Stefano Domenicali is distracted. He keeps looking out of his window. He is waiting for someone. He’s still at home in Italy, despite it being five weeks since he took on the role of CEO of Formula 1. The COVID-19 pandemic has thus far meant that he has not been able to move to Britain to work from Formula 1’s offices.
“Sorry, I am just checking because I need to do a PCR (COVID-19) test,” he says. “A person is coming to my house to do it, and I am alone at home, and so I need to let him in.”
Domenical, Formula 1’s new chief executive, is good at multi-tasking. You need to be when you run a racing team like Ferrari, or a car company like Lamborghini (his previous two jobs), and even the commercial rights holding company of Formula 1.
As we talk, Domenicali’s mobile phone is pinging with new messages. He is a busy man. But there are things he wants to see in the future and better interaction with the media is important. Thus, he is talking exclusively this day to Autoweek.
The Formula 1 season is due to kick off in six weeks and the world is still being disrupted by the pandemic. Can things really go ahead as planned?
F1 HOPES TO DELIVER ‘NORMAL’ 2021
“I think it is realistic,” Domenicali says, “even if, to be honest, it is challenging. We need to be fluid in our approach, but we are in contact with all the race organizers and they are totally committed to holding the races. Of course, we cannot control everything, but we can control our side, the protocols that we want to respect, the ones we had the privilege of using last year.
“This is the credibility we are bringing this year. Last year, there were not so much limitation going from country to country. This year is more complex, and things are evolving every day. But it is our wish and our hope that we can deliver what we want to achieve. We must be strong and we must expect a lot from the race organizers, creating events at the beginning with no spectators or with limited crowd capacity.
“We should not forget that. It is an incredible effort that they are putting in and we need not to forget that. This is a great signal for how strong the link is between countries, organizers and Formula 1 is. It would be easy in this kind of force majeure situation to say: ‘Forget it. We cannot do it.’ But that Is not the case.”
LOOKING AT THE FINANCIALS
In a couple of weeks, Formula 1 will announce its financial results for 2020. It won’t be pretty. The sport may have succeeded in holding 17 races, a calendar that was rather different from the planned 22 events, but the money earned, particularly from the race fees will likely be greatly reduced in comparison to 2019. Race fees make up 38 percent of the sport’s revenues, about the race as TV rights fees.
“I can’t say anything, because we are a stock market company,” Domenicali says, “but what I can say is that there is the will to do the full calendar and that gives us the direction which we are heading in after a very difficult year in that respect.”
It leads to the question of whether the F1 business model is too dependent on the race fees? Would it not be better to relax them a little, allowing the sport to go where it wants to go, from a strategic point of view, rather than having to go to places where the money is good but F1 has limited room to develop its audience.
“Race fees are a significant portion of the revenues of Formula 1,” he says. “This is pretty clear. If you are doing a great job that revenue stream could be higher if there could be more attention from the fans, because then we can also work on competition (with other promoters). I think that the real question is how much will we be able to capture the interest of people by creating incredible, unique occasions and events. From one side, on the racing platform and on the other side by creating a sort of extra environment to which everyone is going because they see music shows, festivals, exhibitions and activation that we need to generate with our platform.”
EXPANDING RACE MARKETS
Domenicali says that F1 needs to think strategically about which regions it wants to focus upon to build the business. And he knows the answers.
“America, China and the Far East, for sure,” he says. “America is a work in progress. I really hope that we can give you a straight answer very, very soon. But, no question, that is a focus. The objective will be to increase to two American races. That is really the target.”
Is Miami still the priority?
“I cannot say today whether Vegas is better or worse to be honest,” he says. “We are working very hard on that. Indianapolis is in the equation. That is why it is good we have a lot of elements, but it would be wrong and premature to say anything because otherwise we create expectation that we don’t want to create. What I can say is that the focus is definitely there. The big thing we need to change in the U.S. is to feed info every day—more at all levels—with the involvement of the drivers, the teams and the organizers. This is something that we want to do very strongly this year.”
“I cannot say today whether Vegas is better or worse to be honest.”
There is also strategic focus on China.
“Last year we were not in a position to do something there because of COVID-19,” he says. “This year we are working on it so that we are ready to go there in case there is the need to replace a race in the second part of the season.
“We are also in contact with other possible promoters,” he adds. “That is good because it shows that the platform is really very valuable for all of us. These are less possible than the American one but we are not forgetting them because there is a massive market that we need to attack.”
THE DRIVE FOR 25 (RACES, THAT IS)
So what is the maximum number of races that F1 can do?
“The maximum you know is 25. But that is the theoretical number that have been discussed, but we are not forgetting that this year – the worst in terms of the COVID-19 situation – we are going to have the highest ever number of races. So let’s see how we can react to that.
“There is always a dispute with the calendar: is it too much or too little. I think that the real focus should be whether the races are interesting. Then the balance of the numbers is easy to find. This is why we need to make sure that the races are extremely challenging and emotional because otherwise even three is more than we need!”
THINKING STRATEGICALLY
Earlier this week, Domenicali chaired the first meeting of the new Formula 1 Commission, the body that makes all major decisions in the sport.
“It was a good day for Formula 1,” he says. “We took important decisions about the direction of the growth of our sport. The good news is that I saw that while we are in a world of competition, when we are talking about strategic thinking, we were able to find the right solution for the benefit of the sport.
“If I think about the engine freeze for example, despite their different positions, I think everyone understood that it was very important for a lot of reasons. It was good that everyone accepts that we need to move forward the new power units and try to involve potential newcomers, specifically automotive manufacturers, while attacking above all the costs and the investment and the return on that investment – as in a normal business. F1 is fantastic but if you say: Has there been a proper financial analysis of what you are doing before when we were talking about new technological challenges, I would say no. Because I know.
“Starting from that, putting carbon neutrality, hybridization that would also be beneficial for the motor manufacturers, entertainment and fun at the centre of the project, it was very interesting to hear that everyone was happy for that. From that point it was natural to have the freeze. I would say there is not a limitation what F1 is in terms of technological research. We are already at the very, very top in that respect—in terms of efficiency. That is not affected by this decision—which is why it was so important.”
Do you think the U.S. will get a second F1 race? Miami? Indy? Las Vegas? If you were running F1, where would like to see the series go in the U.S.? Let us know your thoughts in the comments section below.
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