stockrowWhat it does
Liberty Media is a motorsport and live entertainment company whose principal businesses are Formula 1 and MotoGP. Formula 1 holds the exclusive commercial rights to the FIA Formula One World Championship, a car racing series. MotoGP holds the exclusive commercial rights to the FIM Grand Prix World Championship, a motorcycle racing series. Liberty wholly owns Formula 1 and owns a majority interest in MotoGP.
Rather than manufacture race cars or employ the drivers, Formula 1 develops and sells the championship’s commercial rights. Its customers include race promoters that pay to host events, broadcasters that license races for their audiences, and sponsors that buy advertising and association with the sport. Formula 1 also sells hospitality, subscriptions to its own streaming service and other services. MotoGP operates a similar model for motorcycle racing.
Both businesses coordinate with racing governing bodies, teams, promoters and media organizations. They film races, produce international television feeds and arrange transport for equipment. Their events take place around the world, while operations are primarily headquartered in the U.K. and Spain.
Derek Chang is Liberty’s President and Chief Executive Officer. Liberty Formula One common stock is no longer a tracking stock: it no longer tracks a designated group of businesses within Liberty separately from the company as a whole.
How it makes money
Formula 1 and MotoGP are Liberty’s reportable motorsport segments. Each earns its primary revenue by selling race promotion, media and sponsorship rights. The company also has corporate expenses and minority investments outside those segments.
A race promoter pays for the right to host and stage an event. Promoters generally retain ticket revenue and may also earn money from concessions, local sponsorship and hospitality. Formula 1 directly promoted the Las Vegas Grand Prix, receiving ticket and other commercial revenue from that event itself. Race promotion agreements commonly include annual fee increases; their terms vary by championship and local market.
Both businesses license broadcasts by territory and language under agreements with broadcasters. They also sell direct subscriptions: Formula 1 through F1 TV and MotoGP through VideoPass. Media rights are a primary revenue stream for both businesses, alongside race promotion and sponsorship.
Sponsors pay for rights such as trackside advertising, event naming and official supplier status. Other revenue includes hospitality, support races, licensing, television production and logistics. A significant majority of primary commercial contracts specify advance payments and annual fee increases.
Revenue and expenses follow the race calendars. Formula 1’s are generally lower in the first quarter; MotoGP’s are generally lower in the first and fourth quarters than in the second and third.
Customers and how it sells
Liberty’s commercial customers include race promoters, broadcasters, advertisers and sponsors. Fans also pay directly for streaming subscriptions and hospitality. At most Formula 1 events, the local promoter sells general event tickets, while Formula 1 sells Paddock Club hospitality. MotoGP promoters generally receive ticketing rights, and MotoGP sells its own hospitality programs.
Formula 1 events take place across Europe, Asia-Pacific, the Middle East and North and South America. The championship is followed by hundreds of millions of television viewers in approximately two hundred territories. MotoGP events also span Europe, Asia-Pacific, Australia, the Middle East and North and South America, with television viewers in approximately two hundred territories.
Formula 1 has broadcast agreements worldwide. Its broadcasters include ESPN in the U.S. and Latin America, Sky in the U.K., Germany and Italy, and Canal+ in France. MotoGP’s broadcasters include DAZN in Spain, Sky Italia in Italy and TNT Sports in the U.K. Both series reach viewers through free-to-air and pay television as well as their own subscription streaming services.
Promoters range from circuit owners and event organizers to government bodies. Sponsorship customers can buy packages associated with particular races or with a championship.
Suppliers and costs
Formula 1 and MotoGP depend on independent teams, race promoters and governing bodies to stage their championships. Neither business owns its participating teams or contracts directly with the drivers or riders. Teams secure their own competitors and fund the costs of racing.
Formula 1 pays teams from a prize fund under the Concorde Agreement. The fund is calculated with reference to a fixed percentage of an adjusted operating profit measure, and team payments reflect results and other principles. A share is paid to Ferrari in recognition of its heritage. MotoGP pays the teams’ representative body, IRTA, for services that include securing team participation; IRTA oversees payments to teams.
The businesses also incur costs for event production, freight, travel and technical support. Formula 1 makes cash payments or shares revenue with some promoters for circuit commercial rights. For the self-promoted Las Vegas Grand Prix, Formula 1 was responsible for developing and operating the circuit and paddock facilities.
Formula 1 and MotoGP have variable-rate borrowings. Higher interest rates can increase their debt service obligations.
Competitive position
Formula 1 and MotoGP compete for viewing, event attendance, advertising and media rights against other sports and entertainment. The competing sporting events and leagues identified include the Olympic Games, FIFA World Cup, Champions League, La Liga and Premier League. No competing company is named as such in the available material.
Formula 1’s commercial rights to the F1 Championship extend for a long term. MotoGP also holds exclusive commercial rights under a long-term agreement. The FIA owns the F1 Championship and regulates its sporting, technical and safety aspects; the FIM regulates those aspects of MotoGP.
Our reading: Exclusive rights are a substantial competitive protection because they give Liberty control over selling the commercial rights to these championships for long periods, although they depend on agreements with the governing bodies. The FIA can terminate Formula 1’s agreement in specified circumstances, including certain changes of control.
Formula 1 owns trademarks and race footage, and it has rights to use team intellectual property to portray the championship. MotoGP also owns trademarks and race footage and has rights to use collective team intellectual property. Our reading: Those intellectual property rights reinforce the commercial rights by supporting licensed broadcasts, promotion and merchandise, but neither championship is insulated from competition for audiences and sponsors.
Growth opportunities
Formula 1 aims to broaden the championship’s global reach and increase the value of its commercial rights. Its plans include developing media distribution partnerships, growing sponsorship, expanding hospitality offerings and using licensing arrangements to deepen fan engagement. Formula 1 also seeks more access to fan data and aims to improve on-track competition.
MotoGP’s strategy includes building brand awareness and expanding its audience in markets where it is not traditionally present. It seeks to use greater awareness to increase demand for media rights and race slots and to attract more sponsorship partners. MotoGP also plans to improve the experience at races and work with promoters on event production.
Consolidated revenue increased in the latest year compared with the prior year, driven by higher Formula 1 revenue and revenue from MotoGP. MotoGP was not part of Liberty for the full year.
Formula 1 also has exclusive rights to promote and commercially exploit the F2 and F3 series. It operates F1 Academy, a series intended to develop young female drivers. MotoGP generates revenue from other motorcycle racing series, including WorldSBK and junior championships.
- $2.0BFY2019
- $1.1BFY2020
- $2.1BFY2021
- $2.6BFY2022
Structural risks
- Audience and spending: A decline in the popularity of Formula 1 or MotoGP could impair their ability to exploit commercial rights. The businesses are also sensitive to reductions in travel and discretionary consumer spending, including during a future pandemic or epidemic.
- Participation and rights: Formula 1 depends on the ongoing involvement of its teams. Teams have committed to participate under the Concorde Agreement, subject to earlier termination in specified circumstances. The FIA may also terminate Formula 1’s commercial rights agreements under certain conditions.
- Debt and cash access: Formula 1 and MotoGP have variable-rate borrowings, so higher interest rates can increase debt service and reduce net income and cash flow. Credit facility covenants restrict activities, and access to subsidiary cash is subject to restricted payment tests.
- Regulation and event permits: Both businesses are subject to competition laws and operate across multiple jurisdictions. Radio-frequency permits are needed for live production and communications, while events require local approvals and circuit safety certification.
- Shareholder control: Liberty’s multi-series structure provides different voting rights among its share classes. Charter and bylaw provisions may discourage or delay a change in control.
Bottom line
Our reading
Our reading: Liberty is a commercial rights business built around two global racing championships, with revenue tied to promoters, broadcasters, sponsors and fans rather than manufacturing vehicles. Long-duration exclusive rights support the model, but it relies on governing bodies and independent teams as well as continued audience interest. Debt service and restrictions on moving subsidiary cash are additional exposures alongside the work of expanding MotoGP.