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Monday Reflections: How Formula 1 fueled Florentino Pérez’s Superliga obsession

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Matt’s Monday Musings – A series with no rhyme or reason, just consistent thoughts on all things real Madrid released every Monday. Some weeks can be long, others just brief anecdotal thoughts. Either way, I’ll be posting thoughtful content about the club’s current, past, and future activities:

Imagine growing and cultivating one of the world’s biggest brands. Now imagine that the 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 at the click of a button. However, despite the global magnitude of that reach, the brand cannot really realize the monetary value of what it has created. Frustrating, right? This is the reality of football clubs, especially “superclubs” like Real Madrid, Barcelona or Manchester United.

How is it possible that these multi-billion dollar global entities, with the ability to hire the best and the brightest, are not maximizing the potential of their brand? Because soccer clubs have been a step behind in recent decades, not being able to really break into the US and Asian markets, and find themselves constantly paying middlemen for data and profits that should be theirs. 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 United States. Barça and Real Madrid had more than five times as many followers as the number one American sports team, LA Lakers, and more (as of 2016) than all NFL teams combined. Companies like McDonald’s and Amazon were always trying to convert their customers into fans. Barça had the opposite problem: they had to convert fans into customers. A fan in Mumbai, India, could walk around in a pirated Messi shirt and watch all the team’s games at a local bar, without paying the club a single rupee. If he was one of Barcelona’s more than 100 million Facebook followers, then it was Facebook, and not Barça, that had his personal data. Barca may not even know the guy’s name. He had to pay Facebook to access it.

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If Barça could convert its fans into customers, it would be less dependent on sponsors, television rights and ticket sales in the future. That’s where the entire football industry was headed, one executive told me: ‘instead of selling to sponsors and TV companies that were selling to fans, cut out the middleman and sell directly to fans.’ Super clubs need to start thinking more like digital startups.”

These clubs have millions, if not billions of dollars of revenue left on the table. A stagnant or declining business is a dying business. LaLiga’s viewing numbers are down 30% since the 2018-2019 season and just 7.5% of its viewers fell into the 13-24 age demographic. Needless to say, these are alarming numbers, especially for a man like Florentino Pérez, who knows the true power and value of the club brand. The president suggested as much in his infamous interview with The beach bar on the reasons for the Super League:

Formula 1, the highest class of international motor racing, experienced similar declines in 2008. However, the sport has since transformed its fortunes and proved to be the perfect case study for Florentino and the creators of the Super League.

In 2008, F1 was run by Bernie Ecclestone. The sport was among 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 mogul failed to acknowledge the underlying issues that led to year-over-year declines in viewership, endorsements and overall earnings (sound familiar?). By 2016, the last year of Ecclestone’s tenure, the sport lost more than 200 million fans or became 40% less popular than it was in 2008.

Among the variety of factors that led to F1’s decline, one of the main catalysts was Bernie Ecclestone’s utter disregard for the would-be next generation of F1 fans. In an interview with Asia-Pacific magazine campaignEcclestone was quoted as saying the following:

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

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

“Why do they want to do that? Is it to sell them something? Most of these children have no money. I prefer to talk to the guy in his 70s who has a lot of money.

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

In 2016, Liberty Media acquired Formula 1 and renewed the strategy to expand geographically and better monetize its 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, incorporated fan festivals into racing with concerts and other family events. Liberty media opened the “strategy group” (previously a small circle of executives) to allow the biggest names in Formula 1 to recommend and review potential changes, and improved television broadcast angles. And of course the biggest driver of Formula 1’s newfound success was the partnership with Netflix and the documentary series. “Drive to survive” which it was a resounding success and the true catalyst for the growth of the sport, particularly in the United States.

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

  • Average age of F1 fan: 32 years old
  • 77% of new fans under the age of 35
  • Fastest growing social media engagement across all sports globally
  • Captured the US market by letting ESPN broadcast races for free
  • Added a new track in Miami and increased US race day attendance by more than 50%. Planning to add a third US speedway in Las Vegas.
  • F1’s share price has risen 250% since Liberty Media took over in 2016, capturing billions of dollars in the deal.

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

In creating what was ultimately a flawed product, the Superliga, Florentino Pérez had the right intentions. There needs to be a change in football and clubs want more control over their financial future, rather than be beholden to UEFA and other intermediaries. Clubs are looking to create leagues and content that cater to a new generation of fans. Executives like Florentino Pérez recognize that an institution like Real Madrid has untapped potential and can only be frustrated by declining numbers in various facets of the business.

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