Monday Musings: How Formula 1 Fueled Florentino Perez’s Super League Obsession

Matt’s Monday Musings: A series with no rhyme or reason — just consistent thoughts on all things Real Madrid released every Monday. Some weeks may be long form, others just short anecdotal thoughts. Either way, I’ll be posting reflective content on the current, past, and future on-goings of the club:

Imagine growing and cultivating one of the biggest brands in the world. Now imagine that brand has the ability to engage with nearly 400 million people on any given day. Those 400 million people have a genuine interest in the brand’s product and can be reached with the mere click of a button. Yet, despite the global magnitude of that reach, the brand is unable truly tap into the monetary value of what they have created. Frustrating, no? This is the reality for football clubs, especially “super-clubs” like a Real Madrid, a Barcelona, or a Manchester United.

How can these global multi-million dollar entities, with the ability to hire the best and brightest, not be maximizing their brand’s potential? Because football clubs have been a step behind in the most recent decades, failing to truly break into US and Asian markets, and they find themselves constantly paying intermediaries or middlemen for data and profits that should be their own. Simon Kuper, author of “The Barcelona Complex”, summed it up well:

“About 45% of the world’s population lives in four countries: China, India, Indonesia, and the US. Barca and Real Madrid had over five times as many followers as the number one American sports team, the L.A. Lakers, and more (as of 2016) than all the NFL teams combined. Companies like McDonald’s and Amazon were always trying to convert their customers into fans. Barca had the opposite problem: it had to convert fans into customers. A supporter in Mumbai, India, might walk around in a pirated Messi shirt and watch all the team’s game’s in a local bar, without ever paying a rupee to the club. If he was one of Barcelona’s 100-million-plus Facebook followers, then Facebook rather than Barca had his personal details. Barca might not even know the guy’s name. It had to pay Facebook to access him.

If Barca could turn its fans into customers, then in the future it would depend less on sponsors, TV rights, and ticket sales. That was where the whole football industry was heading, one executuvive told me: ‘instead of selling to sponsor and TV companies who sold to fans, cut out the middleman and sell directly to the fans’. Super clubs need to start thinking more like digital start-up’s.”

These clubs have millions, if not, billions of dollars of revenue left on the table. A stagnant to declining business is a dying business. La Liga’s viewership numbers are down 30% since the 2018-2019 season and only 7.5% of their viewers fell in the 13-24-year-old age demographic. Needless to say, these are alarming numbers, especially for a man like Florentino Perez who knows the true power and value of the club’s brand. The president suggested as much in his infamous interview with El Chiringuito on the reasons for the Super League:

Formula 1, the highest class of international motor sport racing, was seeing similar declines back in 2008. Yet the sport has since transformed their fortunes and turned out to be the perfect case study for Florentino and the Super League creators.

In 2008, F1 was run by Bernie Ecclestone. The sport was amongst the most popular in the world and was at the height of its popularity. But 2008 was a peak for F1 under Ecclestone. The British business magnate failed to recognize the underlying problems that led to year-over-year declines in viewership, sponsorships, and overall profit (sound familiar?). By 2016, the last year of Ecclestone’s tenure, the sport lost over 200 million fans or became 40% less popular than in 2008.

Among the variety of factors leading to F1’s decline, one of the main catalysts was Bernie Ecclestone’s total disregard for the potential next generation of F1 fans. In an interview with Campaign Asia-Pacific magazine, Ecclestone was quoted as saying the following:

“Young kids will see the Rolex (watch) brand but are they going to go and buy one? They can’t afford it. Or our other sponsor UBS — these kids don’t care about banking. They haven’t got enough money to put in the bloody banks anyway. That’s what I think,” he said.

“I don’t know why people want to get to the so-called ‘young generation’.

“Why do they want to do that? Is it to sell them something? Most of these kids haven’t got any money. I’d rather get to the 70-year-old guy who’s got plenty of cash.

“So, there’s no point trying to reach these kids because they won’t buy any of the products here and if marketers are aiming at this audience, they maybe they should advertise with Disney.”

In 2016 Liberty Media acquired Formula 1 and revamped the strategy to expand geographically and better monetize their existing fan base. It is Liberty Media’s strategy that will be studied by the best in sports management for years to come. They relaxed social media rules and allowed race teams to use more “behind the scenes” footage, they incorporated fan festivals at races with concerts and other family-friendly events. Liberty media opened up the “strategy group” (formerly a small circle of executives) to allow the biggest names in Formula 1 to recommend and review potential changes, and they improved TV broadcasting angles. And of course, the biggest driver to Formula 1’s new found success was the partnership with Netflix and the docu-series “Drive to Survive”, which was a resounding success and the true catalyst to the growth in the sport, particularly in the US.

Nielsen now projects that Formula 1 will surpass 1 billion fans in 2022 and has achieved the following since being purchased by Liberty Media in 2016:

• Average age of F1 fan: 32-years-old
• 77% of new fans under the age of 35
• Fastest social media engagement growth across all sports globally
• Captured the US market by allowing ESPN to broadcast races for free
• Added a new circuit in Miami and increased US race-day attendance by over 50%. Planning to add a 3rd US circuit in Las Vegas.
• F1 stock price is up 250% since Liberty Media took over in 2016, capturing billions of dollars on the deal.

There is no reason why Formula 1’s success cannot be replicated in football. There is ample opportunity for every club in the world to tap into an under-monetized US and Asian markets. Of arguably greater concern, is the lack of growth with younger fans. According to a study conducted by Gavin Bridge, younger sports fans consume the game differently: they watch highlights rather than full games, prefer to interact through social media, and they want to watch the big stars. Gen Z devour content online rather than watching the full game. The value of TV deals will go down if that tide does not change.

In creating what was ultimately a flawed product, the Super League, Florentino Perez had the right intentions. There does need to be change in football and clubs want more control over their financial futures, rather than being beholden to UEFA and other middlemen. Clubs are looking to build leagues and content that caters to a new generation of fan. Executives like Florentino Perez recognize that an institution like Real Madrid holds untapped potential and can only be frustrated by declining numbers in various facets of the business.