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IN DEPTH: How much watchmakers pay to keep Formula 1 on track

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Over the past five years, the Swiss watchmaking industry is estimated to have spent over half a trillion dollars supporting Formula 1; probably the most lucrative partnership in sport. Its intoxicating mix of drama, precision engineering, split second timing, passion and a massive global television audiences make it an irresistible promotional platform, as Caroline Reid discovers.

When Formula One driver Romain Grosjean walked away from a fiery crash at last year’s Bahrain Grand Prix he set social media alight.

Fans weren’t just relieved that the Swiss driver only sustained minor injuries from the 67G crash which split his car in two. Many were also amazed that he was wearing a £500,000 Richard Mille RM011TPT Red Quartz which was clearly visible on his wrist as he staggered from the burning wreck.

Romain Grosjean and his Richard Mille watch survived a horrific crash at 2020’s Bahrain Grand Prix.

Timing is everything in F1 as its cars hit more than 200 miles per hour and races are sometimes won by just a hundredth of a second. It makes the sport a natural platform for promoting watch brands so it’s perhaps surprising that F1 only signed up its first official timekeeper in 1982, more than three decades after its inaugural race. There is actually good reason for this.

Until the 1980s, F1 races ran as ad hoc, almost amateur, events. Each team made separate deals with each event promoter and television coverage was patchy as races could be cancelled at the last moment if there weren’t enough cars to fill the grid.

F1’s fortunes began to rev up in 1972 when entrepreneur Bernie Ecclestone bought the Brabham team after he had built up one of Britain’s biggest used car dealerships. Brabham driver Nelson Piquet proceeded to win the F1 championship twice but Ecclestone had his eye on a bigger prize.

He could see that F1 had all the ingredients to become one of the world’s most popular sports and in 1981 he put up his own money to convince the teams. Ecclestone’s company, Formula One Promotions and Administration (FOPA), offered the teams a guaranteed prize fund in return for signing a contract which committed them to race.

This masterstroke ensured that races would go ahead and that gave TV networks the confidence to broadcast them. FOPA negotiated the deals in return for 23% of the proceeds with remainder going to the teams and F1’s governing body the Fédération Internationale de l’Automobile (FIA).

The guaranteed TV exposure drove up the sponsors’ rates which gave the teams more money to spend on cutting edge technology in a bid to win. In turn, this attracted the best drivers which made the sport even more appealing to TV networks. F1 soon became prime-time viewing which boosted the broadcasting fees and fuelled even more interest from brands.

One of the first to line up was Swiss watchmaker Longines which became F1’s official timekeeper in 1982 for an estimated annual payment of $500,000. Its logo appeared next to the on-screen standings and race timings though it didn’t supply the technology which calculated the data. FOPA invested in these sensors and systems and had a turbocharged revenue stream at its disposal.

F1’s popularity accelerated so much that Ecclestone sold Brabham to take up a full-time job running the sport. It was well worth it as FOPA’s revenue rose from £5.8m in 1987 to £18.8m just five years later when the Longines deal reached the end of the road.

source: www.formulamoney.com.

It was replaced as F1’s timekeeper in 1992 by TAG Heuer, which went on to become almost synonymous with F1. “Even back then it wasn’t superficial and was in fact a technical partnership to provide our cutting edge timing equipment to the teams to improve performance through analytics, and was a contributing factor to our watches becoming synonymous with top-tier motorsport,” says George Ciz, TAG Heuer’s chief marketing officer.

Brand building was also vital. Eight years earlier, in 1984, Heuer was sold to the Saudi-owned Techniques d’Avant Garde (TAG) group which lent its acronym to the watchmaker’s name to create TAG Heuer. In the same year TAG acquired a 60% stake in the championship-winning McLaren F1 team and still owns 14.3% of the group to this day.

With logos on McLaren’s windshield, TAG Heuer shared in the glory as Alain Prost steered the team to victory in 1986. Two years later its exposure stepped up a gear as Brazilian superstar Ayrton Senna won his first championship for the team.

Senna and French skiing champion Luc Alphand were TAG Heuer’s first sports ambassadors and promoted the brand in advertisements. They were part of a plan to transform TAG Heuer into a lifestyle brand as its products were seen as being more like scientific instruments than status symbols at the time.

source: www.formulamoney.com.

Senna’s death at the San Marino Grand Prix in 1994 threatened this turnaround strategy as some suggested that it would put the brakes on the rise in F1’s popularity. In fact it had the opposite effect as it shone a spotlight on the sport at a time when there was plenty of drama on the track and the sponsors were pumping in significant financial support.

TAG Heuer never looked back and three years later hit the headlines at the European Grand Prix when three cars qualified with an identical time to the thousandth of a second. It highlighted the importance of precise timing in F1 and this rubbed off on TAG Heuer.

By associating with sports where technology and accuracy are paramount, the watchmaker has polished its reputation for precision whilst positioning itself as a luxury brand appealing to early achievers. F1 followers are wealthier than those of other global sports like football, which makes them an ideal target market.

It is also bigger that sports like sailing and has more blockbuster events than golf, which is mainly viewed by television audiences only for the majors and the Ryder Cup.

F1 is broadcast in around 200 territories and attracted a total of 433m viewers last year. In order to watch every race live, fans in many major markets have to either subscribe to Pay TV platforms or the F1 TV Pro streaming service which costs $79.99 per year. It costs even more to attend a race with the average cost of a ticket coming to around $519 in 2019. The wealth of F1’s fan base is far from the only reason that watchmakers partner with the sport.

F1 is on track to host a record 23 races this year and the number of watch sponsors has increased in line with the growth of the calendar.

Cyrus and Haas F1

One of the newest entrants is Swiss watchmaker Cyrus which sponsors the Haas F1 team. Cyrus is famous for the intricate details on the faces of its timepieces and their skeletonised ‘open heart’ dials which reveal the movement.

Haas drivers Mick Schumacher and Nikita Mazepin show off their Cyrus watches.

Its chief executive Walter Ribaga says that his main objective in F1 is “to increase our brand awareness and make our timepieces known to a larger audience. The F1 Championship touches several countries where we are not yet present therefore, it allows an excellent visibility opportunity.”

TAG Heuer’s Mr Ciz concurs. “One of the many wonderful things about Formula One is its worldwide reach to an international fan base. As a result, we can not only reinforce our name in markets where we are strong, but also reach new fans in places where we haven’t had a strong historic connection.”

Bremont and Williams Formula 1

Bremont, which became Official Timing Partner to Formula 1’s Williams Racing this year, describes the partnership as the coming together of two British engineering businesses, with Bremont co-founder Giles English particularly excited about the agreement after years of informally sharing technical knowledge.

“The links between our two industries are considerable and as Official Timing Partner our relationship will be beneficial on many levels. Over the years we have seen a substantial crossover between the manufacturing skills in F1 and watchmaking, we have employed several individuals from the F1 industry to date,” he describes.

“Complex machining to very high tolerances requires a significant investment in machinery and technical skill set, any extra support from the Williams technical team will undoubtedly be hugely valuable to our business. We’re excited to be working with such a renowned British technology business and look forward to seeing where we can take the partnership.”

Other ways of driving return on investment through a partnership with F1 are even more innovative. Unlike the sponsors of many sports, brands which are involved with F1 can contribute to the team’s success. They do this by providing their most cutting-edge products to the team to test them under stress and boost its chances of victory.

Lewis Hamilton and Carmen Jorda attend the IWC Schaffhausen “Decoding the Beauty of Time” Gala Dinner during the launch of the Da Vinci Novelties from the Swiss luxury watch manufacturer IWC Schaffhausen at the Salon International de la Haute Horlogerie (SIHH) in 2017 (Credit David M. Benett/Dave Benett/Getty Images for IWC)

Oil companies can’t improve the performance of the football clubs they sponsor but they can give experimental products to F1 teams to boost their engine output. Likewise, IT sponsors provide teams with their latest programs to analyse race data from the car and stress-test the software.

In keeping with TAG Heuer’s famous marketing slogan, ‘Don’t crack under pressure’, the watchmaker gives F1 drivers its latest prototypes so that they can see how they perform under extreme conditions. Its former CEO Jean-Christophe Babin revealed this in 2006 when he said in an interview that the drivers “wear new prototypes submitted to extreme G-Force, vibrations and shocks torture tests. For the benefit of the final consumer nobody is more demanding than a top driver.”

Mr Ciz adds that supplying products to F1 “is a great pleasure, proving the resilience and durability of our watches in the more intense situations.”

He explains that “it is a pleasure for us to supply watches not just to the drivers, but the whole team with our different models catering to different needs.”

TAG Heuer supplies Red Bull pit crew with Connected smartwatches.

In 2015 TAG Heuer launched its first smart watch and this comes into its own in the F1 pits where team-work and timing are critical to ensuring that the cars are serviced in a matter of seconds.

“In the pits we have provided Connected Watches to the crew that allow them to monitor their performance and co-ordinate notifications for actions around the Grand Prix weekend, so our watches really touch every part of the team,” Mr Ciz explains.

Although Cyrus is new to F1 it is learning quickly. Mr Ribaga says he has also given the Haas drivers “various timepieces from our collections, from the Klepcys Vertical Tourbillon to the Klepcys Alarm and the Klepcys GMT Retrograde, which they are wearing during the racing days. And they will enjoy other models in the future.”

He adds that “our products have a strong identity which will not change with this sponsorship. Our design and the ‘engines’ that equip our watches already have great similarities with the racing cars of F1. Nevertheless, it is not excluded that this close collaboration will have an influence on our future products.”

Cyrus is also working on a range which is inspired by F1 and is due to launch in the first quarter of next year.

Red Bull drivers Max Verstappen and Alexander Albon in their racing suits adorned with TAG Heuer.

TAG Heuer has a 36-year head start with this. “The TAG Heuer Formula 1 line was launched in 1986 to distil the passion and excitement of motor racing into wrist form,” says Mr Ciz.

“Today the TAG Heuer Formula 1 continues to be a canvas for us to have fun and explore new ideas, with the watch often being the entry point for so many collectors, as it is a watch that a younger audience can really relate to.”

It is well-suited to TAG Heuer’s latest F1 partner. In 2016 it stunned the F1 community when it announced that it was switching from McLaren to the Red Bull Racing team for an estimated $10m annually.

Famous for its youthful image, Red Bull Racing had won four consecutive F1 titles a few years earlier whereas McLaren was going through a barren patch. Although it marked the end of one of the longest partnerships in F1, TAG Heuer’s approach has not wavered.

“This is not just about a decal on a car and watches on the drivers’ wrists. We are both extremely driven, with histories that are deeply rooted in technical innovations driving progress, and when our teams spend time together it is clear that our philosophies resonate at a fundamental level,” says Mr Ciz.

It has already been reflected in TAG Heuer’s range. To celebrate the Monaco Grand Prix it produced a chronograph with a 39 milimetre diameter titanium case limited to 500 pieces. Known as the Monaco Titan, it is made from the same metal that is used to make the ‘Halo’ roll-cage on F1 cars. Mr Ciz adds that “the TAG Heuer Formula 1 models we have produced using signature design elements from Red Bull Racing have been some of our bestselling special edition pieces.”

It has been a winning formula as TAG Heuer’s revenues steadily surged from just $30m in 1988 to over CHF810 million ($880m) in 2018 according to Vontobel Equity.

This performance caught the eyes of several suitors. Venture capital firm Doughty Hanson bought the business in the mid-1990s and later cashed out in a public flotation before luxury goods giant Louis Vuitton Moët Hennesy (LVMH) bought the company for around $800m in 1999.

The expansion of F1’s calendar didn’t just tempt other watchmakers to sponsor teams but also the series itself. This year watchmakers are spending an estimated $88m on F1, which is more than four times higher than the amount a decade ago.

It packs a punch as this comes to around 6% of F1’s total sponsorship income.

In 2010 fellow LVMH stable-mate Hublot replaced TAG Heuer as F1’s official timekeeper and it too soon attracted worldwide attention. This came when Bernie Ecclestone was mugged outside his London home. The thieves actually stole his Rolex but Ecclestone allowed Hublot to use a photo of his bruised face in an advertising campaign alongside the phrase ‘See what people will do for a Hublot’.

It went viral and the level of exposure encouraged Rolex to outbid Hublot for the spot as F1’s official timekeeper. It paid an estimated $45m annually for the privilege and remains there to this day. The deal was brokered by former F1 champion Sir Jackie Stewart who first became a Rolex ambassador (or Testimonee as the watchmaker calls them) in 1968.

The ties between Rolex and motorsport date back to the 1930s when Sir Malcolm Campbell wore one of its watches when he became the first driver to break the 300 mile per hour barrier at the wheel of his Bluebird car.

Stewart boosted its profile in motorsport as he had already won several races by the time he signed up with Rolex and the following year he won his first F1 championship. Ever the promoter, Stewart famously even tailored his shirts a couple of inches short on his left cuff to allow his Rolex to be seen at all times.

A spokesperson for Rolex says that “for more than 53 years, the brand has had a relationship with three-time FIA Formula One Drivers’ World Champion Sir Jackie Stewart and, more recently, multiple Formula One race winner Mark Webber joined the Rolex family of Testimonees.

Formula One is a highly respected global series at the forefront of engineering, and Rolex has a natural association with the sport given the brand develops the highest form of technology that exists in watchmaking. Leaders in their respective fields, Rolex and Formula One share levels of excellence that are incredibly rare making it a perfect partnership.”

Although Rolex doesn’t disclose the uplift in sales it has had from F1, Mr Ecclestone gave some insight into it in 2014 when he told Campaign Asia-Pacific magazine that he had deliberately steered the sport towards older fans as they are wealthier.

“Young kids will see the Rolex brand but are they going to go and buy one? They can’t afford it,” he said. “I don’t know why people want to get to the so-called ‘young generation’. Why do they want to do that? Is it to sell them something? Most of these kids haven’t got any money. I’d rather get to the 70-year-old guy who’s got plenty of cash.”

The road ahead is less certain as Mr Ecclestone gave up F1’s driving seat in 2017 after American investment firm Liberty Media bought the business for $4.6bn. It is now run by former Ferrari team boss Stefano Domenicali and has changed gears as Liberty has made strides to appeal to a younger audience. It launched the F1 TV Pro streaming service, an eSports series, a fly-on-the-wall Netflix documentary and F1’s first ever music playlist. This has all paid off.

Last year F1’s global research director Matt Roberts revealed that it “has the greatest proportion of under 25s of all global sports leagues (with the exception of the NBA). Furthermore, we’ve done a lot of work looking at who is becoming new fans. 62% of new fans are under 35. Things like Netflix, eSports, F1 TV pro, etc have been extremely helpful at growing those audiences.”

Formula 1 sponsorship has not always had a happy ending for watchmakers. In 2018 Oris put the brakes on its 18-year partnership with the Williams F1 team and the watchmaker’s co-CEO Rolf Studer says: “I believe that we as a brand developed into a different direction than what F1 could offer us. Our message is about independence, sustainability, and going our own way. Even though F1 was a great platform for us as a brand and a tool to present ourselves to a global audience, today we believe we have other ways to bring this message to our customers.”

It reflects comments from Williams’ former deputy team boss Claire Williams who said in 2016: “I talk to people that are trying to find sponsorships in different championships and to different rights holders and it’s tough. I think the rise of social media hasn’t helped because there are so many different ways and means by which brands can get their messaging out there where you don’t have to pay millions to get it.”

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