Motorsport - Emergence of New Business Models in a Post Covid World

The Motorsport industry is undergoing a transformation currently. Growth in formula racing format for electric vehicles, rising revenues in Formula One racing championship, growing popularity of motorsports among millennial through broadcasting and social networking platform have boosted the motorsports industry over the past few years. Factors such as increase in number of races, advertisements and sponsorships are driving the motorsports market forward. Huge investments are done by the sponsors as these sports events are an ideal platform for the companies to promote their products. This racing entertainment attracts spectators and generates revenue for their products. Increasing safety features in racing vehicles, increasing promotional activities coupled with rising investments by sponsors across the globe would propel the market growth during the forecast period. Changes in the motorsport regulations such as limitations on the number of combustion engines, turbos and MGU-Hs and others as a key focus towards the driver safety, introduction of Apps, streaming platforms and improved graphics for revolutionizing fans experience and other key trends in the motorsport industry will impact the growth of the market in the coming future.

The growth is mainly attributed to rising partnership of brands and television right holders, emergence of new sporting power, greater fusion of sports and entertainment, rising popularity of live sports on OTT and social media platform. In March 2020, Renault F1 team and DP world have signed an agreement making DP World the global logistics partner and title partner of the team which will become the Renault DP World F1 team. The partnership helps explore opportunities to increase the efficiency of their supply chain. In April 2020, Disney revealed plans about acquiring Formula 1 Racing from Liberty Media for over US$ 4 billion. Liberty Media is potentially looking to sell off its ownership of the sport after just three years at the helm for a significant profit. This acquisition will be done with a vision to rebuild the program layout as a part of making the sport more entertaining. Furthermore, Touring Car Racing analyzed to witness high growth across the next five years. The growing adoption of aggressive digital strategy in world touring car championship such as introduction of new interactive show with WTCC drivers on each event exclusively for digital broadcasting is welcoming larger audience and recruiting new generation of fans. Factors like incorporation of new program formats are analysed to fuel the market growth in future years.

The growing popularity of motorsports encourages broadcasters around the world to make massive investments as a part of earning the broadcasting rights of motorsports events and thus broadcasting revenue is considered to be the major revenue source for the people and entities associated with the events. Motorsport Network is the destination for millions of automotive and racing fans. With more demands on their time, greater connectivity and more competition for their disposable income, audience habits are changing. Growing popularity towards automotive and racing industries holds enormous growth potential through integrated digital ecosystem. Motorsport Tickets is the dedicated motorsport experience provider, offering all General Admission, Grandstand and Hospitality options for every motorsports race. Formula 1 tickets for races during the 2021 season are found in a price range between $121.00 and $8399.00. The average price for a ticket to a single race during the 2021 season is around $1119.11. Tickets in a reserved grandstand seating area are considerably more expensive as they provide a premium view of a section of the track. Rights holders and venues across the world of sport are on a constant quest to enhance the spectator experience at events by adding entertainment elements, such as concerts, fan zones and enabling more access to star performers. As the most popular form of motorsport in the United States, NASCAR tickets are considered to be a hot ticket item among motorsports enthusiasts. NASCAR ticket prices will fluctuate from race-to-race and track-to-track. Some variables that will affect the ticket prices include the series that is racing, the start time of the race, the track, the size of the grandstands and seating location. NASCAR ticket prices during the current racing season are starting as low as $11.00 and the most expensive tickets are costing up to $5460.00. The average ticket price to attend a single race during the 2021 season is $198.87. Many circuits offer ‘Kids Go Free’ policies. At a race like the Austrian Grand Prix, two adults and two children can book the entire weekend in a popular grandstand for less than £500. The cheapest way to see a Formula 1 race is by booking a general admission ticket. For Races like the Belgian Grand Prix, weekend ticket plus camping costs £203pp. Majority of the companies have been providing various types of discounts and additional offers to increase their market demands in the motorsports market. Major companies such as AMG Motorsports, Ferrari S.p.A., McLaren Group and many others have been offering several discounted packages to gain the market traction.

This pricing has also led to significant growth in number of fans in recent years. Motorsports events generates huge amount of revenue and contributes towards the economical development, which is a major growth driving factor of this market. In July 2021, the International Automobile Federation (FIA) revealed that the motorsport industry contributed an annual $188.2 billion of business to the global economy. Growing popularity of motorsports among the people creates a positive impact on the revenue. According to another report of FIA, motorsports is one of the most watched sports worldwide and is one of the fastest growing spectator sports. Grand Prix sports events had an annual attendance of more than 4 million in 2019, while 8 Grands Prix events had more than 200,000 spectators. The weekend attendance went up by 1.75% and the Sunday attendance was up by 4% compared to 2018. Such high popularity of this sports creates various ways to generate higher revenue. This in turn drives the growth of this market. Furthermore, this popularity also provides incentives to the broadcasters to get the broadcasting rights of such events, which creates revenue, as it requires huge amount of investments. This became a major source of revenue for the people and organizations associated with the events. Apart from that, its popularity not only creates revenue though the ticketing but it also attracts more advertisements and sponsorships from various organizations as well as increasing demand for official merchandises and special meet & greet events with the participants, which generates new streams for revenues. In November 2021, Formula 1 owners announced that more than a quarter of a million people have already registered for pre-sale tickets for inaugural Miami Grand Prix, which will take place around May 2022, where the planned audience capacity is around 80,000. The FIA report of July 2021, shows that motorsports industry added $79.1 billion in total value through the goods and services including official merchandises, produced by the motorsport industry showcasing the growth of motorsports impact, not just on the direct industry but also allied markets. Moreover, major automobile manufacturers play a key role in the success of the sport tournaments by providing financial support to the drivers, teams and track operators; and investment for the expansion of their businesses. 

In July 2021, Porsche Ventures announced about its investments in motorsport technology Israel based start-up company Griiip, to change the motorsport viewing experience and raise the perception of car racing to new dimensions. Griiip has already developed a cloud-based data platform that enables the transmission of motorsport data directly from the racing car, and then both analyses as well as visualizes it in the cloud, which offers a new dimension of user engagement, data analysis and viewing experience. This in turn, helps in bringing the excitement of motorsport to the drivers, teams and fans. To enhance the solution performance and to improve the motorsports industry while expanding their business, Porsche Ventures invested in this company. Such developments are set to boost the growth of this market during the forecast period. In addition, these manufactures also offers exposure for the sport through advertising and dealer promotion. Hence the above-mentioned factors will drive the growth of this market.

Along with growing popularity of subscription based OTT platforms for the streaming sports events, the presence of various documentary movies related to the motorsports tournaments and the participants is set to drive the growth of the motorsports market, as it makes people more aware about the event and creates more enthusiasm related to the sports among them. This in turn is making this sports events more popular across the world. For instance, in March 2019, a popular subscription based OTT platform, Netflix and Formula One collaborated and jointly released a documentary series on the platform called Formula 1: Drive to Survive, which provides the viewers a behind-the-scenes look at the drivers and races of the Formula One World Championships. Presence of such documentary movies will affect the market significantly. According to a report of Formula One, Formula 1: Drive To Survive series of Netflix has created a solid fan base of motorsports and beamed the sports of Formula 1 into the homes of a whole new audience. This will drive the growth of this industry during the forecast period. Furthermore, these documentary series created such a massive growth opportunity for this market in the last few years and became so popular, that Netflix and Formula 1 produced two more seasons of the series and started investing on other motorsports documentary projects. In September 2021, Netflix released a new documentary film about the seven-time Formula 1 world champion Michael Schumacher, which provides insights about the experience of the champion and his passion for the sport. Such documentary projects not only providing valuable information about the motorsports events, but also making people more interested in this sports, which in turn will create new revenue streams for the motorsports market, thereby drive the market. Apart from that, during the Covid-19 lockdowns, people across the world started using these OTT streaming platforms for watching these matches, which affected the market growth positively, as many market players started launching completely dedicated OTT platforms for motorsports. In November 2019, NASCAR, a popular stock car-racing series, partnered with NBC Sports to launch TrackPass, a dedicated motorsport over-the-top (OTT) platform to stream live and on-demand videos, as well as various documentaries of various motorsports events including NASCAR practice and qualifying sessions. Such platforms offer the subscribers various intriguing insights about the racing events. Hence, the above-mentioned factors will drive the growth of the motorsports market

Amidst the Covid-19 break out, many motorsports organizations were adopting many new business models including organizing virtual racing events to overcome, such a difficult situation where fans were not able to enjoy these events like before, which in turn will create more opportunities for the motorsports market during the next five years. For instance, in January 2021, F1 announced about the return of Virtual Grands Prix in 2021 after record-breaking year for F1 Esports Series. The F1 report also states that, the virtual racing witnessed a total of 11.4 million live stream views across all digital platforms, which represented a 98% increase than 2019. Similarly, in September 20221, Porsche launched Gran Turismo Cup Asia Pacific virtual racing. The involvement of well known famous champions from past and present days, makes these events more popular among the fans. Furthermore, the prize money from these events goes straight to the charitable trusts, which also affected the involvement of the fans and drivers as well as other celebrities positively. A report states that, more than 30 million people tuned into the Virtual Grand Prix series 2020 to see F1 stars, sporting icons and music chart toppers represent the ten F1 teams in eight live events that replaced the official calendar, as the real-life racing stopped due to the pandemic. Hence, the adoption of new business models such as holding virtual GPs, will create ample opportunities for the growth of this market. 

Another major opportunity creating factor for the motorsports market is the growing penetration of autonomous vehicles for these racing events. Over the years, along with the popularity of motorsports championships, the popularity of autonomous vehicle racing series is growing. These events not only a racing competition but also an engineering as well as creativity competition, as the competitors first had to build their vehicles before taking part into the race. It also helps various students to showcase their talents. For instance, in September 2020, Kartik Chaudhari became part of a team from Carnegie Mellon University (CMU) that is competing in the upcoming season of Roborace, an international competition involving autonomous, electrically-powered vehicles, which gave him a huge opportunity to showcase his talents and to contribute towards the autonomous vehicle revolution, as he was working to accelerate the rise of AI in vehicles and transportation. Furthermore, these events are more safer than the motorsports events, as it causes almost no harm to the humans. Moreover, many organizations are taking various initiatives to become a part of the racing series. In February 2021, Trimble and ROBORACE jointly announced about their comprehensive technology and marketing alliance. As part of the alliance, ROBORACE will utilize Trimble's Applanix POS LVX GNSS-inertial systems in its next-generation autonomous race cars for Season 1 of the championship. Such developments and strategic steps taken by various enterprises are creating huge opportunities for the autonomous vehicle racing series.

In 2021, global leading carmakers like BMW, Audi, Mercedes announced about pulling out of Formula E racing with an aim to spend on the plan to electrify all the road cars by 2025. As a part of the new strategic direction, the brand has deliberately chosen to shift resources for this accelerated ramp-up of electrification, including the development of three electric-only architectures to be launched in 2025 and applying the lessons learned in competition to product development in series. In March 2021, Porsche declared about a long-term partnership with Formula E with a vision to offer the most competitive environment as a part of advancing the development of high-performance vehicles with a focus on eco-friendliness, energy efficiency and sustainability. This is not just an impact for Formula E but across the Motorsport world. For instance, In October 2021, Honda and Red Bull announced about their collaboration after Honda decides to leave formula 1 as an engine supplier due to focus on electrification. Honda opted to quit F1 with an aim to focus on their goal of achieving carbon neutrality throughout the automotive company, but agreed to continuing developing their F1 Power Unit for Red Bull for 2022, which will be overseen a newly-formed company – Red Bull Powertrains. Such collaborations will promote the growth of motorsport activities in coming years as a part of expanding range of mobility products to a wider audience. From 2022, the LMP1 class was replaced by Le Mans Hypercars at French 24 Hours of Le Mans race to bring back the many bigger manufacturers into the historic endurance race and to challenge Toyota’s monopoly over the title. Event of this year saw Hypercar entries from Toyota, Glickenhaus and Alpine, while Peugeot, Audi, Porsche and Ferrari announced about their plans to entering in this series by 2024. Entry of such well known car manufacturers in this tournament is set to boost the growth of this market.

In March 2020, DTM, The touring car championship announced about transition to a spec GT3-based championship in 2021, seemingly abandoning its push to beef up the cars to 600bhp. DTM also revealed that it will introduce a system of success ballast on top of a Balance of Performance system. As per the rules, the top three drivers in the championship will receive handicaps of 25kg, 18kg and 15kg respectively for the following race. DTM platform will be expanded to include five pillars: DTM, DTM Trophy, DTM Electric, DTM Classic and DTM E-sports. From 2023, a new support category featuring fully-electric cars will be introduced by the series with the DTM running a demonstration vehicle at Hockenheim, before building a first prototype model of its 'E-car' next year. Such developments as a part of implementing a progressive diversification of the series combining the highest demands and innovative trends of motorsports are set to drive the DTM market forward tin the coming years. In October 2020, the plan of launching SuperCharge Series, a new electric road car-based series in 2022 with races in cities around the world was announced. SuperCharge series consists of eight teams and will compete using 16 cars powered by a battery producing 500kW/670bhp and capable of reaching 100kph in 2.5 seconds. This new development will drive the electric motorsports market in coming years as the need for road car-based electric motorsport is becoming more and more compelling.

Increasing environmental issues generated from motorsports tournaments and its affect on health along with rising prices of oil have given incentives to the automotive manufactures for producing sustainable and environment friendly products for motorsport and to Formula racing organizations for deploying electric vehicles for tournaments. For instance, to reduce the pollution level generated from motorsports, Formula One world is putting efforts to promote the deployment of electric vehicles in the Formula Racing events for which they have created a distinct format of Formula E. This in turn creates ample growth opportunities for motorsports industry. Apart from that, over the years the investment and the demand for Electric vehicle for motorsports events have risen due to its eco-friendly benefits, as it reduces the pollution level tremendously, thereby having its own health benefits; it’s far safer than other vehicles and saves invaluable resources such as oil. These are the few major factors causing the increasing growth of formula racing format for Electric vehicles, which will positively affect the motorsports market. Few years back, Formula E and UN Environment collaborated to achieve their common goal of improving inner-city air quality, by continuing to promote the profile of alternative energy solutions and the increased uptake of EVs. Such collaborations will drive the growth of Motorsports industry in the next few years. In the recent times, the concept of Electric Vehicles (EV) has attracted huge amount of investments and created massive demand for it, even in motorsports market especially in formula racing. 

To meet such high demands for EVs, manufacturers are aiming at providing cars running on batteries employing electric motors. In November 2020, Mahindra Racing introduced its latest challenger, M7Electro for upcoming 2021 Formula E season and confirmed its new driver line-up, with Alex Lynn signing on alongside Alexander Sims. Similarly, in July 2021, ABB New York City announced about strengthening its long-standing commitment to all-electro series by becoming race title partner for New York E-Prix. This partnership and ABB’s involvement in the ABB New York City E-Prix offers an opportunity to test as well as develop e-technologies, which will accelerate the transition to a low carbon economy, create employments, spur innovation, and will mitigate the impacts of climate change. Such developments and strategic steps are creating growth opportunities for Formula-E market during the forecast period. Major car manufacturers including the Renault, Audi and Jaguar Land Rover, Porsche, Mercedes and others have already started competing in the Formula E events, which will also create a positive impact on the growth of this market during 2021-2026.

The motorsport market is currently undergoing a significant realignment. A number of Motorsports promoters and teams are focusing on making the races more accessible, with significant focus on Asian and African Markets. The players of this market are taking more strategic steps for the expansion of the market through new product launches, acquisition, investments and others; and to showcase their engineering capabilities, which in turn affects the brand value of the organizations, thereby driving the growth of global motorsports market. There have also been a number of acquisitions and consolidations in this market space as well. , Speedway Motorsports and Dover Motorsports made an announcement stating that the companies have entered into a definitive agreement under which Speedway Motorsports will acquire Dover Motorsports for an approximate total equity value of $131.5 million. 

Even though the motorsports market is growing over the years, but the associated environmental risks are creating hurdles for the growth of this market. These motorsports vehicles causes air pollution as well as noise pollution and creates negative impacts on the environment. For instance, according to a report of International Automobile Federation (FIA), published on December 2019, environmental risk is one of the major challenges faced by the F1 motorsport market, as the F1 driving activities produces around 256000 tonnes of carbon dioxide annually. The audit conducted by the FIA also states that, the total carbon dioxide generated by the F1 motorsports in 2019 reached 1.9 million tonnes per year, after including the pollution created by the fans of this sport. Such negative impact of these sports events on the environment will create hurdles for the growth of this market. However, rising adoption of electric vehicles for such motorsports events and various initiatives taken by the FIA to reduce the emission level of F1 is assisting in offsetting this challenge. Growing demand for entertainment associated with single-seater motorsport championship for electric cars is set to drive the Formula E market. The rising interest about Formula E world championship is bringing the thrill of electric racing to as many people, on city-center circuits around the world. Formula E racing is world’s most advanced e-mobility technologies, which are helping to drive progress towards a more sustainable future. For instance, few years back Formula E has joined forces with UN Environment to launch a global partnership with an aim to improve inner-city air quality – continuing to boost the profile of alternative energy solutions and the increased uptake of electric vehicles. In 2014 Formula One implemented a shift from their old v8 engine model to hybrid power units to lower emissions. Hybrid power units can recover heat and kinetic energy from braking to boost the cars. More efficient engines allowed for fewer pit stops, keeping the race exciting. New engine designs are already in the works for 2021 however with higher fuel limits and increased horsepower. New F1 engines will almost certainly keep the hybrid power unit design and not shift to a full electric model. This is just one proponent of the changing phase of the Motorsport world as the industry continues to shift to an eco-friendlier space. The Motorsport market will continue to evolve not just in the vehicular aspect but also behind the scenes in terms of logistics and race hosting driving forward a sustainable future.