Every sport is a business, but few are as closely connected to their budget lines as Formula One: Wipe away the oil and the champagne, and you see an entire economic world — one The Athletic will map out in Business of F1, our series all about this increasingly important element of a booming sport.

Formula One has fostered a reputation over the past 70 years that makes it so much more than a racing series.

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Its international reach, covering five continents and 20 countries with races in some of the world’s most glamorous cities, sets it apart from other sporting events. F1’s reputation for big characters with bigger wallets helped it grow into the fastest business in the world through its history.

But it all comes at a price. Sponsorship is one of the most vital sources of revenue for F1 itself, the 10 teams, and the tracks that put on races each year.

While the era of tobacco money fueling bumper budgets is long over, the focus now being on financial sustainability, F1’s recent boom has brought brands flocking to the series — and prompted an evolution in how teams approach sponsorship.

F1 teams are renowned for innovation, finding new technical tricks or loopholes in the rules to make their cars faster. The same is true for their approach to sponsorship.

“It’s the pinnacle of sports, and (the) pinnacle of the business of sport,” Matt Dennington, McLaren’s executive director of partnerships and accelerator, told The Athletic.

“The sport’s absolutely on fire. More of the consumer brands are able to connect with a huge, very engaged fanbase and a new audience.”

Changing up designs

The days when sponsors would simply pay for a spot of real estate on the car for their stickers are long gone. Partners will now look for more activations, events and content involving the drivers and ways to maximize their link to an F1 team.

Walk through an airport duty-free, and you will see Lando Norris promoting TUMI luggage or a McLaren edition bottle of Jack Daniels. A scroll through Instagram and TikTok (depending on the algorithm) presents Charles Leclerc and Carlos Sainz modeling Ray-Ban sunglasses or even Günther Steiner making guacamole for Chipotle. The links between F1 teams and their sponsors are more explicit and prolific than in the past.

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“Teams are becoming more sophisticated. Everyone’s got to raise their game to a huge amount of content opportunities,” Dennington said.

McLaren has emphasized finding new ways to work with sponsors under the stewardship of CEO Zak Brown, who took charge in late 2016. Before that, Brown headed up Just Marketing International, the motorsport marketing agency he founded in 1995, which was later sold for $76 million.

Not only is the McLaren car covered in far more sponsors than it was towards the end of the tenure of its previous boss, Ron Dennis — the 2014 chrome McLaren was especially bare — but brands will actively take over the entire livery for some races.

In 2021, McLaren ran a retro Gulf Oil livery for the Monaco Grand Prix, while the team adopted a twist on its classic chrome design for Google at this year’s British Grand Prix. At all races, even the wheel rims on the McLaren car are in the colors of the Google Chrome logo – a creative approach to brand promotion.

Although there are limits under F1’s regulations on how many wholesale livery changes a team can do each season, there is always a novelty factor. By the end of the 2023 season, McLaren will have used a tweaked car livery at six races.

“We’re proud that we’ve been first movers in that space, and we’ll continue to innovate,” Dennington said. “We found that we’ve struck the right balance of ensuring that McLaren builds its brand equity, and we still got some of that equity at play within these sort of campaign moments with our partners.”

It has the double benefit of raising the profile for a sponsor and making that deal more valuable, and piquing fan interest. Merchandise around the Gulf Oil livery in 2021 proved very popular, quickly selling out due to what McLaren called “unprecedented demand.”

“What all the teams are doing with their sponsors that are all really a nod to the fans, to give them something exciting to look forward to at all these different races,” Brown said.

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The future of on-car sponsorship?

McLaren also has a way to change the sponsors shown through dynamic on-car displays around the car’s cockpit.

The technology, invented by Seamless Digital, debuted in practice for last year’s United States Grand Prix. Its founder, Mark Turner, initially devised the idea to help smaller teams attract sponsors. It was designed for the Manor backmarker team that relied almost entirely on sponsors for funding but struggled to attract big names. The idea was that sponsors could bid for the placement on the car through a live auction during races.

Turner told The Athletic that McLaren was a “natural fit” as the team saw the commercial benefits and recognized the importance of an easy technical integration. It can’t have an impact on the performance of the car. The system used last year was under 200g, and the prototype designed for 2024 is under 100g.

McLaren are running digital ads on their cars and helmets in Austin that can change during the race 👀

(via @jeff_gluck)

— ESPN F1 (@ESPNF1) October 21, 2022

“It’s part of the racing car,” Turner said. “It’s doing a job of changing the message on that. It can’t be distracting, and it can’t be detrimental to the image of the team as a whole.” The technology allows for subtle changes to the sponsor being displayed at specific points in a race and can be used for whatever messaging the team feels is necessary. “It gives you the ability to tell more of a story,” Turner said.

Dennington said dynamic branding gave teams “flexibility and more opportunity to promote brands” and share specific messages at certain moments. McLaren ran the dynamic screens on the car up to Austria this year, when the team introduced its major car update, but it is evaluating how to reintegrate them in the future. The technology will also be used by AlphaTauri starting in 2024.

More digital approaches are likely to follow for F1 sponsorship. Teams have previously trialed using LED lights on the wheel covers as another solution to share more messaging.

“We need to remain open-minded,” said Dennington. “Safety needs to be thought of first and foremost, and performance needs to be considered. But yeah, I do think there’ll be more innovations.”

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The impact of American growth

F1’s growth in the United States has dramatically changed the sport’s landscape in the past five years. The “Drive to Survive” effect played a massive part in cracking a traditionally tricky market for F1. At the same time, Liberty Media has also made the United States an important target for its commercial efforts.

According to Dennington, the appeal to a more diverse, younger fanbase has been instrumental to the recent commercial upswing, leading to “unparalleled” demand for brands entering the sport.

“It almost feels like it’s a melting pot of the new ownership starting to do the basics really well to ensure the fan as a mega experience, as well as building the aspirational side of the sport and the accessibility of the sport at the same time,” he said.

According to Williams, there were more than double the number of American-headquartered sponsors in F1 last year compared to 2015, rising from 45 to 108. Many of them will be displayed at next week’s Las Vegas Grand Prix, the third American race of the season.

Greg Maffei, Liberty Media’s CEO, told investors last week that Las Vegas was “generating record-breaking sponsorship levels with new marquee brands” and that “commercial interest is strong” for F1 as a whole. “The teams have sustainably improved their financial health, generating their own incremental sponsorship, which benefit our entire F1 ecosystem,” he said.

Dennington thought there was still much more to come from the American market from a commercial point of view.

“You hear some people say, ‘Oh, has F1 peaked in the US?’ We haven’t even had Vegas, so I don’t think it has,” he said.

“We’ve still got huge amounts of opportunity. “Drive to Survive” continues to deliver. We’ve got this Apex film (starring Brad Pitt) being developed. You’ve got a bunch of other shoulder coverage being worked on. So I think the sport will continue to thrive.”

GO DEEPER

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(Lead image: Andrej Isakovic/AFP via Getty Images; design by Ray Orr/The Athletic)

The Business of F1 series is part of a partnership with Michelob ULTRA. The Athletic maintains full editorial independence. Partners have no control over or input into the reporting or editing process and do not review stories before publication.