The Business of Formula One

Jason · 00:00Welcome to episode 162 of The Numbers Game. I'm Jase, I'm here with Nick and Marty. How are we going today, fellas?

Marty · 00:06Going well, Jase. Only 38 episodes before you get very, very, very excited. You know, 38 to 200 is, uh, you know, I know you'd be up and about. No, I'm good, mate. Really good. Uh, looking forward to this one, actually.

Marty · 00:22Nick, how are you? You going well?

Nick · 00:24Going well, yeah, just, uh, waiting for that, uh, one time of the year that really frustrates me because, um, they shut the driving range down at Albert Park. What? Because the Grand Prix is, um, is being erected, or what is, you know, the stands and what not are being erected, so, it's at that level, I go to Albert Park driving range a lot, it's at that point now where everything's up, I'm like, it's coming, it's coming, and It's always, without fail, it's always me working it out when I get there.

Nick · 00:57I get to the range and it's shut and I'm like

Nick · 01:00Why don't you look online? So, uh, but yeah, I do love the GP though, so it's all good. And I think, uh, Jase has got some cool stuff to talk about this episode.

Jason · 01:09If you haven't guessed it already, we're talking numbers. It's the numbers game. We're talking Formula One, baby.

Jason · 01:14Yeah, baby, it's back. And, uh. You know, just to, you know, what, how this all comes about, just going from my usual run on the weekend, marathon training, as we've said over the last few, Case and I doing our little jog around Albert Park, uh, while we still can, just in the, you know, as it approaches, kind of, uh, the Formula One, getting fully fired up, the grandstands are set.

Jason · 01:34Set up the bollards are along the side of the road. You know, there's a bit of atmosphere and buzz in Melbourne. It's getting exciting. And, uh, then I got home and noticed, uh, there was another season of drive to survive on Netflix. So I binge that all weekend. So between running and binge watching Netflix, uh, I've been fully immersed in formula one land.

Jason · 01:53So that's where we're at today, boys. And, uh, yeah, I'm hoping you're ready for it. Is

Nick · 01:57that the latest series? Is that up that

Nick · 02:00out? Is it?

Jason · 02:00The latest series is out. I saw it pop up as the new season and you know, when you're like, I'm going to spread this out so I don't watch it all in one go. And then I think the danger of Netflix is the ebbs just roll into the next one and the next one and the next one starts.

Jason · 02:16And, you know, I'd done like a 30 K run on the weekend and sat on the couch with an ice pack on my knees and ankles just to kind of, you know, chill out a little bit, eat some food. And then before you know it. It was six episodes were done and there was four to go. So it was like, I think I just need to punch out the whole season in a day and call it.

Jason · 02:35So, yeah,

Marty · 02:36I get excited that you're so close to these major events in Melbourne where you live, whereas out of East, you know, we've got the Lilydale fun run. Uh, just not, not the same excitement as the F 1, I just go, we need, we need to get

Nick · 02:51something out of these, surely. The most frustrating thing about the F 1s now, and I don't want to steal your thunder here Jase, but um, at

Nick · 03:00last year they didn't have the, the fighter jets go over.

Nick · 03:04Did you notice that last year?

Jason · 03:05I did. I did.

Nick · 03:06You know why?

Jason · 03:08Probably money. But you tell me, I haven't got that in my notes. So I'm happy to learn something else. Yeah. It's a couple of things I read. CO2 emissions.

Nick · 03:15See, Amish there. It doesn't help them get to their. Net zero. Their net zero. Mm. Really? Um, and you know, it's the absolute highlight.

Nick · 03:24I live in Port Melbourne and I've got, um, I've got friends that, you know, I've got houses with balconies and they stand on their balconies with the kids just waiting for it, you know. It's obviously on the Saturday and the Sunday. Bye. Um,

Jason · 03:36even, even in South Yarra from our balcony, we see them, see the flyover happening as well.

Jason · 03:41If you look out towards our park and the noise is epic and you just, it's, it's the buzz. I reckon, yeah, we're, we're missing out on some economic benefits from the flyover.

Marty · 03:49They used to do that over the MCG as well at one point, didn't they? On Australia day and all that, that doesn't happen anymore. Yeah, I think they used to fly the ANZAC day, the ANZAC flyover.

Marty · 03:58Yeah, that's right.

Marty · 04:00Very

Nick · 04:00disappointing.

Jason · 04:01Got a bit to go through. I mean, I've really gone deep on the numbers and got really fired up and excited for this one. So I've kind of broken it into a couple of segments. We're going to unpack the economic benefit of the Formula One on Melbourne. Then I've had a bit of a look at the books of the Formula One behind the scenes.

Jason · 04:16Um, it is publicly available. So, you know, I'm not sharing anything that I shouldn't be, but. That's also quite interesting. Then the numbers for drive to survive, what that did for the formula one as a business. So numbers galore, special shout out to clients that will be listening, rise scaffold management.

Jason · 04:32Uh, so Nick, you just mentioned all the scaffolding and grandstands that are up around Albert park, our clients, uh, and numbers game listeners, uh, rise scaffold. They put up all the grandstands and pack them down. So well done gents. The place is looking immaculate. So the Formula One in Melbourne, uh, over obviously the last couple of years we've touched on drive to survive, but Formula One is booming.

Jason · 04:54It is getting busier and busier and more and more popular. Uh, last year, the

Jason · 05:002023 Formula One broke records, crowds with 445,000 people passing through. over the weekend between the Thursday, Friday practice sessions, the Saturday qualifying and the Sunday main race, which was record breaking. They've never had a bigger crowd.

Jason · 05:16Uh, the previous biggest crowd was 419, 000 a few years earlier. So, uh, either of you attended the Grand Prix last year?

Marty · 05:23Yep. I go most years. I love it. I've been, but not last year. Beautiful.

Jason · 05:28Um, I went many, many years ago with an accounting add on called Dext and we were in like a little grandstand and the CEO of the Formula One, who was it at the time, older fella, white grey hair.

Jason · 05:41Yeah.

Nick · 05:42Um. Yeah. Anyway, he

Jason · 05:45looked that up, but he, he came in and I wasn't a big formula one fan back in the 17, 18, 19 years. Then there was this guy, Mark Webber, who was in our, in our stand. And so everyone's getting photos with this Martin. I know who Mark Webber is, but I got a photo with Mark Webber and thought, this

Jason · 06:00is pretty cool.

Jason · 06:00You know? And afterwards, everyone's like, do you know how big a deal it was that you were in that particular box with the CEO of the Formula One and Mark Webber and so on and so forth? And I had no idea. I was like, you know, didn't really get it. So it wasn't until Drive to Survive that I, like many other people around the world, got into the Formula One.

Jason · 06:17Ron Walker. Ron Walker. There you go. So the Formula One Grand Prix has been hotly contested around it being in Melbourne. So in 1994, there was a government, um, The Liberal government strategy basically put together in 1994, a state government act called the Australian Grand Prix Act. And this was formed, this was legislated by the government around attracting major events to Melbourne, including the Grand Prix.

Jason · 06:47This, and it's available, you can dig into the PDF and it goes into the ins and outs of how and why the, the Grand Prix can be pulled off, but also what is the government's contribution to making it happen so that the event doesn't run

Jason · 07:00at a loss. So for example, last year it was something like 73 million had to be contributed to, I've got the numbers here, no, 101 million was contributed by the Formula One Grand Prix Government Contribution Fund.

Jason · 07:15Last year for 2023. So what I kind of thought was an event that has 445, 000 people go through the gates is hugely popular. The Formula One is just booming. How is it that we still need to contribute a hundred million dollars in government money towards making the Grand Prix happen?

Nick · 07:36Can I just ask a question?

Nick · 07:38So that 101 million, when you say running at a loss, running at a loss for F1. And then the government's got to contribute that. To get F1 here, because F1 don't want to come here and run a loss, is that what you're saying? Yep, so that's part of the

Jason · 07:54contract, which has now been extended to 2035 or 2037. So

Jason · 08:00effectively, this is where people who maybe aren't into the Formula 1 or don't get around the hype go, What a load of crap that the government's throwing 100 million at the Formula 1 so that they come here to run that event.

Jason · 08:12At a break even effectively for the formula one. So from a revenue point of view, the total revenue in for June for the 2023 financial year for the formula one, um, for the Melbourne end was 230. million. The total outflow in expenses to set up the Formula 1 Grand Prix and run the weekend was 265 million.

Jason · 08:37So it ran at a 35 million loss. Then after the 35 million loss, well sorry, and that's, that's with the total inflows and everything. So it still runs at a loss. From a government, from a Melbourne perspective, the numbers are probably more impressive to look outside of the Formula 1's books. So they talk about the revenue outside of

Jason · 09:00that produces 171 million in gross state product, which is the revenue for the rest of the state.

Jason · 09:06We're talking hotel bookings, the occupancy rate of hotels or the book, the booking rate, almost all hotels in Melbourne hit 90 percent peak booking. across Melbourne for the Formula One Grand Prix. We have 73, 000 interstate travellers arrive and up to nearly 10, 000 international travellers will fly in to follow the Formula One Grand Prix.

Jason · 09:31So when you think about, you know, restaurant bookings, hotels, Ubers, taxis, travels, Crown Casino, people go there gambling, drinking, all the rest of it, it's this flow on effect of how many people come out in the state and spend money that they may not have usually spent elsewhere. Now sometimes you know EY and these other big accounting firms are contracted to look at the numbers to go, well hang on a minute, would Jason have spent a hundred dollars somewhere else that weekend if the formula one wasn't here?

Jason · 09:59Because he's in

Jason · 10:00Victoria anyway, so is it just a transfer of where the money was going? Um, so there's a lot of analysis that's done to that. Another interesting, actually, before I dive in, any, anything that you're kind of hearing in those numbers that you're kind of interested in unpacking a little bit more?

Marty · 10:15I think Adelaide to be annoyed. They had it originally.

Jason · 10:18Yes. Correct. Marty. That was South Australia lost the Grand Prix before 1994. It was in Adelaide. Correct. That's right. I just,

Nick · 10:28I just, um, I would question. I hope no one from Adelaide takes this personally, but I would question Adelaide's ability as a city.

Nick · 10:36To actually hold the JP now with the, with the, like, look at the hotels that we've got from a numbers point of view, and we're at 90 percent capacity. Could they even hold it now? I don't think they could probably not.

Jason · 10:49Uh, and look, I think, I think we'll smash past the 445, 000, um, attendees for 2024, the popularity is just getting more and more.

Jason · 10:57Um, even in my runs

Jason · 11:00around Albert park, they've built additional, um, Corporate boxes that never, or corporate hospitality venues that never existed before. So if you, if you're doing a lap on the bike, or if you're maybe from the golf course, Nick, you might be able to see, it looks like they've basically stacked 10 white shipping containers on top of each other to build this extra grandstand that never really existed or corporate hospitality venue.

Jason · 11:22They've added that on and now selling tickets to that for about 3, 000 a head for the weekend for that particular area that never existed before. So again, as a business model, they're just getting more and more out of this. So, you know, I dare say, well, hopefully, I mean, looking at the 23 numbers, if it ran to a 30 million loss, you'd got to be thinking that this is the year that they're going to turn that into a profitable venture.

Jason · 11:44Um, so the numbers are quite interesting to unpack. There's also money that comes from the motorcycle Grand Prix contribution fund. Um, there's another futures grand prix fund, and then another government contribution that kind of goes unnamed on their financials. Um, I might send Tommy a couple of

Jason · 12:00links.

Jason · 12:00So if you do go to the numbers game. com, the numbers game podcast. com. au website in the show notes, I'll try and make sure there's the link to, again, for the numbers nerds out there. If you want to see the financials for 2023 for the formula one. Um, and the other interesting one is the. Australian Grand Prix Act, which with this government legislation that even talks about how Albert Park and the Crown land gets transferred into the, basically the balance sheet of the business to be used for that point in time.

Jason · 12:31And then it gets transferred back. So it's all this kind of convoluted legislation around how This works. Um, yeah, so I went really deep into a rabbit hole to kind of unpack some of this stuff. So, um, outside of the cost of the government contributing, you know, an estimated 70 to 80 to this and a hundred million last year.

Jason · 12:50So interesting that that kind of jacked up.

Nick · 12:52Quick question. Is it all state government, the federal put any money in? Uh, I believe it's state. All

Nick · 13:00state.

Jason · 13:00I believe it's state. It was, it was a, it's definitely a state government passed act. So I believe because the state has gone after it, it's the state's responsibility, which I think Dan Andrews, you know, when he was going for the extension to get it extended to 2035 or 2037, he was coming under fire when it came to government spending, um, for an event like that, that was running at a loss.

Jason · 13:23So one of the other interesting stats that I will put down to drive to survive, potentially, and maybe I can be challenged here by listeners if they don't think so, before 2019, less than 24 percent of ticket sales were female. It was a male dominated, um, you know, sport. In 2022, or from 2022, 40 percent of tickets have been purchased by females.

Marty · 13:49There's absolutely no doubt. So what was the inspiration to that in regards to the drive to survive? What was exposure, exposure, good looking

Jason · 14:00drivers, all

Nick · 14:02of a sudden you've got this sport that was. Look at Australia, Marty, that was only on at midnight, so unless you really wanted to watch, uh, you were in, in, in, into it, you weren't staying up to midnight on a Sunday to watch it.

Nick · 14:16Drive to Survive brought in the, the human element. It was like watching a reality TV show. With these guys that were flying around the country, driving fast cars, um, huge personalities like Daniel Ricciardo, like Daniel Ricciardo has played a massive hand in all of this. I think personally, it just, it just gave the sport personality and then people were all of a sudden exposed to it.

Nick · 14:39And when you watch Drive to Survive, you haven't watched it, you should watch it Marty, you'll love it. Particularly the first, um, the first series, you learn about the numbers. And you're just in awe of what goes on with this traveling circus, the money that's involved, the cars, like it really does suck you in.

Nick · 14:57So yeah, I think, um,

Nick · 15:00it's absolutely no doubt. It's strive to survive because of the exposure that's given to everyone. And, um, particularly the U S like you look at the U S now, I think is it. Two races a year or three Miami

Jason · 15:11and Las Vegas. And is it Texas as well? I think it's three in the U S now. So that that's been a big part of the next little bit here to do with the numbers from Netflix and drive to survive.

Jason · 15:23So yes, Marty, I think you're going to watch it. You're going to watch drive to survive and report back. Well, they're

Marty · 15:27doing it with tennis too. It's interesting marketing play. Um, you know, just getting the inner sanctum of, of tennis across the world. Same as there. You know, drive to survive. So it's an interesting play.

Marty · 15:38Yeah. I'm interested in the numbers. I had

Jason · 15:41zero interest in formula one. I'd never watched it and never been interested. And I never thought my wife would like absolutely froth the formula one. Like we were, where were we? We were somewhere. And I woke up, Oh, that's it. Gold Coast Marathon last year. So I'd run the Gold Coast Marathon and I was tired.

Jason · 16:00So I went to bed early, like 9 PM. I woke up to Case in bed with AirPods in at midnight that night, the Formula One Grand Prix had just started somewhere in the world. And she sat up from midnight till two in the morning with her phone and some AirPods in. When I rolled over and woke up, she pulled one AirPod out, she goes, do you want one as well?

Jason · 16:18You want to sit up and watch? And I was like, what the? I'm exhausted. I'm going back to sleep, but I love your dedication. Like I was actually quite impressed with the dedication to the sport. Cause it stopped becoming about the TV show and about the drivers. She was legitimately interested in the, the tactics and you know, was someone going to be able to beat Max Verstappen who was just unstoppable and it was, she was wired.

Nick · 16:42I think what the Netflix series did is it, um, it showed the glitz and glamour. So it got people interested via the glitz and glamour. But once you then understand. The complexities of it and, you know, the, the, it's just the millimetres that

Nick · 17:00are in the game and, Marty, I watched the tennis one, it's chalk and cheese, like the drama that surrounds Formula One.

Nick · 17:10Is just in comparison, like tennis does not compare. So it's just such high drama because of the amount of money that's floating around in the politics. Uh, but it just gets you, it gets you in like it's, yeah. Well, you're getting me, I'll watch it tonight. I'm excited. And

Jason · 17:25even when you start to talk about the drivers and changing teams that they race for and how the team politics work, you, you will, Marty, you're going to come in next recording and you're going to have seen like five seasons.

Jason · 17:35You're going to be addicted. So

Nick · 17:37let's not, let's not. Let's not think, let's not forget about the, what the actual draw card is here. These guys in these go kart like size cars, shooting around at three, two to two, two to 300 Ks an hour. So it's hard not to get excited and just be in absolute awe of what these guys are doing at the same time, you know?

Jason · 17:56Yeah. Big time. So Netflix series, uh,

Jason · 18:00Drive to Survive, Marty. Um. Huge appeal, numbers skyrocketed. So for example, the attendance figures at the U S Grand Prix, um, the, the one that they had back in 2018, which I think was just, just Texas at the time. Um, they had 264, 000 people attend in 2018. Three years later, they had 400, 000 people attend in 2021.

Jason · 18:25They then increased the revenue from 1. 15 billion in 2020. To 2. 14 billion in 2021. So an extra billion dollars in revenue between 2020

Jason · 18:38and 2021,

Jason · 18:39then you'll love stock price, Marty, from the launch of Netflix. The stock price for Formula One went up 62%. It's now valued as a company at 17 billion, between 16 and 17 billion dollar valuation, I believe it's USD.

Jason · 18:56So you can do the translation to AUD and

Jason · 19:00a growth in fans globally with 77 percent of new fans between the age of 16

Jason · 19:07and 35.

Jason · 19:08So really nailing that, that demographic. viewer numbers have gone from 70 million viewer average to as much as 110 million viewers worldwide when it's telecast. So just the sheer numbers that tune in and watch the sport, um, I just think just phenomenal how a TV show has just changed the path of Formula One and the, the sport in that way.

Jason · 19:33And then even the driver's lives, like they are rock stars. They already were rock stars, you know, as Formula One drivers, but there is just another element to it now. Um, beyond that, and we won't unpack this now, um, shared a lot of numbers, but just out of maybe for yourself, Marty, as a non Formula One, do you know what a Formula One driver would be paid to spin around in a race car and have a pretty cool life?

Marty · 19:56I'm just going to take a guess, but I would say a couple of mil, two,

Marty · 20:00three mil.

Jason · 20:00Cool. Uh, Max Verstappen, his 2023 contract should have net him about 70 million for cruising around in a car having a pretty good life. Uh, Lewis Hamilton's contract was 55 million. Fernando Alonso got 34 million. And then Perez and Leclerc were next on about 26 million and 19 million.

Jason · 20:19So not a bad little salary for spinning around in a car. And if you've followed the story on Lewis Hamilton and his contract after 2025, this man will be 40 years old. I believe, correct me if I'm wrong there, Nick, I'm going off the top of my head here. I reckon he'll be turning 40 by the time he joins Ferrari.

Jason · 20:38So Marty Lewis Hamilton, you'd know Lewis Hamilton's name, seven times champion at Mercedes. Um, You know, everyone probably thought he was going to be a Mercedes for life and finish his career there and signed a two year extension with Mercedes, but the second year had a little option clause on it, just in case he, uh, wanted to retire or finish up.

Jason · 20:58Little did Mercedes

Jason · 21:00expect that he signed a 446 million deal with Ferrari to jump ship and go over to Ferrari from 2025 season onwards. So in an awkward, weird turn of events. Lewis Hamilton drives the whole current season's about to start in Bahrain or that started in Bahrain and you know, we're in Melbourne soon.

Jason · 21:19He's gonna spend the whole year awkwardly driving with his mates at Mercedes that he's then turned his back on and he's jumping over to Ferrari at the end of the year. So what a wild sport.

Marty · 21:29That's incredible. Yeah, that's just like, Charlie's gonna be very disappointed when I pull him out of cricket tonight and shove him in my car and drive, you know, three times the speed limit.

Marty · 21:39So that is That is incredible growth. And I'm actually really looking forward to the show based on the numbers you've given me, because that's exceptional.

Nick · 21:48Oh yeah. I reckon Charlie will love it. And the first season's great because it, um, from memory, Jase, I think it's the one that was when Ricardo had all the dramas around going to Renault.

Nick · 21:58Yep. Um,

Nick · 22:00yeah,

Jason · 22:01you know. As, as, as I said, not an F1 person, I didn't know all that. So going kind of back in time and revisiting, you know, the driver politics, leaving Red Bull, like Daniel Ricciardo was at Red Bull that went on, that is now going to be one of the most successful teams ever if they keep going the way they're going with Max.

Jason · 22:17And he, he, he screwed up, you know, he, he left and went to Renault, he went to McLaren. If you haven't watched Drive to Survive, I'll stop giving away the whole thing for all those listeners out there that are now thinking like Marty, they've got to go and watch Drive to Survive. Um, but Marty, as well, from a parent and kid's point of view, there's a lot of emotional heart string stuff around.

Jason · 22:37The drivers reflect back to the sacrifice their parents made to put them in a go kart to, to give them the opportunity to become race car drivers. And then there's also the tale of wealth versus hardship, where you've got a couple of drivers who came up through their, their parents didn't have a lot of money, they made a lot of sacrifices versus the kids that came from really wealthy, you know,

Jason · 23:00backgrounds that, you know, were given these opportunities.

Jason · 23:03Lance Stroll, um, is Lance Stroll is the driver. What's his name? Lawrence, Lawrence Stroll. This guy is so rich, he bought Aston Martin and then bought his own Formula One race car team and then rebranded it Aston Martin and then gave his kid a seat in the Formula One, like his kid's talented, but like the sheer wealth and scale of what is going on here in the Formula One.

Jason · 23:27And the story behind, and the stories you get to see at Netflix, um, on the Drive to Survive series.

Nick · 23:32Without the, like the kids that do get through, like, so Daniel Ricardo is one, but, um, from what I've heard, his parents are very well off and, uh, Hamilton's probably the other, but apart from the absolute freaks of nature who managed to get through.

Nick · 23:47Like a Red Bull feeder team or something, if there's no, uh, if there's no money backing drivers, they don't have a chance basically. Um, so I think there's a lot of talk around Perez and

Nick · 24:00the main reason Perez gets a seat is because he's got a massive backer, uh, that brings money into the sport. So financial backer.

Nick · 24:06Yep. Yeah. So it's, it's pretty crazy. And if you talk to Same as

Jason · 24:10I think Yuki, Yuki Sonoda as the Honda family or the, it was a bit of a. Yeah, the Japanese background, bit of money there.

Nick · 24:16Same with the Russian guy who's now obviously been, um, who's, who's been punted, but he was the same. He was in there because of the money, the Russian money that he was bringing to the Billions.

Nick · 24:26Yeah. So it's, yeah, it's a big business at the end of the day. I reckon

Jason · 24:30Marty's, Marty's leaving work now to go home and start streaming. Download it, come

Marty · 24:35home. I'm fascinated in regards to your conversion on it though, Jase, and thinking that age group, that 16 to 35 age group. It's usually you're pretty much setting your interests like in sports, but to actually have, like, I'm, I'm just listening to you two talk about it and just hear how engaged and excited you are about it.

Marty · 24:55Um, like that's fascinating and what that whole sport has done

Marty · 25:00to attract that level of interest and the numbers back that up. So I'll definitely be watching not only because the sports interesting, but yeah, obviously the stories behind it and the numbers behind it. How, how intriguing. To say that, um, and I'm sure once I watch it, I'll have the same feeling, but I've always liked it, but never to the point of being that in depth with it.

Marty · 25:20It's just been a sort of a. Third, fourth, fifth sport, really. So I'll be the number one. Yeah. But to be

Jason · 25:28the number one, Marty, just like the numbers game about to be the number one podcast on some kind of Apple podcast list or Spotify. I did find us at 23, uh, on Feedspot's small business podcast to watch out for in 2024.

Jason · 25:42So we're doing something right, gents. And, uh, thank you to all of our listeners out there who do tune in and, uh, You know, listen to our episodes and provide us feedback, follows, likes, subscribes, five star ratings in the, uh, wherever you get your podcasts from. We do appreciate it. It means a lot to us. If you do have

Jason · 26:00any feedback, any thoughts on this, I want to share your thoughts on Drive to Survive.

Jason · 26:03Hit us up, hello at the numbers game podcast. com. au. Or find Jase, Nick and Marty on Instagram or LinkedIn, where we're happy to connect and chat with anyone, um, about anything they want to talk about. So, thank you for listening, and until next time

Marty · 26:17Look, hook us up on email, we're trying to organize a race back to Lillydale, so, you know, just hit us up.

Marty · 26:23We're all out, another two days, let's do it. Game over. ---