In 2017, Liberty Media made a blockbuster $4.6 billion acquisition of the Formula 1 (F1) Championship, which is the premier global racing competition. At the time, many experts believed Liberty overpaid because of F1's minimal presence in the U.S., which is the world's most valuable sports media market.
However, Liberty had a vision, and F1 is now bigger than ever. In fact, the most valuable of the 10 teams -- Ferrari -- is currently worth more than $3.1 billion on its own. Six of the 10 teams are valued at $1 billion or more, which speaks to the strength of the sport.
Investors can buy a stake in F1 through Liberty Media Formula One (FWON.A +1.84%) (FWON.B +2.65%) (FWON.K +1.12%) stock.
But earlier this week, Liberty announced plans to shell out another $4.5 billion, this time to purchase the MotoGP Championship. It's the world's top motorcycle racing competition, and Liberty thinks it can use its F1 blueprint to unlock substantial value from the sport.
NASDAQ: FWON.A
Key Data Points
Applying the learnings from Formula 1
The Formula 1 Championship has been running since 1950, so Liberty's strategy to grow the sport had to carefully balance satisfying longtime fans and attracting new ones. That meant keeping prestigious races like the Monaco Grand Prix and the Italian Grand Prix -- which have been around since the beginning -- on the calendar, while finding room to expand in valuable markets like America.
Considering MotoGP is slightly older than F1, with its first season in 1949, Liberty faces the same challenge yet again.
F1 held 20 races in 2017, which was Liberty's first full year at the helm. In 2024, the Championship will host a record 24 races, including recent additions like the Miami Grand Prix and the blockbuster Las Vegas Grand Prix, which expanded the U.S. calendar from one race to three. More races equal more opportunities to sell television rights, tickets, and sponsorships, which have contributed to a sharp rise in F1's revenue (I'll discuss that more in a moment).
Beyond expanding the calendar, Liberty always prioritizes taking fans' attention off the cars and directing it toward the unique personalities of each driver, which helps them build a connection with the sport. F1 has the fastest-growing social media presence of any sport in the world, and its Drive to Survive series on Netflix attracts millions of viewers each year.
MotoGP will hold 21 races in its 2024 season, so it still has some room for expansion. Plus, as was the case when Liberty first bought F1, MotoGP only has one race in the U.S. at the moment. Expanding that number will be a top priority for Liberty following F1's success in Miami and Las Vegas.
MotoGP has a Drive to Survive-style docuseries on Amazon Prime already, and I expect Liberty will use it to expand the sport's audience, especially in the U.S.
Growing revenue will be a focus for Liberty
Liberty is a business, and creating an incredible fan experience is a top priority. F1, for example, generated $1.8 billion in revenue during Liberty's first season in 2017. It has grown every year since then (except during 2020 because of a shortened season and no spectators), coming in at $3.2 billion last year.
That revenue is generated through media rights (32.2%), race promotion and ticket sales (29.3%), and sponsorships (18%). The expanded calendar was a primary contributor to last year's strong result, because it led to a record-high 6 million fans physically attending races throughout the season.
Longer-term, television rights will really move the needle. Rumors swirled in 2023 that Apple was prepared to bid $2 billion per year for the global streaming rights to F1, which would immediately double the sport's media rights revenue. The rights won't be available until existing contracts finish at the end of this decade, but Apple's potential bid would truly validate Liberty's efforts so far.
MotoGP is a much smaller business. It generated just $523 million in revenue in 2023, but considering it hosts a similar number of races each year, there is likely significant room for upside. Liberty CEO Greg Maffei told the Financial Times that most of the sport's revenue is concentrated in continental Europe, so there is a huge opportunity to apply the F1 template and expand it beyond its historical roots.
MotoGP was also profitable in 2023, with $192 million in earnings before interest, taxes, depreciation, and amortization (EBITDA), so it will immediately be accretive to Liberty's bottom line.
Image source: Getty Images.
Formula 1 and MotoGP will trade under the same ticker
Liberty's MotoGP deal is expected to close in 2024, but it must clear regulatory hurdles across Europe first. There might be some concern in the European Union that Liberty will hold too much power by owning both Formula 1 and MotoGP, but Maffei is confident the deal will ultimately close.
If and when it does, investors will be able to buy a stake through Liberty Formula One stock. There are three classes. The Class A (FWON.A) shares come with voting rights, whereas the Class C (FWON.K) shares don't. The Class B (FWON.B) shares trade on the over-the-counter market, so they aren't suitable for most investors.
Each class tracks the performance of F1 (and soon, MotoGP) all the same.
