Formula 1 Bets on eSports for Future Growth

Formula 1 (NASDAQ:FWONK) revealed last Monday (January 7) that its two-time F1 New Balance eSports Pro champion, Brendon Leigh, will be featured in a Race of Champions event scheduled for January 19 to 20.

The news from Formula 1 follows the group’s announcement in December that its second-ever eSports series was watched by 4.4 million people as it seeks to be at the “forefront of the e-racing wave.”

The two-day Race of Champions event will feature several top racing personalities, including those involved in Formula 1. Drivers will compete in a head-to-head battle to determine the champion.

“Though it’s not yet clear which drivers will be drawn against one another, the prospect of F1 Esports drivers racing against Formula 1 legends — on an historic F1 circuit no less — is indeed a tantalising one,” the group notes in its release.

Leigh will compete both on a racing simulator as well as on the physical track at Autodromo Hermanos Rodriguez in Mexico. He is set to participate in both a team event as well as an individual competition.

The news also comes on the heels of Matt Roberts, director of market research at Formula 1, revealing in a Reddit Ask Me Anything (AMA) session that eSports has been beneficial to the group.

“[Eighty percent] of the [eSports] audience is under 35 years old but is amazing when you compare this to ageing TV audiences,” Roberts said.

As first reported by Forbes, Roberts said in his AMA session that eSports is part of Formula 1’s drive to attract a younger audience as it seeks to boost its viewership and the future of the sport.

“We know that digital, social and things like esports and fantasy are going to play a big role in appealing to this generation. We feel we are moving in the right direction but we are still have a long way to go.”

Roberts revealed that 61 percent of new fans tuning into the sport are under 35, but that Formula 1 has been playing a “catch up” game as the average age under old management was said to be higher.

In September 2016, Liberty Media (NASDAQ:LSXMA,NASDAQ:LSXMB) announced that it would acquire Formula 1 for a transactional price representing an enterprise value of US$8 billion. The group appointed Chase Carey, who was then the vice chairman of 21st Century Fox (NASDAQ:FOXA), as it sought to support the “next phase of growth” of the sport.

In January 2017, Liberty Media announced the completion of its acquisition of Formula 1.

Roberts revealed that prior to 2017, Formula 1 did not do any marketing and that the current management is working to nail down a strategy to attract a younger audience and “fans of the future.”

He noted that the average age of a global Formula 1 viewer is 40, while 14 percent are said to be under 25. Thirty percent of the sport’s audience is in the 25-to-34 year age group and 20 percent is in the 45-to-54 group, with 17 percent over 55.

“Of course it is important that we don’t alienate our older viewers in pursuit of these younger fans as they will have been fans for many years and are more likely to sit through the 2 hours race,” Roberts said. “It is a good point and a strategy which are in the process of nailing down so maybe I will be able to share more next time.”

Roberts said that tapping into the digital market is a priority for Formula 1’s new management, and that process has yielded positive results.

Formula 1’s eSports series is operated in partnership with Codemasters (LSE:CDM), which is also the publisher of the Formula 1 video game. In 2018, the eSports series saw the inclusion of the official teams of the sport.

In December’s release, Formula 1 said that the eSports series had over 100 million social media impressions, and that 70 percent of viewers tuning in to watch the sport were below 34 years.

“The exponential growth in esports is a material fan engagement and commercial opportunity for us on myriad fronts and we plan to remain in the vanguard as we move into the 2019 season,” Sean Bratches, managing director, commercial operations at Formula 1, said at the time.

Bratches said that the inclusion of the official teams has built the foundation for the future growth of the series as the 2019 season begins.

“Our continued focus will be on broadening opportunities for the next generation of motorsport fans and brands that understand the value of this audience and are hence investing in this space,” he said.

Over 65,000 players competed in qualifying rounds to secure a spot in the inaugural F1 eSports Pro Draft in July 2018, and over 1 million laps were completed in the qualifying sessions through the F1 2017 game.

“Formula 1’s message is clear that esports is an open door for anyone with a passion for gaming and racing,” it states.

The group’s eSport series was contested by 26 drivers from 12 different nationalities, with the series comprised of three live broadcasted events in London, UK.

“The viewing figures for this year’s series are a testament to the series’ growing interest and engagement with a new audience,” Frank Arthofer, director of digital and new business at Formula 1, said in the release. “The younger generation has truly embraced the F1 Esports Series.”

Shares of Liberty Media were down 3.17 percent on Monday (January 14) and closed at US$31.19. The stock has a “sell” ranking on TradingView with 13 verticals against, eight in neutral and seven in favor.

Meanwhile, shares of Codemasters were up 3.66 percent on Monday and closed at GBP 1.84. The stock has a “buy” ranking on TradingView with 15 verticals in favor, nine in neutral and two against.

Image courtesy of Formula 1.

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Securities Disclosure: I, Bala Yogesh, hold no direct investment interest in any company mentioned in this article.