It’s a new day for Formula One

Since the American company bought the sport in 2017, its revenues have jumped. Teams are receiving millions of dollars more in prize money from Formula One; they have risen in value themselves, attracting the interest of investment firms; and they are changing hands.

In 2020, American firm Dorilton Capital paid about $180 million for Williams; Lawrence Stroll, a Canadian billionaire, paid $117 million in 2018 for Force India, which is now Aston Martin; and in June, a group of firms, including one involving actor Ryan Reynolds, bought a 24% stake in Renault-owned Alpine. The investors are paying about $218 million for their stake, which valued the team at about $900 million.

“I think Liberty has taken it to a place where before we didn’t know it was possible to go with the sport,” said Guenther Steiner, team principal of Haas. “Liberty had a vision when they bought F1, what to do, and they did it.”

“I don’t want to give it a valuation in dollars,” Steiner said about his team. “But, obviously, it is worth more than half a billion dollars anyway, as you cannot get a team” for under that.

“Every time somebody sells something, like Alpine, the price goes up because there is less inventory,” he said. Liberty has been working to modernize the sport, and it has been paying off, helped by the Netflix series “Drive to Survive,” which has been bringing new fans to Formula One. Liberty added races and attracted a younger and more diverse audience, and has exploited the American market, adding races in Miami and Las Vegas. Formula One’s revenue was $1.83 billion in 2018, with $913 million distributed to the 10 teams. In 2022, revenue rose to $2.57 billion, and team payments increased to $1.16 billion.

Jefferson Slack, managing director, commercial and marketing, at Aston Martin, said that the team had a five-year plan when he started in 2020, but that sponsorship revenue had already “exceeded it by multiples of what we thought.”

One of the moves that helped the smaller teams was the introduction of a cost cap starting in 2021, which puts a limit on team spending. This year, the base cap is $135 million.

“Without that, there’s no way an individual, even as wealthy as Lawrence, could compete against Ferrari, Mercedes and Red Bull,” Slack said, referring to Stroll.

Laurent Rossi, who was replaced last week as CEO of Alpine, said in an interview this month that new investors were “familiar with franchises” and expected new revenue streams, such as from sponsorships, to be explored, and that he was anticipating the team’s valuation “to go through the roof.”

His reference to franchises arises from Liberty’s shifting toward that model, which is common in U.S. sports, but less familiar in Europe.

Under the franchise model, teams would have their values protected, unlike the current system, in which they are diluted when Formula One adds teams. A franchise model would enhance the value of the existing 10 teams, protecting their exclusive licenses by charging new teams a higher anti-dilution fee of several million dollars, which would be distributed to the current teams.

“The U.S. model is closed leagues and franchises and commissioners,” Slack said. “The international model is federations and politics,” like FIFA and FIA.

Aston Martin and other teams recognize that Liberty’s changes have been important.

“If you look at the way teams are valued, they’ve been growing quite a bit, but we’re still a far cry from the revenue multiple of other sports,” Rossi said.

“If you turn to a franchise model, the risk is lesser as you curb the costs, uncap the revenue, every team is turning profit, less risk for investors, higher valuations – as simple as that.”

Formula One continues to seek new markets, including in Africa and Asia. And fresh investment.

“It’s not a question of whether it continues to grow,” Slack said. “It’s how fast.”