Formula E’s rising revenue is a good problem to have

Formula E

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Formula E has released its preliminary financial results following the conclusion of its 2018-19 season, the championships fifth and the first for its second generation chassis.

The electric racing series will boast eight mainstream motor manufacturers – including Mercedes, which launched its EQ Silver Arrows 01 at the Frankfurt Motorshow earlier this week – when the new season begin in Saudi Arabia on November 22nd.

It reported a headline turnover of “over €200m”, a result which places the company in the black for the time since it commenced operations in 2014. The series close to bankruptcy after its inaugural season, with only a cash injection from Liberty Global, ironically as associate of F1’s commercial rights holder Liberty Media, saving the series from early oblivion.

During its 2018/9 season Formula E recorded a 24 per cent year-on-year increase in cumulative TV audience to over €400m, and a combined live audience at events of “400,000 spectators through the turnstiles.”

Speaking to RaceFans in Marrakesh in January series founder Alejandro Agag, now its CEO and chairman, forecast the boost in earnings. “If everything goes like it looks like going, this year we are going to be very close if not over €200m in revenues,” he said. “What we want here is that everybody is profitable. The teams have to be profitable and we have to be profitable.”

In that sense it’s mission accomplished. The results, however, beg the question: how much longer before the teams demand a portion of the revenues? Equally, how long before the teams demand a say in the running of the sport and framing of regulations, as per Formula 1, where the manufacturer teams have led demands for greater shares of the revenues and input into the regulatory and governance processes. When that happened, costs exploded.

At the time Agag said: “What makes sense is that first we recover our investment, then we make some profit from our investment, and then we start the conversation with the teams on how we’re going to do [any] distribution.”

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Asked in an exclusive interview during Mercedes EQ launch where his company stood in this regard, team principal Ian James, said “I think we need to look at how Formula E, as that platform develops and how also the business model develops.

Nyck de Vries, Stoffel Vandoorne, Mercedes Formula E launch, 2019
Mercedes launched its Formula E team this week…
“They were a loss-making enterprise for the first few years, the first few seasons. They’ve started to recover now, and I think that one of the things that I really like about Formula E, I have not previously been at the sharp end of motorsport but you hear all these little things about the politics…”

James added that the series provides a platform which that “gives us access to some new target groups, some new markets. It still has the racing element in there, so my hope and from what we see as well is that we still have that engagement with the traditional motorsport fans.

“But the fact that it’s electric, the fact that it takes place in city centres, that open opens up totally new target groups to us as well from a motorsport perspective. That fits in very well with the Mercedes-Benz EQ brand.”

However, one of the dangers Formula E faces is that having eight manufacturers in the championship means ultimately one of their number must place, at best, eighth, and is at risk of being beaten by one or more the independent teams with lesser resources. Is there not a risk that FE will experience an exodus of manufacturers, as hit the premier series between 2006-09?

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“We can’t all win,” agrees James. “People will struggle. This sport is hugely complex; [but] I don’t believe you’re ever going to get into a situation where you see the dominance that you see in other series.

Porsche 99X, Formula E, 2019
…they’ll meet Porsche on-track in December
“I think it’s healthy for that as a new series, as a start-up because we’ve still got a lot of work to do to generate the interest in that, and the fan base that’s going to be needed to make it sustainable. From our perspective we’re approaching it with a good dose of humility for the first season, but we’re racers at the end of the day.”

A further challenge the series faces is to contain costs while pursuing technical innovation, for in motorsport terms the two are mutually exclusive. Although bodywork, chassis and batteries are controlled, drivetrains enjoy an element of freedom, and James is concerned that restrictions could make the series less attractive to manufacturers seeking to use Formula E as a showcase for their products.

“I’m super-sensitive at the moment that this needs to be something where Mercedes-Benz and [parent] Daimler need to continue to see the value in doing it,” he admits.

“So I think that, yes, the teams, the independent teams maybe have to be slightly more careful but at the same time I see it incumbent on all of us to make sure it doesn’t get out of control.”

That, and not growing revenues and profit sharing, would appear to be Formula E’s biggest challenge as its new season nears.

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Dieter Rencken
Dieter Rencken has held full FIA Formula 1 media accreditation since 2000, during which period he has reported from over 300 grands prix, plus...

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  • 29 comments on “Formula E’s rising revenue is a good problem to have”

    1. LOL, I think the Mickey Mouse circuits are their biggest problems.

      1. Add to that F1’s (and other series’) rejects and retirees, artificial sweeteners in the form of Attack Mode and FanBoost, stock cars… and you can call it real-life “Mario Karts”!

        Their revenues are growing because of huge numbers of “casual” audience and sugar-addicted teens, but once the former gets bored and the latter grow up in several years – will anyone keep following FE?
        Not a chance.

        1. Haha such old fogies, lighten up! They’re right though, they’re trying to appeal to broader, less traditional motorsports markets, and to me they’re doing a good job. First and foremost you can actually watch the thing for free on YouTube which is a revelation compared to F1 in the UK now for instance. Nobody’s paying £9 to watch one race on NowTV or getting a Sky subscription just for F1 if they’re only a casual viewer. F1 is appealing to the converted already as far as UK coverage goes.

          Meanwhile FE looks attractive. You can watch it streamed live online or watch it later at your leisure. Shorter exciting races plus it’s actually realistic to consider going along to a race since they’re in big cities and it is cheap entry. No one is going to set aside a whole weekend to traipse to some track in the middle of the countryside, spending several hundred just for a seat, to watch something they’re not 100% committed to (certainly not people on the lower income side of things, which is an absolute travesty in F1 by the way). Now I can consider a weekend trip to Berlin for the nightlife and fit in a Formula E race while I’m there since I’m curious about it. To put it simply, FE is massively more accessible. Its popularity is clearly growing each year as a result. How is that a bad thing? A new Motorsport fan is then more likely going to be interested in other series’ as well. Motorsport is so inaccessible to people that many never even realise they have an interest in it. FE is about the most accessible way for many to get involved, and it’s quickly getting a reputation as the new big thing whether you like it or not. It can only keep improving given big name manufacturers are getting more involved as well since electric is clearly the trajectory of the future, whether you like it or not.

          I mean a few years ago electric cars as any kind of performance vehicle were seen as a joke, now look at where we’re at. Electric cars breaking lap records at the Nordschleife, cars like the Porsche Taycan, Tesla’s out accelerating supercars and now Formula E providing a spectacle that isn’t a million miles away from F1. It’s called progress and dismissing it seems to be coming from a noisy generation who are so beholden to the idea of gas guzzling cars that they forget that Motorsport and motor racing has ultimately always been about progress.. so why stop now when it’s clear in a few years electric will be doing many things even better than a petrol powered car could ever do? The fact it’s environmentally friendlier shouldn’t need to put you off!

          1. Well said. Couldn’t have put this in better words. For me, a COTD contender – and I am a hardcore F1 fan since the 90s.

          2. DavidDesu, I think that there is scope to offer a reasoned criticism, whilst at the same noting the aspects that Formula E is doing better than most other series.

            As you rightly note, the focus that Formula E has put on accessibility, both through the use of free to air platforms and low admission costs, is something that makes it stand out from most motorsport series. The use of city tracks might frustrate traditionalists, but at the same time it plays into the image that Formula E wants to have, which is being able to race at venues and in areas where no other racing series could hope to race and giving itself a sense of exclusivity and accessibility in that respect.

            That said, at the same time it is fair to say that some aspects of the series are not without criticism. The FanBoost system may be intended to get fans engaged with the sport, but whilst the gimmickry of the system might alienate some, there have been more serious questions raised about the reliability of the system and questions over whether it is open to abuse and cheating – there have been some who have raised questions over the voting patterns and whether some parties might be gaming the system through the use of fake social media accounts to rig the votes in favour of a particular driver.

            As Dieter notes in the article, there are also questions about whether the series is going to be able to continue to build on what it has done so far. As the initial buzz starts to subside and Formula E moves from being “the new hot thing” to being a more established series, will it be able to keep those fans that it has drawn in engaged, and how will it aim to keep them engaged?

            Similarly, whilst the tendency of Formula E to skip from place to place has given it an international atmosphere, at the same time the fact that the series has so frequently changed the venues at which it has raced at also raises the question of whether it can build a long term community around it. Once that initial sheen of newness has faded, will the series still be able to keep drawing in those new fans? What is their long term strategy to keep those fans engaged beyond that initial phase?

            To some extent, Formula E can draw on the uniqueness of being the only major pure electric racing series – but, over time, it is perhaps not unreasonable to expect more series starting to move in that direction. Will the series still be able to engage people if it starts to lose that particular USP?

            1. Formula E moves from being “the new hot thing” to being a more established series, will it be able to keep those fans that it has drawn in engaged, and how will it aim to keep them engaged?

              All motorsports are facing this problem and they’re not winning. Too many empty seats in all series including in 80% of F1 races.

            2. I think Formula E will move to more traditional circuits after they have more power.

          3. I don’t like what FE offers in terms of racing, but I think it’s just great they’re doing something different and trying to attract people who like it.

            I find the undeserved hype and obvious astroturfing they’re making a big thing out of rather distasteful; it’s annoying when they actually have real achievements they’re not hyping, in favour of whatever gets more clicks online.

            But at the end of the day none of that matters in terms of being decent motorsport. It’s just too slow, on poorly designed tracks.

          4. I for one was actually excited for FE this past year. A new car that I thought was nice looking along with more power and no car switching stops.

            Then came the reality. I had not really watched more than a couple of races in the past. After a handful of races, I realized that the track configurations were Mickey Mouse. How many times did we see a pile up into a narrow corner or chicane? It was pathetic to say the least.

            I have no issue with street circuits. Baku, Singapore even Monaco are fine. Heck, my all time favorite is CART’s Cleveland race. There is no reason FE couldn’t come up with better configurations. This one small change could really make a huge difference.

            Your assertion that the races are on Youtube for free is also incorrect. In the US, the races are on cableTV and not available till a week after the race on Youtube. Nascar puts their races on Youtube around 3 or 4 days after the race.

      2. Totally wrong. The cars don’t have the energy to race on the big circuits that usually have empty seats to boot. Even in F1

    2. This season started in Saudi Arabia, the nation that’s emblematic of fossil fuels (even though they’re not the biggest producers of oil), and certainly a despotic, murderous, genocidal country.
      Some things never change……

    3. They seem to be doing everything right at the moment, slowly growing the brand year by year. I look forward to the generation 3,4 or 5 cars though, when the car performance between FE and F1 converges.

      1. I can’t really see the FE cars becoming that quick tbh – there’s no need for them to be. Maybe the cornering speeds can be similar, but imo there’s no need for the raw speed to be as quick as f1 cars as the straights are never going to be that long. It’s not a bad thing to have them be slower, so long as the racing is still good and they’re able to attract good drivers like Vandoorne, Vergne, De Vries etc to the series.

        1. They will, it just needs time.

          The big question is: Which one of the two series will be obsolete at that point? If F1 hasn’t gone 100% electric when FE hits F1 speeds, I don’t think it will survive much longer. As much as I love F1 (more than FE for sure), ICEs are a thing of the past and have no future in either racing or mass production vehicles.

          1. Formula E is competition for F2 or F3. Until they can race on actual racetracks at speed approximating Formula 1’s speed,it’s an up and comer series. I really like the Electric aspect, just need more pace.

            1. F2 and F3 are not sustainable on their own. They are support series in a dying sport.

        2. @hugh11

          They are already restricted in speed. EV’s have beaten F1 cars in hillclimbs and more records will tumble.

        3. @hugh11

          The FE cars are speed restricted and further so by nature of their rules. The city circuits were chosen as they didn’t carry enough energy. When battery density improves then we’ll see EVs racing all over the place and breaking records.
          VW now have the Goodwood Hill climb record in an EV beating F1 cars and also Pike’s Peak.
          There are road going EVs built with incredible amounts of torque.

        4. You need to go back to highschool and re visit basic physics. An electric motor is pound for pound much more powerful and efficient than any internal combustion engine; you can have an electric motor with 5000 horsepower that is smaller than v6. The thermal losses of an ICE just can’t compete with the thermal efficiency of an electric motor. The only limiting factor is batteries and, as technology improves, that won’t be a factor in the near future.

      2. It’s not impossible, but they’d have to increase costs by a factor of ten or a hundred. FE cars are currently a fairly expensive way to go that fast, but in absolute terms the series is very cheap to run in.

      3. @emu55 It won’t happen – Formula E’s strategy involves city-centre tracks, and F1 speeds at most of them would be dangerous and incompatible with good racing. Having the lower speeds opens up more options for where the racing happens.

    4. Formula E? I haven’t heard of it until this very article.

    5. The Merc is “powered by Vestas”. Is this some kind of curry-based bio fuel for a sneaky advantage?

    6. “The fact it’s environmentally friendlier” – Yeah how so – where does their tiny output of EC come from ?? Right from fossil or nuclear energy. To go ‘whee’ for for 30 minutes on childish tracks. Get into science – the only restorable energy without complete dangerous batteries is H2. 2% of the Sahara can give you 100% of renewable energy using simple stainless steel mirrors, not that fake like E-series, depending on the ever most costly grid. Sound people don’t buy pure E-cars and there’s a good reason for that. – They’re NOT ECO friendly.

      1. Formula E does not power their cars from the grid. If you’re going to slag them off, maybe actually find out what they use.

      2. Even if a vehicle is charged via fossil fuels, the efficiency vs CO2 output is much in favour of electric. Not to mention that many grids are vastly increasing their percentage of renewable generation. Just because something isn’t 100% clean, doesn’t mean it should be completely dismissed and not bother.

        Hydrogen is far from the silver bullet, the efficiency is so low and the difficulty in production and transportation (even if done so with renewable sources and green transportation), battery-electric is far more efficient per source KW than hydrogen. For some science on the matter, have a read of: http://theconversation.com/why-battery-powered-vehicles-stack-up-better-than-hydrogen-106844 which includes many links to more research and information.

        1. “Even if a vehicle is charged via fossil fuels, the efficiency vs CO2 output is much in favour of electric”

          What on earth did you misunderstand to come up with that obvious nonsense?

          The things being discussed here are irrelevant to the bigger picture. FE themselves claim they’re intended to be an example, rather than anything else, so from that point of view all the energy is wasted.

        2. @justrhysism, as you note, in terms of overall efficiency, hydrogen is a noticeably worse choice than a battery electric vehicle – the efficiency of the commercially available fuel cells is some way below that of a battery system, as well as the inefficiencies being introduced into the process of producing the hydrogen and, currently, commercial hydrogen production is almost entirely from fossil fuels, mainly steam reforming of methane gas.

          Whilst a hydrogen fuel cell might be more efficient than the internal combustion engine, overall it is not the most efficient choice – though some might argue that the end user isn’t always keenest on the most efficient solution, and some might view hydrogen fuel cells as preferable if it is quicker to refill and fits into their existing driving patterns (i.e. if it fits their current lifestyle patterns, rather than forcing them to have to rethink how they use their cars).

      3. “the only restorable energy without complete dangerous batteries is H2”

        Nonsense. It may turn out to be the most practical, that’s the most you can say.

        Frankly, H2 as a power source is idiotic given the installed base of IC engines (and supporting infrastructure) and that it is trivial and efficient to turn that hydrogen into synthetic oil. What possible reason is there to change all the cars, trucks, petrol stations, oil tankers and terminals, etc, when we can just stick a bit of carbon in with the hydrogen and get petrol?

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