The Fear of Missing Out

On this blog is a post about the America’s Cup, contrasting the boat-racing series to the lack of new, substantial blood within the ownership ranks of the Verizon Indycar Series. Since then, a new racing series has joined the motorsports landscape in the form of the FIA Formula E Championship that has had this author asking the same questions again. Formula E just had their first race on United States soil, and it seemed to go off quite well. Roger Penske even paid a visit to the Formula E paddock to take in what the fuss is all about. Roger’s son, Jay, made the switch from Indycar racing to Formula E this year — selling all of his Indycar-specific equipment, cars, and spares to turn his interests (sporting and financial) to the international world of all-electric racing.

Joining Jay in Formula E was a dynastic name and team owner nearly synonymous with Indycar racing and the Indianapolis 500 — Michael Andretti and Andretti Autosport. Penske and Andretti (even though it’s the lesser Penske) have looked into and found Formula E to be a worthwhile investment and have fielded teams for, what was, an unproven concept. No one had ever raced fully electric cars before, on a world stage. And the series certainly had its skeptics and detractors leading up to and even after the season started. Drivers pitting to jump into a second car? Top speeds of only 120mph? Tiny tires? Again, entirely unproven, but there was something there that excited the money players to jump in: potential.

Even though the components that make up the DNA of Formula E were (and still are) doubted, the smart money sees the incredible potential in Formula E. Not Formula 1, not Indycar, not NASCAR — Formula E. One of the early investors in Formula E, on a series-level, was Boston Celtics owner, Wyc Grousbeck, who’s sports marketing company — Causeway Media Partners — invested $21m USD to jumpstart the all-electric series. At this past weekend’s Miami E-Prix (as they call it), it was announced that John Malone — American billionaire and media mogul, who owns Discovery Communications — has invested and taken the biggest stake in Formula E to date.

Without knowing what percentage of Formula E Holdings Wyc Grousbeck’s $21m seed funding purchased, we can’t know what the valuation of Formula E is, and therefore it’s difficult to even try to guess what percentage John Malone has purchased and at what cost. But series leader Alejandro Agag (no slouch in business and political circles, himself) admitted that Malone’s investment was substantial. Another boon for Formula E; the potential seemingly being realized.

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The Verizon Indycar Series and the FIA Formula 1 World Championship are two established, and long-running motorsports stalwarts. The Indianapolis 500 Mile Race stands as a crown jewel in the motorsports world with a rich history as long as the American automotive industry, itself. Formula 1 is — by nearly all accounts — the pinnacle of motorsports; a series that globe trots from country to country, touting the fastest cars, the best drivers, and the brightest lights. And yet, even though it was reported a year ago that John Malone was kicking the tires to see how feasible it would be to purchase the Formula One Group (the company owning the rights to Formula 1’s commercial rights) from CVC Capital Partners (majority-owners of the Formula One Group), the deal never materialized. A year later, and John Malone has instead invested heavily into Formula E.

The financials of Formula 1, specifically, are upside-down and a mess to begin with — and are an article for another day. But the fact John Malone was considering heavily the prospect of making the purchase indicates significant potential. And trust that the potential would need to be significant for a company to purchase a billion-dollar sport like Formula 1 in today’s television world that puts an absolute premium on two things: appointment, must-see, live television; and on-demand streaming content. In addition to John Malone’s cursory interest, on the team ownership level there has been movement within the publicly floated Williams F1 team. Healthcare entrepreneur Brad Hollinger has recently purchased 10% of the legendary team, pointing to the great potential the entire sport of Formula 1 is staring at in the coming years.

And yet, with all of this major financial activity in the world of international motorsports, on the surface there seems to be very little sizzle for the Verizon Indycar Series. The only rumors smart marks (intelligent, invested, hardcore fans) ever hear are of the Indycar series potentially going bankrupt; of the Indianapolis Motor Speedway tightening the financial support the series has enjoyed over the past decade and a half; that the series has finally broken even (though some reporters even refute that); a race has been cancelled; it goes on.

What the Verizon Indycar Series lacks in 2015 in that keyword: potential. The OEMs that provide the backbone of the series in the form of engines, and now aerokits (Chevrolet and Honda) spend tens of millions of dollars on development and production, and are handcuff by series mandates that they only sell their products to teams for tens of thousands of dollars, resulting in the need for each OEM to essentially subsidize the technical platform upon which the series races and competes upon. There should be no surprise, then, that there hasn’t been another OEM to enter the fray. Where’s the potential there?