Ferrari and Marlboro, Mercedes and Petronas, McLaren and Vodafone: some sponsorship deals create the kind of association that endures long after they have expired.
This is the type of visibility that companies aspire to achieve when they sign on the dotted line, but it requires the perfect combination of on-track performance and brand marketing.
When thinking of those aforementioned partnerships, the first thing that comes to mind is the liveries, whether it’s the barcode-branded prancing horse, the turquoise-accented silver arrow, or the chrome and red entry made famous by Lewis Hamilton.
It’s not as simple as agreeing a partnership and success following, though. Sponsors have never had more competition for audience attention as teams strive to maximise revenue and cover every inch of their cars in logos.
Aston Martin, for example, even went as far as having co-title sponsors this season, although that ultimately resulted in Cognizant deciding to downgrade its partnership with the team, leaving Aramco as the sole lead partner.
Formula One is clearly still a key component of Cognizant’s marketing mix, but receiving top billing and maximum visibility does not appear to be as important. Partnerships will always come and go in top-level sport, but are companies still getting the same return on investment as before?
To assess the current state of title sponsorships in Formula One, BlackBook Motorsport talks to Austin Schneider, director of business development at Sport Dimensions, Simon Hinchliffe, head of motorsport at Prism Sport & Entertainment, and Aled Rees, CSM Sport & Entertainment's managing director of strategy and insights.
The title sponsorship between McLaren and Vodafone, with its chrome and red livery, is one of the most recognisable in Formula One history
How would you assess the overall health of title sponsorships in Formula One?
Simon Hinchliffe: We have seen a lot of movement in this space over recent years. The shift from title sponsor to title partner, and now the shift to using the top-tier position to rotate partners based on their key markets. The latter is largely in response to fewer brands wanting to commit extremely large sums to single partnerships and therefore capitalising on up-sell opportunities for smaller partners to maximise value.
Aled Rees: Our assessment is that that area is a little less buoyant than we've seen in the past. That said, the rest of the partnerships that we're seeing in place – the number of partnerships that we have, the average value of new partnerships coming into the sport – indicates that there is upward pressure on prices. Teams are starting to ask for more money than they have done in the last few years, and the market certainly feels a lot more [promising]. But how many brands out there are willing to put up US$40 million, US$50 million, US$60 million [for] title sponsorships?
What makes a successful title sponsorship in Formula One?
Austin Schneider: It’s the willingness to be more than a sponsor. I think, at that level, both parties are looking for something more. It may even be more than Formula One. For example, you wouldn’t be surprised to see Oracle working on the drinks side of the Red Bull business, in addition to what it does for the race team. Title sponsorships are best suited as long term, three-to-five years minimum, in order for the parties to make the most out of it.
SH: Authenticity – this truly sits at the heart of a strong partnership, title or otherwise. Audiences are becoming increasingly wary of brands simply using sport properties as emotional hi-jacking to drive brand association without relevance. The simple question from audiences is: how does this brand help me or my team in a positive way to achieve success?
Oracle spends around US$60 million per year with Red Bull in a partnership that has seen Max Verstappen take 31 wins in the past 40 races
Has the value of title partnerships decreased with the wider influx of sponsors?
AR: If you look at the top teams, they've barely got any room left on the cars. Unless a partner leaves, they really don't have much inventory to sell for a partner coming in. Probably the only one of the top teams that seems to have any inventory left is Ferrari. The mid-tier or the primary partnerships that we’re seeing today are healthy for those top teams, but those bottom teams look like they’re struggling a bit at this stage.
The advantage they have though is that, if there isn't any inventory amongst the top have teams, it makes their inventory more appealing, because you can get more branding on the car for a lower fee than you would be paying if you were with Mercedes, for example.
AS: In fact, I’d say the value has increased. Formula One has experienced a massive influx of mid-level partners to the teams that has made for a very crowded environment. The top spot of title partner may allow brands to protect the best assets, the best access, and receive an element of priority that they may not receive as a mid-level partner.
SH: The crowded landscape of Formula One sponsorship isn’t new. In fact, if anything the multiple ways in which you can reach and engage with audiences has significantly increased, offering more opportunities than ever to cut through the noise. The title position will always offer an elevated platform, but this can no longer be relied on to do the heavy lifting when it comes to partnership ROI.
With Cognizant downgrading its partnership with Aston Martin, how is top-level sponsorship evolving?
AR: Clearly having two names is confusing and not desirable. If you’re title [sponsor], you want clear space, you want to be on your own and associated directly with the team name. In the naming hierarchy, you ideally want to be first. How much has it evolved? It feels like, if you went back ten years or maybe more, every team had a very distinct title partner. Today, it feels as though there's less conformity than we’ve had necessarily in the past.
AS: I don’t know all the details there, but it seems like there was a bit of competition for the title sponsor of Aston Martin. They may have felt like they were being overlooked in favour of Aramco.
There is also a natural cycle that occurs in sponsorship where Cognizant may have achieved its goals as title partner – and there isn’t as much justification for the higher price tag any more. This leaves Cognizant open to a lot of opportunities out of the top spot, and the first few steps they take will be important as they continue to develop their programme.
What would you highlight as particularly successful or creative title sponsorships in Formula One?
SH: As title partners continue to focus on brand strength, some of the best examples in recent years centre around livery takeovers and creative branding, such as the Google wheels with McLaren and the Duracell battery with Williams.
AS: I know it is taboo now, but you can’t overlook Marlboro and Ferrari. Those two were together for decades and, beyond just branding, they had a tonne of activation around the world.
Infiniti and Red Bull also come to mind with Infiniti using Sebastian Vettel as its chief performance officer, having him closely involved in road car design. Currently, Oracle and Red Bull are setting the pace in terms of B2B development, B2C engagement, branding, activation and overall partnership.
Has Formula One reached a peak in terms of visibility and popularity? Are there any challenges that may come with this on the sponsorship front?
AR: This year, there are just over 70 new brands [in Formula One] and the average value is close to US$6 million. Of course, you've got big deals like Qatar Airways that are dragging that upwards. Naturally, if you've got less deals, and some of them very big, then your average is going to go up. But what that does indicate is that, since 2021 and the bounce back from Covid, we've seen ever-increasing interest in Formula One, but decreasing inventory available and higher average prices. So it's a bit supply and demand.
AS: It’s hard to say if it has reached the peak. The biggest challenge ahead is sustainability – not just in the environmental sense, but in the economic sense. Is it really a good long-term move to charge US$35,000 per person for paddock club? Will people keep coming back year after year at that price? Will sponsors be okay with all the added activation costs in addition to the increasing rights fees?
This topic tends to bring up more questions than answers for me at this stage.