula One Group's revenue out to the teams, which comes to $1.27 billion of their $3.4 billion.

There are 3 components to how this formula works. The first is equal participation. The second is the Constructors' Championship allocation, which is kind of interesting. The Drivers' Championship has nothing to do with how prize money is paid out; it's just about the constructors. And then the third is historical length in the sport.

Ferrari.

So, for a long time, Ferrari was guaranteed at least 5% of the total pool, just as a thank-you for being Ferrari. You've been a part of the series every year since its inception. You help legitimize the sport. You continue to help legitimize the sport.

Absolutely.

This has gotten negotiated away a little bit over time, but when you look at the rumored distributions—because the Concorde Agreements are not public—there is definitely still a large chunk as a thank-you to Ferrari for being Ferrari.

And you know what? They're worth every penny. The stats that I've seen are that even today, between Max Verstappen and Lewis Hamilton—I guess Lewis is now with Ferrari, but thinking—

I know. I still think he's with Mercedes.

Yeah, yeah, exactly—even today, 30% of all F1 fans say their favorite team is Ferrari.

Wow.

So, when you blend those 3 factors together—the participation, which is equal; the Constructors' Championship allocation; and the historical length in the sport—the estimates are that the top team gets around 14% of the pool and the bottom team gets around 6%.

To keep the math kind of simple, imagine it as the top team getting $140 million-ish in prize money and the bottom getting $60 million-ish. This is a lot closer than it used to be. The Constructors' Championship used to wildly skew the distribution, and the Ferrari premium was even higher.

But this is holding the sport back, in my opinion. You get a positive feedback loop and a negative feedback loop at the top and the bottom. We're sort of stuck in this world right now where the teams on the front 4 or 5 of the grid stay there, and the back stay there.

You could make the argument that making another $20 million, $30 million, or $40 million from the back of the grid is not going to make you magically competitive. But every little bit helps, and I think these things are nonlinear. They sort of spiral up or spiral down, is maybe another way to think about it.

For every $10 million you get out of the Constructors' Championship, you probably can go find $20 million or $30 million more in sponsor dollars. A few people have tried to tell me, “Hey, I actually don't think money is really the answer here.” It's certainly not helping to keep the back of the pack penalized with fewer dollars per year.

Yep. People want to see the stars win.

That's true. But the bottom 5 may as well not even be racing.

Well, you need them on the grid, but—

Do you need some warm bodies there just to clog it up? They risk causing crashes and getting in the top few guys' way, and I guess that throws a race up in the air and anything can happen. But, yeah, the back of the grid is just the back of the grid.

Yeah. But I can't imagine it being a healthy state for the sport if there were only 5 teams.

True. Very true.

All right. So, back to Formula One itself. By the numbers, there are 830 million people who identify as fans globally. This is different from viewers. There are 450 million global TV viewers. The last time they broke this out and reported it was in 2021. It seems to have become a state secret since then, where they no longer report this information.

Now, on to team valuations. As of 2025, Forbes estimates team valuations at about $3.6 billion on average. Average. This has been a huge, huge growth recently. It's an 89% increase in the last 2 years.

Wow. Wow.

It's completely night and day since they put in the cost caps. These teams used to be basically worthless in the Bernie era, and now have an average value of $3.6 billion.

Yes.

Every team is now north of $1 billion, with the least valuable team at $1.5 billion. Then, at the top end, we've got $6.5 billion for Ferrari. Again, not the best business, but the most valuable asset. Love Ferrari. $6 billion for Mercedes, $4.4 billion for McLaren, and $4.35 billion for Red Bull Racing.

The multiples on these things are very silly. If you compare them, most of these teams, except for the top 3, produce very, very little in the way of profit. If you look at an NFL team, they actually spit off a lot of cash. If you look at these teams, I mean, even the most connected to their intrinsic value, Mercedes, is trading at 30 times operating income. They trade at those values because they're scarce assets, not because they are cash-generative assets.

Yes. People got very excited when they started not being absolutely horrible businesses. When they started being fine businesses, everyone sort of pulled forward many, many years of growth and potential profitability into their valuations. Or they basically said, “I don't care what the valuations are at all. I'm a sovereign wealth fund or a decabillionaire, and this sounds fun.”

Yes. And in defense of this, I can think of a million reasons why being an owner or part-owner of an F1 team—

—makes sense—

—is a highly profitable trade for a person or an entity. The funny thing is, a lot of these people, if they're currently cash-flow negative, if they ever decided to sell the team, would make up all the cash that they lost in the business through the asset appreciation.

Right? It’s almost like you’re loaning money to the team for a while, and then you get it back.

So, the market cap of Formula 1 itself. Remember, Liberty bought the company in 2017 for $8 billion, with $4.4 billion of that being equity value. Today, in 2026, it has a market cap of $22 billion and an enterprise value of $25 billion. So Liberty has done quite well, turning $4.4 billion of equity in 2017 into 5x that in 9 years. That’s about a 22% compound annual growth rate.

Yeah. And that is valuing the races at zero, which I think the races probably have value. What did you say? You think that F1 invested in Vegas? Half a billion.

Half a billion.

Okay. Let’s say the Grand Prix are all worth half a billion, just as a swag. There are 22 of them.

Yep.

Is that right? So there’s another $11 billion in value.

You’re assuming that’s money well spent. Well, if Formula 1 itself is willing to put $500 million up to stand up a Grand Prix, then—

Yeah.

That seems a reasonable proxy for the value of a Grand Prix.

Yeah, that’s a great point. So you say, “Okay, the whole sport, inclusive of races, then has $70-ish billion of enterprise value all told.”

Kind of a fun—

Seems reasonable.

Like mental gymnastics to go through to think about how the value all breaks down. Yep.

So then my key question—and the one unfilled-in puzzle piece in all of your minds should be this—is that Ben and David are obsessed with the communist capitalism of the NFL. The NFL, the NBA, MLB, and NHL are thin leagues. These leagues do not retain earnings or have their own enterprise value. They are purely distribution mechanisms where nothing’s left over at the end. They’re like pass-through entities of a sort.

This is a fat league, much like the UEFA Champions League or IPL. It’s a company. It has its own earnings. It generates profits. It has enterprise value. So the key question you should all be thinking about is: Are teams getting their share of the overall dollars compared to what Liberty gets? And how does it compare to a league like the NFL, where the teams are entitled to all the profits?

Well, on the one hand, we can look back at the percentage of F1 management revenue that goes to teams, which was 50% back in 2018 and has shrunk to about 37% last year. So something’s going on there. F1 is actually getting leverage over the teams.

On the other hand, there’s actually just not that much operating income left over once Formula 1 pays for all the other stuff. Formula 1 generated $492 million in operating income on revenues of $3.4 billion. So even if we take all that operating income and say, “Okay, what if we were to distribute that $490 million to the teams?” that would only grow the teams’ distribution from $1.27 billion to $1.76 billion.

Yeah. In other words, the teams are already making 72% of what they would make if they owned the league, because there’s just not that much profit left over after all the costs to run the league, after selling all the sponsorships at the league level, general overhead, administration, and, of course, running the Las Vegas race.

Yep. I suspect if we were to have access to all the books during the Bernie era, that would be a very different story.

Yes. And I think it’s because Liberty is investing in the sport.

Yes. Certainly, there would be more operating income if Vegas was not on their books.

It has reached this very interesting equilibrium where, if the teams were making significantly less than this 72% of what they could make, I’d start going, “Gosh, maybe they should break away. Maybe the league is keeping too much.” But it somehow seems like this 28% of what the teams are leaving on the table is just right, you know.

Mhm.

The racing series is complicated and expensive. It has to maintain this big global footprint and run this logistics operation. Ultimately, we are not starting from whole cloth here. The F1 management exists, and it’s just a matter of, every time the Concorde Agreement rolls around, how much leverage do the teams have in that particular year?

Yep. So that leads us to, I think, maybe the most interesting question of the analysis section for this episode: Did F1 require Bernie to get to where it got to?

Yes, that is the key question.

Obviously, there is this incredible counterexample out there with the NFL of a similar dynamic, arguably a much more complicated dynamic because there were a lot more teams in the NFL that needed to be wrangled.

Yep.

It was heroic work by Pete Rozelle to get them all to buy into communist capitalism.

Yes. He was an N-of-one person who did an N-of-one job. You could rerun that experiment 1,000 times and almost assuredly not end up with the NFL today.

It’s like Dee Hock at Visa.

Yes. The other major U.S. sports haven’t managed to do it.

Nope.

I mean, the NBA is inching closer, but still isn’t there. Baseball’s a long way away.

Yep. At a minimum, I think you absolutely needed a strong individual personality to emerge at the right moment in time. For the NFL, that was Pete Rozelle in the ’50s and ’60s. For Formula 1, that was Bernie in the ’70s. Then you’re kind of at the whim of the personality of that person. Is there something about the other parties you’re dealing with and their personalities, or something about the global nature of the sport?

So, here’s where I was going with the second reason why I think you needed a Bernie: the global nature of the sport and the insane logistics required to be operating a global sport. The idea that the teams, the F1 teams, could have gotten together and hired an employee like the NFL did with Pete Rozelle to go and create all this—there’s no way you could incentivize somebody in the right way.

Yeah, that’s a good question. Why was the NFL able to do it? Could Pete Rozelle have developed the same structure in F1?

No, definitely not.

Why? To go and negotiate with all of these teams, all of these tracks, all of these broadcasters, the FIA, and this crazy NGO rules regulator—

Because of the complex multiparty nature, you have to have the incentives of being your own entrepreneur with a company. Not just an entrepreneur. I think you need somebody truly with Bernie’s background and ruthlessness. You need a street fighter to do this. Pete Rozelle was many great things, but he was not a street fighter.

Yeah. Hm.

What do you think?

I largely agree with you.

You have nothing more to add, in Charlie’s words here?

Nothing more to add. All right. Power.

Power. Yes, but actually, first there’s something interesting to think about, which is power between teams.

So F1 has become about exploiting the tiniest little advantages or cracks in the rule book, as we’ve talked about. Usually, other teams can figure out what you did and copy it very soon, within a few races. There are some advantages that last a whole season, like if you do something different in the fundamental layout of the engine, battery, or gearbox. That will buy you a year of edge if it is the correct decision.

And there’s real magic when you can do something that lasts multiple seasons, like what Mercedes did. I can’t exactly explain to you why, but something happened where they were just better at designing the car than anybody else, and they won for 8 seasons. Or having a driver who was just so much better than anyone else in that era, with Lewis Hamilton.

But those things are more operational excellence than strategy. I mean, the drivers are the ultimate definition of not a power, because anybody else can hire them, right?

Not a power. I think they exist entirely outside the world of strategy. It’s competency. It’s operational excellence. Being good at aerodynamics, car design, and engine design is that, too.

The thing that I would throw out here is that I think skill, or operational excellence, is actually more important in building a successful F1 team than strategy. A lot of these ways that you can win via strategy have a short window that closes when other teams can quickly arbitrage the value away. From what I can tell, almost all durable advantages in F1 that last 3, 4 seasons or more come from operational excellence.

Yeah. I could probably make an argument for scale economies, too, in that even with the cost caps, if you have more financial resources, you’re going to be able to—

Certainly more loopholes.

—hire the best driver. I mean, if you have an extra $100 million versus your nearest competitor, you pretty much should be able to go sign the best driver in the world.

Yeah. So at least there—and that’s, I guess, sort of more like balance-sheet financial scale economies—but there does seem to be persistence in the top teams on the grid.

That doesn’t seem related to power to me.

Yeah.

Like, what power do—

Oh. So you’re just saying that you think the top teams on the grid are just operationally better.

Yes—competency, skill competency, operational excellence. It wasn't a strategy they pursued that differentiated them on a durable basis. I think that exists year to year, but not for an 8-year winning streak.

I could see that, by your argument, the teams are all about operational—

The teams are powerless.

Yeah, which I think is what you want, right? A league. I think in sport, yes, you always want the most talented and highest-performing team to be able to win, and you don't want structural barriers or advantages the way that you do want them if you're a capitalist investor.

Yeah. Let's narrow this at least to the front half of the grid. Put aside the bottom teams that are always at the bottom. There are definite negative power spirals for the bottom set of teams. But for the top half of teams—

Over the arc of a couple of seasons, there is transference.

Yes.

Among that set.

Yes.

Yeah. Okay, I buy it. I buy it.

Exactly.

And so, thus, there must not be real power there.

Yes.

Great. I like it. All right, so back to the Formula One Group.

Yeah. Let's analyze the takeoff phase differently from the scale phase. Why did it become the premier motor racing series? Why is it bigger than Le Mans or IndyCar?

I can think of a few reasons. I believe Formula 1 is the only racing-car series where pretty much everything is custom-engineered by the teams.

There are very few stock elements to it, which inherently makes it more interesting and exciting.

Yep.

Two, the prestige, luxury, old-world European royalty ties.

Yep.

Plus the crossover with Hollywood.

Yep. And once you have that, you can hold on to it. That's a cornered resource that no other racing series can get once you have it.

Like, rally racing may be cool. Grace Kelly was never going to go to a rally race.

Or all the slew of celebrities who come to F1 races these days.

Probably most important, though, I think, is the FIA's explicit designation of Formula 1 as the pinnacle.

You have the more or less global regulating body for many other motorsports, though obviously not all. The FIA doesn't regulate NASCAR or IndyCar, stuff like that, but for many other series, it's explicitly saying, "This is the pinnacle," right? So you have a regulatory-granted monopoly.

Yes. Yes. It's like the royal seal of approval.

Yes. Our normal capitalist forces aren't really allowed to play out in the same way because it's been declared the number-one motor racing series in the world.

It's right there in the name: Formula 1.

Yeah. So that would be a cornered resource in the power framework, for sure.

So now let's ask a more literal question, which is just the Seven Powers framework applied to the Liberty Media Formula 1 entity today. The framework for power is: What is it that enables your business to have persistent differential returns, or basically to be more profitable than your closest competitor on a sustainable, durable basis?

Yep. And the seven are scale economies, network economies, counter-positioning, switching costs, branding, cornered resource, and process power.

All right. So what is stopping someone from eating Formula 1's lunch today?

What is stopping the teams from breaking away and starting FOTA? That's the biggest thing: your suppliers, both at trackside and on the car side, could build something and go around you.

It's expensive and annoying to do that.

Yeah. Formula 1 is pretty interesting as a sports league in that it has inherent network economies within the boundaries of the sport: the Grands Prix and the teams.

Yep. There's also real branding power. People will tune in to watch F1 in a way that they wouldn't tune in to watch FOTA.

It is designated as the pinnacle of motorsport.

Yes.

Yes, and they've got that as a cornered resource that has been designated by the FIA. I think that's what I would classify that as.

There are switching costs, certainly, for the teams—major switching costs for the teams and the circuits, too.

Yep. In fact, this is actually looking like a very protected business the more we analyze it. They're pretty dug in with all their counterparties.

Look, it really speaks to how powerful the F1 Group is that, despite all the years of abuse from Bernie, the circuits and the teams never actually broke away.

Yep. Certainly scale economies. This type of racing series is so expensive to operate that you have to have this scale.

Yep. You have to amortize all the overall costs of the league across a series of 22 races.

Twenty-two races across the teams and across all the viewers, such that you can generate the billion dollars in media rights.

Yep.

Actually, I'm coming away feeling like this is very defensible.

Very, very defensible.

I guess the key to the whole thing is fans continuing to care. All right, Baron Bull.

Yep. Let's do it.

Okay, so I have a table-setting exercise for us getting into this.

Great. Great.

So there are 830 million global F1 fans for a league that does $3.4 billion, and teams that generate another $2 billion or so on top of what the league pays them. So that's about $5.5 billion in gross total revenue across the whole sport for 830 million fans.

Wow. Sure feels like there's a lot of room to grow there.

The NFL generates $23 billion of revenue across just 180 million fans. So that's 4 times the revenue on the number of fans.

Yep. The NFL monetizes a fan at $127 per year, and Formula 1 monetizes a fan at $7 per year. David, what is going on here?

Well, one major thing that is an issue for F1, similar to the IPL on our IPL episode, is that they just don't have anywhere near as much inventory as the NFL, right? There are 22 races a year, and there's no path for them to get to 100 races a year—

Unless they start sending Haas and Mercedes out to this circuit on this day, and at the same weekend you're going to see Red Bull. It's not happening.

Yeah. So they're just fundamentally limited by inventory. Now, the flip of that is they absolutely have the opportunity, as Liberty identified, to make those 22 races into 22 Super Bowls, which they're well on their way to doing.

Right? They have to. So there's that. The biggest thing is the US is the biggest media market in the world, with the highest revenue per consumer and the highest subscriber fee per media broadcast. They just don't have penetration here yet. They're working on it. So that's the easy answer. And then inventory, you're right, is sort of a structural thing.

Yeah. And that leads to, hey, if you really care about growing revenue and you really care about the US strategy, you have to fix the race calendar.

Yes.

You cannot be going up against the NFL in the fall, especially not with 2 of the 3 big US races in the fall.

Yep. So that's a bull case: they figure that out. Another bull case is around the European TV rights, the thing we were talking about. They more fully realize the value where you have actual competition bidding for those rights. And since so many of the viewers are there, moving the needle a little bit actually is a giant amount of revenue change for F1.

Yep.

The last bull case that I had thought of that we haven't really covered yet is a US driver or US team becoming world champion.

Yep. That could really kickstart fandom here.

Yep. I think there's a related bull case of a champion-level female driver emerging in the coming years. Feels like that's—

Going to happen.

Has to happen, should happen. And given how much of the sports fandom has already shifted toward women thanks to Drive to Survive and the movie, that feels like it could be a further acceleration there.

Yep. Bear cases. The biggest one that I just keep hearing is that it is more of a parade than a race. With NASCAR, you have aggressive overtaking lap after lap. It's constantly exciting. And F1 is this beautiful competition, but so much of it is strategy, engineering, stuff that happens in qualifying, conserving resources, and pitting at the right time. It takes away from the natural observability of the sport.

Yep.

The bear case is that despite everything they'll try to do in the regulations to make it more competitive, these are really big cars because of safety, so it's just hard to pass. You're really incentivized to conserve fuel and not burn your tires when you don't need to, and so on. That puts a natural ceiling on the amount of fervor around it.

Yep. One thing that you could have argued a couple of years ago was a bear case, but I think has been put to rest, is that this was a COVID-driven fad. I think F1 has proven enough staying power post-COVID.

That's true. I probably would have bet that it was a COVID fad in the US 1 or 2 years after Drive to Survive, which would have been wrong. It was really in that category with COVID tropes: you got your Peloton, you got your F1 simulator, you're watching Drive to Survive and Tiger King. But of that set of activities, F1 feels like one of the few that has persisted.

Yep. If you're an investor, one reason why you might not give it the multiple that it used to have—Liberty bought it for 18 or 20 times earnings, something like that—is that you might not be as generous about its future growth. It's kind of optimized now.

A lot of the low-hanging fruit that was available for Liberty to do involves levers that they have pulled. So everything from here is going to be more of a multi-decade slog than a series of easy, quick fixes. Not that that's really a bear case, but it won't show up right away.

Yep.

This last thing that I just keep thinking about—I don't know if it's a bull case or a bear case; it really could be either—is the broadcast. Right now, at least when I watched it last season, it left a lot to be desired if you are not super into the sport.

So there's this bull case of bringing Drive to Survive storylines into the race. Let us see the drivers more before the race. After getting to know these people so much on Drive to Survive, it felt weird that I was watching a race and didn't get any sense of their humanity.

Yeah, it's like a different—

It's like, are these the same people? It says their names, but I can't see their face. I can barely hear their voice. Once or twice a race, I get some tiny amount of radio chatter.

So I think there's more you could do to bring the people from Drive to Survive into the race. They're the same people, so you should be able to do it. Second, data visualization could make the dynamic moments of the race more understandable to new fans.

There are amazing moments in the race, but if we're likely to see an overtake 5 laps from now when one driver has the right tires and another has pitted, expose that. Start talking about it, build toward it, and help me visualize it. Why is that going to happen in 5 laps and not 2 laps?

Show me, in a sensible way, that the person on our little graphic is listed in first place, but really they're not in first because they haven't pitted yet and the other 4 people have. Some of that stuff.

Yeah. Help me understand better what's going on. This is actually an opportunity, or maybe we could frame it as part of the bull case for Apple's involvement in the sport. They already developed special cameras for the F1 movie. Apple did.

Yep.

And they're bringing those to their coverage of the races.

It's basically an iPhone, and they rearranged the components to fit in the standard F1 camera package.

Yep. And it's not that difficult to imagine some of the Vision Pro technology being really game-changing on this front for F1. I'm not even really thinking about consumers wearing Vision Pro and watching these things. But to your point about seeing the drivers and experiencing them more during the race, Apple absolutely has the technological ability and resources to invest in helmet cams and driver facial recognition.

Oh yeah, they should do reconstruction.

What do they call it in Vision Pro, where I could take a video call wearing the Vision Pro and it uses my avatar?

Do that with the drivers.

Totally.

I don't know. It would be hard, though. Their faces are so squeezed into those helmets. But you're right, there are technology solutions to this.

Acquired doesn't need to do product development for Apple and F1 here, but this is a bull case for Apple becoming a major partner of F1.

Yep. Anything else in Bear and Bull?

That's what I got.

All right. Quintessence.

Oh man.

Listeners, this is where we try to land the plane. What is the thing that still—

The F1 car?

Yes. To pick the car that we still can't stop thinking about.

Box. Box.

Box. Box. Box. Box is left. All right, so here's mine. It won't come as a shock to anyone, but I am so astonished that this is a sport that might be durably popular with a giant group of people who never watch the sport.

I can't think of another sport where that is true, where someone would say, “Oh, I'm a big football fan, but I've watched 0 NFL games this year.” But there are lots of people who say they love F1, who can name drivers, who will buy merchandise, who will associate with and purchase from sponsors of teams, and who can tell you who won the championship last year, but will never tune in live.

That might be the majority of the US audience.

Yep. I can't think of another one either.

Yep. My contention is that this is by far the most complex sports business and league that we have studied. It's hard to think of others at this scale that might match it in complexity.

It's more akin to boxing or UFC, where a competition happens in a place at a time. It's not anybody's home stadium. There's a promoter.

Yeah.

But this has 10 teams, not 2 fighters, and they have $30 million race cars.

With 1,000-person teams behind it. I was going to make the point earlier in the episode that it would be like if the equipment manager on an NFL team was the most important person on the team—

—and had 800 people who worked for him or her.

Yeah.

Yeah. I can't imagine any other sport that is anywhere near as complex as this. And so you've had this crazy history as a result, but it's still been durable because nobody else could pull all of these disparate parties together in the way that Formula 1 has managed to.

The activation energy to do something similar to this is prohibitively insane.

Yes. Yes.

The next Formula 1 is not a direct thing that looks like Formula 1. It's something completely different that can start small and grow organically from here.

To the point you made a few minutes ago, nobody would ever draw up a league that looked like this on paper, right? It's wonderfully organic.

Yes. Yes. And chaotic.

And it's funny, even though it is a thick league, or a fat league, just like IPL cricket is, that started out of nowhere, came out guns blazing, burned hot, and worked.

Yep.

And this is kind of the opposite. It took 70 years.

Yep. All right. That's my quintessence. What have I got?

Carveouts.

Carveouts. Let's do it. So, for anyone new to the show, this is where we highlight 1 or 2 things that we have loved recently that are totally unrelated to the episode that we wanted to share with all of you.

For my wife's birthday, we went to Marymoor Park in Seattle, where they have—I can't figure it out; it seems reasonably permanent, but it's a tent with a circus show in it.

You told me about this.

It's called ECHO, and it is so awesome. Cirque du Soleil blows me away every time. The performers are just otherworldly in their talent.

Unlike many live performances, it's not like, “Oh, we'll see if this works, and if not, I can bail out and I have a fallback plan.” There are no fallback plans. They hit their marks perfectly every time, doing absolutely superhuman stuff in an awe-inspiring way.

Go see it if you can, or really any circus, because it's just so impressive. I want to go see 5 more. I'm in.

Awesome.

My second one is super quick. The Seahawks just won the Super Bowl, and NFL Films released on YouTube a 40-minute cut of the game called Mic'd Up. You get to hear a whole bunch of the players talking to each other, and it is awesome, whether you're a Seahawks fan—

—and it actually makes the game interesting.

God, was that a boring Super Bowl? And I loved it.

Oh man, we had a great time.

God, that Super Bowl game was like an F1 race.

Yeah.

It was super special doing the Innovation Summit and then going to the game with you. That was—

—that was—

—that was a real-life moment.

Yeah.

All right. My first carveout is Tonal, the exercise equipment. We have some Acquired listeners at Tonal, and they heard me on a previous carveout talking about how I'd redone my home gym, which I'm very happy about. But it is a very small space on my bottom floor here in my San Francisco house, so space is at a premium.

Before we redid the space, I had a full squat rack in there. I had enough room for that and kind of don't have enough room for it anymore. The folks at Tonal reached out. This thing is awesome. It just mounts to the wall and takes up no space. It's perfect, and it's better than a squat rack because I can do an infinite number of strength-training exercises on it.

I'm a very happy Tonal user now. Thank you for making my home gym much better.

My second carveout is continuing my truly amazing and gratifying saga as a parent of my older daughter discovering video games. Because I've been documenting this whole saga via carveouts for the last several months, listeners have been reaching out. One of my old classmates from college, Ryan, actually sent me an email about a game called Princess Peach: Showtime!

Nintendo finally got the picture that girls are a growth audience for them.

And they made a Princess Peach game where Peach is the heroine. Peach goes to a magical theater—

—and an evil witch named Grape takes over the theater, and Peach has to dress up in different costumes and reenact all the plays to save the theater.

My daughter loves this thing, and it's been so fun to watch her become an expert at this game, the way that I fell in love with Super Mario 64 back in the day. It is so cool.

I highly recommend it to anyone with little kids and a Nintendo Switch. Go get Princess Peach: Showtime! Especially if you have a young daughter, it might be her gateway into video games.

Nice. Well, we have some thank-yous and lots of great people we spoke with this episode. And special thank you, as always, to Arvin Navaratnam at Worldly Partners for his awesome, awesome write-up on Formula 1 linked in the show notes.

Arvin really did a banger job. He does a great job every time.

He's become a real indispensable part of the research for Acquired episodes.

Similarly, on my end, thank you again to Joshua Robinson and Jonathan Clegg at The Wall Street Journal, authors of The Formula. Truly the best business history book on F1 out there.

All right, and I've got a great list here. Big thank you to Zak Brown, the CEO of McLaren Racing. Thanks so much for your time and prep. To Greg Maffei, the former CEO of Liberty Media when they, of course, bought Formula 1 from CVC. Thanks, Greg, for helping me understand the whole company.

To Brandon Riegg, who oversees nonfiction and sports at Netflix, very helpful for understanding Netflix's strategy with Drive to Survive and the impact it had. To James Gay-Rees, the co-founder of Box to Box Films, the production company behind Drive to Survive. To Eddy Cue at Apple, a longtime Formula 1 fan, and, of course, to Apple, which recently bought the U.S. broadcast rights to F1.

To Pavan Gami, Alex Knight, and Jimmy Fairbanks, who are equity investors and analysts who really helped me understand the investor perspective on Formula One Group and Liberty Media. To Sid Tewari, partner at Foundation Capital and lifelong F1 fan. To John Nafi, the former vice chairman of McLaren Racing. And from Ford, Bill Ford and Mark Rushbrook, who obviously did the big engine partnership with Red Bull Racing. Thanks for your time, guys.

Yep.

To Nathan Baschez, my good friend and longtime F1 fan. To our friends at Shopify, Tobi Lütke and Malte Parakenings. Both total motorsports nuts. And Tobi actually races in another racing series, so it's kind of fun to get his perspective as a driver.

Tobi. To Andrew Craig, former chairman of IndyCar and sports marketing consultant. To Mike Miller, former Wall Street Journal editor, who helped us think through a lot of the big beats in the story on this one. To our friend Dustin Sedwick, who has done partnerships and sponsorships with teams and races all over the course of his career.

To Colin Fleming and the whole ServiceNow team for bringing us to the Paddock Club for the Las Vegas Grand Prix for some first-party research. To Bobby Epstein, CEO of the Circuit of the Americas track and promoter of the U.S. Grand Prix. And lastly, to our friends at Daloopa for providing us with some amazing financial models and spreadsheets of all the historical data on Formula 1, just like they did for us on Coca-Cola and Google.

Yep. And just one more on my end: to Chase Carey, board member now of Liberty and Fox, but obviously the former CEO of the F1 Group.

Thanks for chatting with us. Really quite the cast this time. David, these lists are getting a little nuts, in addition to all the people that we aren't even naming who helped us, too. So thanks if you didn't hear your name.

Yes.