CNBC SPECIAL: Inside Track - The Business of Formula 1 | Episode 2

SPEAKER_1 (0:00)

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Sara Eisen (0:37)

I'm Sara Eisen, and this is part two of Inside Track, the business of Formula One, a special CNBC podcast. Act Four, Breaking Barriers.

What are we gonna see here?

SPEAKER_5 (0:50)

What do we have here? Let me take you through the garage. We have Orlando's car.

That's what a Grand Prix driver looks like. So don't be looking at data. This is where we'll actually run the race from.

Sara Eisen (1:05)

That's where you sit. Rain or shine, the show must go on at the Canadian Grand Prix.

McLaren Racing CEO, Zach Brown, and his team, including drivers Lando Norris and Oscar Piastri, have just finished practice.

SPEAKER_5 (1:18)

And then that's Oscar's car over there. He had a good session today, so did Lando. So they'll take the car apart, rebuild it effectively overnight, make any changes that the drivers and the engineers discuss.

Sara Eisen (1:32)

The McLaren team has been competing in Formula One since 1966, making it one of the oldest and most storied franchises in the league. But in more recent years, the team has been fighting to keep pace with the Big Three, Ferrari, Mercedes and Red Bull.

Where is the bulk of your investment going now?

Zach Brown (1:50)

It's an R&D game. We're in the prototype business. We have new stuff on our car this weekend. We'll have new stuff on our car next weekend. And depending on what your challenges are with the car, is where you're choosing where to invest your money. Pretty cool.

Sara Eisen (2:06)

A former professional racer himself, Brown brings California Cool to the UK-based team. He oversees not only the team's on-track performance, but also its value to shareholders and sponsors. Full disclosure, CNBC is one of those sponsors.

How is Team McLaren doing financially?

Zach Brown (2:22)

Great. We were losing seven, eight, nine figures when I got started, and now we're a profitable sports team. A lot of that is performance-based, and a lot of credit to Liberty that when they came in, they established the cost cap.

SPEAKER_5 (2:36)

See the spray coming up there.

Sara Eisen (2:38)

Team bosses say the cost cap, which limits what they can spend on building and developing their cars, has also made their finances more predictable, a benefit to newer teams like Haas and their team principal, Gunter Steiner.

Gunter Steiner (2:51)

Before, somebody investing in a race team didn't know if he would spend 200 million a year or half a billion a year. There was everything in between.

Sara Eisen (2:59)

According to Liberty Media CEO, Greg Maffei, financial stability has helped drive a surge in the value of the teams.

Greg Maffei (3:06)

When we got involved, literally the bottom teams were being traded for zero. Today, I don't think you could buy a team for less than $750 million, and the top teams are valued three billion. That's a total change.

Sara Eisen (3:18)

That boost in values is more than theoretical.

In June, a group of investors that includes celebrities, Ryan Reynolds, Rob McElhenney, and Michael B. Jordan took a 24% stake in Alpine Racing, putting that team's value north of $900 million. Other investors would like to get in on the boom too, including the legendary and dready racing family, who have a pending bid to start up a new F1 team. While the league can have up to 12 teams, it's now up to F1 management to make the call.

Greg Maffei (3:50)

Look, we're very happy with 10 teams. There is demand for people to have new teams.

I don't think it's something that we need, but we'll always look if they can add something to the grid.

Sara Eisen (4:00)

And there's no shortage of opinions from the teams. Zach Brown of McLaren.

Zach Brown (4:05)

The teams have a voice, but not a vote. But that doesn't mean that we don't all pretend we have a vote.

Sara Eisen (4:11)

Gunter Steiner from Haas.

Gunter Steiner (4:13)

If it is an upside for everybody in F1, I think everybody's fine, but just adding teams to have more teams to dilute the other ones, why would any business do that? In the end, it's a business.

Sara Eisen (4:24)

And Toto Wolff of Mercedes.

Toto Wolff (4:26)

You bring another team in, that means it's just about 10% less in revenue for the teams. But I would be, as a team owner, perfectly prepared to do this if I would know that that team would compensate us because they're bringing new audiences, new market, they're adding to the show, then it becomes a no-brainer.