Formula 1 invests in full-blown China headquarters

Formula 1’s planned Chinese joint venture will have its own marketing, licensing and media rights arms dedicated to growing the sport’s presence in the vast but still nascent market revealed commercial managing director Sean Bratches.

“What we will do is effectively set up a similar structure to what we have in London,” the former ESPN executive told Reuters at the weekend’s Chinese Grand Prix in Shanghai.

“With a head of marketing, a head of licensing, a head of media rights, a head of sponsorship, a head of digital, etc. and really activate the brand here like its own entity,” added the American.

Sources told Reuters last week that Liberty Media, who took over as Formula 1’s commercial rights holder last year, was talking to potential local partners including Inter Milan owner Suning and La Liga rights holder DDMC to form a joint venture that would help manage business development in China.

Bratches declined to confirm any names but said he had spent the last few weeks in Shanghai and Beijing talking to a “number of entities.”

He added, however, that the sport’s relationship with local company Juss Events Co Ltd., who currently organise the race, would continue, “We plan to continue that relationship and expand it as we go forward.”

Formula One held its first grand prix in China in 2004. Despite a steadily growing fanbase, a Chinese population of 1.3 billion means there still remains a vast opportunity for the sport to tap.

Last year the sport struck a deal to build strategic partnerships in the country with marketing agency Lagardere Sports and Entertainment.

The company’s chief executive told Reuters then that the growth of the Chinese middle classes could see 400 million people over the next 12 or 13 years having disposable income to spend on entertainment and lifestyle.

Efforts to reach out to fans are already underway, with the sport organising a fan-festival in the heart of Shanghai last week and striking fresh television and digital broadcasting deals with state network CCTV and Tencent.

Bratches said the local joint venture would be responsible for agreeing such deals in future.

It could also help the country, which hasn’t yet had a Formula One driver, establish driver development schools and look at organising a second race in China, which Liberty are keen on but remains some years away.

“What we will be doing for the years to come in the rest of the world is developing the brand, developing the sport,” said Bratches.

“But we think there’s opportunities in China to develop another grand prix, driver development schools, certainly digital.”

Since taking over, Liberty Media has invested heavily in setting up marketing, research and digital capabilities at its headquarters in London that didn’t exist under former supremo Bernie Ecclestone.

While Liberty are planning to open local offices in the United States and other parts of Asia, Bratches said setting up a parallel entity similar in scale to its London operation would be unique to China.

“With the entity that we acquired, we believed that it was somewhat under-managed,” said Bratches of Liberty’s acquisition of the sport.

“And our time being spent bringing Formula One up into the ethos of the 21st century, we wouldn’t really be spending… enough time (in China) to really merit what we think the opportunities are here.”

Big Question: Does Formula 1 need headquarters in China as detailed above?