Formula 1

Formula 1 is three competitions in one: a 200mph battle of the world's best race car drivers, the world cup of engineering where thousand-person teams spend hundreds of millions designing cars from scratch, and — as one of our listeners perfectly put it — the “Real Housewives of the Garage”, a soap opera of billionaire egos, team politics, and paddock drama that makes for incredible reality television. It's also the world's most popular annual sporting series with over 827 million fans globally — a fact that would shock most Americans, who until a recent viral Netflix series had barely heard of it. Today we tell the story of how a chaotic, deadly, and gloriously dysfunctional European racing series became one of the greatest business stories in sports. For decades, brilliant engineers and daredevil drivers dedicated their lives (and too often lost them) to a league controlled for 45 years by a single man: a former London car dealer named Bernie Ecclestone, who centralized power and extracted billions, while also undeniably single-handedly making the sport successful. Then, in a move no one saw coming, the American company Liberty Media bought the whole thing in 2017, installed a team of Fox Sports and ESPN veterans, and did what Bernie never would — professionalized it. All of a sudden famously money-losing F1 teams turned into real businesses, with the average team valuation today clocking in at an astounding $3.6 billion. Buckle up for one of our most-requested episodes: the wild story of Formula 1. Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26Links: Sign up for email updates https://www.acquired.fm/email and vote on future episodes! The Formula by Joshua Robinson and Jonathan Clegg https://www.amazon.com/Formula-Rogues-Geniuses-Reengineered-Fastest-Growing/dp/0063318628Drive to Survive on Netflix https://www.netflix.com/us/title/80204890?s=i&trkid=13747225&shareType=Title&shareUuid=45562EBF-7469-47D9-AB12-03CEEEAD7505&trg=cp&unifiedEntityIdEncoded=Video%253A80204890&vlang=enF1 The Movie on Apple TV https://tv.apple.com/us/movie/f1-the-movie/umc.cmc.3t6dvnnr87zwd4wmvpdx5cameAdrian Newey, How to Build a Car https://www.amazon.com/How-Build-Car-Autobiography-Greatest/dp/000835247XSenna documentary https://www.imdb.com/title/tt1424432/Worldly Partners' Multi-Decade Formula One Study https://worldlypartners.com/businesshistoryAll episode sources https://docs.google.com/document/d/1ysqphcScUdKoP3zTyGEqyrlZK3_m_YVhgjfXp7sTNZ8/edit?usp=sharingCarve Outs: Cirque du Soleil Echo https://www.cirquedusoleil.com/echoSuper Bowl LX Mic'd Up https://www.nfl.com/videos/best-of-mic-d-up-super-bowl-lxTonal https://tonal.com/Princess Peach: Showtime! on Nintendo Switch https://www.nintendo.com/us/store/products/princess-peach-showtime-switch/Daloopa for historical financial data https://daloopa.com/ More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC 00:00:00 Start 00:00:37 Intro 00:05:52 Origins of F1: Britain, Italy, and Monaco 00:30:43 Bernie's Entrance 00:37:42 Bernie Consolidates Power 00:50:33 F1 as a Global TV Sport (Except America) 01:08:08 F1's Incredible Engineering Achievements 01:19:34 Senna's Crash and a New Era for Safety 01:33:18 The Many Owners of F1, and Bernie's Liquidity Drama 01:57:48 FOTA: The attempted breakaway series 02:05:07 RedBull, Mercedes, and Reinventing the Sport 02:42:33 Liberty Media buys F1 and Brings it to the Modern Era 03:05:03 Drive to Survive 03:26:45 Apple, TV Rights, and Success in America 03:41:52 F1: The Business Today 03:56:23 Analysis: Why Did F1 Work… and Was Bernie Necessary? 04:05:40 7 Powers 04:08:23 Bear vs. Bull Cases 04:16:32 Quintessence 04:20:08 Carve-Outs + Outro ‍Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Rosenthal?

  I was just listening to the F1 theme song to get pumped up.

• 0:04Ben Gilbert?

  Me too. Were you really? Yes, it's so good. I just got new speakers here in Acquired HQ North. And actually, thanks to a recommendation from a listener in the acquired Slack. And yeah, it was bumping.

• 0:17David Rosenthal?

  Amazing.

• 0:18Ben Gilbert?

  All right, let's do this.

• 0:19David Rosenthal?

  Let's do this.

• 0:38Ben Gilbert?

  Welcome to the spring 2026 season of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.

• 0:46David Rosenthal?

  I'm David Rosenthal.

• 0:47Ben Gilbert?

  And we are your hosts. Today, we dive into a sport that started in the 1930s, that began for the pure love of auto racing, extremely dangerous auto racing. Then, after World War II, the British Air Force veterans and mechanical engineers joined the sport to push the limits of technology and physics. It eventually became the sport of rich guys who want to own teams to gallivant around Europe, losing colossal sums of money along the way. And in fact, David, since the sport began, over 100 separate teams have entered and exited the competition, mostly because they went bankrupt. And today, the sport has been dragged kicking and screaming into being professionally managed and is now owned by the publicly traded US company

• 1:31Ben Gilbert?

  that has owned the Atlanta Braves, Sirius XM, and Live Nation, that is Liberty Media. And against all odds, Liberty has managed to turn the sport, the teams, and the drivers into real viable businesses. Today's episode, listeners, is on Formula One, the world's premier motorsport series.

• 1:51David Rosenthal?

  Woo. I was gonna save this for later in the episode. But do you know what else, among the many other, like, hundreds of companies that Liberty has owned, do you know what else they owned? You won't guess it, because there's so many. Excite at Home.

• 2:05Ben Gilbert?

  No way!

• 2:05David Rosenthal?

  From our Google series.

• 2:07Ben Gilbert?

  Throwback. That's awesome. Well, listeners, really what we're doing here today with Formula One, it's three sports in one. It is, of course, the world's best race car drivers showcasing their skills, but it's also the World Cup of Engineering. These days, it's fair to say that the races are more determined by the design feats of the thousand-plus people that work on each car than the drivers. And Formula One is the only motorsport in the world that requires a team to design and build their own car from scratch, which is an insane engineering feat to enter the competition. And as one listener put it to us, "It's also the World Cup of Office Politics." Or as another one put it, "It's Real Housewives of the Garage," which that makes for a fantastic Netflix show.

• 2:52David Rosenthal?

  Oh, does it ever. We might talk about that towards the end of the episode here.

• 2:56Ben Gilbert?

  Yes. The sport itself is completely insane. It is a grid of 20 drivers, competing at over 200 miles per hour in races that last 190 miles, and they do this every week or two in a different city around the world. They load the entire circus, the cars, the teams, the hospitality, onto a fleet of seven Boeing 777s between races, and they set up shop in 24 different cities, from Monaco to Bahrain to Melbourne, Australia. Each car costs $20 million to make and hundreds of millions of dollars to develop. The cars have 300 to 600 sensors on them, and, shockingly to me as an American, David, I don't know if you knew this before we started researching, it's actually the world's most

• 3:38Ben Gilbert?

  popular annual sporting series with over 827 million viewers.

• 3:44David Rosenthal?

  Yeah, I had no idea until we started researching, because we're Americans.

• 3:47Ben Gilbert?

  And, you know, the Olympics and the World Cup don't count, because they're every two and four years. So, pretty crazy. Listeners, starting in just five days, a season will kick off that's gonna see some of the biggest changes in the sport in decades. So, we've got new regulations, which means all-new car designs, an expansion to an 11th team with Cadillac, Audi and Ford are also entering the sport, and a brand-new broadcast partner in the US in Apple TV. And while everything got much more professionalized, it's still owned by a bunch of rich guys who love auto racing.

• 4:20David Rosenthal?

  They're just no longer money losing rich guys.

• 4:22Ben Gilbert?

  That's right. So listeners, just like our NFL, NBA and IPL cricket episodes, this show is about the business of F1. So we apologize in advance if we don't spend time on your favorite rivalry or regulation detail or the V10 engine sound. You can join the email list to get updates every time an episode drops at acquired.fm/email. You get to vote on future episodes and the email list is just getting much, much better. So we now have episode summaries, our big takeaways and exclusive photos from our research process. That's acquired.fm/email. Chat about this afterwards with us, with the whole acquired community in the Slack, acquired.fm/Slack. So with that, this show is non-investment advice. David and I may have investments in the companies we discuss

• 5:07Ben Gilbert?

  and this show is for informational and entertainment purposes only. David Rosenthal, where do we dive in?

• 5:14David Rosenthal?

  Well, first off, we owe a huge thank you to Joshua Robinson and Jonathan Clegg, who are the sports editors over at The Wall Street Journal and just recently published, I think, the best business history book of Formula One called The Formula. It was one of the main sources for this episode and they both actually helped us in the research. So thank you, guys.

• 5:36Ben Gilbert?

  Yep.

• 5:37David Rosenthal?

  So Ben, Formula One, as we know it, really started after World War II in 1950. But unlike a traditional company or even many of the sports leagues that we've studied over the years, it doesn't have a exact sort of founding moment. Its origins are really part and parcel with the beginning of motor racing itself. So it didn't take long after the invention of the modern automobile, which is generally agreed upon to be by Karl Benz in Germany in the late 1800s, that people had the idea to start.

• 6:09Ben Gilbert?

  Racing these things.

• 6:10David Rosenthal?

  Yeah. I mean, after all, like people raced horses. Why wouldn't they race cars too?

• 6:14Ben Gilbert?

  Yep.

• 6:15David Rosenthal?

  So throughout the first few decades of the 1900s, Various automobile clubs popped up across Europe and they would host these races. They'd sell tickets and advertising to fund prize purses. And drivers and manufacturers would travel from all over the world to compete in these races. 1906, the Automobile Club of France, which was the largest in Europe at the time, hosts an inaugural race just to the southwest of Paris called Le Mans, L-E-M-A-N-S. And this group of organizers, they decided to call this Le Mans race by a very literal name in order to attract spectators and participants.

• 6:56David Rosenthal?

  They call it the Grand Prix de Le Mans, literally translated as "The Big Prize."

• 7:04Ben Gilbert?

  It's great. It carries all the way forward to this day.

• 7:06David Rosenthal?

  Yes, the names in this sport are very literal. So the success of this Le Mans Grand Prix causes a bunch of similar races to pop up across Europe, all throughout the teens and twenties, copying the same rules or formula as the Automobile Club of France. You had Monza pop up in Italy, you had the Monte Carlo race in Monaco, you had the Nürburgring in Germany, et cetera, et cetera, et cetera. You've probably heard of all these places.

• 7:32Ben Gilbert?

  Yep.

• 7:33David Rosenthal?

  Eventually, in the 1920s, all the major European automobile clubs get together in Paris and they say, "Why don't we centralize oversight of this formula into one international organization?" And that becomes, after a series of name changes over the years, the Fédération Internationale de l'Automobile, or the FIA, which still exists today and still administers the rules of Formula One. And as Josh and Jonathan point out in the book, the sport is literally named after the rulebook.

• 8:08Ben Gilbert?

  There's a lot of fighting about the rules in this sport, both when they're setting the rules every few years and in races when they're going up to yell at the race stewards, "Oh, this is illegal, this is not illegal." Anyone who is sort of complaining that this sport is too into the rules needs to remember it is named after them.

• 8:24David Rosenthal?

  It's named after the rulebook, yes. Okay, so at this point, you've got all these Grand Prix and these famous racetracks that you know today, and you have the FIA as this sort of rules body overseeing the common regulations amongst them. But they're all independent events. There's no championship series, there's no league, there's one winner at the end of each race and then you go to the next race.

• 8:46Ben Gilbert?

  Yep.

• 8:46David Rosenthal?

  There are a couple of attempts before World War II to create a championship series, but they all fizzle and then, of course, the war disrupts everything. After the war, however, there's renewed interest. Everybody wants to have a World Drivers' Championship. And so in 1949, the FIA announces the inaugural Grand Prix World Championship for Formula One drivers. A global drivers' competition of seven of the most prestigious Grand Prix races, set to begin the following May 13th with the running of the British Grand Prix at the Silverstone Circuit in England. And that becomes the first race of the first season officially of F1.

• 9:31Ben Gilbert?

  1950.

• 9:32David Rosenthal?

  Now, there really are three sort of foundational pillars of this early era of the sport. There's one in the UK, there's one in Monaco, and there's one in Italy. So, taking them in turn, first in the UK. Britain was and is the heart of the sport, both in the early days and all the way through to today. So today, 70% of the F1 teams are based in the UK. Really, the only notable exception is Ferrari, which of course is in Italy.

• 10:01Ben Gilbert?

  Yes. All of these teams, despite having such different cultures and opinions and rivalries, a giant amount of their employees, at least on the technical side, work in a very small area in the English Midlands, within tens of miles of each other.

• 10:16David Rosenthal?

  Yes, it's like, very, you know, seemingly random. So, why was the UK and this weird part in the middle of the country like the natural home of F1? If anything, given the proto-history, it should have been France or maybe Germany. Well, after World War II, Britain had been, as you alluded to in the intro... Absolutely the right set of circumstances for this all to come together.

• 10:40Ben Gilbert?

  Yep.

• 10:41David Rosenthal?

  One, unlike Germany, they'd actually just won the war. But the country was in bad shape and like in desperate need of entertainment and redevelopment. And then unlike France, Britain had a ton of empty airfields and lots and lots of newly unemployed British fighter pilots and mechanics. And what better way to, you know, redevelop the infrastructure in the heart of the rural area of the country than to put all of these people and abandoned airfields to work racing fast cars?

• 11:15Ben Gilbert?

  And much like the development of Silicon Valley, which we talked about in our Lockheed Martin episode, there's sort of this positive feedback loop that keeps that area the main area for this. So there's universities that specialize in aerodynamics and engine design and mechanical engineering. It's still the best place to source talent to build an F1 team.

• 11:35David Rosenthal?

  Yeah, even the teams that are owned and nominally operated by companies in other countries, most of them still base their actual operations in the countryside in the UK for this reason.

• 11:48Ben Gilbert?

  Yep.

• 11:49David Rosenthal?

  So one of these newly unemployed Royal Air Force pilots is a man named Colin Chapman, who also happened to be a mechanical engineer in addition to a former pilot and who, along with Enzo Ferrari, probably did more than any single person to shape the first era of F1. So Chapman founded the Lotus Racing Team in 1952 with 25 pounds as his initial startup capital in a set of empty stables in North London. Even then, 25 British pounds was not enough to build a car capable of racing in F1. So he had to have another way of making money. In parallel, he also started the Lotus road car business, which quickly became, you know,

• 12:34David Rosenthal?

  look, hey, it's not Ferrari, but like decently successful.

• 12:37Ben Gilbert?

  In fact, the first Tesla Roadster was based on a Lotus Elise chassis.

• 12:42David Rosenthal?

  That's right. So in 1958, Chapman finally has enough capital together to build an F1 car. He enters his first car in Formula One and he revolutionizes the sport. I mean, today, teams are super professional operations with hundreds of engineers and Tons of equipment. Back then, it was much more like the early days of the NFL. You have like one or a couple people who are team owners, managers, coaches, and sometimes also players or drivers.

• 13:13Ben Gilbert?

  Yes. And it says a lot that there actually was not a Constructors' Championship when it first got started. That wasn't until 1958.

• 13:22David Rosenthal?

  Yes, it was just about the drivers.

• 13:24Ben Gilbert?

  Right, it was just the drivers' championship.

• 13:26David Rosenthal?

  Because often, these were the same people.

• 13:28Ben Gilbert?

  Right. So for anybody who follows the sport today, there's sort of two different things you're competing for. Can the driver individually win the season? Or can the team between its two drivers win the Constructors' Championship? Called Constructors' Championship, of course, because each of these teams is required to construct their own vehicle.

• 13:45David Rosenthal?

  Yep, and enter two cars and thus two drivers in the competition. So Chapman was the first constructor to realize that building a winning race car wasn't just about adding more horsepower to the engine.

• 14:00Ben Gilbert?

  Which was kind of the Ferrari prevailing viewpoint at the time.

• 14:03David Rosenthal?

  That was Enzo's, arguably till he died, what he really cared about was power. Chapman had a great quote on this. He said, "Adding power makes you faster in the streets. Subtracting weight makes you faster everywhere." So he realized like a whole bunch of stuff, that like being lighter is better, having better handling is better, because it's not like these racetracks are like NASCAR racetracks, where the cars just go around in a circle. There's all these technical corners, there's hairpin turns, there's chicanes, there's double apexes. It's a very technical sport, not just from the engineering for the cars, but also for the drivers.

• 14:36Ben Gilbert?

  Yep.

• 14:36David Rosenthal?

  There's one other very important element that Colin Chapman introduces to the sport during his time in F1, which was sponsor logos on the cars. So until Chapman adds sponsorship to his cars, all the F1 cars had just been painted whatever color the FIA'd assigned their country.

• 14:58Ben Gilbert?

  Yes. And that's how you have silver with Mercedes, and British Racing Green, and of course Ferrari red.

• 15:04David Rosenthal?

  And they stick to this day. So Chapman, when he goes out in the 60s and finds a sponsor to finance his building activities, he paints his lotuses red and white in the corporate colors of his new sponsor, Gold Leaf Tobacco. And this is the start of one of the most important partnerships in F1 history. Fast cars and cigarette companies.

• 15:26Ben Gilbert?

  Yes, and this was illegal for a long time. The FIA did not allow you to have sponsorship. And then they realized, OK, we're being too much a purist about this. These teams are all going to go out of business. But there are companies lining up to try to pay them to put the logo on it. OK, this is the way to make the sport viable.

• 15:44David Rosenthal?

  Yep, ironic, because then the EU would legislate tobacco advertising and sponsorship out of existence in the early 2000s, once again. But it's actually really weird. Go look at any of the sports historical greats like Ayrton Senna, or Michael Schumacher, or Alan Pross. They all had the Marlboro logo all over them.

• 16:03Ben Gilbert?

  Or John Player Special. I mean, there were these cigarette companies, some of which I'd never even heard of. But they're so dominant on the cars for a long time there that you actually don't see the team name. At least on the liveries now, you see the team name and their big sponsors. This looked like it was Team Marlboro Racing, or Team John Player Special, not McLaren, or...

• 16:24David Rosenthal?

  Yeah, I mean, they actually painted the cars to look like cigarette boxes going down the track.

• 16:29Ben Gilbert?

  Yep.

• 16:29David Rosenthal?

  Unfortunately, his story has a sort of strange and sad ending. Did you find this, Ben?

• 16:34Ben Gilbert?

  Oh, yes.

• 16:35David Rosenthal?

  Yeah, so in the late 70s and early 80s, he gets tied up in an embezzlement scheme with John Delorean. Chapman designed the chassis for the DMC 12, you know, like the Back to the Future car.

• 16:49Ben Gilbert?

  Which would be awesome if the car didn't suck and the company didn't end in a giant scandal.

• 16:54David Rosenthal?

  Totally. The company collapsed, and British prosecutors accused John Delorean and Colin Chapman of each embezzling $8 million in government incentives that they supposedly were going to use to build the factory. Chapman dies of a heart attack once this comes out at age 54, truly sadly. And then Delorean goes on to be arrested by an FBI sting in LA, attempting to buy 220 pounds of cocaine with the intent to distribute to, like, pay off his debts. For Delorean, man, you can't make this stuff up.

• 17:26Ben Gilbert?

  He was a man with a dream, David.

• 17:27David Rosenthal?

  Yeah.

• 17:30David Rosenthal?

  Through all of this, though, the cowboy nature of the teams, the individual iconoclastic owner slash mechanic slash designer slash drivers, the cigarette money, the vague or not so vague whiff of fraud, that totally embodies the early era of F1. It was the Wild West in Europe.

• 17:50Ben Gilbert?

  Yep. And just so people can really picture it, I think you kind of know what an F1 car looks like now. An open-wheel car with a giant spoiler or rear wing, it's got a front wing. When we first started here in 1950, and really even into the 60s, too, these cars didn't look anything like that.

• 18:10David Rosenthal?

  They looked like soapbox derby cars.

• 18:12Ben Gilbert?

  That's exactly right, almost like little bullets.

• 18:14David Rosenthal?

  Yep. So the UK contribution and the Chapman story really reflects this Wild West aspect of F1. If that's all there was in the beginnings of the sport, I don't think we'd be doing this episode today. Right around the same time that Lotus is coming into the league, there's another, very different founding pillar number two of F1 taking place in Monaco, which is that in 1956, the sovereign Prince Reineer III of Monaco, as we talked about at great length in our Hermès episode, married the American movie actress Grace Kelly and brought her to live in the prince's palace of Monaco. This brings together all of the

• 18:58David Rosenthal?

  old world luxury and heritage and legitimacy of Europe with the glitz and the glamour of Hollywood and the new world in a way that's still very much part of F1 today. I mean, basically, this marriage was like the 20th century's version of, you know, Travis and Taylor, the NFL, and, you know, Swifty crossover. Like, it was the crossover event of the century. So- As we said a minute ago, there had been Grand Prix races on the streets of Monaco for many years, going back to before World War II, and the track and the location was already quite prestigious. But when Princess Grace comes to the party, things go to a whole new level. So all of her Hollywood circles start coming out to the race, to visit her.

• 19:40David Rosenthal?

  And conveniently, on the race calendar, it just happens to coincide with the Cannes Film Festival, right up the road in Cannes in France. So Frank Sinatra becomes a regular attendee to the Monaco Grand Prix, the Beatles, the Rolling Stones, et cetera, et cetera. Eventually, many, not most, of the F1 drivers start moving to Monaco and becoming stars themselves. I mean, like today, Lewis Hamilton, Max Verstappen, Charles Leclerc, Lando Norris, they all live in Monaco.

• 20:08Ben Gilbert?

  Well, it also has some tax benefits.

• 20:10David Rosenthal?

  Yeah, it also has some tax benefits.

• 20:12Ben Gilbert?

  But for anybody who has been to Monaco, or seen pictures of Monaco, or really any towns sort of on the French Riviera in that area, you might think, wait, but it's like cliffside, and the streets are all really narrow and old and winding. These cars that we were talking about at that time, it kind of made sense to race those cars in these types of environments. It makes a lot less sense now. There's no chance they would add Monaco, with the cars being the size that they are today, to the race calendar.

• 20:42David Rosenthal?

  Yep. But there is also no chance that they would ever get rid of Monaco. This is what brings luxury into the sport. And today, again, also, this doesn't seem that radical. It's part of sports league setup playbook 101. Like, look at our episode on the IPL. This was so far ahead of its time, back in the 1950s, and also totally by accident. Which leads us then to the third Italian founding pillar of F1, Ferrari.

• 21:10David Rosenthal?

  Undeniably, the most important team, company, and person of this first age of F1 was Enzo Ferrari. Enzo actually founded the company before World War II purely as a racing company.

• 21:27Ben Gilbert?

  Yeah, wasn't he racing Alfa Romeo cars?

• 21:29David Rosenthal?

  Yes, that was the purpose of the company, was to race Alfa Romeo cars.

• 21:33Ben Gilbert?

  Also a red racing team because they were Italian.

• 21:35David Rosenthal?

  Yes, indeed. Ferrari itself didn't start making cars until after World War II. But of course, when the F1 championship series starts in 1950, Enzo has to join. This is the pinnacle of racing. And Ferrari is the only team that's been part of every single F1 season, going all the way back to the beginning.

• 21:54Ben Gilbert?

  There's a funny thing here where you might think, oh, Formula One, that's the big established series. That legitimizes an automaker by being a part of it. It actually works the other way with Ferrari. Ferrari participating in Formula One legitimizes the series. Ferrari, if they ever decided to stop racing in Formula One, would make people go, oh, so what is the big racing series?

• 22:18David Rosenthal?

  Yes, totally. Formula One is actually the marriage of two separate things, the teams and the racetracks. Unlike just about every other sport out there, these are separate entities. It'd be like if the Seahawks were a team that would play wherever.

• 22:37Ben Gilbert?

  Whenever they could get a game going.

• 22:38David Rosenthal?

  And they didn't have any relationship with Lumenfield in Seattle. So what Formula One, the organization, is doing is they are bringing this set of teams and this set of racetracks on the calendar, this set of Grand Prix, together.

• 22:54Ben Gilbert?

  And in the early days, it was kind of a different set of teams and drivers at each of the Grand Prix. Who can we get to come race at this track when? And it would come together in a very haphazard way.

• 23:05David Rosenthal?

  So back to Enzo and Ferrari. Unlike Chapman and Lotus and the Brits, Enzo actually had business since. He was an entrepreneur and he was the first person who realized that there was an absolutely incredible business opportunity at the intersection of these really fast cars, these sort of legitimizing racing heritage and all the glitz and the glamour and the wealth of the celebrity that was represented by Monaco. And that opportunity was selling fast cars to the rich and famous. Yep. So Ferrari, pretty quickly after World War II, becomes a legitimate luxury brand.

• 23:47David Rosenthal?

  I think you could maybe even argue they're the only legitimate luxury brand established in the second half of the 20th century. Oh, that's interesting. Yeah, and it's very impressive how fast it happened. Before the war, it was Enzo racing a bunch of Alfa Romeos. And then suddenly, it's Ferrari. Right. Because as he's participating in F1, Enzo's also hand-making cars for all the European royalty and all the American movie stars that are flowing through F1. And so, just like the equestrian heritage kind of serves as the legitimizing soul of Vermees, motor racing in F1 serves as the legitimizing soul of Ferrari.

• 24:28David Rosenthal?

  It's just that they were co-developed together here in the 50s and 60s after World War II. Hmm. So, we need to talk much more about Ferrari on another episode of its own. Oh yeah, we should do a Ferrari episode. For the purposes of F1, they really were that unifying factor that pulled together the glitz and the glamour and the luxury and the hardcore racing. Because the Ferrari cars became this tangible way that fans, even though they couldn't afford to buy them, could relate to what was happening on the track by dreaming about buying these road cars that they saw their favorite celebrities or, you know, royal monarchs driving around.

• 25:08Ben Gilbert?

  Because a lot of these other teams are building one or two or three cars, period, and they're racing them, and then that's it.

• 25:15David Rosenthal?

  Yep, totally. Where's with Ferrari? Probably every boy growing up around the world, you know, myself included, probably you too, like, has had a poster of a Ferrari or a model of a Ferrari in their bedrooms.

• 25:27Ben Gilbert?

  Okay, so you might be wondering, where are the Germans in all of this? We've talked about the Brits with Colin Chapman, we talked about Monaco, we talked about Ferrari. In the 50s, Mercedes actually was a major player in Formula One and auto racing. But while they were racing one of their cars in Le Mans, it actually crashed and killed 82 people.

• 25:47David Rosenthal?

  Oh yeah, it was one of the worst disasters in motor racing history.

• 25:50Ben Gilbert?

  They actually pulled out of, I think, all racing and they didn't return to Formula One for another 40 years. That accident was so devastating that four of the remaining Grand Prix were canceled. Racing was just so dangerous in this time. I mean, you had 14 deaths in F1 alone, not even counting other racing series or audience attendees across this first decade.

• 26:13David Rosenthal?

  Totally. Mortal danger was actually, I think, a core part of the appeal of the sport

• 26:18Ben Gilbert?

  Absolutely.

• 26:19David Rosenthal?

  in those early days. What better to go along with all your glitz and glamour than an element of mortal danger? These guys were gladiators. They were risking their life every time they got in a car.

• 26:32Ben Gilbert?

  In the 1950s, you had 14 deaths, so that's 1.4 a year. In the 1960s, you also had 14 deaths, plus 15 spectators in the 1961 Italian Grand Prix crash. In the 1970s, didn't get much better, you had another 12 deaths, and then it starts to get safer from there, and we'll talk about all that later. But the first three decades, you were on about a one to two death per year rate.

• 26:55David Rosenthal?

  So that's 5 to 10% of the entire racing field would die every year.

• 27:01Ben Gilbert?

  Yep, and there were many, many more crashes and many, many more injuries. These were just fatalities. Famously, Niki Lauda's head caught on fire and he was scarred for the rest of his life.

• 27:10David Rosenthal?

  Yeah, and then he was back out racing several weeks later. It's insane.

• 27:14Ben Gilbert?

  It's unbelievable.

• 27:15David Rosenthal?

  So, back to Ferrari, though. He's really the entrepreneur that figures out How to build a real big business at the intersection of everything that's going on here. He's just doing it through his road car business. There's a great quote from another team owner during this era. And it goes, Formula One is Ferrari and Ferrari is Formula One. It's that simple. This is another team owner that is saying that, like a competitive team to Ferrari. And you might know who the team owner was who said that quote.

• 27:50Ben Gilbert?

  Hmm. Oh, it's Bernie.

• 27:53David Rosenthal?

  Yep. It was the person who quite literally would replace Enzo in that quote. Bernie Ecclestone, the supremo impresario owner of F1.

• 28:09Ben Gilbert?

  Owner of some part of F1, but controller of all of F1.

• 28:13David Rosenthal?

  So Josh and Jonathan in the Formula book have a great quote about Bernie and Ferrari. As it turned out, no one would get richer off the Ferrari mystique than Bernie, a man who has never once employed in Maranello.

• 28:30Ben Gilbert?

  Yep.

• 28:31David Rosenthal?

  And that will be our protagonist today. But before we begin Bernie's tale.

• 28:37Ben Gilbert?

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• 28:57David Rosenthal?

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• 29:17Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer. That's governance, risk and compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes and cuts the time that you'd spend on vendor assessments in half.

• 29:39David Rosenthal?

  In half? Which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor and Snowflake all stay audit ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 29:58Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance and the work to earn and prove trust. We're huge fans of Vanta over here and literally hundreds of acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V A N T A dot com slash acquired for $1,000 off and just tell them that Ben and David sent you. Okay, so David, enter Bernie Ecclestone.

• 30:28David Rosenthal?

  Bernie Ecclestone. So Bernie was born in 1930 and he was a hardscrabble kid. He grew up in Suffolk, which is to the northeast of London. His dad was a commercial fisherman and his mom was a authoritarian homemaker, according to many biographies about him. You never really know with the legends about Bernie, but that's the story, at least as he wanted it told.

• 30:54Ben Gilbert?

  Yep.

• 30:55David Rosenthal?

  After the war, Bernie ends up getting into the wheeler dealer business in London with surplus cars and motorcycles from the war. He opens his own showroom in the outskirts of London where he starts to specialize in selling luxury automobiles to the newly rich and famous. Basically, he becomes like the London celebrities car guy. You know, you got your jewelry guy, your clothes guy, you got your drugs guy in the 60s, you got your car guy. Bernie's the car guy.

• 31:31Ben Gilbert?

  People refer to him as a former used car dealer, but that's not really right.

• 31:36David Rosenthal?

  Yeah, well, I mean, it is right. He started that way.

• 31:39Ben Gilbert?

  It's like calling someone else's puzzle dial Rolex a used watch. You know, it's not really used.

• 31:45David Rosenthal?

  No, no, it's like, you want a Ferrari or you want a Bugatti? Hold the phone. Let me make some calls and see if I can get you one.

• 31:53Ben Gilbert?

  Right.

• 31:54David Rosenthal?

  There's also always been plenty of gossip over the years that Bernie was involved in more underground activities, shall we say, at the time. And Bernie himself would encourage this. So specifically, there was a longstanding rumor. That Bernie was the mastermind behind the great train robbery of 1963, where 2.6 million pounds was stolen from a British Royal Mail train. This is like one of the most famous train robberies in history. Bernie loved this speculation. And so in 2005, a long time later, he finally addressed it.

• 32:29Ben Gilbert?

  When he's what, 70 years old or something?

• 32:31David Rosenthal?

  Yeah, 75 years old. He gives a quote to the media when asked about it. "There wasn't enough money on that train for me to be involved. I could have done something bigger."

• 32:43David Rosenthal?

  You start to get a flavor of who Bernie is.

• 32:45Ben Gilbert?

  Which actually is correct, given what he would go on to do.

• 32:48David Rosenthal?

  Very correct. 2.6 million pounds, that's jump change. So criminal mastermind or not, Bernie is smart. Once he gets into hawking cars to the new money rich folks in London, he doesn't just sell them the cars. He also steers them into financing, which I think is basically how car dealers make money. They mark up the cars a little bit, but then they really get you on the financing and the servicing fees, et cetera, et cetera. And when you're selling really expensive cars, the financing fees start to add up. So this nets Bernie his first small fortune. Now, the deeper that he gets into this luxury auto world,

• 33:31David Rosenthal?

  Bernie has the same realization that Enzo Ferrari had a decade or two earlier, which is that motorsport and racing is the legitimizing heritage of all of these fast luxury cars. So just like Enzo himself, Bernie wants to have his dealership and his brand associated with Formula One. So in the mid 60s, Bernie starts hanging around with F1 drivers. And being the wheeler dealer that he is, he pretty quickly becomes the agent. For a few of his pals, negotiating better deals for them with their teams for their salaries, you know, for a small fee, of course.

• 34:10Ben Gilbert?

  Yes, of course.

• 34:12David Rosenthal?

  Eventually, he cooks up a scheme with one of his star clients, who actually drives for Lotus for Colin Chapman, a driver named Jochen Rindt, to leave Lotus and buy a team together for themselves. They're going to become, not just the talent, you know, Jochen's going to become an owner. Jochen, at the time, he's one of the best drivers in the world. He's on top of the standings in F1. He's blowing away the field throughout the 1970s season. And then tragically, during his practice session at the fourth to last Grand Prix of the season, crashes and is killed. And Rindt and Chapman were constantly fighting about the safety of the Lotuses that he was driving.

• 34:53David Rosenthal?

  Rindt was so far ahead of the pack in the standings when he was killed that he would actually win the driver's championship that year.

• 35:00Ben Gilbert?

  Oh, he still won, right?

• 35:02David Rosenthal?

  Yeah, posthumously. He's the only driver ever to win a championship posthumously.

• 35:08Ben Gilbert?

  So he got zero points in all of the races after his death, but he was so far ahead that he still won.

• 35:14David Rosenthal?

  Bernie, as the story goes, is devastated after Rindt's death. And to honor the memory of his friend, he decides that he's going to carry through on the plan that they had together, the dream they had. And in 1972, Bernie buys the Brabham F1 team for 100,000 British pounds, which would be about 2.3 million dollars today. Today, I think every single F1 team is worth at least 1.5 billion, I think is the floor.

• 35:45Ben Gilbert?

  Yep, that's exactly right.

• 35:48David Rosenthal?

  Bernie doesn't make that much money on the Brabham team, as we will see, but...

• 35:51Ben Gilbert?

  He sells it for what, 5 million later?

• 35:53David Rosenthal?

  5 million a couple of years later, yeah. So, you know, a nice return. But definitely the fact that team valuations go from 100,000 pounds to a floor of 1.5 billion is thanks to Bernie.

• 36:05Ben Gilbert?

  Well, thanks to Bernie for part of it, and then specifically, thanks to Bernie leaving after that.

• 36:10David Rosenthal?

  Yes, for the other part of it, as we will get into. So when Bernie buys the Brabham team in 1972, along with it, he also gains membership into the, quote, "Formula One Constructors Association." Now, this is a very loose organization.

• 36:31David Rosenthal?

  Organization is being generous here of all the team owners that Colin Chapman had actually kind of taken the lead in pulling together back in 1963 with the original purpose solely of coordinating joint travel and transport logistics to getting their teams and cars to all the various races around the world. It's like, hey, you're my bitter rivals. I never want to associate with you. I battle to the death with you out on the tracks, but-

• 36:59Ben Gilbert?

  We are going to the same place.

• 37:00David Rosenthal?

  We're going to the same place. Why don't we share a ride, so to speak?

• 37:03Ben Gilbert?

  And today, actually, Formula One management does handle all this. And I think they make a little bit of profit on it. Like, it's a service that they sort of sell to teams, the tiny amount of profit relative to the rest of it. But they handle the logistics of moving the whole circus around the world.

• 37:17David Rosenthal?

  Yep. Well, one thing I can guarantee is that once Bernie takes it over, he's definitely making a profit on it. So Bernie, when he joins this owners' table, shall we say, pretty quickly realizes a couple of things. One, except for Enzo Ferrari, none of these other guys have a lick of business sense. All they care about is fast cars and winning races. Whatever money they have or don't have, it's all going down the tubes in pursuit of victory. The second thing he realizes is that, except for Ferrari, and by this point in time, Enzo has sold half the company to Fiat, so he has major resources behind him in Italy. None of

• 38:01David Rosenthal?

  these other guys actually have any real money. I mean, for God's sakes, Colin Chapman is about to nearly go to jail over an $8 million embezzlement case with DeLorean. $8 million went a lot farther back in the 70s, but-

• 38:14Ben Gilbert?

  These cars are quickly becoming very expensive, and the teams are becoming very expensive to run. There is not a sustainable way to run a team. I think the average tenure over the entire existence of Formula One is about six years for a given team.

• 38:28David Rosenthal?

  Just to make this exact point, here is the list of F1 teams in 1972, the year that Bernie buys into the league. Lotus, Tyrell, McLaren, probably know that. Ferrari, you definitely know that. Surtis, March, BRM, Matra, and Brabham.

• 38:46Ben Gilbert?

  So there's two that exist today.

• 38:49David Rosenthal?

  And at that point in time, only one of them is a real business. So Bernie sees this, and he's like, dang, there's an opportunity here.

• 38:58David Rosenthal?

  All these other guys are focused on winning races. Yeah, I'd like to win, but I really care about getting rich. And there's quite a void of power here that I can insert myself into. So just to paint the picture of the business state of F1 when Bernie came into the league, each individual team negotiated their appearance fees with each individual Grand Prix separately. So they're like a whole bunch of Grand Prix's, each with their own race promoters and organizers. There are a whole bunch of teams, nine of them to be exact, and they're all negotiating separately with each other.

• 39:39Ben Gilbert?

  Assuming there's, I don't know, 15 races or something, that would be 135 distinct agreements between teams and local races.

• 39:47David Rosenthal?

  Everybody's getting paid wildly different amounts and usually not very much.

• 39:52Ben Gilbert?

  And these things sort of need to depend on each other because how valuable is a race to go to if the other teams aren't going to show up to that one?

• 40:01David Rosenthal?

  Right. I mean, this is like the sports business world's worst practice, number one. Not only is it bad for overall revenue, you know, you have no centralized leverage over the tracks if you're all negotiating separately. To your point, Ben, it's just playing bad for the sport.

• 40:18Ben Gilbert?

  How are you supposed to sell tickets and tell fans they should come if?

• 40:20David Rosenthal?

  Right. You don't know if Ferrari's gonna show up or if McLaren's gonna show up. There's no way to know as a fan until you actually showed up at the racetrack who was gonna be there.

• 40:34David Rosenthal?

  The other aspect of the sport that I say would be in shambles, but wasn't even in shambles because it didn't exist, was broadcast and television and promotion. There was none of it.

• 40:46Ben Gilbert?

  Yeah, thankfully Bernie came along before that became too big. I mean, can you imagine if each of these racetracks was trying to do their own media rights deal?

• 40:55David Rosenthal?

  I mean, he came along at the perfect time. It was already criminally too late that F1 and the Grand Prix's hadn't gotten to television. I mean, we're talking about the mid 70s. If you look over at the NFL in America, they're already making like 50 million plus a year in broadcast rights.

• 41:13Ben Gilbert?

  Yeah, it was 10 years into their, I think 1961 was their first national broadcast deal.

• 41:17David Rosenthal?

  I mean, they'd already launched Monday Night Football in 1970. It's not like there wasn't a playbook for this out there.

• 41:23Ben Gilbert?

  Yes.

• 41:24David Rosenthal?

  F1 meanwhile is just as if not more popular is a global sport, has great demographics, and is making $0 in media rights. So Bernie shows up, he's hardly a media professional here, but even he can see that there's room for improvement on both of these fronts.

• 41:42Ben Gilbert?

  Even before realizing, hey, media rights are going to be super valuable, the thing that he clearly sees is centralizing these negotiations is going to be the way to extract the most value.

• 41:54David Rosenthal?

  Yes, there's two opportunities here. The near-term easy one is centralize the negotiations with the racetracks, extract the most value, capture a bunch of it for myself. And then there's a longer-term play of like, ooh, what can I do about these television deals? I think it's actually worth one more quick pause here to compare, contrast Formula One and the NFL and Bernie and Pete Rozell, because these are sort of happening at the same time. But Bernie is like the anti-Pete Rozell. You know, Pete Rozell was this consummate manager, professional, media guy from Los Angeles. He started as the LA Rams PR guy. And then he gets drafted by the owners of the NFL to be an employee of the league to

• 42:39David Rosenthal?

  serve them and their interests as commissioner.

• 42:42Ben Gilbert?

  And the league is owned 32 ways by the owners of the teams.

• 42:46David Rosenthal?

  Right. So Rozell's unifying vision to the NFL owners was communist capitalism, as we talked about on that episode. Like, hey, this league first, we're all in this together. Let's centralize our negotiating and our media rights so that we can all grow the pie and share the spoils evenly. Bernie's MO doesn't league first, it's me first.

• 43:09Ben Gilbert?

  He does centralize things, but it's not like Formula One becomes owned by all the teams equally. It's more like he says, okay, I'm going to start a company and that company is going to go sign agreements with racetracks and then you're all open to do business with me to figure out what it's going to be like for you to race at those racetracks.

• 43:32David Rosenthal?

  Yep. So the way he does this, he proposes to the other team owners, hey, obviously we need to centralize our negotiations. And, you know, I can tell that you guys don't want to do this, or you would have already done it. Why don't you just leave it to me? I'll take care of everything. You give me your rights for your team appearances and I will go fight with these race promoters, many of whom are probably gangsters themselves, and I will get us the best collective deal. I'll tell you what, I will even take all the risk and guarantee to all of you other guys upfront that you're gonna get paid at least as much as you're making now.

• 44:14Ben Gilbert?

  Hmm. And you must come to the races. That was the teeth. No more of this, like, I might show up, I might not.

• 44:20David Rosenthal?

  Yes, that was also part of the motivation of, we gotta fix the sport. Nobody says, so, I'll do all this and I'll just take a small fee off the top for my services. Supposedly, in the meeting of the Constructors Association, he verbally says that he will only take 2% of the total race fee revenue off the top for his services.

• 44:41Ben Gilbert?

  Really?

• 44:42David Rosenthal?

  But of course, nobody writes anything down because Bernie never writes anything down. And when the dust finally gets settled and many decades later, all of the books and stuff become public through a whole series of court cases, turns out Bernie's actually taking 8% off the top for his fees, which is, you know, a healthy amount. In addition, he's also an owner of one of the teams, so he's getting his owner split.

• 45:08Ben Gilbert?

  Honestly, 8% is not bad. If you are massively increasing the amount that every team is getting paid by doing this and you are sort of like organizing and orchestrating the sport, taking 8% for those services, it seems quite reasonable.

• 45:23David Rosenthal?

  Absolutely great point, and you are 100% correct. Bernie is doing a great service for all the F1 teams and owners. He is instantly making the sport a lot more valuable.

• 45:38Ben Gilbert?

  And sustainable.

• 45:39David Rosenthal?

  And sustainable, totally.

• 45:41Ben Gilbert?

  Every single team would go bankrupt except Ferrari, otherwise.

• 45:43David Rosenthal?

  Yep. So, before Bernie gets there, the average prize purses and payments that teams would get from a Grand Prix, and obviously they varied wildly, but on average, it was like $10,000 per team. So, like, nothing. In Bernie's first year running the show, he takes the average prize and fee payment up to $40,000 a year. So 4X in one year. And then a couple of years later, by the mid 70s, it's up to 150K per race. And then by the end of the decade, he's gotten it up to 200K. So like massive, massive improvements.

• 46:22Ben Gilbert?

  Per team, per race? Yeah, so suddenly you can start to actually fund your operation. If you know that every time you show up to the track, you're getting 200K to do it.

• 46:30David Rosenthal?

  As Bernie would never fail to point out, all of the other team owners should be massively grateful to him for essentially saving their asses here at funding their teams.

• 46:42Ben Gilbert?

  Yep.

• 46:43David Rosenthal?

  And back to the original purpose of the Constructors Association of coordinating travel costs. Bernie also goes out and negotiates competitive rates with freight providers and massively improves travel costs on the logistics side of the business for the teams. Basically Bernie's sort of first act in F1 reminds me of one of my favorite sayings that I heard earlier in my career from a mentor. He may be a thug, but at least he's our thug.

• 47:12Ben Gilbert?

  Yes, so it's worth taking a pause to say the FIA is still the governing body of the sport, of this racing series. And so Bernie takes over this thing called the Constructors Association, but really the FIA and their set of rules is still governing what happens between these teams at the racetracks. He's just the one sort of organizing the commerce through the Constructors Association.

• 47:36David Rosenthal?

  Yes, and importantly, the FIA is the one who blesses each of the racetracks with being a Grand Prix part of Formula One.

• 47:47Ben Gilbert?

  Hmm.

• 47:48David Rosenthal?

  So what happens next, as you might imagine, you know, these race promoters are none too happy about this little guy from England coming and beating them up.

• 47:58Ben Gilbert?

  Right, someone's aggregating all this power in the ecosystem and they're negotiating with us and it doesn't feel good because they've got all this leverage now.

• 48:04David Rosenthal?

  Yep, they go to the FIA and say, hey, you gotta do something about this Ecclestone guy. He thinks he's running F1.

• 48:14Ben Gilbert?

  Yep.

• 48:15David Rosenthal?

  This results in a whole series of protracted negotiations between Bernie and the Constructors Association and the FIA that finally get hammered out in 1981 with the first Concorde Agreement, which is still the name of the roughly every five-year agreements that govern F1 to this day. Do you know why they're called the Concorde Agreements?

• 48:41Ben Gilbert?

  I do. That is the physical location in Paris of where they were negotiated, right?

• 48:48David Rosenthal?

  Yes, of the FIA headquarters at the Place de la Concorde, which gives you a sense here. The Place de la Concorde in Paris is one of the ritziest, most famous parts of Paris. It was a bunch of, like, stuffy bureaucrats.

• 49:02Ben Gilbert?

  And so what is the FIA? Is it a nonprofit? Is it a government body? Is it like an NGO?

• 49:07David Rosenthal?

  It is an NGO. That's exactly what it is. It is an international organization that was formed by all of the respective European country motoring clubs. So the FIA also regulates, like, rally sports, endurance racing, et cetera, et cetera. It's not just Formula One. It's just that Formula One is the pinnacle of racing.

• 49:27Ben Gilbert?

  It's a standards body.

• 49:28David Rosenthal?

  Yeah, exactly. So in this first Concorde Agreement, the two sides, Bernie and the Constructors Association and the FIA and racetracks by proxy, agree on four things. One, the FIA will have full unilateral and unchallenged jurisdiction over the rules of the sport going forward. The Constructors Association and Bernie, they have no say over the technical rules of the sport. Two, the Constructors Association teams will commit to showing up and participating in every official Grand Prix race. In return, all of the race fees and prize money now contractually must be paid centrally to Bernie and the

• 50:13David Rosenthal?

  Constructors Association.

• 50:16David Rosenthal?

  And two, Bernie and the Constructors Association will control all rights and income from any future televising of F1 races for the next five seasons.

• 50:30Ben Gilbert?

  Banana.

• 50:31David Rosenthal?

  Banana. No rights to the race organizers, no rights to the FIA, all the TV money flowing through Bernie.

• 50:40Ben Gilbert?

  Which, if you look today, that is the single largest revenue stream of the whole thing.

• 50:44David Rosenthal?

  Of course. How could it not be?

• 50:46Ben Gilbert?

  Yep.

• 50:46David Rosenthal?

  So what's interesting is both sides here actually feel like they're getting a pretty good deal. And to be fair, the reason that they thought that was the TV media rights weren't actually worth anything yet.

• 51:02Ben Gilbert?

  Well, did they put in that the TV media rights, when they do happen, Bernie still only gets 8% and the teams get the rest of the 92%? Or is that yet to be negotiated?

• 51:11David Rosenthal?

  Gray area.

• 51:12Ben Gilbert?

  Okay.

• 51:13David Rosenthal?

  Bernie thrives in the gray zone. So at the time, European and British television was, A, mostly state-controlled with organizations like the BBC and its peers all across Europe, and B, very far behind the US in terms of monetization and sophistication of televising sports especially, but any kind of media. I mean, again, these are mostly like the equivalent of PBS in the US. They're public broadcasters.

• 51:42Ben Gilbert?

  There's not a competitive ecosystem. There's really one party to go to.

• 51:46David Rosenthal?

  Yep. So the teams and the FIA and the tracks, yeah, even though they're giving up all the TV rights to Bernie, they don't look that valuable to them. They're like, "All right, you want to go have a boondoggle and see if you can figure this out? Good luck to you."

• 51:59Ben Gilbert?

  Right. And to be honest, it sounds hard to film. You've got these racetracks with 15 turns and cars that whiz by real fast and crappy technology at the time to try to film them. And you want to go do business with the government to try to get them to broadcast? Okay.

• 52:18David Rosenthal?

  Yep.

• 52:18Ben Gilbert?

  Have fun.

• 52:19David Rosenthal?

  So Bernie. Unclear if he had a vision for this all along, or if he was like, oh, here's something I can grab. Let me go see what I can do with it. Either way, he basically executes it perfectly. So, once he gets the TV rights, he goes to an umbrella group of all the public broadcasters all across Europe called the European Broadcasting Union. It represents 92 different countries' national public broadcasters, including the BBC in the UK, and says, hey, you have a lot of F1 fans in your respective countries. It's a big sport in Europe.

• 53:01David Rosenthal?

  I now have the rights to broadcast this sport. How about I'll sell them to you for super, super, super cheap, a couple million a year for all 92 countries? So, like amortized in aggregate, basically nothing for any individual broadcaster to take these rights. The only thing I want them all to do is promise to show every single race on the calendar, not just the ones that are in their home country.

• 53:32Ben Gilbert?

  Hmm.

• 53:33David Rosenthal?

  So, seems like a pretty good deal, right?

• 53:35Ben Gilbert?

  So, he's in grow the sport mode, right? Not capture value right here. This is a growth opportunity.

• 53:40David Rosenthal?

  Yep. This is a long game. So, they all say yes. And then, Ben, as you were saying a minute ago, it pretty quickly becomes clear, hey, all 92 public broadcasting entities don't really have the expertise or the interest in figuring out how to televise this sport. Seems hard.

• 54:01Ben Gilbert?

  It's still true today. The way that most of the broadcasters around the world take F1 is they take one main feed that is produced, and then they do more stuff on top of it.

• 54:10David Rosenthal?

  So, this is when that starts. Bernie says, all right, no problem. I'll take the risk. I'll fund the investment upfront personally to create a central, single television feed for each race that Formula One, quote unquote, slash me Bernie.

• 54:28Ben Gilbert?

  Yeah, what is Formula One at this point?

• 54:30David Rosenthal?

  Yeah, what is Formula One? So, we should say Bernie loved to operate without contracts. Here's his exact quote. I carry out my business in a very unusual way. I don't like contracts. I like being able to look someone in the eye and then shake them by the hand rather than do it the American way with 92-page contracts that no one reads or understands. If I say I'll do something, I'll do it. If I say I won't, I won't.

• 54:56Ben Gilbert?

  Yeah.

• 54:57David Rosenthal?

  And who owns these things? I don't know. I'm making sure it happens. So Bernie goes and sets up a new company. Formula One Promotions and Administration, or FOPA.

• 55:09Ben Gilbert?

  Not to be confused with Foca, F-O-C-A, which was the Constructors Association that, you know, just did that deal with the FIA.

• 55:17David Rosenthal?

  Right. That Bernie is now de facto head of, but doesn't have any legal ownership of.

• 55:22Ben Gilbert?

  Right.

• 55:23David Rosenthal?

  The first thing that he has FOPA do is create this centrally-produced TV feed from England and then distribute it out to all the various broadcasters all across Europe.

• 55:33Ben Gilbert?

  He just keeps running this playbook over and over again of, okay, cool, I'll centralize something, I'll aggregate something, and now I have leverage to go and do business with the rest of the ecosystem.

• 55:43David Rosenthal?

  Yep. And his plan has been, like you identified, I'm gonna get all of these public broadcasters across Europe to basically go develop the market for me.

• 55:51Ben Gilbert?

  Right. They're making the next negotiation much more favorable to me. They're out there right now, sure, we didn't really exchange much money, but they're out there building the brand, getting people are excited, and then as soon as that agreement period is up, then I'll go to them and say, okay, it's really expensive and I am the one who you have to pay.

• 56:08David Rosenthal?

  Yes. I'm gonna be sitting in the middle as the choke point for what will now be a hugely in-demand television product, which is exactly what happens. Now Bernie also gets really lucky here because in the intervening years, the pay-TV ecosystem in Europe finally comes online.

• 56:28Ben Gilbert?

  Hmm.

• 56:29David Rosenthal?

  So one of the reasons why America was farther ahead in developing the television market is that cable and pay-TV had become a thing earlier in America, and so there's just a lot more bidders for content out there in America. When Bernie started this adventure, it wasn't clear that the same thing was going to happen in Europe, but it did.

• 56:49Ben Gilbert?

  Yeah, and there was one other element that developed in all this, too. In addition to these agreements that Bernie was having everyone sign, race organizers were required to surrender income from trackside advertising and corporate hospitality to Formula One-owned entities. So this now means that the race organizer, the track business model, is really just ticket sales.

• 57:13David Rosenthal?

  Yep. So as it's becoming clear that TV rights are now going to be really valuable, the original 1981 Concord Agreement term comes up. And Bernie now needs to go negotiate a new deal.

• 57:28Ben Gilbert?

  Oh, because FOPA and the TV rights were actually not a party to the previous Concord Agreement.

• 57:35David Rosenthal?

  Right, exactly. It didn't exist yet. Bernie created it in the interim. So the other two sides, of course, come in and they're like, hey, thank you for making TV rights a thing. We're pretty sure they're going to be valuable going forward. We deserve a cut. No teams, no tracks, no races. We want in on this.

• 57:54Ben Gilbert?

  Yep.

• 57:54David Rosenthal?

  So Bernie says, OK, OK. He starts with, why don't we just divide it all up a third, a third, a third? FOPA and the teams, you'll get a third. FIA, you guys can get a third. But then a third really should officially go to FOPA. I'm the one that created this and we're producing the broadcasts. So after a whole bunch of negotiation, it ends up splitting out that the FIA gets 30%. FOPA and the teams get 47%. And FOPA, Bernie's company, gets 23%.

• 58:29Ben Gilbert?

  FOPA is just a guy. He's just saying, and 23% of it goes to me, a thing I fully own.

• 58:35David Rosenthal?

  Yes, this company that I created. Bernie is a master at playing everyone off here. This split gets negotiated before Bernie really ramps up running bidding processes in each country for the TV rights. So he actually renews the European Broadcasting Union deal for another three-year term to sort of keep growing the sport and not value maximize just yet because he doesn't want a lot of money to start going to the other organizations.

• 59:10Ben Gilbert?

  Hmm.

• 59:11David Rosenthal?

  So that was the second Concord agreement. When the third Concord agreement comes up for negotiation in 1992, Bernie goes to the FIA and he's like, "You guys, you're getting the TV money, but you can't be happy because it's really not that much, you know? And there's a lot of complexity here. You're an international organization. What if I just make this easy for you? I'll pay you a flat fee. Rather than you taking 30%, I'll pay you $5 million a year, going up by $1 million every year, up to $9 million at the end of this term, in exchange for your percentage of the TV rights.

• 59:56David Rosenthal?

  This will be way easier for you." And the FIA is like, "Great. That sounds like a great deal. Let's do that." So Bernie now has the 23% he originally had, plus another 30% that used to belong to the FIA, for which he has to pay $5 to $9 million a year.

• 1:00:15Ben Gilbert?

  And you can actually imagine, if you're an international regulatory standards body, the fact that a guaranteed payment is being made available to you so you're not taking risk anymore, might actually be great.

• 1:00:25David Rosenthal?

  Of course, and this is the justification that they all give to the press when the deals are done. So, deal gets done. Bernie's now got 53% plus all of his cuts that he's taking from the Constructors Association for his services, plus his team ownership, et cetera, et cetera. Deal gets signed. He goes out, runs auctions across Europe, and really across the globe with any TV provider who's interested in showing F1. All of a sudden, TV rights go from small, single-digit millions in aggregate to F1 to over 25 million a year just flowing into FOPA and Bernie from the TV rights.

• 1:01:08Ben Gilbert?

  Oh, wow.

• 1:01:08David Rosenthal?

  But call it 40 to 50 million a year. So a big, big step up.

• 1:01:13Ben Gilbert?

  OK, so how do the teams feel about this? I mean, then suddenly there's this guy that's getting half-ish of the revenue from the broadcasts of their sport.

• 1:01:22David Rosenthal?

  That is the key question. You would think that the other owners would be pretty pissed. And some of them were, to be fair. One of the other owners, Ken Tyrell of Tyrell, which, fun fact, is actually the forerunner of the Mercedes team today, publicly accuses Bernie of, quote, "stealing F1 from the teams." But that's kind of a minority opinion. By and large, they're all still pretty grateful to Bernie at this point because turning F1 into this major TV sport meant that all of a sudden, all of their individual team sponsorship deals just got way, way, way more valuable.

• 1:02:06Ben Gilbert?

  Ah, that makes sense.

• 1:02:09David Rosenthal?

  Before F1 was televised, all that sponsors were getting when they got their logos on the cars was just exposure to whoever happened to show up at any given track for any given race. And really, it wasn't even the totality of the fan base that showed up. It really was only fans that were sitting close enough or at the right angles where they could actually read the logos on the cars.

• 1:02:39Ben Gilbert?

  It's interesting because at this point in time, the more valuable real estate would have probably been the trackside advertising. Whereas today, the trackside advertising is not nearly as valuable as the space on the car because the cameras stay fixed on the cars and on the drivers. That's the valuable space that people are after. And unless you're televising it, the cars are the thing in motion whizzing by.

• 1:03:03David Rosenthal?

  Right. Yeah, there's no way you're going to be able to read what's on an F1 car when it's whizzing by live.

• 1:03:08Ben Gilbert?

  Right.

• 1:03:09David Rosenthal?

  So this is when sponsorship money, and in particular, tobacco money, really starts funneling into the sport. In aggregate, until it finally gets banned by the EU in 2006, tobacco company advertising poured $4.5 billion into team sponsorships in F1 over the years. That is a lot of money, and that was just one category.

• 1:03:40Ben Gilbert?

  And in particular, part of the reason why tobacco is so interested here is there was sort of a loophole that as there was all this pressure to ban tobacco advertising on TV and on radio and on billboards and in newspapers, putting it on a car that happened to show up in a TV broadcast, oh, that was a sponsorship of a team. It's sort of this way that the tobacco companies got to stay on TV, and it was heavily associated with a brand image that they wanted to cultivate. It's glamorous, there's speed, it's risk-taking, they get to do these full takeovers of deliveries of the cars. I mean, it is a full-screen ad, it's just not classified as a TV advertisement. Okay, so finally, thanks to tobacco companies and TV meteorites

• 1:04:22Ben Gilbert?

  and Bernie, there's all this money flowing into Formula One to fund these ever-increasingly expensive operations. And of course, the question then is, what do they do with all this money? You know, these teams want to just go out and beat each other, and so they're going to spend into an infinite limit to attempt to do so.

• 1:04:40David Rosenthal?

  Oh, yes. And of course, they come up with some pretty clever ways to invest slash burn that money and make the cars go faster on the grid.

• 1:04:51Ben Gilbert?

  Yes. But first, all right, listeners, now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team, and deploying them is no longer the hard part.

• 1:05:07David Rosenthal?

  Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 1:05:21Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI control tower.

• 1:05:31David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent, visible and secure in one place.

• 1:05:48Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 1:06:04David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 1:06:21Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 1:06:30David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you.

• 1:06:42David Rosenthal?

  Okay, so we're in this era now where team owners have a lot more resources at their disposal, and boy, are they deploying it. Ben, what are some of the crazy things that they start doing during this time?

• 1:06:55Ben Gilbert?

  So in 1968, Colin Chapman from Lotus had become a really big believer that the way that his drivers could go faster in the turns was applying more downforce so they'd have better traction on the road. And they put the first airfoils, or wings, on the car. And in 68, that was just really small wings. They almost look like early Formula One, the cars that were just these like long tubes, but with like little hints of what Formula One would become on them. It's this kind of amazing transitional period. We'll link to it in the show notes.

• 1:07:26David Rosenthal?

  And then don't they go to like, big wings before the FAA regulates those out of existence, right?

• 1:07:34Ben Gilbert?

  There is a lot of experimentation, yeah, that happens in this period. It's really fun. In the email, we'll put a bunch of pictures of crazy F1 cars that were technically within regulation when they were first tried, before all these tactics were made illegal. But it's probably time to stop and do a little physics lesson here. I never really understood this. So this is listeners' education for me. Lighter cars are faster. So why would you want to put a spoiler on a car that pushes it into the ground harder? You don't want a heavier car. And so you sort of have to separate this idea of downforce pushing down on the ground from just weight.

• 1:08:14Ben Gilbert?

  There are ways to get downforce, which can be good, that is different than a heavy car.

• 1:08:20David Rosenthal?

  Yeah, it's funny. Before doing this episode and learning all this alongside you, I always just sort of assumed that at least road car manufacturers put this stuff on cars to make them look cool, not to actually do anything.

• 1:08:32Ben Gilbert?

  Right. But you want downforce to make it stick to the road better on turns. But the issue, of course, is that with a big spoiler, yeah, you're creating downforce, but you're actually creating a ton of drag also. So the car is facing resistance to going forward as a byproduct of what you're attempting to really do is force the car down. So if you focus too much on optimizing for downforce on the turns, you end up slowing yourself down in the straightaways. So the takeaway from lesson number one here is downforce good, drag bad.

• 1:09:04David Rosenthal?

  Yep.

• 1:09:04Ben Gilbert?

  So let's flash forward nine years from that 1968 initial aerodynamics experiment. So we're now here in the late 1970s. Lotus is still working on this issue. They were trying to figure out a way to produce downforce that doesn't produce a lot of drag. And what followed is the stuff of F1 lore. You will hear racing nerds talk about the Lotus 78 and the Lotus 79 as if these are like gilded vehicles.

• 1:09:29David Rosenthal?

  Mythical beasts.

• 1:09:30Ben Gilbert?

  Yes.

• 1:09:30David Rosenthal?

  Yeah.

• 1:09:31Ben Gilbert?

  So the first breakthrough is, well, wait, what if we can turn the whole car into a wing? I mean, rather than our traditional shaped car with a wing slapped on top, what if we made it actually part of the body style itself so the whole thing gets pushed down? And when you look at the Lotus 78, it really does look like one big wing. I mean, Google it, we'll put in the email. It's really cool. The second breakthrough is a fun one from the world of fluid dynamics. Everyone listening is probably familiar with how. How airplanes generate lift. The wing is shaped in a special way such that when the plane moves forward, you generate high air pressure underneath the wings, low air pressure over the wings, and thus the airplane is pushed up into the air. Well, what if you did the opposite?

• 1:10:16Ben Gilbert?

  That is what the Lotus team did. They shaped a car like an upside down airplane wing. So the bottom of the car had a special skirt on it that shaped airflow to speed up under the car, squeezing air into a very small space since it's super close to the road as the air molecules move along at high speed under the car, which creates that low air pressure zone, and then carefully control the air with a gradual up slope and a diffuser to guide how the air comes out from underneath the car in the back. The effect this had was to create low air pressure under the car, high air pressure over the car, and essentially suck the car onto the ground. And in physics, this is called the Venturi effect.

• 1:10:58Ben Gilbert?

  So the areas under the car are called Venturi tunnels.

• 1:11:02David Rosenthal?

  Ah, that's why. It is funny, when you and I were at the Vegas Grand Prix and we kept saying, "Oh, my God, these are like fighter jets on the ground." They actually are like fighter jets on the ground.

• 1:11:14Ben Gilbert?

  Yes, they really are like upside down fighter jets. So, did it work? Absolutely. Mario Andretti, upon driving it, said that it cornered as if it was painted to the road. And he won both the driver's championship and Lotus won the constructor's championship in 1978. Interestingly, by the 1980s, it was producing so much downforce that the drivers could take these corners at super fast speeds. And it actually became a safety hazard, especially because if the car would go up on a curb or the skirt slipped in any way, the cars were then going way faster than they otherwise could have without that sort of sucking to the ground, the ground effect to cause the traction. So in 1983, these ground effects were outlawed

• 1:11:57Ben Gilbert?

  and regulations were updated to say that you must have a flat-bottomed car.

• 1:12:01David Rosenthal?

  Hmm, interesting.

• 1:12:03Ben Gilbert?

  Yes. But- For fans of ground effects, they would make their way back for the 2022 to 2025 regulations, which that's what we saw in Vegas, David. It was crazy cold to watch because I think 70% of the downforce from those cars is created by the ground effects, not from the pushing down of the spoiler, but the sucking of the car onto the track. And so it was kicking up all that dirt, especially during qualifying, because it's driving around on these Las Vegas roads that just have sand and dirt and silt that sort of builds up and creates these just like huge clouds of dust in the air from all the sucking.

• 1:12:42David Rosenthal?

  And then qualifying in the rain was insane, seeing like all the rainwater just shooting up off of these cars.

• 1:12:49Ben Gilbert?

  Yeah, the rooster tails, as they call it. And I think it was two years before we went in Las Vegas, one of the cars even sucked up a drain cover that had been welded shut and basically wrecked the car. But these cars produce so much downforce that if you drive over even a welded shut manhole cover, chunk, it sucks it right up.

• 1:13:09David Rosenthal?

  Wild.

• 1:13:10Ben Gilbert?

  Yeah. So ground effects, very, very powerful. There are a few other just giant leaps forward that would happen in areas other than aerodynamics also. So engines over the years have gotten way more fuel efficient, with only 50% of energy in an F1 engine lost to heat compared to 70 or 80% in a road car being lost to heat. So this obviously is something that F1 teams care a lot about because if it's more efficient, you can carry less fuel, have a lighter car, go faster. So huge, huge advantage. They've also gotten a massive increase in horsepower, tripling from 300 something horsepower engines when we first started in the 50s to 1,000 ish horsepower coming out of these engines today.

• 1:13:55David Rosenthal?

  Insane, in cars that are light enough that you could basically pick them up. A half to a third as heavy as like an average road sports car.

• 1:14:04Ben Gilbert?

  The F1 cars were that light because of all the carbon bodywork.

• 1:14:07David Rosenthal?

  Yeah. So 1,000 horsepower in something. It's basically light as a feather, as far as cars go.

• 1:14:13Ben Gilbert?

  And then, of course, there's turbochargers, which are an insane invention. This harnesses the unused energy from the exhaust gases to spin a turbine and then use that to compress the air that is going into the engine, which ultimately means then there's more oxygen in each engine cycle, so you can have a more powerful combustion every single engine cycle and thus more power again in the car.

• 1:14:38David Rosenthal?

  Which actually raises an important point, too. It's not like any of these teams, even the ones that were backed by actual car manufacturers, were doing this with the goal of advancing technology for consumer road cars. But as a byproduct, a lot of this technology over the years did make its way into the consumer landscape.

• 1:15:01Ben Gilbert?

  Yes, and it did become an intentional strategy over time, and it provided air cover for a lot of spend, especially for these constructors that were also consumer carmakers, if they could say, oh, this is R&D and stuff's going to go into cars. And it did. I mean, you had paddle shifters and carbon.

• 1:15:17David Rosenthal?

  Or even just turbos. I mean, so many cars, even like not sports cars are turbos these days, and a lot of that technology got perfected in F1.

• 1:15:26Ben Gilbert?

  Yeah, I think people sort of overstate this when they say there's all this technology that came from F1 cars, but I think it's more like the technology was sort of iterated and perfected, or they would explore new material science or something in F1 cars that would eventually go into road cars.

• 1:15:41David Rosenthal?

  Yep.

• 1:15:42Ben Gilbert?

  So that's engines on top of aerodynamics. Then there's this whole third category where they really had a breakthrough in electronics. So all the cars we've been talking about at this point were very, very manual and analog. And in the early 90s, the Williams team comes along and realizes, oh, this technology is finally good enough for us to try to automate some of the systems in the car in real time.

• 1:16:05David Rosenthal?

  Let's add software, baby.

• 1:16:07Ben Gilbert?

  This is the early 90s. I mean, this is pre-internet. So they come up with this whole crazy, broad set of ideas, and remarkably, they implement basically all of them, and they work very, very well. So the systems are traction control, anti-lock brakes, active suspension, semi-automatic transmission. Speaking of road relevance, David, and transferability to consumer cars.

• 1:16:32David Rosenthal?

  Yeah, totally.

• 1:16:33Ben Gilbert?

  All of these worked together, and the car even automatically adjusted its ride height. Customized to each corner on each racetrack. So competitors saw this and got so mad and accused Williams of making a car that drove itself. But for a couple of years, this was legal and they won both drivers and constructors championships in 1992 and 1993 with Nigel Mansell and Alain Prost. In fact, the car was so dominant that Prost's old teammate and rival from McLaren, the great Ayrton Senna, who we have not yet talked about on this episode, the three-time world champion, wanted to jump ship from McLaren to join Williams.

• 1:17:14Ben Gilbert?

  And Prost was actually retiring after that 93 season. So a spot did open up for Senna to join Williams in 94.

• 1:17:24David Rosenthal?

  Ah, but then the FIA made it illegal to do all this software stuff.

• 1:17:28Ben Gilbert?

  Changed the rules as soon as he gets there and says, hey, you can't have all these electronic driving aids. I mean, I know it makes the car really desirable, but no, this is not the same sport anymore because it actually decreases the amount that the driver matters so much that we aren't really willing to go there. So Senna is then left on a new team with a car that's just on par or quite possibly behind the quality of the whole rest of the grid when they had to take out all these electronic innovations. And sadly, early in that 1994 season, the racing world would witness its most infamous and fatal crash in that Williams car.

• 1:18:07David Rosenthal?

  Yeah, which is obviously Senna's death in 1994, which becomes this global moment. I believe still to this day, Ayrton Senna's funeral in Brazil is the largest attended public funeral in history.

• 1:18:25Ben Gilbert?

  Yes.

• 1:18:26David Rosenthal?

  I think 3 million people showed up in the streets.

• 1:18:29Ben Gilbert?

  That's right.

• 1:18:30David Rosenthal?

  For his funeral.

• 1:18:31Ben Gilbert?

  It's this horrible tragedy. He had just sort of gone from rising star to clearly the best race car driver in the world, just this natural talent. There's a beautiful documentary released in 2010 for anybody who's interested to go learn about his life and this crash.

• 1:18:47David Rosenthal?

  I mean, one at a time, this. Light on just the sport in general in a way that hadn't happened since the modern television era began.

• 1:18:56Ben Gilbert?

  Yep.

• 1:18:56David Rosenthal?

  Two, it specifically shined a light on how unsafe it still was.

• 1:19:01Ben Gilbert?

  Yeah, so it's interesting because by this time, the fatalities had really dropped off. So we mentioned, I'll just go through the counts here by decade. 1950s, there were 14. In the 60s, there was another 14. In the 70s, there were 12.

• 1:19:14David Rosenthal?

  Yeah, you have more than one a season.

• 1:19:16Ben Gilbert?

  Yes. So then they start implementing a bunch of obvious stuff. The FIA has to inspect every track and make sure it is complying to all the rules before every race. You can't have straw bales anymore.

• 1:19:28David Rosenthal?

  That's right, the barriers used to be straw bales.

• 1:19:31Ben Gilbert?

  Yes, now you need these guardrails. They have to be double reinforced. You need separation on the pit walls. There was a lot of stuff going on sort of near the pits that drivers were going too fast or accelerating too fast. Finally, you get fireproof overalls in the 1970s. You get fuel safety cells, mandatory seat belts, multi-point harnesses. So big steps in the 70s.

• 1:19:52David Rosenthal?

  Yeah, this is one of the craziest things to me in doing the research was for a long period of time, F1 drivers actually refused to wear their seat belts because they wanted to get thrown out of the car so they didn't catch fire after it crashed.

• 1:20:09Ben Gilbert?

  Right.

• 1:20:09David Rosenthal?

  Insane.

• 1:20:10Ben Gilbert?

  They didn't want to limit their options in a dangerous situation. So after all that, then in the 1980s, you have four deaths. Lot better than 14 or 12. And in the 90s, the only two deaths were this one weekend, Rowland and Senna. And so it did kind of come as a shock because I think people felt like, oh, we're through this era, things are a lot safer. But obviously, they still have a long way to go. So what happened after Senna's death?

• 1:20:41Ben Gilbert?

  From a safety perspective and what impact did it have? The biggest one is they just slowed down the cars.

• 1:20:47David Rosenthal?

  Right.

• 1:20:47Ben Gilbert?

  I mean, all this R and D and sticking to the road and getting crazy traction and taking high speed turns, the faster you go, the more dangerous it is. And so interestingly, F1 racing today is not that much faster than it was in 1950. The top speed is like 40 miles per hour faster than the old top speed. I would have thought, oh, all this R and D, these cars are probably two, three, four times faster. No, they're not. And so, right after Senna's death, they limited the aerodynamics of the cars. You couldn't use as big of wings. You couldn't use as big of diffusers. In 1998, a few years later, they grooved the tires to reduce cornering speeds. So they actually looked a little bit more like the tires we use on the roads instead

• 1:21:31Ben Gilbert?

  of the flats or the slicks that you see real race car tires. There were also some structural things they put into the cars. So deformable crash structures, survival cells, front impact testing, higher sides on the cockpits, and they changed the tracks too. A lot of corners were given larger runoffs and upgraded barriers. So that all did help. But in the 2010s, there were also two fatalities. And so this is when the really big noticeable change happened.

• 1:22:00David Rosenthal?

  The halo?

• 1:22:00Ben Gilbert?

  The halo. So in 2018, in response to the 2014 crashes, the FIA says enough is enough. We are gonna mandate that every car has this really, really rigid, robust, heavy thing that you put right on top of the driver. And there's a giant bar directly in the center of the driver's field of view. So there's a giant compromise here. But it has saved at least three people's lives since then because it can protect a driver even when a car is upside down and skidding. These innovations have made it so we have had zero fatalities since 2014.

• 1:22:41Ben Gilbert?

  It's, I think, the longest stretch in F1 history without a fatal accident.

• 1:22:47David Rosenthal?

  Yep, it certainly seems like this sport is a lot safer these days.

• 1:22:50Ben Gilbert?

  Yeah, it's still dicey, but over the last 70 years, they've observed all the lowest hanging fruit of ways that they can protect the driver.

• 1:22:57David Rosenthal?

  Yep. So bring it back to the business narrative here. What are the kind of great ironies here of the obvious right decision to focus on safety and slow the cars down? Is it just further fuels this sort of spending spiral amongst the teams? Because the harder you make it to go fast, the more they're going to be incentivized to spend every last dollar and look in every last little corner and find every last little loophole to get an advantage?

• 1:23:28Ben Gilbert?

  Yeah, I mean, when the sport first started, there were giant gains to pick up left and right. And you could sort of do all sorts of crazy stuff. And we were talking about all the different car designs with spoilers that are up on giant poles and, I mean, truly wacky ideas. There was a six wheeled car.

• 1:23:44David Rosenthal?

  That's right.

• 1:23:45Ben Gilbert?

  At one point. Because it wasn't in the rules that you only had to have four wheels. And over time, as they start adding more and more guidelines for safety and for all these other reasons, the way to succeed in Formula One shifted from making a more powerful engine or figuring out the very best arrow to figuring out how to exploit the rules.

• 1:24:04David Rosenthal?

  Yeah, and do more and more exotic stuff.

• 1:24:06Ben Gilbert?

  Yes. What is left unclear in the rules where I can see a little bit of daylight between what they intended to write and what they did write? And what can I catch that the other teams won't catch? And how do I sink $50 million of R and D into achieving some speed outcome with that?

• 1:24:23David Rosenthal?

  It's really funny. I hadn't thought about this till now, but actually, the right analogy is the semiconductor industry and Moore's Law. It's like a different set of rules. It's like the rules of physics instead of the rules of the FIA. But as you progress, like TSMC and ASML, they've got to spend incrementally more and more CapEx and more R and D every year to push the boundaries farther and farther. And all the low hanging fruit is gone. And they get more and more exotic with lasers melting tin just in time, you know, et cetera, et cetera.

• 1:24:53Ben Gilbert?

  Good point. Yeah, I hadn't thought about it that way.

• 1:24:55David Rosenthal?

  Meanwhile, while the teams are spending themselves into unprofitable oblivion, Bernie, starting in 1993, becomes the highest paid corporate executive in Britain.

• 1:25:07David Rosenthal?

  Taking home in 1993, $44.5 million in cash. And that's only what's reported to Her Majesty the Crown in that year, as we'll get into. He's also getting older by this point in time. He's in his late 60s. He's on his second marriage. He has two young daughters with his second wife, Slavika. And he starts to think about estate planning and maybe some liquidity for his family and his estate. But in doing so, he just about causes the whole thing to fall apart. Because even though he was the highest paid corporate executive in Britain,

• 1:25:50David Rosenthal?

  that didn't necessarily mean that he was running FOPA and F1 like any kind of professional organization. He did everything himself and intentionally didn't keep any records. He minimized the number of contracts that he would sign intentionally. He kind of operated F1 like a sole proprietorship, shall we say. The whole corporate operation was run out of a building in London that was also his house. Seriously, like the bottom floor floors of the building were F1 offices. And then he had the floors above. And supposedly, he had all the rooms in the offices bugged. So he could listen to what everybody was saying at every point in time. And famously, he would kick everyone out at 6:00 PM.

• 1:26:35David Rosenthal?

  He'd be like, all right, leave my house now. It's time for y'all to go home.

• 1:26:40Ben Gilbert?

  Wow.

• 1:26:40David Rosenthal?

  This continued until Liberty takes over in 2017. He had a few lawyers and finance people to make it all function. But there was no marketing department for F1. There was no research or data department. There was no sales department besides Bernie.

• 1:26:56Ben Gilbert?

  Well, there weren't actually that many things to sell. They weren't selling a lot of sponsorship at the league level at that time. That was pretty much all teams. I guess TV rights you have to sell.

• 1:27:04David Rosenthal?

  Exactly. Like, yes, on the sponsorship side, but TV rights, you know, they're in 90, soon 100, 120, 130 countries, all with different contracts and different providers. Bernie's just out there doing this more or less all by himself. Though we should say, he also had a right-hand man and essentially number two in the business, a former Formula 2 driver and also owner of another team in the league, the March team, a man named Max Mosley, who happened also to be a lawyer. Very useful for Bernie's activities. There's this great quote that Bernie recalls saying to him when they first start working together.

• 1:27:48David Rosenthal?

  "Your problem, Max, is you always want things absolutely clear. And sometimes it's better if things are not clear."

• 1:27:56David Rosenthal?

  So he gets with the program and they pretty quickly become two peas in a pod. In 1993, that same year that Bernie becomes the highest-paid executive in the UK, he kind of shadow arranges to get Max installed as the new president of the FIA. Meanwhile, he had already somehow connived to get himself, Bernie, already an official role at the FIA as the vice president in charge of promotional affairs. In addition to all this, at one point along the way, he also took over as the promoter of the Belgian Grand Prix at Spa.

• 1:28:33Ben Gilbert?

  Oh, so he was paying a race fee to himself?

• 1:28:36David Rosenthal?

  Yes. So at various times, Bernie was serving in a principal role in all of the major F1 stakeholder categories. Team owner, race promoter, official FIA representative, and of course, CEO and owner of FOPA and de facto, the league itself. And I think at every point in time, he was always in at least two, if not three or four of those roles simultaneously.

• 1:29:09Ben Gilbert?

  Unbelievable.

• 1:29:10David Rosenthal?

  He really takes the, you know, no conflict, no interest phrase to new heights.

• 1:29:14Ben Gilbert?

  Absolutely unbelievable. There's a great quote from Eddie Jordan, who is a Formula One legend. Do you know this quote?

• 1:29:21David Rosenthal?

  Uh, no, no, no.

• 1:29:22Ben Gilbert?

  He said that Bernie Ecclestone was someone who sold Formula One four times, has never bought it back, has never lost its control, and still owns it. And do you know the most important thing? He never effing owned it in the first place.

• 1:29:35David Rosenthal?

  Yeah.

• 1:29:38David Rosenthal?

  Yes, so let's tell that story about how he sells it four times, never buys it back and still owns it and never owned it in the first place. That is such a great quote. I hadn't found that. I love it. I love it.

• 1:29:51Ben Gilbert?

  Yes. All right, listeners, now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 1:30:06David Rosenthal?

  Yep, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 1:30:23Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 1:30:38David Rosenthal?

  And that's how you get features that customers love, like Tabular Review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 1:31:02Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 1:31:21David Rosenthal?

  And Logora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Logora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Logora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 1:31:50Ben Gilbert?

  Truly insane numbers, and that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at lagora.com/acquired and just tell them that Ben and David sent you.

• 1:32:15David Rosenthal?

  Okay, so Bernie's many sales and monetization opportunities. Here in the mid 90s, he starts exploring liquidity options for himself. And in particular, he wants to funnel that liquidity into a new set of offshore vehicles to avoid British estate taxes for his family after he dies. And, you know, this is like a natural activity for somebody approaching their 70th birthday. What Bernie didn't foresee, or anybody else, is-

• 1:32:47Ben Gilbert?

  He had another 25 years at least in him.

• 1:32:49David Rosenthal?

  At least, because he's still alive in 2026.

• 1:32:51Ben Gilbert?

  Yep.

• 1:32:52David Rosenthal?

  Now, also to be somewhat fair here, protecting his estate from the heavy British inheritance taxes is a legitimate concern, because otherwise there would be no way that his family could keep control of F1 after his death. It would have to be broken up and sold just purely to fund the estate taxes.

• 1:33:13Ben Gilbert?

  So if you actually are a team, this is starting to become kind of an existential risk of what if Bernie dies suddenly and then they have to sell F1 off into different parts with different owners?

• 1:33:26David Rosenthal?

  And you say, you know, if you're a team owner, it's not just if you're a team owner. If you're a team owner or a race promoter, you want a plan here. So it just so happens here in the mid to late 90s that we're in the height of the dot com era.

• 1:33:39Ben Gilbert?

  Wait, that plays into this?

• 1:33:41David Rosenthal?

  Oh, yeah. So what's the natural thing to do? Bernie's gonna IPO F1.

• 1:33:49Ben Gilbert?

  Oh, I've totally missed this.

• 1:33:50David Rosenthal?

  Oh, yeah. Oh, there is so much delicious chaos that gets unleashed here. By this point in time, Bernie's various companies, and there are even many more than we have talked about on this episode, just for simplicity. Collectively, they're earning about 250 million British pounds a year in revenue, and they have 50% plus EBITDA margins. And remember, this is at a time when the British pound is worth, call it, 60 to 70% more than the US dollar. This is a very IPO-able business, if it were a, you know, regular business.

• 1:34:31Ben Gilbert?

  Yes.

• 1:34:32David Rosenthal?

  Nonetheless, times are so crazy that Bernie hatches a plan with his bankers at Solomon Brothers to consolidate all the various F1 companies that he owns into a single holding company called SLEC Holdings, S-L-E-C Holdings. And he's going to transfer his ownership of that new company to his then-second-wife Slavika for tax reasons. So S-L-E-C was short for Slavika Eccleston. And float it in a dual-listed IPO in the US and England with an anticipated valuation of around $4 billion.

• 1:35:16David Rosenthal?

  We should also note here, too, being a little glib in this episode. In 2023, Bernie ultimately pleaded guilty to tax fraud as a result of all the machinations we're about to talk about, and had to pay a 653 million pound payment to the Crown in back taxes and fines. And he also received a, I think, 17-month jail sentence, which was then suspended, probably in large part to his advanced age.

• 1:35:46Ben Gilbert?

  Crazy.

• 1:35:47David Rosenthal?

  All of this lurking in the background may have been part of the reason that famously he turned down several offers of knighthood throughout his life.

• 1:35:56Ben Gilbert?

  Although you'd think it would actually bode better for you if you're a knight going into some lawsuit with the government over owing the government money.

• 1:36:03David Rosenthal?

  Good point. Yeah, does the Crown sue one of their own? I don't know.

• 1:36:08David Rosenthal?

  Anyway, as he starts formulating all these plans with Solomon Brothers, they're like, "Well, I see your revenue. I see your EBITDA."

• 1:36:18Ben Gilbert?

  And what were those again?

• 1:36:20David Rosenthal?

  250 million British pounds of revenue and call it 50-plus percent EBITDA margins on that.

• 1:36:26Ben Gilbert?

  Whew, good business.

• 1:36:27David Rosenthal?

  Yeah, great business. What they don't see is any sort of formal legal control or document that he has from anybody giving him the actual rights to a lot of this. You know, he's got the actual rights to the TV stuff, but the promoter fee stuff, the transportation, we haven't even mentioned the paddock club that gets set up along the way here. There's a lot of money flowing through that.

• 1:36:56Ben Gilbert?

  And to be clear, these are all income streams to Bernie. I mean, so of course, we've talked about the meteorites, but what a race promoter does is if F1 is thinking about going to a racetrack, the person who owns the racetrack, or a company affiliated with the racetrack, or a government affiliated with the racetrack, pays a giant amount of money to Bernie for the privilege of having a race there. That's a promoter fee.

• 1:37:19David Rosenthal?

  Yep. So conveniently, right at this same time as they're doing IPO preparations, it comes time to negotiate the fourth Concorde agreement with the teams and the FIA. In this new agreement, Bernie swaps in a new entity called Formula One Constructors Association Administration Limited, a new company owned by Bernie, Foca Ah,

• 1:37:52David Rosenthal?

  for the original Foca, so that he can now legally have all the rights to everything he's doing. And remember who the new president of FIA is that just got installed? Max Mosley.

• 1:38:05Ben Gilbert?

  Yeah.

• 1:38:07Ben Gilbert?

  So he's just gonna rubber stamp it?

• 1:38:09David Rosenthal?

  Of course.

• 1:38:09Ben Gilbert?

  Or that's at least the belief.

• 1:38:11David Rosenthal?

  Yeah. Well, it passes. Let's just say that. The path is now paved to IPO, except there's one snag that comes up. News of the plans, as well as Bernie's recent consolidation of legal power, gets leaked to the press, and this causes the European Union antitrust investigators to start poking around.

• 1:38:34Ben Gilbert?

  You don't say.

• 1:38:36David Rosenthal?

  Bernie is doing so much self-dealing here that there's no way he's gonna survive an investigation. So Bernie shelves the IPO idea and also resigns from his official role as a vice president at the FIA. And the combination of those two things is enough to at least get the EU off his back for the moment. But he needs another plan for getting liquidity. So he switches banks to Morgan Stanley and convinces them that instead of IPO-ing, they should issue debt on F1 and use the proceeds from the debt to pay himself and his new offshore entities a special $1.4 billion dividend.

• 1:39:17Ben Gilbert?

  What?

• 1:39:18David Rosenthal?

  Secured by the future TV rights streams, by the revenue streams from the future TV rights. This deal actually happens. It's called the Bernie Bonds.

• 1:39:30Ben Gilbert?

  It is always something you should be a little bit worried about. If a company is raising a giant amount of debt principally to pay out its primary shareholder a special dividend.

• 1:39:40David Rosenthal?

  Yes, especially if it's Bernie.

• 1:39:42Ben Gilbert?

  Why would you buy that debt?

• 1:39:43David Rosenthal?

  That's a really good question. The offering, I believe, was intended to be $2 billion, but there was not enough demand and that Morgan Stanley could only rustle up $1.4 billion worth of money that was willing to do this deal. Either way, the deal happens on a Friday. All gets done, debt's issued, Bernie gets his dividend, money gets transferred to the offshore entities. On the following Monday, Bernie calls up his bankers and says, "Oh, there was something else that I didn't tell you. I'm having triple bypass heart surgery today."

• 1:40:24David Rosenthal?

  Today. So they just did the debt deal.

• 1:40:26Ben Gilbert?

  Three days after.

• 1:40:27David Rosenthal?

  Just issued the special dividend, took 1.4 billion dollars out. Three days later, Bernie is having triple bypass heart surgery.

• 1:40:35Ben Gilbert?

  The entire future success of this thing is heavily dependent on Bernie being in the seat.

• 1:40:40David Rosenthal?

  Yes. Fortunately for him and everybody else, he survives the surgery. Gives a quote to the press from the hospital room, "I have disappointed so many people."

• 1:40:52David Rosenthal?

  Which later, one of his principal bankers would recall her response being, "If you make it out alive, I'm gonna come kill you myself."

• 1:41:02David Rosenthal?

  Oh, man. Well, Bernie survives. Later that year, we're in 1999 now, his wife, Slavica, i.e. really Bernie, starts selling off equity stakes in SLECK Holdings to various private equity firms. Including, cannot make this up, in February of 2000, they sell a 37% stake in F1 to Hellman and Friedman, the giant private equity firm based in San Francisco. H&F then goes and buys out some of the other minority owners that Slavica slash Bernie had been selling stakes to.

• 1:41:45David Rosenthal?

  And Hellman and Friedman collectively gets a 50% ownership stake in F1. And then, they go negotiate with Slavica and Bernie an option to buy another 25% from them for 600 million pounds and gain 75% majority ownership of F1. So they get the option, the option's papered. One month later, in March of 2000.

• 1:42:15Ben Gilbert?

  This was in March of 2000, right when the dot-com crash happened?

• 1:42:19David Rosenthal?

  The dot-com crash is about to happen, but it gets crazier before the bubble bursts.

• 1:42:25Ben Gilbert?

  Really?

• 1:42:26David Rosenthal?

  In March, H&F gets an unsolicited, over-the-top bid from a German new media company called EM.TV.

• 1:42:39David Rosenthal?

  To buy their entire stake in SLECK/F1 immediately, right away. This is the height of dot com craziness right before the crash. So this German company, EM.TV, they had just previously bought the Jim Henson Company in the US, which of course makes the Muppets. And they were just trying to roll up all of these media properties and they were gonna bring them into the digital era or something, some sort of dot com fever dream. H&F hits the bid. They sell out. So how long did H&F own Formula One? One month. One month? H&F owns Formula One for one month.

• 1:43:23David Rosenthal?

  They make an immediate 241 million pound profit in one month. On how much invested? 1.1, 1.2 billion invested. Oh my god. So, you know, a 20% return, but like- In a month. I got more. So 50% of F1 is now in the hands of EM.TV. They want to exercise the 25% option that H&F had negotiated, but they don't have any more cash. They blew it all on the first transaction. And the Muppets. And the Muppets.

• 1:44:01David Rosenthal?

  So EM.TV goes out and does another 1.6 billion euro debt deal to raise the money. So they take 600 million from JP Morgan and Lehman Brothers, and they take a billion from a local German bank called Bayern LB. They use this debt, they exercise the option, they now own 75% of F1, and Bernie and Slovakia hold the last 25%. Wow. And then the bubble bursts. Wow. So all that was done like in days, weeks? Like right up to the end times. The music is ending as this is all happening.

• 1:44:44David Rosenthal?

  Bernie meanwhile is just getting tons of money into his bank accounts. The bubble bursts. EMTV misses their interest payments to the banks. Shocking, shocking. Shocking, shocking. Another German media mogul named Leo Kirsch comes in and saves the company. His company, Kirsch Media, takes over EMTV. They now assume F1 ownership. 18 months later, they go bankrupt. So 2002, the net result of which is that ownership of the 75% stake in F1 transfers to the debt holders. Which is who? Bayern LB, the German bank, JP Morgan, and Lehman Brothers.

• 1:45:29David Rosenthal?

  With Bernie and Slovakia still owning the 25% minority share. Oh my god. Crazy. Okay, so it all comes to a head in 2004 when the banks are super frustrated because Bernie's still running the thing as he always did. Paying himself everything. The banks keep trying to tell Bernie what to do. They're like issuing him directions as if he's their employee and Bernie just keeps ignoring them. So the bank consortium sues Bernie for control of the sport. The judge rules in favor of the banks. However, Bernie addresses the media after the court proceedings and says that the verdict would mean, quote, "nothing at all."

• 1:46:13David Rosenthal?

  And he's planning to continue business as usual. Because he's got an ace up his sleeve. Separately, he has been negotiating with CVC Capital Partners, the large European private equity firm. The deal gets done with CVC. They buy out the banks. They also buy out Bernie and Slovakia's 25%. So more money going to Bernie now here. Whoa. But Bernie will remain CEO. He's just an employee hired by CVC to continue being Bernie. And he gets the opportunity to use some of his proceeds to invest with CVC alongside them in the deal. Amazing.

• 1:46:54David Rosenthal?

  All told, CVC and Bernie for his portion spend about $2 billion acquiring 100% ownership.

• 1:47:04David Rosenthal?

  They finance 1.1 billion of it with another set of debt. So they put 900 million of cash equity into the deal. Compared to, I believe, over 3 billion that Bernie and his trusts had pulled out of the company through all the debt and equity machinations that we discussed earlier.

• 1:47:26Ben Gilbert?

  Unbelievable.

• 1:47:27David Rosenthal?

  Oh, my goodness.

• 1:47:29Ben Gilbert?

  This is important to know, the CVC slash Bernie buy-in to this new F1 entity is about 900 million of equity.

• 1:47:38David Rosenthal?

  Yes.

• 1:47:39Ben Gilbert?

  $2 billion total purchase price, including the debt.

• 1:47:42David Rosenthal?

  Bernie resumes his job with renewed vigor, now that he is newly incentivized to grow revenue and profits again. So the first thing that he does after CVC cleans up the ownership is he kind of goes right back to his original bag of tricks, which is extracting more money from race promoters. So by this point in time, 2005-ish, there are basically three types of Grand Prix races. You have the prestigious historic ones like Monaco and Monza and Silverstone. They're not going anywhere.

• 1:48:20Ben Gilbert?

  The European heritage tracks, if you will.

• 1:48:22David Rosenthal?

  Exactly. They don't pay nearly as much in race fees to F1, but they're sort of there to build and maintain the brand.

• 1:48:31Ben Gilbert?

  Yep.

• 1:48:31David Rosenthal?

  Then you have a new set of races, like Bahrain and China, that had just come on.

• 1:48:37Ben Gilbert?

  The flyaway races.

• 1:48:38David Rosenthal?

  They are paying huge fees to F1 in order to have their races on the calendar.

• 1:48:46Ben Gilbert?

  We're talking 2 to 3X.

• 1:48:48David Rosenthal?

  Yes, 30, 40, 50 million a year-ish.

• 1:48:52Ben Gilbert?

  And today, even into the 60 millions.

• 1:48:55David Rosenthal?

  Yes. The problem slash opportunity at this point in time is you had a whole bunch of races in the middle. Canada, Australia, Spain, Belgium, the second race in Germany that wasn't the Nürburgring, the second race in Italy that wasn't Monza, et cetera, et cetera, et cetera. Those other races actually made up most of the calendar, but they neither brought in a lot of revenue nor were they any sort of strategic value. Like, nobody got excited.

• 1:49:23Ben Gilbert?

  Right. They weren't an expansion opportunity for the sport. They weren't a way to find new audience.

• 1:49:28David Rosenthal?

  Yep. So Bernie goes out and he courts Abu Dhabi, Singapore and India to come in and displace some of those middle races and be new Grand Prix's. And just like Bahrain and China, these are big money deals. So India is 40 million a year just in race fees to F1. Abu Dhabi is the biggest. They commit to a billion-dollar total F1 investment over the coming years, including constructing a whole new track from scratch in the desert outside the city. So Bernie's on a roll with these new races.

• 1:50:07David Rosenthal?

  So then, in the early 2010s, Bernie lands the big one, Russia. He'd been trying to get a Russian Grand Prix for a long time. Russia had just won the 2014 Winter Olympic bid for Sochi. Yep. And put $50 billion into the ground and infrastructure at Sochi for the Olympics. Bernie and F1 goes and convinces them that the best way to sort of amortize the cost of this investment in Sochi is to put a race there after the Olympics.

• 1:50:43Ben Gilbert?

  Probably not wrong.

• 1:50:44David Rosenthal?

  Totally not wrong. So they sign a deal with Russia. And of course, it's a deal with the state. You know, anytime you're negotiating with Russia, you're negotiating with the state.

• 1:50:53Ben Gilbert?

  Increasingly, a lot of these flyaway races are.

• 1:50:55David Rosenthal?

  Yes, it's not unique to Russia here.

• 1:50:57Ben Gilbert?

  It's not a local entrepreneur race promoter with a racetrack. These are sovereign deals.

• 1:51:01David Rosenthal?

  Yes. To construct a new $270 million F1 track around the Olympic Park and pay F1 $50 million a year for seven years to host the race. There's an amazing Bernie and Putin story. As they're in final negotiations for the deal, the Russian contingent asks Bernie to fly over to Sochi and sit down with Putin to finalize the deal. To which Bernie responds, do I look stupid? If they think I'm gonna go negotiate this contract with Putin, no way.

• 1:51:41David Rosenthal?

  If they want me to go, they can send back the contract first, signed, which they do. And then Bernie goes to Sochi and sits down with Putin and do a press conference and announce the whole thing.

• 1:51:53Ben Gilbert?

  Wow.

• 1:51:55David Rosenthal?

  I guess that's how you negotiate with Putin, is you you don't negotiate with Putin. So ultimately, the Russian Grand Prix would get canned early in 2022 after Russia invaded Ukraine.

• 1:52:05Ben Gilbert?

  I was gonna say, it's not on the calendar I saw.

• 1:52:07David Rosenthal?

  No, no. Bernie would get asked on a British morning TV show after the Ukraine invasion, what he thinks about all this, and he famously says that Putin is a, quote, "first-class person", and that he, Bernie, would take a bullet for him.

• 1:52:20Ben Gilbert?

  Wow. Okay.

• 1:52:22David Rosenthal?

  Yeah, okay.

• 1:52:24Ben Gilbert?

  I did hear from some folks that I talked to, and I'd always ask the question, what's it like working with Bernie? Overwhelmingly, people said delightful.

• 1:52:32David Rosenthal?

  I could believe that.

• 1:52:33Ben Gilbert?

  That like, when all the dust settled, like, the terms, you kind of look at the terms and go, oh, whoa, there's actually not much here for me.

• 1:52:40David Rosenthal?

  Yeah.

• 1:52:41Ben Gilbert?

  But just delightful to work with.

• 1:52:44David Rosenthal?

  He's a very loyal partner.

• 1:52:46Ben Gilbert?

  Yeah.

• 1:52:46David Rosenthal?

  So, anyway, that's the racetrack side of things under the reinvigorated Bernie and CVC. The other big piece, of course, is the team relations side of things. We previewed this earlier, but at this point, the whole shtick of, hey, I'm getting rich, but you're getting rich too, has way worn out its welcome. There's also the fact, too, that now it's not just Bernie getting rich, it's the private equity firm that's also getting rich on the backs of the teams and all the investments that they're making into the cars and R&D. And by this era, in the kind of mid, late 2000s, it's truly gotten out of control.

• 1:53:29David Rosenthal?

  The top teams are spending like 400 to 500 million dollars a year on their cars.

• 1:53:35Ben Gilbert?

  And the race calendar is insane because, you know, it started in the 50s, 60s of, hey, we'll go wherever we can get enough teams to race. And then it turned into, well, we'll go wherever anybody will write a 40 million dollar or larger check.

• 1:53:49David Rosenthal?

  Let's put this circus on a plane to Russia. And China.

• 1:53:52Ben Gilbert?

  And now the like, by this point in history, we're talking about here, the mid, late 2000s, the broadcast calendar makes no sense. You've only optimized for who will pay us the biggest race promotion fees.

• 1:54:04David Rosenthal?

  These races are being run at all hours of the day and night.

• 1:54:08Ben Gilbert?

  Yes.

• 1:54:08David Rosenthal?

  So team relations are pretty bad. And then 2008 hits. The biggest teams with the biggest budgets, yes, they're spending themselves way into the red, but at least they were sort of backstopped by actual consumer car manufacturers that own them and were investing into them for all sorts of, you know, strategic or R and D or brand marketing purposes. So, you know, you had Honda in the sport, Toyota, BMW, obviously Ferrari.

• 1:54:38Ben Gilbert?

  Renault.

• 1:54:38David Rosenthal?

  Yep. As we hit 2008 and the financial crisis, the consumer car businesses for all of these guys except Ferrari just fall off the cliff. So all of a sudden it becomes no longer tenable either financially or just public perception wise for Honda or BMW, et cetera, to keep operating these money sinkhole F1 teams.

• 1:55:03Ben Gilbert?

  Yep.

• 1:55:03David Rosenthal?

  So as they get into 2008, Bernie, CVC, and the FIA all team up and they float a solution, a lifeline to the teams. We are going to help you guys institute a cost cap on manufacturing.

• 1:55:19David Rosenthal?

  And we'll help you design it. Let's get it approved by all the teams. This will save you. Basically, what they're proposing is the F1 equivalent of a salary cap in other sports like the NFL or the NBA, except instead of on the players, the salary cap is going to be on the investments into the cars.

• 1:55:37Ben Gilbert?

  Yes. And there are some teams that are a fan of this, and there are other teams who hate this more than anything they could possibly imagine.

• 1:55:47David Rosenthal?

  Yes, specifically Ferrari and McLaren.

• 1:55:49Ben Gilbert?

  Ferrari would like nothing more than to lose half a billion dollars a year making their F1 cars as long as they get to win. They do not care. It pays back infinitely in brand marketing if they are just a winning F1 team for their particular line of business.

• 1:56:06David Rosenthal?

  You know what car manufacturer is basically unaffected by a global financial recession? Ferrari.

• 1:56:12Ben Gilbert?

  Yes.

• 1:56:14David Rosenthal?

  Their customers are staying on the waitlist, no matter what the financial climate is out there. So Ferrari and McLaren has a lot of the same dynamics. They threaten to pull out of the sport. And ultimately, they bully all the other teams into joining them in opposition of the cost cap. There's also all of this pent up bad will against Bernie, all these deals that have happened, CBC, the FIA, et cetera. In 2009, eight of the 10 teams threatened to pull out of the sport and start a rival

• 1:56:53David Rosenthal?

  breakaway league called FOTA, the Formula One Teams Association.

• 1:57:00Ben Gilbert?

  Yeah.

• 1:57:01David Rosenthal?

  And they announced that they're doing it and they're creating their own series starting in 2010.

• 1:57:06Ben Gilbert?

  Yeah, so the Formula One Teams Association, or FOTA, was really two things in one. One, it's can we band together as a team to negotiate as one to get leverage in whatever we're negotiating over? And in this instance, it's we don't want a cost cap. The other thing is it is a legitimate breakaway series.

• 1:57:25David Rosenthal?

  Yep.

• 1:57:25Ben Gilbert?

  Which would be a really hard thing to start. I mean, to go figure out how to sign all these new deals with the best tracks in the world and media rights deals. There's a lot of value in what. Bernie and the series are actually doing.

• 1:57:40David Rosenthal?

  Yep.

• 1:57:41Ben Gilbert?

  So it works. The cost caps didn't happen. They did impose a 10-year freeze on engine development. And so in the short term, this is kind of how these negotiations go. The teams got what they wanted without actually having to leave by having a credible threat to leave.

• 1:58:00David Rosenthal?

  Yep. And specifically, what they got was Max Mosley's resignation from the FIA, or at least agreement not to stand for reelection.

• 1:58:09Ben Gilbert?

  It's hard for them to actually link arms for too long because, kind of two reasons. One, Bernie and Max could offer different things to different teams to get them to individually cave. So like, they can go to the Brawn team, and we'll talk about the Brawn team in a minute, but there was this shoestring budget team, scrappy upstart. Bernie had been withholding their payments from the previous year when they had raced as Honda, because Bernie's opinion was, well, you're not the same team, so you don't deserve your payout. And so

• 1:58:39David Rosenthal?

  Oh, save it, save it.

• 1:58:40Ben Gilbert?

  Brawn really needs the cash. So it's very easy to go and get them to capitulate when you owe them a few million bucks. And you're going to wire the money immediately as long as they break ranks with the other team. That's a great way to bust a strike. But the biggest thing is, is just this kind of misaligned incentives where all these constructors actually have very different reasons for racing and different incentives. And so it's hard for them to be unified on anything, given the wildly different incentive set.

• 1:59:09David Rosenthal?

  Yep.

• 1:59:10Ben Gilbert?

  So, I don't know if you knew this, David, I talked to Zach Brown, the CEO of McLaren Racing, to prep for this episode. And I specifically asked him why teams don't form a breakaway series now. And we'll talk about the economics of what the business looks like today. I needed a great answer. So he said, prior to Liberty's acquisition of F1, there had been many discussions and even attempts at a breakaway series. Of course, the teams would unite around the sport themselves, but it always fell down when the teams had to discuss how to share the pie. And, you know, it's one of these things where Ferrari is going to say, we're entitled to this, and our heritage for the sport, and McLaren and Mercedes, they're going to say, oh, we're really good, so we deserve more. So, yeah, they just never would agree on how to divide up the pie.

• 1:59:52David Rosenthal?

  Yep. The net of this is that team and league relations in F1 are at a all-time low.

• 1:59:59Ben Gilbert?

  Yes.

• 1:59:59David Rosenthal?

  Here at the end of the 2000s.

• 2:00:01Ben Gilbert?

  Yeah, and we didn't even talk about, if you're a fan of F1 during this time period, you know about Spygate and Crashgate. Both of these, McLaren magically wound up with a giant binder full of the complete specification of Ferrari's car for that year. And there was this all-giant hullabaloo and court hearings and everything about these stolen documents and did they use them to win? At the same time, you have Crashgate.

• 2:00:32David Rosenthal?

  Yeah, this is bad.

• 2:00:33Ben Gilbert?

  Where it ended up looking pretty conclusive that a team intentionally had one of their drivers crash in order to get a safety car to come out, which would advantage their other driver to do better in that race, putting one of their driver's life at risk.

• 2:00:52David Rosenthal?

  Not just one of their drivers, like other drivers too.

• 2:00:55Ben Gilbert?

  Yes.

• 2:00:55David Rosenthal?

  Could be involved in the crash.

• 2:00:56Ben Gilbert?

  And they're covering it up and they're...

• 2:00:58David Rosenthal?

  These are major sports integrity issues.

• 2:01:01Ben Gilbert?

  Yes, public trust is at an all-time low.

• 2:01:03David Rosenthal?

  Yeah, yeah, yeah, yeah.

• 2:01:06David Rosenthal?

  So ironically, miraculously, and certainly despite all of Bernie's best efforts to the contrary, pretty much this whole situation gets fixed by two new teams that enter Formula One who nobody saw coming. One of which was a auto manufacturer and a dark horse re-entrent into the sport.

• 2:01:38Ben Gilbert?

  Yep.

• 2:01:38David Rosenthal?

  The other was a, well, I was gonna say energy drink manufacturer, but I don't think we can say manufacturer because they don't actually make the drink.

• 2:01:49Ben Gilbert?

  An energy drink company.

• 2:01:50David Rosenthal?

  An energy drink marketing company named Red Bull. But before we tell their stories...

• 2:01:59David Rosenthal?

  All right, listeners, now is a great time to talk about one of our favorite companies, Statsig.

• 2:02:05Ben Gilbert?

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• 2:02:16David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 2:02:36Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 2:02:49David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 2:03:00Ben Gilbert?

  All right, so David, you mentioned an energy drink company.

• 2:03:04David Rosenthal?

  Yes, so let's start with Red Bull.

• 2:03:08David Rosenthal?

  The Red Bull company story itself absolutely deserves its own acquired episode someday because it is truly insane. So briefly, Dietrich Mataschitz was an Austrian toothpaste salesman for Unilever and P&G who goes on a business trip to Thailand in 1984, decides to radically change his life, and brings back a local Thai energy tonic to start bottling and selling. Or again, I can't even really say that because he outsources manufacturing, bottling, and selling it,

• 2:03:48David Rosenthal?

  and turns it all into a company that now does over $10 billion a year in annual sales. Like astonishing. The key pillar of what Red Bull, the company, actually does Is, of course, marketing. And one of the main pillars of its marketing strategy has always been extreme sports.

• 2:04:09Ben Gilbert?

  Red Bull, their entire business model is, yeah, we sell these drinks, but really, you're buying the drinks to associate with a lifestyle. And we need to educate you about the lifestyle that you are associating yourself with.

• 2:04:24David Rosenthal?

  So in 1989, like, I mean, actually, five years, pretty quickly after Dietrich starts the company, Red Bull sponsors its first F1 driver. And then they steadily grow their investment in the sport until ultimately they become the title sponsor of the Sauber team in 1995.

• 2:04:44Ben Gilbert?

  Is that the team that's now Audi?

• 2:04:46David Rosenthal?

  Yes, yes.

• 2:04:47Ben Gilbert?

  Sauber Steak.

• 2:04:48David Rosenthal?

  Sauber Steak, yep, yep, yep, yep. This is where Red Bull starts.

• 2:04:51Ben Gilbert?

  Huh.

• 2:04:52David Rosenthal?

  The Red Bull entrance into F1 was so perfectly timed because this is right as the EU regulation is coming online, forcing tobacco finally out of the sport. And so the great irony is that it's actually like an energy drink company that replaces the cigarettes. There's a great quote that Josh and Jonathan have in The Formula. "Two decades after Marlboro execs looked at F1 drivers and saw the heirs to the American cowboy, Mattischitz recognized them for what they really were: over-caffeinated adrenaline junkies with scant regard for their personal safety." It was a match made in marketing heaven.

• 2:05:35Ben Gilbert?

  Perfect, perfect.

• 2:05:37David Rosenthal?

  So Red Bull totally breaks the mold of what an F1 sponsor should be doing. Previously, the sponsors were all leaning into like the prestige aspect of the sport, you know, the luxury, the aristocraticness of it, you know, all the Monaco stuff, the oil companies, the watch companies. None of these sponsors are rocking the boat. And importantly, just like F1 and Bernie itself, none of these sponsors, except maybe the cigarette companies, are interested in younger audiences. Bernie has a great quote about this when he's asked about the challenges F1 faces of its aging demographic.

• 2:06:20David Rosenthal?

  He says that younger audiences are not a priority because they, quote, "don't buy Rolexes."

• 2:06:26Ben Gilbert?

  Yet.

• 2:06:27David Rosenthal?

  Yet. Yet. That is the key thing, Bernie. Yet. Yet.

• 2:06:31Ben Gilbert?

  Yep.

• 2:06:32David Rosenthal?

  Anyway, Red Bull, though, of course, is the opposite of this. They are all about young people, the extreme lifestyle. They don't just sponsor F1. They sponsor all these extreme sports, like jumping out of planes in the stratosphere, you know?

• 2:06:47Ben Gilbert?

  Balloons.

• 2:06:48David Rosenthal?

  Yeah. They are, uh, unique among the F1 sponsor set. The problem, though, for Red Bull is that Sauber isn't very good. So there's another great quote from Matt Schitt's in The Formula. "If an insurance company sponsors a team and that team loses, people don't change their insurance company. But when the Red Bulls lose, people get a new drink."

• 2:07:13Ben Gilbert?

  Yeah.

• 2:07:14David Rosenthal?

  In 2004, Red Bull dumps Sauber and makes the radical decision that rather than sponsoring another team, they are going to directly get into the business. And Matt Schitt's and Red Bull buy the failing Jaguar Racing team, which was, at this point in time, owned by Ford, because Ford had acquired Jaguar, and with it came the F1 Racing team. Jaguar was going through all sorts of trouble, as was Ford during the financial crisis and the lead up to it. Things are so bad for the team that Ford is willing to sell the whole team to Red Bull for one British pound.

• 2:08:00Ben Gilbert?

  Really? I didn't realize that.

• 2:08:01David Rosenthal?

  Yep. The purchase price that Red Bull paid was one British pound to establish Red Bull Racing. Now, the problem is, they still gotta make the team good, but...

• 2:08:11Ben Gilbert?

  Can we talk about the, like, amazing full-circle moment of this year, now that Ford is...

• 2:08:16David Rosenthal?

  Yes. Yes.

• 2:08:17Ben Gilbert?

  Partnering with Red Bull on their power units?

• 2:08:19David Rosenthal?

  Yes. Yes. It's so full circle. It's amazing.

• 2:08:22Ben Gilbert?

  Also, Ford actually did make engines for F1 for a long time. So it's interesting that, like, their exit from the sport was, they were no longer an engine manufacturer. Then they had this weird team with Jaguar. They divested that, and then they're dormant in the sport for...

• 2:08:37David Rosenthal?

  20 years, yeah. Back to Red Bull taking over. Yes, they need to make the team good. Obviously, that's not gonna happen overnight, but they start, you know, putting steps in place. What they can do now that they actually own a team, instead of just being a title sponsor... Is they can act however they want within the paddock. So when Red Bull rolls up to the paddock the next year in 2005, which remember is the first year of CBC's ownership and the new Bernie regime. They bring, no joke, a mobile nightclub named the Energy Station as their team paddock facility to all the Grand Prix around the world.

• 2:09:21David Rosenthal?

  And they have a radical open door policy. So previously, the paddock was like the sacred place. Corporate sponsors and high rollers could spend for paddock club access. It was very limited. Red Bull rolls in and we're like, the door is open all the time. Anybody who is in the paddock can come in to our energy station. You could be from any other team. You could be any other sponsor. You could be a guest. Just come on in and party with us. So they have DJs at all hours. They have a team of girls, the Red Bull Formula Unas team of hostesses, who are there. They have a swimming pool on the roof.

• 2:10:06Ben Gilbert?

  Do you know what they did in Monaco?

• 2:10:08David Rosenthal?

  I read about this, but I can't remember.

• 2:10:09Ben Gilbert?

  There's not room for the Red Bull Energy Station because it's Monaco and there's not room for anything. And so they constructed a temporary building that they put on pontoons.

• 2:10:21David Rosenthal?

  Out in the harbor?

• 2:10:23Ben Gilbert?

  Out in the harbor.

• 2:10:24David Rosenthal?

  Amazing, amazing. Yeah, they're just like giant middle finger to the whole establishment.

• 2:10:30Ben Gilbert?

  Yes.

• 2:10:31David Rosenthal?

  There's alcohol everywhere, drinks are flowing. And of course, there is Red Bull. I mean, it's genius. It's absolutely genius. So all of this is masterminded by Dietrich. And the young team principal that he hires, takes a chance on to run the team. Christian Horner.

• 2:10:53David Rosenthal?

  Who, you know, if you watched Drive to Survive, you probably know all about Kristen Horner.

• 2:10:57Ben Gilbert?

  Yes.

• 2:10:58David Rosenthal?

  The other team owners and principals and Bernie hates this, like hate it. They hate it so much. They're trying to control everything. This is a serious sport. This is a serious enterprise. And here's Red Bull just partying.

• 2:11:12Ben Gilbert?

  And Red Bull got much better as a racing team, but the essence of the strategy is basically still the same. They generate zero profit despite being one of the best teams and the highest revenue teams, or near zero profit, very thin to create the biggest marketing spectacle that they can to sell energy drinks. It's just a super different business model than anyone else in the.

• 2:11:34David Rosenthal?

  It's almost like, like Amazon and streaming, you know, like Prime Video, which we'll talk about later. Like, the business model is not the streaming. It's the retailer. Anyway, obviously, all the other team owners hate it, but the drivers and the staffs love it. You know, these are all young people mostly who are driving the cars, working on the engineering as mechanics, et cetera. All of a sudden, there's like a 24/7 party following them around the world. Like, hell, yeah. So McLaren goes so far, they even forbid all members of their team from entering the energy station. Like, it's like a fireable offense if you're caught.

• 2:12:19Ben Gilbert?

  No fun. And honestly, like, you're gonna go have drinks, you're probably gonna share team secrets. It's probably a good policy.

• 2:12:24David Rosenthal?

  Exactly, exactly. So one night, back to Kristen Horner and the strategy of like, how do we actually start building a winning team here? He clandestinely invites McLaren's legendary technical director over to the energy station for a chat, late at night,

• 2:12:47David Rosenthal?

  against rules. And that technical director just happened to be a man named Adrian Newey, the single most legendary F1 car designer, probably in history.

• 2:13:02Ben Gilbert?

  The way people talk about Adrian Newey is basically the same way that they talk about Kelly Johnson from Skunk Works, from our Lockheed Martin episode. And I've heard the comment from more than one person, "It's like he can see air."

• 2:13:15David Rosenthal?

  Yes. He is a savant of aerodynamic design.

• 2:13:19Ben Gilbert?

  And Adrian's book is great, talking about sort of his career in F1 and what he's learned. He still draws by hand.

• 2:13:27David Rosenthal?

  Yeah, yeah, in the age of CAD and AI and everything.

• 2:13:31Ben Gilbert?

  He just sort of like envisions physical forms of cars, how air will flow around them, and then draws with a pencil.

• 2:13:40David Rosenthal?

  Yep. So Horner and Dietrich lure Newey into joining Red Bull. And this is how they build a winning team. It takes a couple of years to ramp, but starting in 2010, so what's that? Five seasons after they enter the league? Red Bull starts a run of four consecutive drivers and constructors titles from 2010 to 2013. And importantly, for the product on the field, up until this point, the racing had gotten pretty boring because Ferrari had been on this huge run

• 2:14:25David Rosenthal?

  where Michael Schumacher was just dominating the sport and like blowing away all competition.

• 2:14:30Ben Gilbert?

  Well, I mean, there were some years where it really came down to the wire or didn't go Schumacher's way. But if you were an F1 fan in the 90s and early 2000s, it is totally fair to say there was Schumacher and then there was everyone else.

• 2:14:43David Rosenthal?

  Yep. And that had started to fade, as we'll get into in a minute.

• 2:14:47Ben Gilbert?

  And was this Sebastian Vettel in 2010 that kicked off the Red Bull run?

• 2:14:51David Rosenthal?

  Yep. This starts a new dynasty within F1 of an energy drink company.

• 2:14:58Ben Gilbert?

  I know. And it's so fun watching. I mean, they are truly a central figure of the drive to survive narrative, starting with Sebastian all the way through, you know, Max is arguably the best driver in the sport today. And so it's so fascinating that he's on an energy drink team.

• 2:15:17David Rosenthal?

  Right.

• 2:15:17Ben Gilbert?

  The most insane thing about Red Bull, I think, is I used to think they were like a sponsor, like, oh, this energy drink company uses F1 for marketing, but they have developed so much competency in actually being a constructor that-

• 2:15:34David Rosenthal?

  They're building a car, right? Like a, like a road car.

• 2:15:37Ben Gilbert?

  Yeah, they're like a real car company now.

• 2:15:39David Rosenthal?

  Yeah.

• 2:15:40Ben Gilbert?

  Not technically road, but track. So they're building a supercar, limited production and all that, but like a car that you can go buy and race on a racetrack. I think it's the RB17. It's the last thing Adrian Newey did when he was there, is design this car. And I mean, you look around, like, what does a car company do? It makes the body, it makes the power units. Red Bull has Red Bull powertrains, which is a lot of former Honda people that they've sort of hired, and now they're working with Ford. But like, they do a lot of the things that a car company does.

• 2:16:13David Rosenthal?

  Yep. It's an incredible story. And as you start to think about dragging this sport kicking and screaming into the 21st century and positioning for the social media era, you could imagine that this is a really good thing. So meanwhile, during this era, as we alluded to earlier, there is another hugely successful team that builds its own dynasty-

• 2:16:41Ben Gilbert?

  That comes out of nowhere.

• 2:16:42David Rosenthal?

  Also gets purchased for one British pound.

• 2:16:49David Rosenthal?

  And listeners, I suspect unless you are a hardcore F1 fan, you probably will not be able to guess what team this is. But see if you can figure it out as we go along.

• 2:17:03Ben Gilbert?

  But who is it in 2006, David? What is, what does the team start as?

• 2:17:09David Rosenthal?

  So we talked a second ago about Michael Schumacher's dominance of the league in the late 90s and early 2000s at Ferrari.

• 2:17:17Ben Gilbert?

  Side note, did you know he is one of the first athletes to pass a billion dollars in career earnings? It was apparently right around the same time as Tiger Woods.

• 2:17:26David Rosenthal?

  No way. I didn't know that.

• 2:17:27Ben Gilbert?

  Yes.

• 2:17:28David Rosenthal?

  How?

• 2:17:29Ben Gilbert?

  Michael Schumacher was getting paid $60 million a year-

• 2:17:32David Rosenthal?

  Wow.

• 2:17:33Ben Gilbert?

  -in that era. Like, that's what Max and Lewis make today.

• 2:17:36David Rosenthal?

  Today.

• 2:17:37Ben Gilbert?

  And with all the inflation that's happened with the growth of the sport, I mean, this illustrates just how much Ferrari is perfectly willing to burn money-

• 2:17:47Ben Gilbert?

  To win, like they they will generate an infinite amount of losses in order to win in Formula One. You had the driver of his generation, sort of the the person who took the torch post Senna and is so obviously the best driver.

• 2:18:00David Rosenthal?

  And obviously, you know, most athletes that you would think of who have become billionaires didn't become billionaires because of their sport salaries.

• 2:18:09Ben Gilbert?

  Right.

• 2:18:10David Rosenthal?

  It was off the field.

• 2:18:10Ben Gilbert?

  And Schumacher had a lot of off the field stuff, too.

• 2:18:13David Rosenthal?

  Interesting, interesting. Huh. All right. Well, so one thing we didn't talk about in Schumacher's dominance at Ferrari was like, yes, it was him. He was the driver of his generation, but it was also the engineering team behind him. And specifically, the engineering team led by technical director at Ferrari at the time, Ross Brawn.

• 2:18:40Ben Gilbert?

  Okay, and the whole tires thing. We got to talk about that.

• 2:18:43David Rosenthal?

  Okay, well, well, we get into it. So, so what Brawn realized, maybe not first, but I think better than anybody, was the dynamic we talked about earlier, that after the FAA started clamping down so much on the rules, the way to win was to exploit loopholes. So Brawn figured out a whole bunch of stuff together with Schumacher.

• 2:19:06Ben Gilbert?

  And Schumacher's work ethic was unbelievable. I mean, there's another great documentary that people should watch, Schumacher on Netflix. But he was like a driver and an engineer, or like a driver and a mechanic. He's always in the garage. He's there at all hours. He's getting as many test laps in as he can. And this is an era where you could do that. He's spending, you know, if he's not on the track and he's not in the garage, then he's working out. And he's his work ethic is just like unbelievable.

• 2:19:33David Rosenthal?

  Yeah, he's an animal. He's like, he's the Max Verstappen of his era.

• 2:19:38Ben Gilbert?

  But he's got a wrench in his hand. And he's like

• 2:19:40David Rosenthal?

  Yes, he's also an engineer.

• 2:19:41Ben Gilbert?

  The ultimate collaborator for the engineers.

• 2:19:42David Rosenthal?

  Yes. So they Figure out that there's a loophole with the way tires work in F1.

• 2:19:50Ben Gilbert?

  So for a brief period of time, you could pick between one of two tire manufacturers.

• 2:19:55David Rosenthal?

  Yes.

• 2:19:56Ben Gilbert?

  Bridgestone had a big issue, so almost everyone said, oh, we're going to move away from Bridgestone to Michelin. And Ferrari and Ross Brawn in particular realized, well, wait a minute. If we're the only ones that stick with Bridgestone, like, yeah, it's counterintuitive to do that because like these tires apparently have a big problem. But like, if we send a bunch of engineers over there, they send a bunch of engineers over here. We can effectively have custom made tires.

• 2:20:21David Rosenthal?

  Yes.

• 2:20:21Ben Gilbert?

  Just for our car and just for Michael's driving style. And so they spent a year working together, basically getting to develop their own custom tires. Whereas everyone else who were on the Michelin's had to use this sort of like common denominator tire that worked with all the cars and all the driving styles.

• 2:20:38David Rosenthal?

  Yep. It's important. We should note here for folks who are not deep F1 fans.

• 2:20:44David Rosenthal?

  Though one, I think maybe the only part of F1 cars.

• 2:20:48Ben Gilbert?

  That are common.

• 2:20:49David Rosenthal?

  Common mandated across the whole league.

• 2:20:52Ben Gilbert?

  Tires in the halo.

• 2:20:53David Rosenthal?

  Tires in the halo. Yep. Yep. Whereas if you look at like NASCAR or like other motorsports out there, a lot of stuff is mandated to be common. And like the degrees of freedom of parts of the car that you can actually engineer is like much, much, much narrower. It's part of what makes F1 unique is and so expensive is that every car truly is custom engineered, except for the halo and the tires.

• 2:21:15Ben Gilbert?

  Yeah. Teams are designing their own bolts.

• 2:21:17David Rosenthal?

  Yes. Yes. So here, Brawn and Schumacher and Ferrari are like, oh, wow, we just found a way to custom engineer our own tires. Like, hell, yeah. So that was a big part of Schumacher and Ferrari's dynasty. So the FIA eventually closes the tire loophole. Brawn leaves Ferrari and becomes the team principal of Honda, which he joins in 2007 ahead of the 2008 season. Now, remember we said a minute ago that in 2008 with the financial crisis, Honda exits the sport.

• 2:21:56Ben Gilbert?

  Yep.

• 2:21:56David Rosenthal?

  So Brawn is one year into the job and they come to him and they're like. Ah, sorry. We're gonna shut the team down. We gotta get out of the sport. Like, this is untenable in this environment. We can't be operating an F1 team. Braun is scrambling. He just went from like, top of the world at Ferrari, to getting to be team principal at Honda, and now he's out of a job with, as good as he is, no real prospects for another one, because this is bad times for the sport.

• 2:22:26Ben Gilbert?

  And there are very limited chairs in this world.

• 2:22:29David Rosenthal?

  Yes, yes. So, he's scrambling, and he's like, wait, wait, wait a minute, Honda. You're worried about looking bad to the public and shareholders by continuing to operate an F1 team in this climate. You know what's gonna make you look even worse? If you lay off the like, 1,000 people that are part of this team. So how about, instead...

• 2:22:56Ben Gilbert?

  You just give me some time. You don't, I understand you might need to lay everyone off. Look, that's business reality. Give me a few months, and I will find a buyer for the team. I just need you to keep everyone employed so that there's something to sell.

• 2:23:12David Rosenthal?

  Yes, yes.

• 2:23:13Ben Gilbert?

  Looks around, can't find anything, as you would expect.

• 2:23:17David Rosenthal?

  It's 2008, the world's falling apart.

• 2:23:18Ben Gilbert?

  Back to Honda and says, look, I know we have very limited time left. We're not gonna find another buyer. What about a management buyout?

• 2:23:25David Rosenthal?

  Yeah, I'll take it off your hands.

• 2:23:27Ben Gilbert?

  And when I say buyout, I'm also not really gonna give you any money.

• 2:23:32David Rosenthal?

  Yeah.

• 2:23:33Ben Gilbert?

  But what if, what if, there's some period of time where you agree to keep funding people's salaries? I'll give you one British pound.

• 2:23:43David Rosenthal?

  Yep.

• 2:23:44Ben Gilbert?

  You give me the team, and then at some point, you're fully out, but we have some sort of consulting agreement in the meantime. Some contract in place.

• 2:23:51David Rosenthal?

  Some, you know, runway down to, you know, do a soft landing here for the team and these people.

• 2:23:57Ben Gilbert?

  But you get to tell your board and the shareholders that like, you are no longer wasting money on this extraneous thing.

• 2:24:02David Rosenthal?

  And you're not gonna lay off, you know, 1,000 people in England.

• 2:24:05Ben Gilbert?

  Yep.

• 2:24:05David Rosenthal?

  Yep. So apparently, I don't know if you read this... Bernie, of course, gets wind of what's going on.

• 2:24:12Ben Gilbert?

  Oh, Bernie does not like Ross Brawn.

• 2:24:14David Rosenthal?

  He does. No, no, no, no. He doesn't like Brawn anyway. He definitely doesn't like somebody else buying a team for one pound. He tries to swoop in and convince the Honda board that they should sell it to him instead.

• 2:24:25Ben Gilbert?

  Oh, I didn't realize that.

• 2:24:26David Rosenthal?

  Yes, yes, yes. Never mind that he's like head of F1.

• 2:24:31Ben Gilbert?

  Yeah, well, he just-

• 2:24:32David Rosenthal?

  He's still willing to buy the team.

• 2:24:33Ben Gilbert?

  He just generally doesn't like the idea that there's a transaction that doesn't go through him.

• 2:24:37David Rosenthal?

  Yes, or that there's a good deal to be had and he's not getting in on it. Great drama. If only this drama could be televised.

• 2:24:45Ben Gilbert?

  In fact, there is a great Keanu Reeves documentary-

• 2:24:48David Rosenthal?

  Yes, yes, it's so good. Called Brawn.

• 2:24:50Ben Gilbert?

  Called Brawn on this team. It's awesome.

• 2:24:52David Rosenthal?

  Anyway, back to the story at hand. Amazingly, Honda doesn't go with Bernie. The board decides, you know what, we're gonna stick with who brung us. We'll sell the team to you, Ross, for one pound. But when we say we're out, we'll fund you for the year, but we're really out. We're not gonna give you an engine anymore.

• 2:25:13Ben Gilbert?

  Right, right. That's, so Ross is like, but surely I can just like enter into a commercial agreement and pay you like $15 million or, you know, whatever it is to be the engine supplier and you'll give me an engine. Like, you've already made the engines in the years past. They're gonna be the same or similar.

• 2:25:29David Rosenthal?

  This used to be your team.

• 2:25:30Ben Gilbert?

  Right.

• 2:25:31David Rosenthal?

  Nope, they're like, this is where we draw the line. We can't be putting any more money besides the salaries these people into F1.

• 2:25:39Ben Gilbert?

  So, quick pause. It is worth noting, not every team makes their own engines. There's only, at any given time, a handful of engine suppliers. And so, like Mercedes today makes the engine for the Mercedes car, but McLaren also goes and buys the engine from Mercedes. So this is like a reasonably common-

• 2:25:58David Rosenthal?

  Yeah, Ferrari will supply engines to other teams, right?

• 2:26:01Ben Gilbert?

  Cadillac is racing in a Ferrari engine.

• 2:26:03David Rosenthal?

  Yep, yep, yep, exactly. So Ross is desperate. He goes and chats with Mercedes, who, as you said, Ben, had been out of the sport since, I think, 1955 or whatever we said earlier.

• 2:26:16Ben Gilbert?

  Yeah, they, at this point in time, do not have a team. And since that horrific crash, all those decades before, not in F1.

• 2:26:23David Rosenthal?

  Not in F1, but they had been supplying engines to McLaren. So Mercedes says, okay, Ross Brawn.

• 2:26:32David Rosenthal?

  We have our McLaren relationship that's very important to us. But we respect you and your body of work at Ferrari and we respect what you're trying to do here. We will supply you an engine for 2009. You know, we're still loyal to McLaren, but like, we will give you an engine so that you can compete with your team this season and not shut it down.

• 2:26:52Ben Gilbert?

  And it like, it sort of doesn't fit in the chassis that Honda had developed. They had to like, do some real aftermarket janky stuff. So everyone thinks this car is gonna absolutely suck.

• 2:27:02David Rosenthal?

  Suck, yes.

• 2:27:04Ben Gilbert?

  Oh, by the way, the team is called Braun GP. It's not even like a real company. They, the team just looked at Ross Braun and they were like, you're a leader, so how about calling it Braun? Like, the whole thing-

• 2:27:15David Rosenthal?

  Yeah, they couldn't even line up a title sponsor.

• 2:27:16Ben Gilbert?

  And they're even landing sponsors for like, individual races. Cause they can't actually land full season-

• 2:27:21David Rosenthal?

  It's the financial crisis. Nobody wants to, yeah, exactly.

• 2:27:24Ben Gilbert?

  The whole thing was-

• 2:27:25David Rosenthal?

  Nobody expects anything performance-wise-

• 2:27:27Ben Gilbert?

  Yes.

• 2:27:28David Rosenthal?

  -out of this team.

• 2:27:29Ben Gilbert?

  Yes.

• 2:27:30David Rosenthal?

  Well, it turns out that before the Honda engineers got pulled away back to Japan,

• 2:27:39David Rosenthal?

  they had come up with a new aerodynamic innovation called the double diffuser.

• 2:27:47Ben Gilbert?

  Oh, yes.

• 2:27:48David Rosenthal?

  I have no idea how this thing works. I just know that it performs like a beast.

• 2:27:52Ben Gilbert?

  And most things you read about it really don't explain how it works either. In general, what diffusers do is they direct the airflow that is coming out from the bottom of the car up and sort of out of the way to ideally shape the aerodynamics as the air escapes the back of the car.

• 2:28:12David Rosenthal?

  Somehow they came up with a double version of it.

• 2:28:14Ben Gilbert?

  But everyone is challenging it at the beginning of the season, going, wait, wait, wait, this isn't legal. It performs so well that by mid-season, everyone else has adopted a double diffuser.

• 2:28:26David Rosenthal?

  Yeah, I mean, you're burying the lead, which is first race of the season in Australia in Melbourne. These two Brawn GP Franken cars roll out and they win first and second place. Like, they blow away the field. Uh, Jenson Button, who was the, the first driver on the team, he wins six of the first seven races of the season. Uh, it's like sending the sport into chaos.

• 2:28:52Ben Gilbert?

  Yes. And I, I wish I had known this, David. We had just started our research on F1.

• 2:28:58David Rosenthal?

  And we met Jenson.

• 2:28:59Ben Gilbert?

  We met Jenson. We went to, uh, the Las Vegas Grand Prix with Service Now. And part of the whole weekend of festivities they had planned for us was a luncheon with Jenson Button. And he was telling the stories of the Brawn GP. I did not appreciate, this is the outlier of outliers. No, no team has been on this shoestring of a budget with this type of Franken car. Uh, and this real underdogness and performed in such spectacular success the way they did.

• 2:29:25David Rosenthal?

  Yeah, usually it's like, either you're Ferrari and you invest hundreds and hundreds of millions of dollars, or you're Red Bull, you hire away Adrian Newey, and even then it takes several years to develop a winning car. This just doesn't happen in F1.

• 2:29:39Ben Gilbert?

  No. And so, David, how does the season end?

• 2:29:42David Rosenthal?

  So by like a hair's width, Jenson and Brawn had accumulated enough of a lead in the first half of the season, that even though they don't win a single race in the second half of the season, after everybody else also figures out the double diffusers, they still end up winning both the constructors and the drivers championships.

• 2:30:07David Rosenthal?

  So in one year, this team and Ross Brawn went from like new Honda team principal to nearly out of the sport, to owner of his own team for one pound, to world champion.

• 2:30:20Ben Gilbert?

  This is what makes F1 great. Uh, it's, it's really not watching the races. The, the races are fine. There's not that much passing. Once you get through the first turn, you know, you kind of know who's most likely to win, and it's probably from one of the top four teams anyway. It's not any given Sunday, the way that, that NFL game is.

• 2:30:40David Rosenthal?

  No, no, no.

• 2:30:41Ben Gilbert?

  But this act of heroics and teamwork and personality and perseverance.

• 2:30:48David Rosenthal?

  And engineering.

• 2:30:48Ben Gilbert?

  And engineering, like this is what makes F1 great.

• 2:30:52David Rosenthal?

  So. There's just one problem for the, you know, new world champions. They don't have funding for the next year. There's no way as cool as it would be to continue the Cinderella story. Brawn GP and its current financial state and ownership can't continue for the 2010 season.

• 2:31:14Ben Gilbert?

  Yep.

• 2:31:15David Rosenthal?

  There's just not enough money to invest in developing the next car, et cetera, et cetera. So Ross knows that he has to sell the team. And of course, who's the logical buyer now? Mercedes.

• 2:31:29Ben Gilbert?

  They don't currently have a motorsport team. They clearly are interested. They make your engine.

• 2:31:36David Rosenthal?

  Make the engine. They've just had all of this success with Brawn. Yeah, they have the strategic partnership with McLaren, but like, hey, what's McLaren compared to an opportunity to own their own team? So they announce in the offseason that they're dumping McLaren, Mercedes is, and buying a 75% majority share in Brawn for $200 million and renaming the team to Mercedes.

• 2:32:07Ben Gilbert?

  The storied Mercedes team that you know of today, where Lewis Hamilton won six drivers championships and the team won eight straight constructors championships, is the team that rises out of the ashes of Brawn GP.

• 2:32:25David Rosenthal?

  Incredible, just incredible. The first thing they do after they buy their team, they're so excited. They hire Michael Schumacher to come out of retirement. Lewis Hamilton is still a young kid at this point in time. They hire Schumacher out of retirement to come reunite with Brawn, the dream team, and, you know, drive this monster car. Yeah, it doesn't work out.

• 2:32:49Ben Gilbert?

  It's like Jordan on the Wizards.

• 2:32:50David Rosenthal?

  Yeah, this is the Jordan and the Wizards era.

• 2:32:53Ben Gilbert?

  Although, I mean, I was gonna say it's like Tom Brady, but Tom Brady won a Super Bowl with the Bucks, so.

• 2:32:57David Rosenthal?

  Yeah, yeah, no, Schumacher and Brawn and Mercedes do not win another Super Bowl. Everybody else had picked up the double diffuser and that, that really was the advantage that they had. It wasn't any more than that.

• 2:33:09Ben Gilbert?

  And I think Mercedes thought they were buying something that had somewhat of a durable advantage. You know, oh, maybe you've started thinking about next year. The team really hadn't. And so there's sort of this realization at Mercedes of, oh, crap, we bought a lemon.

• 2:33:26David Rosenthal?

  Yeah.

• 2:33:26Ben Gilbert?

  We need to put hundreds of millions of dollars into this on top of that stake that we already bought. And to Mercedes' credit, they did. I mean, they could have cut their losses and said, ah, this doesn't make sense for us. And instead, they built arguably the best Formula One team to ever exist across multiple decades.

• 2:33:48David Rosenthal?

  Well, they bring on a partner.

• 2:33:51Ben Gilbert?

  Yes.

• 2:33:54David Rosenthal?

  So after a couple of years of Schumacher and Brawn.

• 2:33:58Ben Gilbert?

  Brawn, by the way, who bought the team for a pound and then sold 75% of it for $200 million.

• 2:34:04David Rosenthal?

  Yeah, he's doing just fine. But after a couple of years, Mercedes decides this isn't working. They fire Brawn and Schumacher, which is crazy. Who fires Michael Schumacher?

• 2:34:15Ben Gilbert?

  Right.

• 2:34:16David Rosenthal?

  Mercedes, F1. This is what happens. And they make two key hires in each of their places. As team principal, they bring in Austrian businessman who previously had been an investor in the Williams F1 team named Toto Wolff. And again, if you watch Drive to Survive, you definitely know Toto.

• 2:34:39Ben Gilbert?

  Yep.

• 2:34:40David Rosenthal?

  Probably the best Formula One team executive in history, certainly by valuation increase.

• 2:34:45Ben Gilbert?

  Yes. Yeah, I've got some numbers for you later on why.

• 2:34:48David Rosenthal?

  Yes. Okay, so put a put a pin in that. Who could you possibly hire to replace Michael Schumacher as your number one driver on the Mercedes team? Well, obviously, you know the answer. A young British racing driver, Lewis Hamilton.

• 2:35:03Ben Gilbert?

  Yep.

• 2:35:04David Rosenthal?

  Yep. So Toto, Lewis, and then the other driver they bring on, Nico Rosberg.

• 2:35:10David Rosenthal?

  As you said, Ben, would go on to win eight constructors championships in a row.

• 2:35:14Ben Gilbert?

  And Nico won the driver's championship one of those years.

• 2:35:18David Rosenthal?

  He beat his teammate, Lewis, yeah.

• 2:35:19Ben Gilbert?

  So it's not even like, oh, well, they had Lewis Hamilton. So how good was the car really? It's like, no.

• 2:35:24David Rosenthal?

  No, no, it was the car.

• 2:35:25Ben Gilbert?

  The one year that Lewis didn't win, Nico won.

• 2:35:28David Rosenthal?

  Yep. Certainly the most dominant run in the history of the sport. And this ended Red Bull's own run. But what was so great for the sport during this period is it's not like the Schumacher era where the top team is just blowing away the field. You now have this great drama of the fight every season between Mercedes and.

• 2:35:52Ben Gilbert?

  Is it Vettel? Is it Hamilton? Is it the young up and coming Verstappen?

• 2:35:57David Rosenthal?

  Yes, yes. It's these epic dramas that are playing out on the track. And really, it's these two teams that create the modern era for the teams and for the sport. I mean, Christian Horner at Red Bull and certainly Toto at Mercedes. They are a totally new breed of team principals. These guys are CEOs and Zach Brown at McLaren is also, he actually is the CEO.

• 2:36:25Ben Gilbert?

  Right. He's literally not the team principal. He is just the CEO.

• 2:36:28David Rosenthal?

  He's just the CEO. They're playing roles that nobody at the team level had ever played before, except Enzo Ferrari and Bernie. And Bernie, of course, had greater aspirations.

• 2:36:41Ben Gilbert?

  They're building these businesses. They're not just building race cars and race teams.

• 2:36:46David Rosenthal?

  Yep. So just to quickly take the Mercedes example, Ross Brawn buys it in 2008, 2009 for one pound from Honda. Mercedes buys it a year later, or 75% of it, for 200 million pounds. Today, Mercedes is worth $6 billion under Toto. Not Mercedes, the car company. The Mercedes racing team alone just did a minority transaction valuing the team at $6 billion.

• 2:37:18Ben Gilbert?

  Yes.

• 2:37:19David Rosenthal?

  That is, what, twice as much as all the cash that Bernie pulled out of F1 in its entirety during his heyday? Just for one team?

• 2:37:30Ben Gilbert?

  Yep.

• 2:37:31David Rosenthal?

  And speaking of valuations and Bernie and cashing out.

• 2:37:37David Rosenthal?

  In 2016, as all this is taking place, F1 finally lands in the right set of hands to shepherd the sport going forward.

• 2:37:50Ben Gilbert?

  Yep.

• 2:37:51David Rosenthal?

  So, starting a few years after CVC and Bernie reacquired F1 the league, CVC starts reselling minority pieces of F1 to other asset managers out there, including BlackRock, the Norwegian Sovereign Wealth Fund, Norges Bank, at increasing valuations. They also load F1 up with a bunch of debt again and pull cash out. Actually, put $4 billion of debt on the league. I mean, this is what private equity does, but... And the cash flows are growing at F1, like, thanks to the new races and the increasing TV contracts, et cetera, et cetera.

• 2:38:35David Rosenthal?

  But by 2016, CVC is now down to a 35% ownership stake. They've pulled out a total of $4.5 billion of cash through a combination of the debt and equity sales. Remember, they and Bernie only put in $900 million to start. And they still own the largest single stake in 35% in the league. But it's time for a transition of power, shall we say, a full exit.

• 2:39:09Ben Gilbert?

  And we've checked in a few different times along the way. What is Formula One at this point? Because it was the weird Bernie entities and then it was the holding company in his wife's name. At this point, it is a company that is owned by CVC. But interestingly, a thing to know is that company doesn't actually own the sport. But what it does have, did you find this, David? The 2001 deal?

• 2:39:34David Rosenthal?

  Oh, is this the 100-year management rights?

• 2:39:36Ben Gilbert?

  The key asset that this company owns is, in 2001, Bernie had secured the 100-year commercial rights to Formula One from the FIA.

• 2:39:51David Rosenthal?

  In a no-bid process.

• 2:39:52Ben Gilbert?

  In a no-bid process for $360 million.

• 2:39:57Ben Gilbert?

  When you think, what is the asset really? The asset is the right to run the business of what FIA defines as Formula One.

• 2:40:09David Rosenthal?

  Yep. So basically, all the commercial activities, except team sponsorships, which are the providence of the teams, and race tickets, which are the providence of the promoters.

• 2:40:19Ben Gilbert?

  And there's some other little things that the teams make money on and that the promoters make money on, but basically, yes.

• 2:40:26David Rosenthal?

  So in September of 2016, it finally gets announced that the American media company, Liberty Media, is acquiring F1 for $4.4 billion of equity value and assuming all of the outstanding debt that the company has for a combined total enterprise value of $8 billion. Now, the way they do it is interesting. Liberty and John Malone and Greg Maffei, we've talked about Liberty many times over the years on Acquired, they are masters of deals and financial engineering.

• 2:41:00David Rosenthal?

  The way they do it, they initially acquire a like 18, 19% stake in F1 from CVC, so enough to make them the largest shareholder. And then, they actually changed the whole name of Liberty Media, the company, the publicly traded company, into the Formula One Group, create a new tracking stock to track the value of F1 Group.

• 2:41:30Ben Gilbert?

  F-W-O-N-K, or F-WONK, as the investment community refers to it.

• 2:41:34David Rosenthal?

  I know, it's so great. And then they issue F-WONK shares to the remaining equity holders, including CVC and Bernie, et cetera, such that 100% of the company is now liquid and publicly traded.

• 2:41:49Ben Gilbert?

  The completely fascinating thing about Liberty Media today is it sort of doesn't exist anymore. They bought F1, then they did enough other spinoffs through the Atlanta Braves spinoff, through Liberty Live, the Live Nation spinoff. At this point, like 90% of Liberty itself is Formula One, and the stock...

• 2:42:14Ben Gilbert?

  Is actually Formula One. It's like they spun out everything else that was left. And so the holding company is actually basically Formula One now.

• 2:42:22David Rosenthal?

  And so the plan that they announced is that former Fox and News Corp executive Chase Carey, who had been president and COO of News Corp, would become chairman of F1, but that Bernie would remain as CEO. Now, Chase Carey had been a total legend at Fox. I mean, I remember him when I worked at News Corp and at Dow Jones. Chase helped Rupert launch Fox Sports and built the whole Fox NFL program. Like, da-da-da-da-da, da-da-da-da-da. That was Chase. So he's the right man for the job.

• 2:43:04David Rosenthal?

  And he brings over a team of like all the NFL OGs, Fox and NFL OGs. So Sean Bratchis, who had been one of the key people who had built ESPN during its kind of parallel rise with SportsCenter and comes and joins the team. And the whole thesis is that Formula One is this incredible sport, incredible fan base, incredible asset. And we can see with what's going on at Red Bull and at Mercedes that like it's gonna crush in the modern era. It just needs the right management to like get out of the way and let this happen.

• 2:43:44Ben Gilbert?

  And that Bernie had sort of systematically under-invested, which created opportunity.

• 2:43:50David Rosenthal?

  Yes.

• 2:43:51Ben Gilbert?

  So there was almost no US market development. I mean, by this point, they had Circuit of the Americas in Austin, but no other US races yet. There was very limited sort of storytelling around the sport and digital investment. There was no social media presence. The property was mostly behind like a closed paywall with restricted ass access, especially in the US. And really, it was about old white guys with money as the demographic. So is this like, if you kind of like looked at it with a modern media company approach. You're like, oh, there's low hanging fruit everywhere here.

• 2:44:29David Rosenthal?

  Asset just waiting to be unlocked.

• 2:44:32Ben Gilbert?

  Yes.

• 2:44:33David Rosenthal?

  So, pretty quickly, when Chase and Liberty come in, it becomes clear that there's not enough room for two bosses in F1 of Chase being chairman and Bernie remaining as CEO. I mean, really, as long as Bernie's there, there's not room for anyone else to run anything. So on January 23rd, 2017, after they had announced the acquisition the previous fall, Liberty announces that Bernie is stepping down as CEO. He will become honorary chairman emeritus and an advisor to the board of directors of F1, but not actually on the board. So in other words, Liberty fires him.

• 2:45:16David Rosenthal?

  I mean, they had to. There's no way that they could do what they wanted to do and what needed to be done, as long as he was still there holding the reins.

• 2:45:26Ben Gilbert?

  This is a classic what got you here, won't get you there situation.

• 2:45:30David Rosenthal?

  Yep.

• 2:45:31Ben Gilbert?

  All that stuff that Bernie did, no doubt, built the sport and created the sport. And the way in which it needed to go from here, Bernie could do almost none of those things and was probably holding it back at this point.

• 2:45:44David Rosenthal?

  Yep, yep.

• 2:45:45Ben Gilbert?

  So I was doing the math on his run. What year did he sort of start becoming the steward of Formula One?

• 2:45:53David Rosenthal?

  1972.

• 2:45:55Ben Gilbert?

  And he left in 2017?

• 2:45:59David Rosenthal?

  A long run.

• 2:46:00Ben Gilbert?

  Forty-five year run. I can't think of a sport, a sporting league in the world, that was basically controlled by a person for almost half a century like that.

• 2:46:11David Rosenthal?

  The closest that I can think of is Pete Rozell. Thirty years at the helm of the NFL.

• 2:46:18Ben Gilbert?

  Yep.

• 2:46:19David Rosenthal?

  Yeah. So Chase takes over as CEO.

• 2:46:24David Rosenthal?

  And he and Liberty know they have their work cut out for them. So they come up with a four-point plan. Number one, most importantly, they need to fix the relationships with the teams. Thanks to Red Bull and Mercedes, teams had started to become more successful financially, more business-minded on their own. But the relationship with Formula One, the league, was still like highly contentious through all of this, arguably even more so as they were growing in power under Bernie. So the cost cap is the obvious thing to do.

• 2:47:01Ben Gilbert?

  It has to happen.

• 2:47:02David Rosenthal?

  And like we said, really, it was the indication of how broken things were before that Bernie and the FIA couldn't get it done, and it resulted in the photo breakaway attempt.

• 2:47:13Ben Gilbert?

  Because if you don't have a cost cap, you are just going to have teams that have some, either independent funding or some other business, that lets them go hundreds of millions of dollars into the red, which basically means everyone needs to, to compete with them, which means that other than those one, two, three, four teams, you're just going to keep churning your bottom six on the grid over and over and over again because they can't run a viable business.

• 2:47:39David Rosenthal?

  So number one priority is they gotta fix the teams, which they do in the first concord agreement that Liberty negotiates. They get everyone to agree to a cost cap of $145 million in expenses on the car, so not including driver salaries, that's separate. This is huge.

• 2:48:02Ben Gilbert?

  And not including the three most powerful executives, or the highest-paid executives, not including marketing spend, and power units are outside the cost cap, too. So it's a cost cap, for sure, and, you know, it gets some of the job done. But if you spit off a lot of cash, there's still plenty of ways to spend that cash to become more successful.

• 2:48:25David Rosenthal?

  Yes, that is definitely true. But I think it really does end up functioning kind of as intended, like a salary cap in other sports. The Cowboys can spend a lot more on marketing than the other teams.

• 2:48:38Ben Gilbert?

  But they haven't been to the Super Bowl in a while.

• 2:48:40David Rosenthal?

  Yeah, right, right, right. The amount that they can spend on their equivalent of the car on the field, in that case, the players, is same as everybody else.

• 2:48:47Ben Gilbert?

  And they also implement wind tunnel restrictions. You can only spend so much time in the wind tunnel. We already have the restrictions on testing in season. So there really are, at this point, heavy restrictions. It's gone from 145 million down to 135, but then it got adjusted now up to 170 with inflation and with adding more races because you get to add more to the cost cap for that. But they're now spending, every team, under 170 million. Then there were several teams that were spending 400 or 500 million before.

• 2:49:16David Rosenthal?

  This is huge. It instantly makes every team at least close to break even. It does make every team profitable, but it makes a lot of teams profitable. And for the top teams, this overnight makes them immensely profitable. So when we talked about Mercedes going from being worth one pound to $6 billion, this is why. The Mercedes team is a great business now, like an NFL level business.

• 2:49:45Ben Gilbert?

  Yes.

• 2:49:45David Rosenthal?

  And Ferrari, obviously, hasn't traded, but certainly is worth more than that. And every team, as we talked about at the top of the episode, is worth at least a billion and a half now.

• 2:49:56Ben Gilbert?

  Yeah, so the numbers on this now are the average revenue per team today in 2026 is about 430 million. About 60% of that comes from sponsorship, and the next highest comes from the distributions coming from Formula One Group. And we'll talk about how those distributions work later, but what's their share of meteorites and everything. Then they have 5% to 15% that come from selling merch, or engines, or licensing, or garage tours, or what have you. But 60% is sponsorship. And so if your average revenue per team is around 430 million, and the cost cap is only 170 million, plus your driver, plus your marketing. Spenses plus your, you can kind of see how these become pretty quickly.

• 2:50:41David Rosenthal?

  Pretty good businesses.

• 2:50:41Ben Gilbert?

  At least break even or close to break even businesses. Now, there are some outliers toward the front of the grid, like you were saying. Mercedes does 800 million in revenue now.

• 2:50:53David Rosenthal?

  Wow.

• 2:50:54Ben Gilbert?

  Ferrari, 670, McLaren, somewhere right in that neighborhood, too, around 650 to 700. 420 for Red Bull Racing. 15 years ago, all four of those teams were operating at a loss. And 10 years ago, most of them were operating at a loss.

• 2:51:10David Rosenthal?

  Yeah, it's interesting, back to your point earlier about Red Bull's strategy. They could be making

• 2:51:15Ben Gilbert?

  Yes.

• 2:51:16David Rosenthal?

  Much more, I think, and they intentionally choose not to.

• 2:51:18Ben Gilbert?

  That's exactly right. They try to keep their profit margin, their operating margin at like 1% or less.

• 2:51:24David Rosenthal?

  Yeah.

• 2:51:24Ben Gilbert?

  So McLaren now does 70-ish million in profit. Ferrari does about 80 million, but the real outlier, Mercedes does an estimated 200 million in operating income from Formula One now.

• 2:51:39David Rosenthal?

  Wow. I mean, that's like the level that Bernie was making for the whole league a couple decades ago.

• 2:51:44Ben Gilbert?

  Right, 25% operating income.

• 2:51:47David Rosenthal?

  Yeah.

• 2:51:48Ben Gilbert?

  And on top of being phenomenally profitable, Total Wolf estimated in 2021 that Mercedes, that he thinks Mercedes gets a billion dollars of advertising equivalent value for being involved in the sport.

• 2:52:00David Rosenthal?

  Yeah, easy.

• 2:52:00Ben Gilbert?

  So on 600 million dollars of total spend last year, Mercedes generated a double bottom line of over a billion dollars in marketing equivalent value plus 200 million dollars in actual profit.

• 2:52:12David Rosenthal?

  I mean, think back to 10, 20 years ago, Mercedes was just like luxury cruisers, you know, like, yeah, they had AMG. You could get more horsepower in your S-Class, but like, nobody thought these things were Ferraris.

• 2:52:25Ben Gilbert?

  Yeah.

• 2:52:26David Rosenthal?

  Now, they're a legitimate sports car maker.

• 2:52:29Ben Gilbert?

  Yep. We should say, Toto Wolff is just so unbelievably impressive. So they're an extreme outlier in doing 200 million a year in operating income. And this isn't like they're underinvesting. They're a competitive team at the front of the grid, so they're not holding back an R&D investment. That $6 billion number that you cited, David, is real because that is a transaction that happened where the CEO of CrowdStrike bought into Toto's holding company to get a sort of proxy ownership in the team. So why does Toto have a little holding company of his own?

• 2:53:08Ben Gilbert?

  Unlike all the other team principals, Toto is a major equity owner in the team. So when he joined the team in 2013, he negotiated to own almost a third of the team, which at the time, the whole team was worth about 165 million. And it's now 13 years later worth $6 billion. So he's now a billionaire from his team ownership, even though it's actually like the main owner is Mercedes. He just managed to become a major equity owner, and that is really unique among team principals.

• 2:53:43David Rosenthal?

  Yeah. So that's obviously priority number one for Liberty is we gotta fix the teams to fix the sport. Unless, obviously, priority number two was they had to fix the relationships with the race promoters, with the tracks. Talk about a stakeholder that Bernie had just been extracting from. The whole calendar, as we talked about a minute ago, was just designed to maximize race fee payments to F1. There was zero consideration or thought at the league level about how to make the races themselves successful.

• 2:54:26David Rosenthal?

  Like, how do you market each one and grow the pie? And, you know, avoid a situation where you have this huge middle of the pack of the races that nobody cares about? That's not good for the sport. I mean, when Liberty came in, there was so much mistrust with the race promoters that other than the just straight economic fee payments, none of the races shared anything with F1, the league. So, no data on fan attendance, no marketing strategies, nothing.

• 2:55:01Ben Gilbert?

  Well, think about just how squeezed you were getting. You walk up to F1 as a race promoter and say, "Hi, I'd like to have a race, please. I own a racetrack." And they say, "Okay, well..."

• 2:55:09David Rosenthal?

  Send back this contract and a $50 million payment.

• 2:55:12Ben Gilbert?

  Right. Pay us $20 million if you're, you know, one of the European tracks. Pay us $40, $50 million if you're one of these new US ones trying to come online. Pay us $50 to $60 million if you're a Middle East sovereign wealth fund. Oh, and your revenue stream's right. Well, the paddock club, that's all gonna belong to us.

• 2:55:30David Rosenthal?

  Yeah.

• 2:55:31Ben Gilbert?

  And the sponsorships on the racetrack, that's gonna belong to us, too.

• 2:55:37David Rosenthal?

  I guess you can sell tickets?

• 2:55:38Ben Gilbert?

  You can sell tickets? You should set up some hot dog stands. I think Food and Bev, that, that...

• 2:55:43David Rosenthal?

  Oh, yeah, but also Food and Bev for Paddock Club. We're doing that.

• 2:55:46Ben Gilbert?

  Oh, but no cameras, because, of course, we've already sold the media rights and that exclusively flows to us and you don't get to participate in that. So, you probably aren't gonna be profitable on this. And if you are, certainly not in the first few years, you might wanna get your local government to kick in. This is gonna be great for the city, which it is. So, my advice on getting profitable on this thing would be, go get some tax help.

• 2:56:12David Rosenthal?

  Find other people's money. Yeah, exactly, exactly. So, one of the first things they do is they get all the race promoters together, you know, in a room and say...

• 2:56:22Ben Gilbert?

  They're business partners. They should be.

• 2:56:24David Rosenthal?

  Yes, we're partners. We're partners.

• 2:56:26Ben Gilbert?

  They're not competing with each other.

• 2:56:27David Rosenthal?

  We gotta work together here. And let's share data, like, hey, there's a lot of hardcore fans that, like, travel race to race. Shouldn't we all be sharing data and, like, marketing to those people and getting them to come to more races in more cities? Just no brainer stuff. Ultimately, the vision here, which has mostly been realized, I think, is this is an opportunity for 22 Super Bowls every year.

• 2:56:52Ben Gilbert?

  Mm hmm.

• 2:56:52David Rosenthal?

  In cities and countries around the world. When F1 comes to your country, comes to your city, it is an entire weekend that should be treated just like the Super Bowl. So like, let us help you make that happen. Let us help you get musical acts.

• 2:57:08Ben Gilbert?

  Oh.

• 2:57:08David Rosenthal?

  Let us help you coordinate the celebrity attendees. Let us help you coordinate social media.

• 2:57:14Ben Gilbert?

  Austin has been really smart about this, the Circuit of the Americas. They've landed Taylor Swift, Ed Sheeran, Sting, Eminem, Garth Brooks. They really do turn it into this just giant festival. And it all kind of stems from an admission that the race might not be that good. So you need to provide an experience for everyone.

• 2:57:38David Rosenthal?

  I think they would argue that the whole weekend needs to be great.

• 2:57:41Ben Gilbert?

  Right. There's one of four teams who are going to be on the podium. And after you do the qualifying, whoever's in pole has like a very good chance of winning. And after the first turn, if there's no crashes and after the first lap, then we pretty much know. So I hope the rest of the activities are fun.

• 2:58:01David Rosenthal?

  Yeah. So fix stakeholder relations with the tracks, number two. Number three, fix stakeholder relations with the fans. We've alluded to this a little bit, but and Red Bull and Mercedes and Lewis Hamilton were starting to push the edges, but like, F1 had a huge social media problem. Bernie and F1 had been doing everything they could to keep the sport in sort of the heyday state for them of the mid 90s where. He controlled everything. It all flowed through Bernie.

• 2:58:40Ben Gilbert?

  Control over growth. If you have to pick between those two things, control.

• 2:58:44David Rosenthal?

  Yes. I control TV. I control the presentation. I control the race fees. I control the journalist access. I control who gets to go where in the paddock club and when, who gets to see what, et cetera, et cetera, et cetera. It was so bad that Lewis Hamilton, when he came into the sport as this incredible star who had global appeal, was the first real F1 driver to become a legit celebrity in America.

• 2:59:12Ben Gilbert?

  The first superstar black athlete in Formula One.

• 2:59:16David Rosenthal?

  First black athlete, period. There were no other black athletes before or since. All the things that Lewis Hamilton is, he, being a native millennial, wanted to have an Instagram account.

• 2:59:28Ben Gilbert?

  And that's underselling, like being one of the most fame savvy individuals.

• 2:59:33David Rosenthal?

  That too.

• 2:59:33Ben Gilbert?

  And what he had, that he brought into Liberty's office, was a stack of cease and desist letters.

• 2:59:41David Rosenthal?

  That Bernie kept sending him to take down posts on his Instagram because he was, quote, "illegally distributing F1's intellectual property."

• 2:59:52David Rosenthal?

  That's how bad this was.

• 2:59:53Ben Gilbert?

  Nothing sums it up better than that.

• 2:59:55David Rosenthal?

  Yeah. So Liberty immediately is like, "Yes, please, Lewis. Post as much as you want on your Instagram."

• 3:00:03Ben Gilbert?

  Yep.

• 3:00:04David Rosenthal?

  And then finally, and related, there was also just a whole basket of low-hanging fruit opportunities to grow the sport. So one of these was esports and video games. There had been an independent video game studio in the UK that had been making official F1 video games for several years. Shortly after Liberty acquires F1, that studio gets acquired by Electronic Arts, makers of Madden and FIFA, that do billions of dollars of revenue for EA and their league partners every year.

• 3:00:41David Rosenthal?

  Liberty works with them. Another initiative, again, remember Chase and the whole crew, they're coming from the NFL world. Among the many things that the NFL has done so great over the years is turning all the off-season content into exciting, marketable events like the NFL Draft. Well, what's the equivalent of the NFL Draft for F1? The testing period. Let's televise the testing period. Let's make it an event. Let's generate revenue and grow the sport.

• 3:01:11Ben Gilbert?

  Can we generate narrative out of it? I mean, all the sports journalists who cover F1 right now can't stop writing about how little track time the Aston Martin team has gotten because of the new crazy stuff that... By the way, Adrian Newey is now designing for Aston Martin.

• 3:01:27David Rosenthal?

  He's team principal now.

• 3:01:28Ben Gilbert?

  So he's got some new crazy design that isn't, I guess, super reliable yet. And so there's all these great, you know, stories being talked about of how are the drivers going to do when they've had so little time to actually practice with all the other drivers? This is exactly what you want.

• 3:01:46David Rosenthal?

  Yep, and all that was just falling on the floor before. No engagement, no revenue, no utilization of that.

• 3:01:54Ben Gilbert?

  Yep.

• 3:01:55David Rosenthal?

  So then, the last bucket is also pretty obvious. We should probably go start courting Hollywood. Racing movies seem to be pretty popular around the world.

• 3:02:10Ben Gilbert?

  They're medium, medium popular.

• 3:02:11David Rosenthal?

  People like them. I mean, especially for the budgets that they've been made for in the past. Certainly, this is a sport that lends itself to visually compelling narratives.

• 3:02:22Ben Gilbert?

  I think you're right that the initial thing was, oh, yeah, people like racing, and this is visually compelling. That was actually wrong. That is not the correct thesis, but it is the place to start.

• 3:02:33David Rosenthal?

  Yep. Of course, what we're getting at is they end up with, I think, the most impactful piece of sports media in history.

• 3:02:48Ben Gilbert?

  Ever, across any sport. Absolutely. And that is Netflix's Drive to Survive.

• 3:02:53David Rosenthal?

  Oh, yeah.

• 3:02:56Ben Gilbert?

  All right, so they go to Netflix, these clever F1 guys, and they say, hey, I think you should do a series. And the initial idea, David, like you're saying, is race cars are cool, visually compelling, people like racing.

• 3:03:12David Rosenthal?

  Seems like a no-brainer.

• 3:03:14Ben Gilbert?

  And what it would evolve to, really, it's a human drama.

• 3:03:17David Rosenthal?

  Yes.

• 3:03:18Ben Gilbert?

  It's about, when we said there's three concurrent competitions, there's a driving competition, there's the World Cup of Engineering, and there's the World Cup of Office Politics. It turns out the World Cup of Office Politics is an amazing, amazing thing for a, effectively a reality TV show, especially-

• 3:03:35David Rosenthal?

  It's the most compelling television product.

• 3:03:37Ben Gilbert?

  When you then, as secondary flair elements layer in, race cars going super fast.

• 3:03:45David Rosenthal?

  Occasionally crashing.

• 3:03:47Ben Gilbert?

  Yes, attractive mid-20s dudes in the most extravagant, amazing places on earth, swimming and being on yachts and partying the night before your big race, and it's it's just perfect.

• 3:04:02David Rosenthal?

  It's incredible.

• 3:04:04Ben Gilbert?

  But the human story, that is the killer unlock of Drive to Survive.

• 3:04:08David Rosenthal?

  And it was so perfectly made for what everybody in the sport needed at the time, because if you had made Drive to Survive for, I don't know, let's take the NBA, sure, it would have succeeded on a lot of the dimensions you just mentioned, but the hardcore fans would hate it, because they'd say, like, this isn't basketball, come on.

• 3:04:35Ben Gilbert?

  Right.

• 3:04:36David Rosenthal?

  This is just fluff for attracting new audiences. The thing about F1 at this moment is everybody was so starved for access, any glimpse behind the curtain, that even the most hardcore petrol heads, who would be the first to say, like, yeah, of course this isn't the sport, this isn't F1, they loved it too. They'd never gotten to peek behind the curtain.

• 3:05:01Ben Gilbert?

  All right, so how did it come to be? So Netflix and Liberty start talking. F1 was also pitching Amazon on doing something, trying to get a little bit of a bidding war here. Who's it going to be? Netflix or Amazon or someone else? Amazon already had something in the works with Mercedes and Lewis Hamilton that was just focused on them. But hilariously, F1 and Liberty control the actual track rights. So even though Amazon was going to get the rights to Lewis and Mercedes, they couldn't film the documentary on track. So it kind of ruins the whole thing. Ultimately, you do need F1 to play ball. So Amazon ends up bidding the most for the league-wide thing, the thing that would become Drive to Survive. Liberty comes back with that bid in hand to Netflix

• 3:05:45Ben Gilbert?

  and says, hey, can you guys match this? Rumors are that it was about double the Netflix bid.

• 3:05:51David Rosenthal?

  This is the rights payment that Netflix or Amazon would pay to F1 for the right to go make this series.

• 3:06:00Ben Gilbert?

  Which is the way it used to work, but based on how successful Drive to Survive has become, you don't have to pay the sports leagues anything anymore.

• 3:06:07David Rosenthal?

  Netflix doesn't pay those sports leagues. Even the NFL, they don't pay them anymore.

• 3:06:11Ben Gilbert?

  It's such a giant, giant spotlight on your sport.

• 3:06:15David Rosenthal?

  Yeah.

• 3:06:16Ben Gilbert?

  You know, they're small numbers. I think it was the order of like 5 million versus 10 million or something like that. But Netflix comes back and says, you know what? We're at our ceiling. But we do think we're the best partner for this. So our offer remains the same.

• 3:06:30David Rosenthal?

  If you guys are really focused and really mean it about growing the sport as the priority here, our global audience is going to grow the sport.

• 3:06:37Ben Gilbert?

  So Liberty goes for it. They say, yep, we're in for the lower price. And at this point in time, Netflix's audience in the US was something like 2X what Amazon's was. Once Netflix secures these rights, they then start working down a list of production companies. Box to Box Films wins because they had done that 2010 Senna documentary, which is great. I highly recommend folks find it and watch it. Box to Box had already been working with Red Bull Racing on a documentary idea just focused on them.

• 3:07:10David Rosenthal?

  I had heard rumors that the whole thing started as a Red Bull documentary. Now it makes sense.

• 3:07:14Ben Gilbert?

  Yes. So ultimately- The Red Bull idea gets scrapped, along with that Lewis and Mercedes idea that that Amazon was working on that gets scrapped. Although, listeners, we have heard rumors that that one is back in the works now with with someone else. F1 takes a big leap of faith and gives Netflix and box-to-box films complete creative control and final cut, which I also think is really important, that like, that this this is a highly opinionated version with full access that is not controlled by the sport.

• 3:07:46David Rosenthal?

  The other really interesting nuance here is Netflix is like, yo, yo, we make highly-produced content that doesn't come out right away. We can't turn around a new episode every week during the season.

• 3:07:58Ben Gilbert?

  Right. Drive to Survive comes out right before the next season starts.

• 3:08:02David Rosenthal?

  And all at once.

• 3:08:04Ben Gilbert?

  Always, always a season behind. In fact, if you're listening to this episode, then like, three days ago, the most recent season of Drive to Survive will come out. So Mercedes, interestingly, declines to participate, probably partly because of the documentary that they think they have in the works at the time with Amazon, but also because they're Mercedes.

• 3:08:29David Rosenthal?

  Right. This seems like a risk.

• 3:08:31Ben Gilbert?

  They've just won everything you could possibly win, like, eight years in a row. They're very profitable, or they're getting very profitable at this point. Why would you take any risks? And then Ferrari looks over and says, well, if Mercedes is out, we're definitely out. We're Ferrari.

• 3:08:45David Rosenthal?

  So things are actually looking kind of dire. Netflix is left with the bottom eight teams.

• 3:08:51Ben Gilbert?

  And they ended up creating something really amazing out of Daniel Ricciardo. I mean, that first episode just hooked a lot of people. After the success of seasons one and two, which we heard was kind of a slow burn, people loved it if they watched it, but the algorithm wasn't surfacing it to that many people. And over time, they sort of realized, oh, wow, this is actually applicable to many more people than we thought. Young women across America and the world are into this, and we thought it was going to be 50-year-old petrolhead men, or at least we feared that it might be, so we sort of started in that narrow circle. As it grows and grows and grows, and season two's doing well, and season three was this massive smash hit, suddenly then, all the Mercedes and Ferrari partners and sponsors

• 3:09:34Ben Gilbert?

  are coming to them and going, why are we not in Drive to Survive?

• 3:09:37David Rosenthal?

  Why are we not getting these impressions?

• 3:09:39Ben Gilbert?

  What are you doing? And so then, of course, in the later seasons, all the teams are in it.

• 3:09:43David Rosenthal?

  Yep. Amazing.

• 3:09:45Ben Gilbert?

  So the other thing you may remember is seasons one and two were fully filmed, released and on Netflix when the pandemic hit.

• 3:09:56David Rosenthal?

  Yep.

• 3:09:56Ben Gilbert?

  But it was sort of like the perfect thing for everybody to get really into just when they were starting to get trapped at home. And F1 actually did a pretty amazing job of reacting to the pandemic. Within a few months, they were back on the track racing. They were doing these clever sort of double headers where they would race twice in a row at the same track. They were creating bubbles, just like other sports were creating bubbles. But the pandemic was weirdly very successful for the sport because they had Drive to Survive ready to watch. And the sport sort of lent itself to their ability to recover quickly.

• 3:10:34David Rosenthal?

  Remember when everyone was building an F1 simulator and playing the e-sport too?

• 3:10:38Ben Gilbert?

  Yes, yes. So eventually it would become the number one Netflix show in 93 countries at peak. And when you try to walk through some of the numbers, trying to figure out what actually was the impact of this. In the first week, and this is an official reported number, there tend to be over 500,000 accounts that view the new season, just in that first week. And with the Netflix stuff, it's always reasonable to multiply it by two or three because of password sharing. So call it like a million and a half people that watched just in that first release week. We heard elsewhere than in the fullness of time, a season of Drive to Survive is viewed in the sort of low tens of millions of accounts.

• 3:11:21Ben Gilbert?

  So again, with password sharing, you could generously assume, call it 40 to 50 million unique people would watch the show.

• 3:11:28David Rosenthal?

  Which by the way, that is a huge number of people watching a single piece of, you know, non-live event, non-sporting event content.

• 3:11:37Ben Gilbert?

  In fact, it's, um, here's a funny story. I was watching Drive to Survive, the most recent season with my wife to prep for this episode. And while we're watching it and Christian Horner is getting interviewed, I made a comment of like, yeah, it's crazy. He. Like gets fired. He's not with Red Bull anymore. And she's like, whoa, spoilers. And I was like, that happened six months ago. Like, that's it. Her mental model is real life is irrelevant. Drive to Survive is canonical. That's the really unique thing about this sport is how many more people are fans of the sport, but don't watch races.

• 3:12:15David Rosenthal?

  Yep. And this is where the modern media business model that Liberty came in and embraced thrives. And Bernie World never could have realized or seen this. Everybody still makes money, even when fans only watch Drive to Survive. Why did the Mercedes and Ferrari sponsors pressure them to participate? It's all the impressions of the sponsor logos.

• 3:12:42Ben Gilbert?

  Yeah. Okay, so impact. Obviously, Drive to Survive worked, but how do you slice it? How much? What stats did you find, David?

• 3:12:51David Rosenthal?

  So one part of the Liberty strategy that we hadn't hit yet because we were saving it for Drive to Survive was bring this sport to America.

• 3:12:59Ben Gilbert?

  Yes.

• 3:13:00David Rosenthal?

  Feels like it should have an audience here in a way that it never had under Bernie. And so Drive to Survive was a big part of that strategy. So if you look at F1 viewership in the US, in 2018, before Drive to Survive launched, about half a million Americans watched races. In 2021, that has doubled in three years to over a million Americans watching F1 Grand Prix. I don't know what percentage of that doubling is attributable to Drive to Survive, but it's not 10%. It's probably more like 80%.

• 3:13:39Ben Gilbert?

  Yep.

• 3:13:40David Rosenthal?

  So then, three years later on, in 2024, once there are more US races on the calendar, which we'll get to in a second, viewership of the Miami Grand Prix in 2024 was 3.1 million Americans. Now, granted, that's optimal, like a US time zone, a US race, there's natural interest, et cetera. But like, The idea that 3.1 million Americans would be watching an F1 race before Drive to Survive, totally insane.

• 3:14:10Ben Gilbert?

  It's more than most NBA games.

• 3:14:12David Rosenthal?

  So that's just in America. Globally, F1 added 73 million new fans between 2020 and 2021 alone during the COVID period. That's a 20% increase in fans during COVID.

• 3:14:30Ben Gilbert?

  Yeah. The stat on that in the US is that the US now has 52 million American fans, which has doubled since Drive to Survive came out.

• 3:14:41David Rosenthal?

  Most of those fans don't watch the races.

• 3:14:42Ben Gilbert?

  Right. The average viewership of a Grand Prix in the US is about 1.3 million people today. Miami is a giant outlier at 3.1 million US viewers.

• 3:14:54David Rosenthal?

  But there's all sorts of other ways that fans can engage with F1 beyond the races. And then probably the most obviously directly attributable stat to Drive to Survive, the percentage of F1 audience that is women went from 7% to, there are reports out there that it's like 40% today.

• 3:15:16Ben Gilbert?

  Of F1 fans are women?

• 3:15:17David Rosenthal?

  Of F1 fans. Again, not watching the races necessarily, but follow the sport, are interested in what's happening.

• 3:15:26Ben Gilbert?

  Yeah. One quote I heard in research was that Liberty helped F1 move away from the male, stale and pale audience.

• 3:15:33David Rosenthal?

  Yes, that it certainly did. Thank you, Daniel Ricciardo.

• 3:15:37Ben Gilbert?

  Yes.

• 3:15:38David Rosenthal?

  So staying on the America strategy for Liberty and F1, obviously adding races in the US is a big priority here.

• 3:15:47Ben Gilbert?

  I think Austin went much better than they thought it was going to.

• 3:15:49David Rosenthal?

  Yeah, and Austin obviously launched before Liberty bought the sport, but they make it a priority.

• 3:15:56Ben Gilbert?

  Do you know about the previous US track record?

• 3:16:00David Rosenthal?

  Oh, it's awful. It's so bad. They raced in Long Beach at one point, right?

• 3:16:06Ben Gilbert?

  Yeah, so anyone who's familiar with F1 today probably doesn't realize there were nine different races historically that attempted to run in the US, all of which are defunct, and they typically only lasted a year or a few at a time.

• 3:16:22David Rosenthal?

  It's so bad.

• 3:16:23Ben Gilbert?

  The most successful one, long-running one, was in upstate New York.

• 3:16:29David Rosenthal?

  Yeah, Watkins Glen, right?

• 3:16:30Ben Gilbert?

  They held Grand Prix in Phoenix. They did have one in Vegas before, but it was confined to just the Caesar's Palace property, and it was just like all tight turns, back and forth and back and forth and back and forth. They were in Detroit, and they were also at the Indianapolis Motor Speedway, where the Indy 500 is, but they they never really made a good impression.

• 3:16:51David Rosenthal?

  Yeah, well, there was a bad, there was a horrible thing where like half the teams refused to race one year there, right? And the fans revolted and threw stuff on the track and like, yeah, it was bad.

• 3:17:01Ben Gilbert?

  Yeah. So the US track record, not good. And then they come in and do brand-new, from-scratch-built track for Circuit of the Americas in Austin and does quite well. You now have that. You've got, in the similar time zone window, in the Americas, you've got Mexico City, you've got the Canadian Grand Prix in Montreal, and you've got the Sao Paulo race. So you now have sort of four in this time zone window. And Liberty and F1 really go for it at this point.

• 3:17:35David Rosenthal?

  Yes. So pretty quickly after Liberty buys the league, they start working on adding another race in the US, and that becomes Miami, which launches in the 2022 season.

• 3:17:49Ben Gilbert?

  And then just one year later, they launch the Vegas race. But this is a different type of race. There is no promoter. Rather than charging a fee and having someone else run the race, they say, okay, we're going to forego the promoter fee and we're just going to operate this race ourself. We're going to take all the risk and get all the reward. But it's a pretty big bet because they actually bought the real estate to build the paddock club. So after talking to a lot of the different folks around F1, I would say it hasn't been an obvious win. I don't think they will pursue this model elsewhere, if I'm reading the tea leaves right now. These things take a long time

• 3:18:34Ben Gilbert?

  to pay back. And I think they've sunk over half a billion dollars into building this out. And they really shut down the city for a long period of time and block off a lot of stuff to make it happen. It's much easier to run a business where you say, you know what, we're not going to keep every little bit of upside for ourselves.

• 3:18:54David Rosenthal?

  You guys handle that, we'll just take the money.

• 3:18:56Ben Gilbert?

  Yes.

• 3:18:57David Rosenthal?

  Bernie had some things, right?

• 3:18:59Ben Gilbert?

  Yes.

• 3:19:00David Rosenthal?

  He had a lot of things, right?

• 3:19:01Ben Gilbert?

  Yep. But there are now six races in the North American, South American time zone. And the US is the biggest media market in the world. So they're leaning in hard.

• 3:19:10David Rosenthal?

  Yep. Well, speaking of the paddock club you mentioned, it has totally transformed since Liberty's acquisition of F1. You and I got to experience it with ServiceNow in Vegas. We were just beginning our F1 research at that phase. And we left for like weeks afterwards saying, oh, F1 is a corporate sport. The consumer side must really not be big at all. But like, man, this is the most B2B thing we've ever seen. There's a Strategery interview that Ben Thompson did with Mike Cannon-Brooks, the Atlassian CEO last year. They're the title sponsor of Williams. And

• 3:19:53David Rosenthal?

  Mike says this, he says, hey, we view our Williams sponsorship and our F1 participation as we get to have a mobile executive briefing center that we can go around the globe throughout the year and bring our customers to this amazing event and have an amazing customer example to show them in Williams of how they use our software. Like, I don't think Elasian has a physical executive briefing center. I think F1 and the Paddock Club is their executive briefing center.

• 3:20:26Ben Gilbert?

  It's funny, yeah, since this was our first experience with it, it was shocking to me realizing how large the consumer element of the sport was globally. Because in America, it feels like this, like a little enterprise software conference.

• 3:20:41David Rosenthal?

  Exactly.

• 3:20:42Ben Gilbert?

  Okay, so what are the economics of all of this? And how does that play into F1 as a business? So apparently, the title sponsorship at the front of the grid now can be a 50 to 100 million dollar deal. And Oracle's title sponsorship of, exactly, per year, of Red Bull Racing is reportedly 100 million. Other places cite that the big title sponsorships are more around 50 million. But either way, I mean, really big numbers and right in line with the biggest deals that F1 itself does. So the LVMH deal is 100 million dollars per year. And that's the Louis Vuitton banners everywhere, Tag Heuer being the official timekeeping sponsor, the LV trunk, and of course, they spray Moet all over each other

• 3:21:25Ben Gilbert?

  on the podiums. So you get sort of wrapped in a blanket of LVMH now when you watch a race.

• 3:21:32David Rosenthal?

  Yes. And back to the impact of Drive to Survive for a minute. Oracle's CMO said, I believe on an earnings call, that Drive to Survive was the reason that they decided to get into F1 and do the big Red Bull sponsorship.

• 3:21:50Ben Gilbert?

  Really?

• 3:21:50David Rosenthal?

  Yes.

• 3:21:51Ben Gilbert?

  Fascinating.

• 3:21:52David Rosenthal?

  That they weren't engaged with the sport beforehand and then started to watch Drive to Survive. And that led to.

• 3:21:59Ben Gilbert?

  Wow.

• 3:22:00David Rosenthal?

  Ultimately, you know, multi hundred million dollar investment over several years.

• 3:22:04Ben Gilbert?

  It's 500 over five years is the rumored value. So thank you Netflix for that gift. So the cheapest deals you can get, and let's say you want to slap your logo on a car somewhere, you know, a little under a bumper or something.

• 3:22:17Ben Gilbert?

  The cheapest deal is about a million dollars and that's a back of the grid car. The most valuable real estate, I thought this was interesting. There's an airbox on the car that sort of sticks up behind the driver's head that you can see from the side. Those go for the sort of six to seven million dollar range. And the logo placement on a driver's chest is also very desirable. That's about a million and a half, especially toward the front of the grid. And this really is the way that these teams make money. It's about 60% of the revenue comes from sponsorship. And the teams are now averaging about $200 million of total sponsorship per team. But average is kind of the wrong way to look at it because it varies wildly from front of the grid to back of the grid.

• 3:23:00David Rosenthal?

  Yeah.

• 3:23:00Ben Gilbert?

  The other big thing is that hospitality is rolled in. So if you're entertaining a client at a football game, like let's say you do a big sponsorship deal with an NFL team and you get a suite. You get three to four hours together and most of that is actually consumed by watching football because you care about it. It's an exciting game. Anything can happen. If you bring a client to an F1 race, like ServiceNow brought us, you spend three days together. And the race is only like two hours. And actually in the race, there's not that much you need to pay attention to most of the time. That there's some really exciting moments and you pay a lot of attention then, but there's plenty of time for a conversation otherwise.

• 3:23:39Ben Gilbert?

  So it's much more conducive to forming real relationships versus a traditional two, three hour sports game. And you get to do it in geographies where your business operates all over the globe, not just a stadium near your office. And I even heard some comments of sponsors saying, oh, we didn't even bother with a logo placement on the car. It's actually more about the relationships and hospitality.

• 3:24:04David Rosenthal?

  Totally. So I can totally see why if your strategy is something like Atlassian and this is our mobile briefing center. It's really only F1. I mean, maybe like tennis or golf or something like that that you could think about as an alternative.

• 3:24:19Ben Gilbert?

  Here's my last bullet point on this. Ultimately, this sport is a magnet for sponsors because it has a global reach for brand. It's humans pushing the limits, both in physical competition and engineering cleverness. It's bleeding-edge technology, and the sport is premium, if not luxury, in its positioning in almost every market around the world.

• 3:24:37David Rosenthal?

  Yep.

• 3:24:38Ben Gilbert?

  All right. Media rights?

• 3:24:40David Rosenthal?

  Media rights. Well, to put a bow on the Liberty strategy, or at least the come-to-America part of it, right after Liberty takes over in 2017, they do a deal with ESPN, much like Bernie's original European Broadcasting Union deal. Liberty says, "Will you please show all of the F1 races on the calendar on ESPN? We will give it to you for $0."

• 3:25:11Ben Gilbert?

  Was it actually $0?

• 3:25:12David Rosenthal?

  It was actually $0 for the 2018 season. I think maybe 2019, 2020 as well. We just want to grow the sport.

• 3:25:22Ben Gilbert?

  Yep.

• 3:25:23David Rosenthal?

  Get something going, some traction in America.

• 3:25:26Ben Gilbert?

  And ESPN, despite being a cable company, not a broadcaster, does have huge reach. It's the most valuable channel in every cable package.

• 3:25:33David Rosenthal?

  Yep. If you're a sport and you want to grow in the US, you need to be on ESPN. Previously, F1 had bounced around for a while. It was on the speed channel.

• 3:25:43Ben Gilbert?

  All these weird pay TV packages, yeah.

• 3:25:44David Rosenthal?

  Yeah, yeah. It was on NBC for a while, but only certain Grand Prix. They didn't show the whole season. Anyway, after Drive to Survive and COVID, those rights become a lot more valuable in America. So ESPN comes back in for another three-year round of rights. In 2022, after the sport has grown so much, ESPN does start paying real money for the rights, rumored $80 to $90 million a year for a three-year deal for the US TV rights.

• 3:26:15Ben Gilbert?

  Up from zero? That's huge.

• 3:26:16David Rosenthal?

  The ESPN contract ends in 2025. In the interim...

• 3:26:22David Rosenthal?

  Apple had their own F1 media success on their hands this past summer with the F1 movie with Brad Pitt.

• 3:26:33Ben Gilbert?

  F1 the movie, to say the title precisely, David.

• 3:26:36David Rosenthal?

  Which grossed $630 million worldwide at the box office, the highest amount not only for a racing film, for any sports movie ever, and the highest grossing box office movie of Brad Pitt's entire career. That's wild.

• 3:26:58Ben Gilbert?

  And this massively exceeded people's expectations. It kind of shouldn't. Like, it was Brad Pitt, it was beautiful camera work, it was a feel-good story, it had incredible special effects. It was the same director and producer of Top Gun, like, people were calling it Top Gun on land.

• 3:27:14David Rosenthal?

  Yeah, you can't go wrong.

• 3:27:16Ben Gilbert?

  Right. The only thing working against it really is it was a racing movie, and racing movies, other than Ford versus Ferrari, haven't ever really been, like, big box office smashes. And even that was fine.

• 3:27:28David Rosenthal?

  Well, nobody had ever made a racing movie like this before.

• 3:27:31Ben Gilbert?

  Right. So if you do the quick math on that 630 million, and call it, I don't know, $30 a ticket, you come to the number of 21 million tickets sold at the box office. And depending on which estimates you believe from our Drive to Survive conversation earlier, there's a chance that the movie actually reached more people than Drive to Survive has.

• 3:27:54David Rosenthal?

  Or at least it's kind of in the same ballpark.

• 3:27:56Ben Gilbert?

  Yes.

• 3:27:57David Rosenthal?

  Either way, both are home runs. So on the back of that, Apple comes in over the top for the US media rights negotiations with a five-year deal at $150 million a year.

• 3:28:13Ben Gilbert?

  Rumored.

• 3:28:14David Rosenthal?

  Rumored.

• 3:28:15Ben Gilbert?

  But probably close.

• 3:28:16David Rosenthal?

  Probably close for the media rights. I mean, on the one hand, sure, this is not NFL dollars yet, but this is real money. For, again, a geography that was zero when Liberty took over, was a huge deal to get ESPN up from zero to, call it, 80 to 90. Now you're talking about almost double that. And for Apple...

• 3:28:39David Rosenthal?

  This is probably just the tip of the iceberg of what they can do with F1.

• 3:28:43Ben Gilbert?

  Yeah, so if you think about the bulk case for F1 here, 33% of F1's revenue comes from media rights, and that 140 million is only 13% of the total media rights worldwide, which is 1.1 billion total. So this is, you know, important to F1, but this is not... the bulk of their consumption and the bulk of their media rights dollars are outside the US.

• 3:29:08David Rosenthal?

  Hey, Apple's a global company. Like, sure, they love their US Apple TV subscribers and Apple customers, but they love their European and Asian and Middle Eastern customers just as much. They'd love to show them, you could imagine, F1 on Apple TV someday.

• 3:29:26Ben Gilbert?

  And the real bulk case for... I know we'll do Baron bulk case later, but just to pull this one forward, for F1 here is, in a lot of those markets, like we were talking about earlier, they've got these vertically integrated, sort of the channel is the broadcaster is the network thing, and they don't have a competitive bidder. And so with Apple, with Netflix, with more likely Amazon, I think, than Netflix, but with streamers and with YouTube buying media rights, now you have these tech companies as real viable bidders against the, you know, one or two broadcasters in the country. So you actually can sort of more fully realize the media rights when there's a real market for them.

• 3:30:05David Rosenthal?

  Yep.

• 3:30:06Ben Gilbert?

  But I will say, just so listeners are really grounded in this, US viewership is only 1.3 million people actually watching any given race, with a peak of 3.1 million at the Miami Grand Prix. That is half of what NASCAR averages. Like, this is not even the number one motorsport in the US, and actually quite far from the number one motorsport in the US. International viewership is 60 to 70 million people on a race weekend. So the US, if they crack the code, man, the US has running room ahead of it.

• 3:30:39David Rosenthal?

  Yep. And, I mean, hell, clearly it's working so far.

• 3:30:42Ben Gilbert?

  Yes. All right. Before we catch up to today, should we do the quick update on the teams that are hitting the grid this year?

• 3:30:49David Rosenthal?

  Yeah, got some new teams coming in.

• 3:30:51Ben Gilbert?

  So we've got the return of consumer auto manufacturers. Stake has become Audi. Honda is partnering with Aston Martin. Ford has joined with Red Bull as an engine partner. Honda used to be the partner who would make Red Bull's engines in around 2019. And then in 2021, Honda left the sport. And Red Bull, instead of picking another engine supplier, they actually took it in-house and started Red Bull Powertrains with Honda's technology and technical support. And I think they hired a bunch of the people away from Honda.

• 3:31:25David Rosenthal?

  Yep. This Ford partnership is actually like more of a partnership, right, with Red Bull and less of a straight, we're supplying you the engine.

• 3:31:34Ben Gilbert?

  Oh, yeah, Ford is very much not supplying the engine to Red Bull. They are sort of a engineering partner on Red Bull Powertrains. And I know there's engineers sort of flying back and forth and multiple Ford sites that are sort of collaborating with Red Bull on building their engines. A lot of shade has been thrown at Ford, saying that this is just a marketing exercise. And hey, Red Bull was all prepared to take engine manufacturing in-house. So why do they need Ford's help? But speaking of a marketing exercise, Cadillac is entering the sport this year. And you might say, whoa, that's a whole team. Like, that's, that's not just marketing. They're really, you know, an equity owner and putting their best foot forward.

• 3:32:18Ben Gilbert?

  This is a team called Cadillac that uses Ferrari engines and a lot of other components, too. The whole power unit, the gearbox. I mean, it's like still a major deal that it's a major American manufacturer that is joining the sport. But this is a Cadillac with a Ferrari under the hood. And Cadillac is shelling out $450 million in a, like, an expansion fee effectively just to join the grid.

• 3:32:45David Rosenthal?

  It's just great for the sport that all of this is happening.

• 3:32:48Ben Gilbert?

  So great.

• 3:32:48David Rosenthal?

  And just really reflects how far things have come with relations with the teams. And it's so healthy. That manufacturers are coming back and the number of teams is expanding. To the GM Cadillac versus Ford kind of opposing case studies are really interesting.

• 3:33:05Ben Gilbert?

  I kind of love the rivalry, though, right?

• 3:33:06David Rosenthal?

  Yeah, the rivalry is amazing.

• 3:33:08Ben Gilbert?

  Sniping at each other and they're really getting in the F1 spirit.

• 3:33:11David Rosenthal?

  And it's really unclear like what you should do and what the better strategy is. You pointed out some of the downsides in both. You know, the upside for GM and choosing to use Cadillac as the brand is they own the team. They can, over time, invest, build this into a powerhouse, or if they can, that would be great. They're certainly going to start in the back of the pack. It would be a real coup if they didn't. Whereas Ford is coming in with Red Bull, one of the top teams. Like, they're going to be on the podium from season one.

• 3:33:43Ben Gilbert?

  I know, it's kind of genius.

• 3:33:44David Rosenthal?

  Yeah.

• 3:33:44Ben Gilbert?

  Real big blue oval on that car. They announced and unveiled the car in Michigan. I mean, it was like a Ford-Red Bull event.

• 3:33:52David Rosenthal?

  Yep.

• 3:33:53Ben Gilbert?

  And, uh...

• 3:33:54David Rosenthal?

  Meanwhile, GM and Cadillac unveiled theirs during the Super Bowl, right?

• 3:33:58Ben Gilbert?

  They did, with a Super Bowl commercial and then with an activation in Times Square.

• 3:34:02David Rosenthal?

  Yep.

• 3:34:03Ben Gilbert?

  But I love it. I love to see it.

• 3:34:05David Rosenthal?

  Yep, and the other big thing for this year is there's a new Concord agreement, complete with a full rewriting of the rule set by the FIA. So there's a resetting of the field.

• 3:34:18Ben Gilbert?

  And people always say these things come with a big reset, but do I think Mercedes and Red Bull and McLaren are not going to be, you know, three of the top four teams? No, I think that's going to stay. Have we seen anything in preseason from any of the teams at the back of the grid where they have some magic car that they've developed? Not really. I mean, the biggest thing I think we've seen is Ferrari, who is a front-of-grid team, is doing something very clever to create downforce with their exhaust, but we'll have to see how that actually plays out.

• 3:34:46David Rosenthal?

  Yep.

• 3:34:47Ben Gilbert?

  We should say there's some excitement around this new rule set where it's going to enable more passing, which should make for more dynamic races, which I've been ripping on the whole time. I do like watching F1 races, but I do also think they could learn something from the NFL and figure out how to make it more competitive and a better pure sport.

• 3:35:07David Rosenthal?

  More exciting, yeah, better product on the field.

• 3:35:09Ben Gilbert?

  On the cons, man, there's a lot of graping about these hybrid engines. The, uh, Max Verstappen called it like a... souped up Formula E car or some, which is, you know, it's, it's actually perfect Formula One drama that he's out there, you know, making fun of the cars even before the season starts. But, you know, everything from the, the noise to the Max's comment about how they drive to the kind of confusing nature of watching the sport and trying to, on top of everything else, now understand the strategy behind battery preservation, that, that might be a little tough for them to overcome in presenting to the viewer, especially new viewers.

• 3:35:48David Rosenthal?

  Yep. One thing that we heard kind of unanimously from folks who've been around the sport for a while, it's just sort of a shame that no one can experience the old cars.

• 3:35:59Ben Gilbert?

  Yes.

• 3:36:00David Rosenthal?

  Anymore. Like you can watch videos, you can listen to audio recordings.

• 3:36:03Ben Gilbert?

  The early 2000s, V10, you just had to be there.

• 3:36:07David Rosenthal?

  But everybody says, yeah, there's nothing like having one of those old, big engines go by you and just the sound and the power and the vibrations or something you would never experience anywhere else. Certainly kills any, you know, sustainability angle that Formula One is trying to push these days.

• 3:36:25Ben Gilbert?

  Okay. I have a major beef with this. So there's two reasons why they switched to hybrid engines. One is road relevance because 10 years ago or whatever, everyone thought that electric cars were going to take over the world, or at least hybrid cars were. And it was good to start investing in Formula One in these technologies so they could trickle into the cars that everyone's driving. Adoption has been much slower than we expected there. The other reason is this sustainability push, which, look, I'm, I'm all for sustainability. The carbon footprint of Formula One is absolutely hilarious to me when people talk about the sustainability of the power units, like the engines in the cars, when they are flying the whole circus around the world every week on a fleet of

• 3:37:08Ben Gilbert?

  seven triple sevens. I mean, okay, the European races, everything goes by truck, which is a little better, but it's still 300 trucks. If, if you line these up, it would form a convoy over five kilometers long. And so I, I was trying to like do some math of, okay, how much of the carbon footprint is actually from the power units themselves when they're driving on track? During the 2019 season, the logistics operation, moving these cars in the circus around, accounts for 64 times the emission of the cars themselves, even when you include practice, qualifying, and races. I mean, these F1 tanks have 30 gallons of gas, max,

• 3:37:52Ben Gilbert?

  right? It's three 30-gallon tanks over the course of a weekend. And there's only 22 cars. It's a rounding error. This is a complete farce.

• 3:38:02David Rosenthal?

  I think I'm hearing a passionate argument from you to bring back the V10s.

• 3:38:06Ben Gilbert?

  Bring back, I've never heard one, and I want to hear one. I don't know. My general belief on this is let the sport be the sport and do whatever is going to be the best sort of fan and driver experience. And I think they are trying to cram too many things into F1. Like, let it be a sport. Secondarily, let it be an innovation playground for auto manufacturers, but like, don't die on the hill of sustainable fuels. How about just putting two races really close to each other and just rearranging the flight calendar a little bit? That would do so much more, even if you just change one race than any compromises you're making on power units.

• 3:38:46David Rosenthal?

  Well, you know what would make a really big impact to American viewership of F1 races and adoption of the sport? If they stopped going head-to-head with the NFL on Sundays in the fall.

• 3:39:01Ben Gilbert?

  Yes. In research, we heard some strong and very compelling arguments for creating sort of a mini-season in the spring for US time zones. Yeah. And kind of staying over here, so it's good for a carbon footprint. It's great for viewership, because you get six races that all build on each other in excitement. It's great for US ratings, the biggest media market in the world. I'm amenable.

• 3:39:26David Rosenthal?

  I think it's a win-win. And bring back the V10s. And, you know, what do Americans love more than loud engines?

• 3:39:33Ben Gilbert?

  That's right. That's right. All right. The business today?

• 3:39:36David Rosenthal?

  Tell us about the business today.

• 3:39:37Ben Gilbert?

  Yes. All right. So.

• 3:39:40Ben Gilbert?

  Formula One Group does $3.4 billion in revenue. And the most recent numbers here are from 2024. The revenue mix is the media rights, which is broadcasting, is exactly 33%, about $1.1 billion. Race promotion is the next biggest budget at 29%, about $1 billion.

• 3:40:01David Rosenthal?

  Those are the fees from the race promoters.

• 3:40:03Ben Gilbert?

  Exactly. Advertising and sponsorship is the smaller bucket, 19%. That's $630 million. It is their fastest growing.

• 3:40:13David Rosenthal?

  And to be clear, that's advertising and sponsorship to the league, to F1,

• 3:40:17Ben Gilbert?

  Yes, just at the league level.

• 3:40:18David Rosenthal?

  Not to the individual teams.

• 3:40:19Ben Gilbert?

  Which you'll notice that $630 million is pretty small compared to the sum of all the teams. The teams earn about $2 billion in total sponsorship across all of them, which makes sense because the teams actually have a lot more to sell in the way of driver access, hospitality packages, speaking engagements, garage tours. Also, the best sponsorship placements are on the cars and the drivers, which the teams own. So the camera is actually focused on those while the walls of the track just kind of go whizzing by, which is why they need to repeat the same logo 1,000 times on the wall of the track for you to get an impression of it. So the best assets that are sponsorable actually belong to the teams.

• 3:41:01David Rosenthal?

  Yeah, this is one of the really unique aspects of F1 as a sport that actually allow it to operate in this really weird way where the league is not owned by the teams. Because so much of the media rights value de facto will go to the teams. Like, as the media reach grows, the value of the team's sponsorship grows, and that's their primary revenue driver.

• 3:41:25Ben Gilbert?

  Right. Yeah, it's a funny way to think about it. Their exposure grows, therefore their own direct sponsorships can grow.

• 3:41:32David Rosenthal?

  Yeah.

• 3:41:32Ben Gilbert?

  So, back to the revenue mix. We talked about for the parent company, 33% broadcast, 29% race promotion, 19% advertising and sponsorship. And then they've got this other bucket at 19%. That's hospitality packages, merch, and licensing.

• 3:41:49Ben Gilbert?

  So that's on the revenue side, total 3.4 billion. Now let's look at costs. The biggest cost is the distribution to teams, which we haven't talked that much about how this works yet. This couldn't be more different than the way it works in the NFL. The NFL splits the league revenue exactly 32 ways even, no questions asked. Communist capitalism is delightful. The distribution to teams is renegotiated in every Concord agreement. Both the split with Formula One Group is renegotiated and the-

• 3:42:26David Rosenthal?

  Distribution mechanisms amongst the teams, yeah.

• 3:42:29Ben Gilbert?

  Exactly. They currently distribute about 37% of Formula One Group's revenue out to the teams, which comes to 1.27 billion of their 3.4 billion. There are three components to how this formula works. The first is equal participation. The second is the constructors championship allocation, which is kind of interesting. The driver's championship has nothing to do with how prize money is paid out. It's just about the constructors. And then the third is historical length in the sport.

• 3:43:04David Rosenthal?

  Ferrari.

• 3:43:04Ben Gilbert?

  Yeah. So for a long time Ferrari was guaranteed at least 5% of the total pool, just as like a thank you for being Ferrari. You've been a part of the series every year since its inception. You help legitimize the sport. You continue to help legitimize the sport.

• 3:43:20David Rosenthal?

  Absolutely.

• 3:43:21Ben Gilbert?

  This has gotten negotiated away a little bit over time. But when you look at the rumored distributions, because this is the Concord agreements are not public. There is definitely still a large chunk as a thank you Ferrari for being Ferrari.

• 3:43:36David Rosenthal?

  And you know what? They're worth every penny. So the stats that I've seen is that even today, in the Max Verstappen, Lewis Hamilton, well, I guess Lewis is now with Ferrari, but thinking back to when he was with Mercedes.

• 3:43:51Ben Gilbert?

  I think it's Mercedes.

• 3:43:52David Rosenthal?

  Yeah, yeah, exactly. Even today, 30% of all F1 fans, their favorite team is Ferrari.

• 3:44:02Ben Gilbert?

  Wow. So when you blend those three factors together, the participation, which is equal, the constructors championship allocation, and the historical length in sport, the estimates are that the top team gets around 14% of the pool and the bottom team gets around 6%. So to keep the math kind of simple, imagine it as the top team getting 140 million-ish in prize money and the bottom getting 60 million-ish. This is a lot closer than it used to be. The constructors used to wildly skew the distribution and the Ferrari premium was even higher. But like, this is holding the sport back, in my opinion.

• 3:44:43Ben Gilbert?

  You get a positive feedback loop and a negative feedback loop at the top and the bottom. And so we're sort of stuck in this world right now where the teams on the front four or five of the grid stay there and the back stay there. And you could make the argument that, hey, making another 20, 30, 40 million dollars from the back of the grid is not going to make you magically competitive. But every little bit helps, and I think these things are nonlinear. They sort of spiral up or spiral down is maybe another way to think about it. And for every $10 million you get out of the constructors championship, you probably

• 3:45:24Ben Gilbert?

  can go find 20 or 30 more million in sponsor dollars. So a few people have tried to tell me, hey, I actually don't think money is really the answer here. It's certainly not helping to keep the back of the pack penalized with less dollars per year.

• 3:45:42David Rosenthal?

  Yep. People want to see the stars win.

• 3:45:44Ben Gilbert?

  That's true. But the bottom five may as well not even be racing.

• 3:45:49David Rosenthal?

  Well, you need them on the grid, but...

• 3:45:51Ben Gilbert?

  Do you? Why?

• 3:45:53David Rosenthal?

  You need some warm bodies there.

• 3:45:54Ben Gilbert?

  Just to like clog it up. They risk causing crashes and getting in, you know, the top few guys' way. And I guess that throws a race up in the air and anything can happen. But yeah, the back of the grid's just the back of the grid.

• 3:46:07David Rosenthal?

  Yeah, but I can't imagine it being a healthy state for the sport if there were only five teams.

• 3:46:13Ben Gilbert?

  True, very true. All right, so back to Formula One itself by the numbers. There's 830 million people who identify as fans globally. This is different than viewers. There are 450 million global TV viewers. The last time that they broke this out and reported it in 2021 seems to have become like a state secret since then, where they no longer report this information. Now on to team valuations. So as of 2025, Forbes estimates team valuations at about $3.6 billion on average. Average, this has been a huge, huge growth recently. It's an 89% increase in the last two years.

• 3:46:56David Rosenthal?

  Wow, wow.

• 3:46:58Ben Gilbert?

  It's completely night and day since they put in the cost caps. I mean, these teams used to be basically worthless in the Bernie era and now have an average value of $3.6 billion.

• 3:47:10David Rosenthal?

  Yes.

• 3:47:11Ben Gilbert?

  Every team is now north of $1 billion, with the least valuable team Haas at $1.5 billion. Then at the top end, we've got $6.5 billion for Ferrari. Again, not the best business, but the most valuable asset. Love Ferrari. $6 billion for Mercedes, $4.4 billion for McLaren, and $4.35 billion for Red Bull Racing. The multiples on these things are very silly. Like, if you compare them, because again, most of these teams, except for the top three, produce very, very little in the way of profit. And so if you look at an NFL team, they actually spit off a lot of cash.

• 3:47:54Ben Gilbert?

  If you look at these teams, I mean, even the most connected to their intrinsic value, Mercedes, is trading at 30 times operating income. They trade at values because they're scarce assets, not because they are cash generative assets.

• 3:48:08David Rosenthal?

  Yes.

• 3:48:09Ben Gilbert?

  People got very excited when they started not being absolutely horrible businesses, and when they started being fine businesses, everyone sort of pulled forward many, many years of growth and potential profitability into their valuations. Or they basically said, I don't care what the valuations are at all. I'm a sovereign wealth fund or deck a billionaire, and this sounds fun.

• 3:48:28David Rosenthal?

  Yes, and in defense of this, I can think of a million reasons why being an owner or part owner of an F1 team

• 3:48:35Ben Gilbert?

  Makes lots of sense.

• 3:48:36David Rosenthal?

  is a highly profitable trade for a person or an entity.

• 3:48:40Ben Gilbert?

  The funny thing is, a lot of these people If they're currently cash flow negative, if they ever decided to sell the team would make up all the cash that they lost in the business ever from the asset appreciation.

• 3:48:52David Rosenthal?

  Right. It's almost like you're loaning money to the team for a while and then you'll get it back.

• 3:48:56Ben Gilbert?

  So market cap of Formula One itself. Now, remember Liberty bought in 2017 the company for $8 billion with 4.4 billion of that being equity value. Today in 2026, it is a market cap of $22 billion with an enterprise value of $25 billion. So Liberty has done quite well turning 4.4 billion of equity in 2017 into 5x that in nine years. That's about a 22% compound annual growth rate. So then on top of the series itself, Formula One Group being worth $25 billion of enterprise value, you look at the teams, those if you sum them all up are worth another $36 billion or so, not including Cadillac

• 3:49:38Ben Gilbert?

  yet. And so there's a grand total then of $61 billion of enterprise value between the teams and Formula One itself. Interestingly skewed toward the teams.

• 3:49:49David Rosenthal?

  Yep. And that is valuing the races at zero, which I think the races probably have value. What did you say you think that F1 invested in Vegas? Half a billion?

• 3:50:03Ben Gilbert?

  Half a billion.

• 3:50:04David Rosenthal?

  Okay. Let's say the Grand Prix are all worth half a billion, just as a swag. There are 22 of them?

• 3:50:11Ben Gilbert?

  Yep.

• 3:50:11David Rosenthal?

  Is that right? So there's another $11 billion in value.

• 3:50:15Ben Gilbert?

  You're assuming that's money well spent?

• 3:50:16David Rosenthal?

  Well, if Formula One itself is willing to put $500 million up to stand up a Grand Prix, then that seems a reasonable proxy for the value of a Grand Prix.

• 3:50:30Ben Gilbert?

  Yep. That's a great point. So you say, okay, the whole sport inclusive of races then has 70-ish billion of enterprise value all told. Kind of fun.

• 3:50:40David Rosenthal?

  Seems reasonable.

• 3:50:41Ben Gilbert?

  Like mental gymnastics to go through to think about how the value all breaks down. Yep. So then my key question, and the one unfilled in puzzle piece in all of your minds should be, Ben and David are obsessed with the communist capitalism of the NFL. And the fact that the NFL, the NBA, MLB, NHL, these are thin leagues. These leagues do not retain earnings or have their own enterprise value. They are purely distribution mechanisms where nothing's left over at the end. They're like pass through entities of a sort. This is a fat league, much like the UEFA Champions League or IPL. It's a company. It has its own earnings. It generates profits. It has enterprise value.

• 3:51:25Ben Gilbert?

  So the key question you should all be thinking about is, are teams getting their share of the overall dollars compared to what Liberty gets? And how does it compare to a league like the NFL where the teams are entitled to all the profits? Well, on the one hand, we can look back at the percent of F1 management revenue that goes to teams, which was 50% back in 2018 and has shrunk to about 37% last year. So something's going on there. F1 is actually getting leverage over the teams. On the other hand, there's actually just not that much operating income left over once Formula One pays for all the other stuff.

• 3:52:06Ben Gilbert?

  Generated 492 million in operating income on revenues of 3.4 billion. So even if we take all that operating income and we say, okay, what if we were to distribute that 490 million to the teams? That would only grow the team's distribution from 1.27 billion to 1.76 billion. Yep. In other words, the teams are already making 72% of what they would make if they owned the league because there's just not that much profit left over after all the costs to run the league, after selling all the sponsorships at the league level, general overhead, administration, and of course, running the Las Vegas race. Yep. I suspect.

• 3:52:51David Rosenthal?

  If we were to have access to all the books during the Bernie era, that would be a very different story.

• 3:52:57Ben Gilbert?

  Yes.

• 3:52:58David Rosenthal?

  And I think it's because what's going on is Liberty is investing in the sport.

• 3:53:02Ben Gilbert?

  Yes. Certainly, there would be more operating income if Vegas was not on their books. It has reached this very interesting equilibrium where if the teams were making significantly less than this 72% of what they could make, I'd start going like, gosh, maybe they should break away. Maybe the league is keeping too much. But it somehow seems like this 28% of what the teams are leaving on the table is like just right, you know?

• 3:53:33David Rosenthal?

  Mm hmm.

• 3:53:34Ben Gilbert?

  The racing series is complicated and expensive and has to maintain this big global footprint and run this logistics operation. And ultimately, we are not starting from whole cloth here. The F1 management exists, and it's just a matter of every time the Concord rolls around, how much leverage do the teams have in that particular year?

• 3:53:55David Rosenthal?

  Yep. So that leads us to, I think, maybe the most interesting question of the analysis section for this episode, which is, did F1 require Bernie?

• 3:54:08Ben Gilbert?

  Yes, that is the key question.

• 3:54:09David Rosenthal?

  To get to where it got to.

• 3:54:16David Rosenthal?

  Obviously, there is this incredible counter example out there with the NFL of a similar dynamic, arguably a much more complicated dynamic, because there were a lot more teams in the NFL that needed to be wrangled.

• 3:54:32Ben Gilbert?

  Yep.

• 3:54:32David Rosenthal?

  It was hero's work by Pete Rozell to get them all to buy into communist capitalism. I think, though, you did need a Bernie to get F1 to where it is today.

• 3:54:47David Rosenthal?

  For two reasons. One, doing this episode and telling the Bernie story has made me appreciate much more how unique what Pete Rozell did at the NFL was.

• 3:55:00Ben Gilbert?

  It's like D Hawk at Visa.

• 3:55:02David Rosenthal?

  Yes. He was an N of one person who did an N of one job. You could rerun that experiment a thousand times and almost assuredly not end up with the NFL today.

• 3:55:16Ben Gilbert?

  I mean, the other major US sports haven't managed to do it.

• 3:55:20David Rosenthal?

  Nope. I mean, the NBA is inching closer, but still isn't there. Baseball's a long way away.

• 3:55:26Ben Gilbert?

  Yep.

• 3:55:27David Rosenthal?

  At a minimum, I think you absolutely needed a strong individual personality to emerge at the right moment in time. And for the NFL, that was Pete Rozell in the 50s and 60s. And for Formula One, that was Bernie in the 70s. And then you're kind of at the whim of the personality of that person.

• 3:55:50Ben Gilbert?

  Is there something about the other parties you're dealing with and their personalities? Or something about the global nature of the sport?

• 3:55:59David Rosenthal?

  So here's where I was going with the second reason why I think you needed a Bernie. The global nature of the sport, the insane logistics required to be operating a global sport. You know, the idea that an employee, that the teams, the F1 teams could have gotten together and hired an employee like the NFL did with Pete Rozell to go and create all this, there's no way you could incentivize.

• 3:56:25Ben Gilbert?

  That's a good question.

• 3:56:26David Rosenthal?

  Somebody in the right way.

• 3:56:27Ben Gilbert?

  Why was the NFL able to do it? Could Pete Rozell have developed the same structure in F1?

• 3:56:34David Rosenthal?

  No, definitely not.

• 3:56:35Ben Gilbert?

  Why?

• 3:56:36David Rosenthal?

  To go and negotiate with all of these teams, all of these tracks, all of these broadcasters, the FIA and this crazy NGO rules regulator.

• 3:56:50Ben Gilbert?

  You think because of the complex multi-partiness, you have to have the incentives of like being your own entrepreneur with a company?

• 3:56:58David Rosenthal?

  Not just an entrepreneur, I think you need somebody truly with Bernie's background.

• 3:57:04Ben Gilbert?

  Ruthless.

• 3:57:04David Rosenthal?

  Ruthlessness, like you need a street fighter to do this. Pete Rozelle was many great things, but he was not a street fighter.

• 3:57:11Ben Gilbert?

  Yeah. Hmm.

• 3:57:13David Rosenthal?

  What do you think?

• 3:57:14Ben Gilbert?

  I largely agree with you.

• 3:57:15David Rosenthal?

  You have, uh, nothing more to add in Charlie's words here?

• 3:57:19Ben Gilbert?

  Nothing more to add. All right, power?

• 3:57:21David Rosenthal?

  Power, yes.

• 3:57:23Ben Gilbert?

  But actually, first, there's something interesting to think about, which is power between teams.

• 3:57:29David Rosenthal?

  Hmm.

• 3:57:30Ben Gilbert?

  So, F1 has become about exploiting the tiniest little advantages or cracks in the rulebook, as we've talked about. And usually, other teams can figure out what you did and copy it very soon, like, within a few races. There are some advantages that last a whole season, like if you do something different in the fundamental layout of the engine, or battery, or gearbox, that that will buy you a year of edge, if it is the correct decision. And there's real magic when you can do something that lasts multiple seasons, like what Mercedes did, where, you know, I can't exactly explain to you why, but something happened where they were just better at designing the car than anybody else, and they won for eight seasons.

• 3:58:14Ben Gilbert?

  Or having a driver that was just so much better than anyone else in that era with Lewis Hamilton. But those things are more operational excellence than strategy.

• 3:58:25David Rosenthal?

  I mean, the drivers are the ultimate definition of not a power, because anybody else can hire them.

• 3:58:29Ben Gilbert?

  Right, not a power, I think they exist entirely outside the world of strategy. It's competency, it's operational excellence. And, like, being good at aerodynamics and car design and engine design is kind of that, too. And so, the thing that I would throw out here is, I think skill, or operational excellence, is actually more important in building a successful F1 team than strategy, because a lot of these ways that you can win via strategy have a short window that closes when other teams can sort of quickly arbitrage the value away.

• 3:59:07Ben Gilbert?

  And from what I can tell, almost all durable advantages in F1 that last three, four seasons or more come from operational excellence.

• 3:59:20David Rosenthal?

  Hmm. Yeah, I could probably make an argument for scale economies too. In that even with the cost caps, if you have more financial resources, you're gonna be able to exploit more loopholes.

• 3:59:37Ben Gilbert?

  Certainly you can hire the best driver. I mean, if you have an extra $100 million versus your nearest competitor, you pretty much should be able to go sign the best driver in the world.

• 3:59:47David Rosenthal?

  Yeah, so at least there. And like, you know, that's, I guess, sort of more like balance sheet, financial scale economies. But there does seem to be persistence in the top teams on the grid.

• 4:00:00Ben Gilbert?

  That doesn't seem related to power, to me.

• 4:00:03David Rosenthal?

  Yeah.

• 4:00:04Ben Gilbert?

  Like, what power did Mercedes have?

• 4:00:06David Rosenthal?

  Oh, so you're just saying that you think the top teams on the grid just are, they're just operationally better?

• 4:00:11Ben Gilbert?

  Yes, competency, skill competency, operational excellence, not a strategy they pursued that differentiated them on a durable basis.

• 4:00:21David Rosenthal?

  I guess that's true.

• 4:00:22Ben Gilbert?

  I think that exists year to year, but not for an eight-year winning streak.

• 4:00:25David Rosenthal?

  I could see that, I buy your argument. The teams are all about operational excellence.

• 4:00:29Ben Gilbert?

  The teams are powerless.

• 4:00:31David Rosenthal?

  Yeah, which I think is what you want when you're designing a league.

• 4:00:36Ben Gilbert?

  I think in sport, yes, you always want the most talented and highest performing team to be able to win. And you don't want structural barriers or advantages the way that you sort of do want if you're a capitalist investor.

• 4:00:54David Rosenthal?

  Yeah, let's narrow this at least to like the front half of the grid. Put the bottom teams that are kind of always the bottom. There's definite negative power spirals for the bottom set of teams. But for the top half of teams, over the arc of a couple of seasons, there is transference among that set.

• 4:01:18Ben Gilbert?

  Yes.

• 4:01:19David Rosenthal?

  Yeah, okay, I buy it, I buy it. And so thus, there must not be real power there?

• 4:01:24Ben Gilbert?

  Yes.

• 4:01:25David Rosenthal?

  Great, I like it. All right, so back to the Formula One group.

• 4:01:30Ben Gilbert?

  Yeah, let's analyze the takeoff phase different than the scale phase. Why did it become the premier motor racing series? Like, why is it bigger than Le Mans or IndyCar?

• 4:01:42David Rosenthal?

  I can think of a few reasons. I believe Formula One is the only racing car series where pretty much everything is custom engineered by the teams. There's very little stock elements to it, which inherently makes it more interesting and exciting.

• 4:02:03Ben Gilbert?

  Yep.

• 4:02:03David Rosenthal?

  Two, the prestige, luxury, old world, European royalty ties.

• 4:02:11Ben Gilbert?

  Yep.

• 4:02:11David Rosenthal?

  Plus the crossover with Hollywood.

• 4:02:13Ben Gilbert?

  Yep. And once you have that, you can kind of like hold on to it. Like, that's sort of a cornered resource that no other racing series, once you have it, can get it.

• 4:02:21David Rosenthal?

  Like, rally racing may be cool. Grace Kelly was never gonna go to a rally race.

• 4:02:28Ben Gilbert?

  Yep.

• 4:02:29David Rosenthal?

  Or all the slew of celebrities who come to F1 races these days. Probably most important, though, I think, is the FIA's explicit designation of Formula One as the pinnacle. Yeah. You have the more or less global regulating body for many other motorsports, though obviously not all. FIA doesn't regulate NASCAR or IndyCar, so stuff like that. But for many other sports explicitly saying, this is the pinnacle.

• 4:03:00Ben Gilbert?

  Right. So you sort of have a regulatorily granted monopoly.

• 4:03:03David Rosenthal?

  Yes, yes. It's like the royal seal of approval.

• 4:03:06Ben Gilbert?

  Yes. Our normal capitalist forces aren't really allowed to play out in the same way because it's been declared. It is the number one motors racing series in the world.

• 4:03:16David Rosenthal?

  It's right there in the name, Formula One.

• 4:03:17Ben Gilbert?

  Yeah.

• 4:03:18David Rosenthal?

  So that would be a cornered resource in the power framework, for sure.

• 4:03:22Ben Gilbert?

  So now let's ask like a more literal question, which is just the Seven Powers framework applied to the Liberty Media Formula One entity today. And the framework for power is, what is it that enables your business to have persistent differential returns or basically to be more profitable than your closest competitor on a sustainable, durable basis?

• 4:03:45David Rosenthal?

  Yep. And the seven are scale economies, network economies, counter positioning, switching costs, branding, cornered resource, and process power.

• 4:03:54Ben Gilbert?

  All right, so what is stopping someone from eating Formula One's lunch today?

• 4:04:00David Rosenthal?

  What is stopping the teams from breaking away and starting FOTA?

• 4:04:04Ben Gilbert?

  That's the biggest thing, is that your suppliers, both at the track side and at the car side, could build something and go around you. It's expensive and annoying to do that.

• 4:04:21David Rosenthal?

  Yeah, Formula One is pretty interesting as a sports league in that it has inherent network economies within the boundaries of the sport,

• 4:04:30Ben Gilbert?

  Yeah.

• 4:04:31David Rosenthal?

  of the Grand Prix's and the teams.

• 4:04:34Ben Gilbert?

  Yep. There's also real branding power. I mean, people will tune in to watch F1 in a way that they wouldn't tune in to watch FOTA.

• 4:04:42David Rosenthal?

  It is designated as the pinnacle of motorsport.

• 4:04:45Ben Gilbert?

  Yes.

• 4:04:47Ben Gilbert?

  Yes, and they've got that as a cornered resource that has been designated by the FIA. I think that's what I would classify that as. There are switching costs, certainly for the teams.

• 4:04:59David Rosenthal?

  Major switching costs for the teams and the circuits, too.

• 4:05:02Ben Gilbert?

  Yep. In fact, this is actually looking like a very protected business. The more we analyze it, they're pretty dug in with all their parties.

• 4:05:11David Rosenthal?

  Look, I mean, it really speaks to how powerful the F1 group is, that despite all the years of abuse from Bernie, the circuits and the teams never actually broke away.

• 4:05:25Ben Gilbert?

  Yep. Certainly, scale economies. This type of racing series is so expensive to operate that you kind of have to have this scale.

• 4:05:33David Rosenthal?

  Yep. You have to amortize all the overall costs of the league across a series of 22 races.

• 4:05:40Ben Gilbert?

  22 races across the teams, across all the viewers, such that you can generate the billion dollars in media rights.

• 4:05:47David Rosenthal?

  Yep.

• 4:05:48Ben Gilbert?

  Actually, I'm coming away feeling like this is very defensible.

• 4:05:51David Rosenthal?

  This is very defensible.

• 4:05:53Ben Gilbert?

  I guess the key to the whole thing is fans continuing to care. All right, Baron Bull?

• 4:05:58David Rosenthal?

  Yep, let's do it.

• 4:05:59Ben Gilbert?

  Okay, so I have a table-setting exercise for us getting into this.

• 4:06:04David Rosenthal?

  Great, great.

• 4:06:05Ben Gilbert?

  So there are 830 million global F1 fans for a league that does 3.4 billion and teams that generate another 2 billion or so on top of what the league pays them. So that's about $5.5 billion gross total revenue across the whole sport for 830 million fans.

• 4:06:27David Rosenthal?

  Wow, sure feels like there's a lot of room to grow there.

• 4:06:30Ben Gilbert?

  The NFL generates $23 billion of revenue across just 180 million fans. So that's four times the revenue on 1/5 the number of fans.

• 4:06:44David Rosenthal?

  Yep.

• 4:06:45Ben Gilbert?

  The NFL monetizes a fan at $127 per year and Formula One monetizes a fan at $7 per year. David, what is going on here?

• 4:06:56David Rosenthal?

  Well, one major thing that is an issue for F1, similar to IPL on our IPL episode, they just don't have anywhere near as much inventory.

• 4:07:07Ben Gilbert?

  Right.

• 4:07:07David Rosenthal?

  As the NFL. 22 races a year and there's no path for them to get to 100 races a year.

• 4:07:15Ben Gilbert?

  Unless they start sending like just Haas and Mercedes are going to head out to this circuit on this day and at the same weekend, you're going to see Red Bull. It's not happening.

• 4:07:26David Rosenthal?

  Yeah, so they're just fundamentally limited by inventory. Now that said, the flip of that is they absolutely have the opportunity, like Liberty identified, to make those 22 races into 22 Super Bowls, which they're well on their way to doing.

• 4:07:39Ben Gilbert?

  Right, they have to. So there's that. The biggest thing is the US is the biggest media market in the world with the highest revenue per consumer and the highest subscriber fee per media broadcast and you just don't.

• 4:07:55Ben Gilbert?

  You don't have penetration here yet. They're working on it. So that I think is like the easy answer. And then I think inventory, you're right. There's sort of a structural thing.

• 4:08:03David Rosenthal?

  Yep. And then that, you know, leads to, hey, if you really care about growing revenue and you really care about the US strategy, you've got to fix the race calendar.

• 4:08:14Ben Gilbert?

  Yes.

• 4:08:14David Rosenthal?

  You cannot be going up against the NFL in the fall. And especially not with two of the three big US races in the fall.

• 4:08:22Ben Gilbert?

  Yep. So that's a bull case. They figure that out. Another bull case is actually around the European TV rights, the thing we were talking about. They more fully realize the value where you have actual competition bidding for those rights. And since so many of the viewers are there, moving the needle a little bit actually is a giant amount of revenue change for F1.

• 4:08:42David Rosenthal?

  Yep.

• 4:08:43Ben Gilbert?

  The last bull case that I had thought of that we haven't really covered yet is a US driver or a US team becoming world champion.

• 4:08:52David Rosenthal?

  Hmm. Yep.

• 4:08:53Ben Gilbert?

  That could really kickstart fandom here.

• 4:08:56David Rosenthal?

  Yep. I think there's a related bull case of a champion or champion level female driver emerging in the coming years.

• 4:09:05Ben Gilbert?

  Yeah.

• 4:09:05David Rosenthal?

  Feels like that's gonna happen, has to happen, should happen. And given how much of the sports fandom has already shifted towards women, thanks to Drive to Survive and the movie, that feels like it could be a further acceleration there.

• 4:09:20Ben Gilbert?

  Yep. Bear cases, the biggest one that I just keep hearing is that it is more of a parade than a race. I mean, like NASCAR, you have aggressive overtaking lap after lap. It's just constantly exciting. And F1 is this beautiful competition, but so much of it is strategy, engineering, stuff that happens in qualifying, conserving resources, pitting at the right time. It takes away from the like natural observability of the sport. And so the bear case is that despite everything they'll try to do in regulations to make it more competitive, you know, these are really big cars because of safety that it's just hard to pass and you're really incentivized to conserve fuel, not burn your

• 4:10:05Ben Gilbert?

  tires when you don't need to, et cetera, et cetera.

• 4:10:08David Rosenthal?

  Yep.

• 4:10:09Ben Gilbert?

  Which puts a natural ceiling on the amount of fervor around it.

• 4:10:13David Rosenthal?

  Yep. One thing that I think you could have argued a couple of years ago was a bear case, but I think has been put to rest is this was a COVID-driven fad. I think F1 has proven enough staying power post-COVID.

• 4:10:29Ben Gilbert?

  That's true. I probably would have bet that actually it was a COVID fad in the US, one or two years after Drive to Survive, which would have been wrong.

• 4:10:35David Rosenthal?

  I mean, it was really in that category with like COVID tropes. Like you got your Peloton, you got your F1 simulator, you're watching Drive to Survive and Tiger King. But of the set of activities, F1 feels like one of the few that has persisted.

• 4:10:51Ben Gilbert?

  Yep. If you're an investor, one reason why you might not give it the multiple that it used to have, like Liberty bought it for 18 or 20 times earnings, something like that. One reason you might not be as generous in its future growth is it's kind of optimized now. A lot of the low-hanging fruit that was available for Liberty to do is levers that they have pulled. So everything from here is going to be a little bit more of like a multi-decade slog than some easy quick fixes. Not that that's really a bear case, but it won't show up right away.

• 4:11:26David Rosenthal?

  Yep.

• 4:11:26Ben Gilbert?

  This last thing that I just keep thinking about, I don't know if it's a bull case, bear case, it really could be either, is the broadcasts right now, at least when I watched it last season, do leave a lot to be desired if you are not super into the sport. So there's this bull case of bringing Drive to Survive storylines into the race. Like, let us see the drivers before the race more. After getting to know these people so much on Drive to Survive, it felt weird that I was watching a race and I like didn't get any of their human side.

• 4:11:56David Rosenthal?

  Yeah, it's like a different product.

• 4:11:57Ben Gilbert?

  It's like, are these the same people? It says their names, but like I can't see their face. I can barely hear their voice. Like, once or twice a race, I get some little tiny amount of radio chatter. So I think there's more you could do of like bringing... The people from Drive to Survive into the race, they're the same people, so you should be able to do it. And second, data visualization to make the dynamic moments of the race. Like, there are amazing moments in the race, but make them more understandable to new fans. So if we're likely to see an overtake five laps from now, when so and so has the right tires and so and so else has pitted, like exposing that, start talking about it, building toward it, and help me visualize it.

• 4:12:39Ben Gilbert?

  Like, why is that going to happen in five laps and not two laps? Like, a sensible way to show, hey, that person on our little thing, it says they're in first, but really, they're not in first because they haven't pitted yet, and those other four people have. So some of that stuff-

• 4:12:54David Rosenthal?

  Yeah, help me understand better what's going on. Yep. This is actually an opportunity, or maybe we could frame it as part of the bull case for Apple's involvement-

• 4:13:02Ben Gilbert?

  Yes, absolutely.

• 4:13:03David Rosenthal?

  -in the sport. You know, they already developed special cameras for the F1 movie. Apple did.

• 4:13:11Ben Gilbert?

  Yep.

• 4:13:12David Rosenthal?

  And they're bringing those to their coverage of the races this season.

• 4:13:17Ben Gilbert?

  It's basically an iPhone, and they rearranged the components to fit in the standard F1 camera package.

• 4:13:21David Rosenthal?

  Yep. And it's not that difficult to imagine some of the Vision Pro technology being really a game changer on this front for F1. I'm not even really thinking about consumers wearing Vision Pro and watching these things. But to your point about seeing the drivers, experiencing the drivers more during the race, like, Apple absolutely has the technological ability and resources to invest in helmet cams, driver facial recognition-

• 4:13:52Ben Gilbert?

  Oh, yeah, they should-

• 4:13:53David Rosenthal?

  -reconstruction.

• 4:13:54Ben Gilbert?

  What do they call it in the Vision Pro where I could take a video call wearing the Vision Pro and it uses my avatar?

• 4:14:00David Rosenthal?

  Right.

• 4:14:00Ben Gilbert?

  Do that with the drivers.

• 4:14:01David Rosenthal?

  Totally.

• 4:14:02Ben Gilbert?

  I don't know, it'd be hard, though. Their faces are so squeezed in those helmets. But you're right, there's technology solutions to this.

• 4:14:08David Rosenthal?

  Acquired doesn't need to do product development for Apple and F1 here, but like, this is a bull case for Apple becoming a major partner of F1.

• 4:14:16Ben Gilbert?

  Yep. Anything else in Baron Bull?

• 4:14:19David Rosenthal?

  That's what I got.

• 4:14:20Ben Gilbert?

  All right. Quintessence.

• 4:14:22David Rosenthal?

  Oh, man.

• 4:14:23Ben Gilbert?

  Listeners, this is where we try to land the plane. What is the thing that's still on our mind-

• 4:14:27David Rosenthal?

  Land F1 car.

• 4:14:28Ben Gilbert?

  Yes, that, to pit the car, that we still can't stop thinking about.

• 4:14:32David Rosenthal?

  Box, box.

• 4:14:33Ben Gilbert?

  Box, box, box. Box this lap.

• 4:14:40Ben Gilbert?

  All right, so here's mine. It won't come as a shock to anyone, but I am so astonished that this is a sport that might be durably popular with a giant group of people who never watch the sport. I can't think of another sport where that is true, where someone would say, oh, I'm a big football fan, but I've watched zero NFL games this year. But there are lots of people who say they love F1, who can name people, who will buy merch, who will associate and purchase from sponsors of teams, and who can tell you who won the championship last year, but will never tune in live. And that might be like the majority of the US audience.

• 4:15:25David Rosenthal?

  Yep. I can't think of another one either.

• 4:15:28Ben Gilbert?

  Yep.

• 4:15:29David Rosenthal?

  Whew, my contestants. This is by far the most complex sports business and league, certainly that we have studied. And it's hard to think of others at this scale that might match it in complexity.

• 4:15:51Ben Gilbert?

  It's more akin to boxing or UFC with this sort of a competition happens in a place at a time. It's not anybody's sort of home stadium. There's a promoter.

• 4:16:02David Rosenthal?

  Yep.

• 4:16:03Ben Gilbert?

  But this has 10 teams, not two fighters, and they have $300 million race cars, so...

• 4:16:13David Rosenthal?

  With 1,000-person teams behind it. I was gonna make the point earlier in the episode that it'd be like if the equipment manager in an NFL team was the most important person on the team and had 800 people who worked for him or her.

• 4:16:31Ben Gilbert?

  Yeah.

• 4:16:32David Rosenthal?

  Yeah. I can't imagine any other sport that is anywhere near as complex as this. And so you've had this crazy history as a result, but it's still been durable.

• 4:16:46David Rosenthal?

  Because nobody else could pull all of these disparate parties together in the way that Formula One has managed to.

• 4:16:53Ben Gilbert?

  The activation energy to do something similar than this is prohibitively insane.

• 4:16:58David Rosenthal?

  Yes, yes.

• 4:16:59Ben Gilbert?

  The next Formula One is not a direct thing that looks like Formula One. It's something completely different that can start small and grow organically from here.

• 4:17:08David Rosenthal?

  To the point you made a few minutes ago, nobody would ever draw up a league that looked like this on paper.

• 4:17:14Ben Gilbert?

  Right. It's like wonderfully organic.

• 4:17:16David Rosenthal?

  Yes, yes, and chaotic.

• 4:17:18Ben Gilbert?

  And it's funny, even though it is a thick league or a fat league, just like IPL cricket is, that started out of nowhere and was, it came out guns blazing and burned hot and worked.

• 4:17:30David Rosenthal?

  Yep.

• 4:17:31Ben Gilbert?

  And this is kind of the opposite. It took 70 years.

• 4:17:33David Rosenthal?

  Yep. All right, that's my quintessence. What I got?

• 4:17:37Ben Gilbert?

  Carve outs?

• 4:17:38David Rosenthal?

  Carve outs. Let's do it.

• 4:17:39Ben Gilbert?

  So for anyone new to the show, this is where we highlight one or two things that we have loved recently that are totally unrelated to the episode that we wanted to share with all of you. So for my wife's birthday, we went to Marymore Park in Seattle where they have a, I can't figure it, it seems reasonably permanent, but it's a tent with a Cirque du Soleil show in it. And the show-

• 4:18:02David Rosenthal?

  You told me about this.

• 4:18:03Ben Gilbert?

  Is called Echo, and it is so awesome. The Cirque du Soleil blows me away every time, but the performers are just otherworldly in their talent. They're, unlike many live performances, it's not like, oh, we'll see if this works, and if not, I can bail out and I have a fallback plan. There's no fallback plans. They hit their marks perfectly every time, doing absolutely superhuman stuff in an awe-inspiring way. Go see it if you can, or really any Cirque du Soleil, because it's just so, so impressive. I want to go see five more. Like, I'm in. I'm super hooked.

• 4:18:35David Rosenthal?

  Yeah, you make it sound like actually really awesome.

• 4:18:38Ben Gilbert?

  If you appreciate N of One performers who are doing something that, well, you'd have to train your entire life for it and you're the very best in the world and you make no mistakes, and it's coupled with like unbelievably creative, clever things where you think like, how did they even think of this? That's Cirque du Soleil.

• 4:18:54David Rosenthal?

  Awesome.

• 4:18:55Ben Gilbert?

  My second one is super quick. The Seahawks just won the Super Bowl, and NFL Films released on YouTube a 40-minute cut of the game called "Mic'd Up," and you get to hear a whole bunch of the players talking to each other, and it is awesome, whether you're a Seahawks fan or not.

• 4:19:09David Rosenthal?

  And it actually makes the game interesting?

• 4:19:11Ben Gilbert?

  God, was that a boring Super Bowl and I loved it.

• 4:19:13David Rosenthal?

  Oh, man. We had a great time.

• 4:19:15Ben Gilbert?

  God, that Super Bowl game was like an F1 race.

• 4:19:17David Rosenthal?

  Yeah.

• 4:19:20David Rosenthal?

  It was super, super special doing the Innovation Summit and then going to the game with you. That was, that was a real life moment.

• 4:19:27Ben Gilbert?

  Yep.

• 4:19:28David Rosenthal?

  All right. My first carve out is Tonal, the exercise equipment. So we have some acquired listeners at Tonal and they heard me on a previous carve out talking about how I'd redone my home gym and, uh, which I'm very happy about, but it is a very small space. It's on my bottom floor here at my San Francisco house. And, uh, so, so space is at a premium. Before we redid the space, I had a full squat rack in there. I had enough room for that and kinda don't have enough room for it anymore. And so the folks at Tonal reached out. This thing is awesome. It just mounts to the wall and it takes up no space. It's perfect and it's better than a squat rack because I can do

• 4:20:09David Rosenthal?

  a infinite number of strength training exercises on it. So, uh, very happy user of Tonal now. Thank you for making my home gym much better. My second carve out is continuing my truly amazing and gratifying saga as a parent of my older daughter discovering video games. Because I've been documenting this whole saga via carve outs for the last several months, listeners have been reaching out and one of my old classmates from college, Ryan, actually sent me an email about a game called Princess Peach Showtime. Nintendo finally got the picture that like, hey, girls are

• 4:20:50David Rosenthal?

  a growth audience for them. And they made a Princess Peach game where Peach is the heroine. Peach goes to a magical theater and an evil witch named Grape takes over the theater and Peach has to dress up in different costumes and go reenact all the plays. To save the theater. My daughter loves this thing and it's been so fun to watch her like become an expert at this game, the way that I fell in love with Super Mario 64 back in the day. It is so, so, so cool. So highly recommend to anyone with little kids and a Nintendo Switch, go get Princess Peach Showtime, especially if you have a young daughter. Might be their gateway into video games.

• 4:21:35Ben Gilbert?

  Nice. Well, we have some thank yous and lots of great people we spoke with this episode, as always, to Arvind Navarathnam at Worldly Partners for his awesome, awesome write-up on Formula One, linked in the show notes.

• 4:21:50David Rosenthal?

  Arvind really did a banger job.

• 4:21:52Ben Gilbert?

  I mean, it's so good.

• 4:21:53David Rosenthal?

  He does a great job every time, but like, this was a banger.

• 4:21:55Ben Gilbert?

  He's become a real indispensable part of, of research for acquired episodes.

• 4:21:59David Rosenthal?

  Similarly, on my end, thank you again to Joshua Robinson and Jonathan Clegg at The Wall Street Journal, authors of The Formula, truly the best business history book on F1 out there.

• 4:22:11Ben Gilbert?

  All right, and I've got a great list here. Big thank you to Zach Brown, the CEO at McLaren Racing. Thanks so much for your time in prepping. To Greg Maffey, the former CEO of Liberty Media, when they of course bought Formula One from CBC. Thanks Greg for helping me understand the whole company. To Brandon Reig, who oversees nonfiction and sports at Netflix. Very helpful for understanding Netflix's strategy with Drive to Survive and the impacts it had. To James Gay Rees, the co-founder of Box to Box Films, the production company behind Drive to Survive. To Eddie Q at Apple, longtime Formula One fan and of course, who recently bought the US broadcast rights. To Pavan Gami, Alex Knight and Jimmy

• 4:22:53Ben Gilbert?

  Fairbanks, who are equity investors and analysts who really helped me understand the investor perspective on Formula One Group and Liberty Media. To Sid Trevetti, partner at Foundation Capital and lifelong F1 fan. To Jam Najafi, the former vice chairman of McLaren Racing. And from Ford, Will Ford and Mark Rushbrook, who obviously did the big engine partnership with Red Bull Racing. Thanks for your time, guys.

• 4:23:18David Rosenthal?

  Yep.

• 4:23:19Ben Gilbert?

  To Nathan Bachez, my good friend and longtime F1 fan. To our friends at Shopify, Toby Lutka and Mikhail Parotkin, both total motorsports nuts. And Toby actually races in another racing series, so kind of fun to get his, his perspective as a driver.

• 4:23:33David Rosenthal?

  It was super fun talking to Toby.

• 4:23:36Ben Gilbert?

  To Andrew Craig, former chairman of IndyCar and sports marketing consultant; to Mike Miller, former Wall Street Journal editor, who helped us think through a lot of the big beats on the story on this one; to our friend Dustin Sedgwick, who has done partnerships and sponsorships with teams and races all over the course of his career; to Colin Fleming and the whole ServiceNow team for bringing us to the Paddock Club for the Las Vegas Grand Prix for some first-party research; to Bobby Epstein, CEO of the Austin Track, circuit of the Americas, and promoter of the US Grand Prix; and lastly, to our friends at Dalupa for providing us with some amazing financial models and spreadsheets of all the historical data on Formula One, just like they did for us on Coca-Cola and Google.

• 4:24:18David Rosenthal?

  Yep. And just one more on my end to Chase Carey, a board member now of Liberty and Fox, but obviously former CEO of the F1 Group.

• 4:24:29Ben Gilbert?

  Yep.

• 4:24:29David Rosenthal?

  Thanks for chatting with us.

• 4:24:30Ben Gilbert?

  Really, quite the cast this time, David. These lists are getting a little nuts. In addition to all the people that we aren't even saying that helped us too, so thanks if you didn't hear your name.

• 4:24:41David Rosenthal?

  Yes.

• 4:24:41Ben Gilbert?

  All right. If you liked this episode, go check out our other sports episodes: the NFL, NBA, IPL, cricket, some good ones in there. And now, if you're fired up about F1, the first race is just a few days away. So if you want to see any images from this episode, you can join our email list, acquired.fm/email. We'll also share our big takeaways from every episode, episode summaries. You're going to get involved in helping us pick future episodes. We do polls and little hints to that email list of what our next episode will be. So sign up at acquired.fm/email and come talk about it in the Slack at acquired.fm/Slack. With that, listeners, we'll see you next time.

• 4:25:23David Rosenthal?

  We'll see you next time.