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Good Thursday Morning. It’s Super Bowl week! Watching the sports world descend on Las Vegas, a once radioactive city for any league to be associated with, for the biggest, most treasured sports spectacle in the US is a sight to behold. I wrote a piece last year about Vegas’ ascension to the top of the US sports world if you’re interested in learning more.

Here’s the rundown of this week’s Sports Business Playbook:

• 📰 This Week’s Topic: Lewis Hamilton, one of, if not the, greatest drivers in F1 history, is leaving Mercedes after 12 seasons, six world championships, and 82 race wins following the upcoming 2024 season. His destination: Ferrari, the most iconic team in F1. We break down the business impacts of this seismic move.

• 🍸️ Impress Your Friends at Cocktail Party: Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? Hit the “Impress Your Friends at Cocktail Party” section at the bottom for a CliffsNotes of this week’s topic

• 🤯 “Whoa of the Week”: Super Bowl ad prices through the years, and a wild new NBA All-Star Game court

• 💪 Weekly Reminders that Sports are Awesome: The next great sports journalist

Hey team,

As any Drive to Survive fan knows, F1 loves its drama.

Each season includes heart-pumping racing on the most iconic tracks in the world, real-life outcomes that Hollywood writers can only dream of, and Mean Girls’-level high school drama and pettiness between the teams and the drivers.

We’re still over three weeks away from the 2024 season beginning, and we’ve already received a bombshell that will have seismic effects on the sport for the next several years: Lewis Hamilton, seven-time champion and one of, if not the, greatest drivers in F1 history (a record 103 all-time wins), is leaving the Mercedes team after 12 seasons to join the Scuderia Ferrari team in 2025.

For my readers who are not F1 fans, this is the equivalent of Michael Jordan signing with the New York Knicks in 1998 following his iconic run with Chicago Bulls.

Safe to say — it sent shockwaves through the F1 ecosystem.

The announcement’s timing caught everyone off guard but the gravity of the move was felt immediately, with many pundits hailing it as the most important signing in F1 history.

The move gives Hamilton a chance to solidify his legacy as the F1 GOAT by winning his F1-record eighth title under the banner of the most storied team in all of F1, and it represents a potential return to glory for a Ferrari group that has not won a championship in 15 years — something once unthinkable given the team’s decorated past.

For our purposes, it also has massive business implications for both Ferrari as well as Hamilton himself.

In this week’s edition, you’ll learn about:

• Lewis Hamilton’s status as a cultural icon and his desire for a poetic ending to his illustrious F1 career

• Ferrari’s luxury, limited-supply business model

• Why the signing has the potential to return Ferrari to glory and supercharge their business off the track

Start your engines, folks. We’re going racing.

Lewis Hamilton, OBE and F1 OG

Lewis Hamilton is one of the most remarkable stories in F1.

Coming from a mixed race, middle class family where his father worked three jobs to support his early karting career, Hamilton’s modest beginnings and non-traditional path to one of the most prestigious, luxury-based sports were quickly outpaced by his talent on the track.

After being scouted and signed as a young teen by McLaren, Hamilton rapidly ascended through the amateur ranks and made it to the F1 circuit in his early 20’s. His scintillating pace and fearless driving style earned a large fan following (and pissed off the other drivers, including his teammate at the time, Fernando Alonso). Hamilton capped this meteoric rise by becoming the youngest F1 champion ever — age: 23 — in 2008.

Ahead of the 2014 season, he jumped from McLaren to the Mercedes team in what would become one of the greatest runs in racing history.

At the time, Mercedes (“the Silver Arrows” as their fans know them) had only been back in the sport for three years following a 50+ year absence, and the team had mustered just one win in that time period. The move was met with raised eyebrows and skepticism.

12 seasons, six world championships, and 82 wins later, it’s obvious the decision was a winning one on the track.

And, it also worked out in the boardroom. Here are three key metrics:

1. The Mercedes F1 team received an unheard of ~25% of all TV time during its championship-winning seasons, according to Joe Pompliano. Huge for sponsors and brand recognition/equity for Mercedes.

2. At the time of Hamilton’s move to the Silver Arrows in 2013/14, the team was doing $195 million in revenue. That number has now jumped to $700 million (258% increase)

3. The team was worth $389 million in 2013/14. According to Sportico, that valuation now stands at $2.7 billion — a 594% increase and good for the second most valuable team in F1 (who’s number 1? More on that later)

Now, there are lot of reasons for why Mercedes’ business exploded:

• Liberty Media’s acquisition of F1 in 2016 has boosted F1’s business operations (2023 revenue grew 100% to $4.5 billion USD) and therefore, raised all team valuations significantly.

• The steady hand of team principal and CEO Toto Wolff, one of the most brilliant minds in F1.

• Mercedes’ technical team building one of the most complete cars under the regulations at the time that enabled the drivers to win as much as they did.

But, Hamilton’s impact on this growth can’t be overlooked because of 1. how good he is as a driver, and 2. his cultural significance in the sporting world.

In a sport traditionally dominated by white, well-to-do Europeans, Hamilton is a change agent, an icon, and frankly, a rockstar.

He is the only black driver on the F1 circuit, is covered in tattoos, and has never been shy to speak about cultural issues, his philanthropic/social justice efforts, and his other interests — i.e., extreme sports, fashion — off the track.

His social media following (36 million Instagram followers) is 3x larger than any other driver, he made nearly $70 million last year between his contract with Mercedes ($55 million) and endorsements (~$10-15 million), and he has a dating history that would make Derek Jeter blush.

Oh, and to top it off, he was awarded knighthood by the British monarchy in 2021.

All of that being said, the last two years have been a challenge on the track for Hamilton and Mercedes.

After being robbed of what would have been his F1-record eighth championship due to a boneheaded decision by race officials during the final laps of the last race of 2021, new car regulations took effect for the 2022 season.

Every couple of years, F1 comes out with a set of new car regulations that all teams must abide by. Unlike other racing sports — i.e., NASCAR — where the vehicles are predominantly the same, the teams all have leeway to construct the cars in their own vision as long as they abide by these new rules and stay under a designated cost cap.

While Mercedes had dominated the past era, they missed badly on their design of this new car.

They have won just one race in the last two years, and while they have finished a relatively respectable 3rd (2022) and 2nd (2023) in the standings, they expect to win. To make matters worse, their rival, Red Bull, has completely dominated the sport — winning 17 of 22 races in 2022 and 21 of the 22 races in 2023.

So, Hamilton and Mercedes were at a crossroads.

He’s 39 and is chasing that elusive eighth championship that will crown him as the greatest of all time. It’s unlikely Mercedes will put together a car that can compete with Red Bull before the new regulations come out in 2026.

Plus, Mercedes has their young driver of the future in George Russell and another prodigy — Andrea Kimi Antonelli — moving up the amateur ranks who could be ready for an F1 seat in the next few years.

So, Hamilton chose to chart a new path.

Now, he gets to “fulfill a childhood dream” of racing for Ferrari, and he teams up with current #1 driver Charles LeClerc to form a super team to try to bring a championship back to Maranello.

It would be a poetic ending to an illustrious career on the track, but I think there are additional business opportunities the two sides are considering with this deal.

It requires understanding Ferrari’s business model. Let’s dig in.

The Business of the “Prancing Horse”

Ferrari is the quintessential luxury sportscar company.

Their business is prestige and exclusivity. And let me tell ya — business is booming.

The automaker generated nearly $6.5 billion USD in revenue in 2023 (+17% YoY) and a net profit of over $1.36 billion, both records.

And their 2024 forecast is expected to beat both of those numbers again.

How do they do it?

Like many high-end luxury retailers, it’s all in the craftsmanship and the perceived scarcity value.

Ferrari shipped 13,663 vehicles in 2023. This number is tiny, particularly when compared to other car manufactures.

Mercedes, for example, shipped 2 million units, including 328,200 top end vehicles (i.e., Maybach, AMG, and G-Class) that would be the most direct comparison to Ferrari. Another Italian supercar maker — Lamborghini — shipped even less (10,112).

The difference? Each Ferrari was sold for ~$500,000 in 2023 (a 14% spike YoY).

These brands have the ability to produce more vehicles, but they choose keep this number low to maintain the high standard of quality and, more importantly, to ensure they are driving exclusivity and demand (which means increased price).

Customers will join a paid order waitlist for months/years to become one of the select few who can own such a prestigious status symbol.

In addition to vehicles, Ferrari has furthered this strategy in its other lines of business.

Its licensing arm — putting Ferrari’s logos on things — produces roughly $1-2 billion per year, with partnerships with Ray-Ban sunglasses, Puma, and Richard Mille watches, to name a few.

They also took a bold step of launching their own fashion line back in 2021.

When it comes to marketing, Ferrari — and other luxury brands, for that matter — do not engage in traditional advertising.

As an example, have you ever seen a Ferrari TV ad? No, and there’s a reason for that.

Ferrari instead chooses to “advertise” via reputation and its racing teams.

This goes back to the thesis cited in my article about Renault’s F1 team in October about “win on Sunday [race day], sell on Monday.”

As a refresher, car manufacturers that also have F1 teams, such as Ferrari, Mercedes, and Aston Martin, believe that there is a correlation between on-track success and automotive sales for their brands, according to a New York Times article from last year. For reference, a brand health study that Aston Martin conducted in January 2023 suggested that 96% of customers believe the association with F1 increases their consideration of the brand.

Ferrari competes in sportscar and endurance racing (think the 24 hours of Le Mans), but its crown jewel is Formula 1.

Ferrari is the only constructor to have been a part of every F1 season, and the organization has won a record 16 championships during that 70+ year history.

With this dominance has come a rabid fanbase (the “tifosi”) and a team/brand that is held in the utmost reverence by all racing fans. As Sebastian Vettel famously said:

Ferrari has ridden this reputation to incredible business success:

• The most valuable F1 team in the world — $3.13 billion — according to Sportico’s 2023 rankings

• Generated $500 million in revenue (and $50 million in profit) in 2022

• Has the largest social media following of any of the F1 teams on Instagram (13.4m) and Twitter/X (4.9m)

But, while they have this rich history and there has been a lot of selling on Monday, there has not been a lot of winning on Sunday as of late.

Ferrari has not has not won a championship since 2008, they’ve developed a reputation in F1 for wacky decision making and bad luck in what I can only describe as on-track “Clemsoning,” and it has seen two comparatively younger teams — Mercedes and Red Bull — surpass it to become the toast of the circuit.

With the guidance of second-year team principal Frédéric Vasseur and the Hamilton signing, Ferrari expects to return to greatness on the track, and they expect it to also impact their bottom line.

Hamilton’s potential impact on/off the track

The on-track opportunity for both parties here is obvious, but there is a lot to unpack on the business side.

For Hamilton, the benefits of this move are huge.

• He gets a monster contract (details have not been confirmed but it is expected he will be the highest paid driver, and the figure could reach $100 million per year). That’s also not counting the additional sponsorship opportunities that could come his way for being associated with the iconic F1 brand.

• Ferrari has pledged to make monetary and marketing contributions to his philanthropic endeavors, including Mission44.

• He will have an ambassador-type role with Ferrari, which could extend after his racing career is complete. This could include opportunities in the broader auto business as well as fashion, one of Hamilton’s off-track interests

For Ferrari, they’ve just tossed gasoline on an already well lit fire.

The impacts will be felt in all aspects, including ticket sales, sponsorships, and merchandise — areas where Ferrari already commands some of the highest prices — and drive up the team’s overall value.

• Ticket Sales/Merch: While some F1 fans stay with specific teams, others are driver-focused, meaning they are transient fans based upon where their favorite driver goes. Hamilton and his huge following coming to Ferrari will surely create new tifosi and drive incremental interest in the already most popular F1 brand in the world, meaning higher ticket and merchandise sales.

• Endemic Sponsorship: The opportunity for sponsors to capture this many global eyeballs — each F1 race has about 100 million viewers, so you’re talking about 20+ Super Bowls per year — along with a team that is sure to grab a ton of screen time during races due to Hamilton will be tantalizing.

• Hamilton-based Sponsorship: As Vincenzo Landino notes in his Qualifier newsletter, Hamilton furthers brings a stable of personal sponsors — i.e., Monster Energy, UBS, Bose — who may want to “pony” up the extra cash to sponsor the broader Ferrari team, too.

But, the other major area the move can make an impact: traditional auto sales.

Having Hamilton under the Ferrari brand will bring even more fans and eyes to the brand, which should translate to additional orders (and as always, higher prices).

And if Hamilton is able to bring a championship to Ferrari?

My goodness, the sales on Monday.

Ham-mer Time

Looking at all of these factors now that the dust has settled on the move and the initial shock has gone, the signing makes all the sense in the world business-wise.

As Murray Barnett, former head of F1’s global sponsorship and commercial partnerships, told SportsPro: “Putting the dominant brand [in Formula One] with the most successful racing driver currently on the grid – and, indeed, one of the greatest of all time – is a perfect match.”

Now, all that’s left is for Hamilton to go win his record eighth championship and for his fans to learn how to say “Get in there, Lewis!” in Italian (see title of the article 😉).

🍸️ Impress Your Friends at a Cocktail Party

Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? This section is the CliffsNotes of this week’s topic

• Opener: We’re still over three weeks away from the 2024 F1 season beginning, and we’ve already received a bombshell that will have seismic effects on the sport for the next several years: Lewis Hamilton, seven-time champion and one of, if not the, greatest drivers in F1 history (a record 103 all-time wins), is leaving the Mercedes team after 12 seasons to join the Scuderia Ferrari team in 2025.

• Shot: In a sport traditionally dominated by white, well-to-do Europeans, Hamilton is a change agent, an icon, and frankly, a rockstar. His social media following (36 million Instagram followers) is 3x larger than any other driver, he made nearly $70 million last year between his contract with Mercedes ($55 million) and endorsements (~$10-15 million), and he has a dating history that would make Derek Jeter blush.

• Shot: Hamilton’s dominance on-track at Mercedes has helped grow Mercedes’ F1 team from upstart to giant — $700 million in revenue last year; worth $2.7 billion. After two challenging years following new car regulations, he’s jumping to the most iconic brand in F1.

• Shot: Ferrari is the quintessential luxury sportscar company. They deal in craftsmanship and limited supply/scarcity value (just 13,000 cars shipped last year; average price: ~$500k). They do not advertise through traditional mediums, and the F1 team is one of their biggest brand builders. Teams like them that use this model have a mantra: “win on Sunday [race day], sell on Monday.” The team is historically great (a record 16 championships) and boasts strong financials ($500 million revenue; $3.13 billion valuation), but they have fallen on hard times as of late and need a spark. Hamilton can bring that.

• Chaser: Both sides win in this deal. In addition to a chance to win his F1 record eighth championship with the ultimate brand, Hamilton gets a monster contract (rumored to be close to be $100 million per year), Ferrari’s investment in his philanthropic efforts, and an ambassador-type role with the broader company. Ferrari gets one of, if not the, best drivers ever plus major upticks in ticket sales, sponsorships, and merchandise — areas where Ferrari already commands some of the highest prices — and the team’s overall value. And if Hamilton wins, there will be even greater auto sales coming.

🤯 “Whoa” of the Week

Insane, mind-blowing things constantly happen in the sports business world. Here was my favorite of the past week.

1. Super Bowl ad prices through the years

2. This will be the court used for this year’s NBA All-Star Festivities

💪 Weekly Reminder that Sports are Awesome

This newsletter is, of course, mostly centered on the business side of sports and the things that happen off the field. That being said, it’s important to remember why we fell in love with sports in the first place, though.

This section is meant to highlight the amazing things that happened in sports this week that serve as that reminder.

1. Jeremiah Fennell is awesome. At what point does a broadcaster make a move and find a way to work this kid in more regularly?

Thanks for reading! Let me know what feedback you have.

Also, if you enjoyed this breakdown, please consider sharing it with your friends and network by clicking the social media icons at the top of the newsletter.

Until next time, sports fans!

-Alex