It’s 2017, where are the sponsors?

Watching the car launches this past week and now seeing the action during the first test of 2017, I was reminded of how devoid of major sponsorships the cars seem be. Perhaps I’m just getting old and recall the logos of West, Marlboro, Elf, John Player Special, Parmalat and Martini—which is still on a Williams after a glorious return to F1—and others that now seem destined for the history books.

Much has been made of the EU law on tobacco advertising and how this ruined major sponsorship of F1 and while there is no doubt the exit had a major impact on the sport, the lack of major technology companies and other global businesses is still somewhat surprising.

I was reading an interesting article here about that very issue. Let me say, up front, that I don’t disagree with this article. They are experts in the field and are in the business. What I do want to focus on are a few of the concepts I found interesting.

The article quotes Force India owner Vijay Mallya regarding the lack of sponsors beating a path to Formula 1’s door:

“If the boss of Formula 1 says publicly that the sport is crap, what do you expect? Which sponsor wants to enter a business than speaks like that about itself? Bernie put off many sponsors with his comments, and those who did come went to the rights holders.”

We’ve heard this before from Vijay and other team bosses and specifically the smaller teams have always had an axe to grind about why they aren’t finding large sponsors. That doesn’t mean they are unfounded but then the teams are also responsible for the current formula—via the F1 Strategy Group—and if the product isn’t as good as it could or should be, Ecclestone’s not the kind of dog to lap it up. He’s always called a fig a fig and a trough a trough.

If you’ve listened to our podcasts over the last several years, you’ll have heard me question the teams and their role in the marketing and sponsorship efforts of their business. I’ve not been critical as I am not on the ground floor working with them but I do find it odd that the teams seem to have slowed their pace on major sponsorship outreach in favor of simply banking on Formula One Management prize money. There could be very good reason for this and one could be that FOM held the major sponsors for itself, as Mallya suggests, and if that’s the case, the major dollars only funnel through the prize money payout. I’m not completely convinced that’s the case.

I’ve spoken to new McLaren marketing guru, Zak Brown, a few times about this issue and he’s always felt that F1 is a terrific marketing investment and there are complicated reasons why the teams aren’t getting major deals these days. I recall former McLaren CEO, Ron Dennis, holding out for $20+ million deals and felt the team was certainly valued properly but according to their article, that may be a legacy way of looking at the shift in marketing programs.

“Teams are basing their sponsorship valuations as a proportion of the overall running costs incurred by the team, not based on the actual value of the sponsorship,” explains Wright. “For example, if a front wing end plate accounts for 3% of the overall cost, then a team will expect to get the same amount of money back from a brand sponsoring that position. The reality is that the actual value of that position is much less than 3%, and brands know this and therefore are not willing to shelve out the money to put their name on the side of the car. As costs are growing, media values are dropping, and therein lies the problem.”

I find this a very intriguing possibility and from what I’ve read from team bosses, the title sponsorship values have always hovered in that $15-30 million range or at least a significant portion of the team’s budget. Over the last few years, we’ve seen smaller logos and smaller parts of the car from organization such as Microsoft, UPS, Johnnie Walker and others.

To be fair, Force India have done a much better job of gaining sponsorship on their car than other teams including Sauber which has been in F1 much longer. Strange then that McLaren has no title sponsor and it will be interesting to see what Brown can do. He’s managed some of the biggest motorsport sponsorship deals in F1 and beyond so if he can’t get a title sponsor for McLaren, then there is truly something very wrong.

At the article points out, Liberty Media are on board now and I know they get it. They’ve hired a former ESPN marketing guru to grow the sport and monetize the product. I think they’ll succeed and what’s good for F1 will be good for the teams. I still believe the teams need to spend more on their sales teams combined with a fresher marketing approach. They are under the illusion that tweeting more and hosting Facebook live events is the answer. It’s not. It’s time to get out and sell things again. Time to brush off those PowerPoint presentations and start hustling for sponsors. Time to recalibrate your pricing schedule and find new ways to create sponsor value.

Hat Tip: Sine Qua Non