Earlier this month, Liberty Media entered into an agreement to buy 39 acres of land at the south end, and just east, of the Las Vegas Strip for $240 million. It could be the most important property transaction since the “Implosion Era” of the 1990s. First some background:
Doomsayer after doomsayer said our future was bleak. Gaming was on the brink of extinction. It was written in stone (or at least on every web page) that America’s youth had forsaken casinos. Millennials, it seems, preferred VR headsets, Netflix, and taking food photos to gathering round the green felt or being hypnotized by our spinning reels and video bonuses.
In vain, millions were spent developing youth-focused “skill” games with zero results. It seemed to harken back a few decades to Las Vegas’ great experiment with roller coasters and carnival attractions. They, too, failed to move the age demographic even a tenth of a point.
But then there was the pandemic. Suddenly, the holy grail of “what’s up,” known as the LVCVA Visitor Profile, moved nearly two points younger in 2021 (LVCVA stands for Las Vegas Convention and Visitors Authority). “Fifty Plus,” that magic golden year that sustained us for decades, was suddenly reading 43.2! Was there a hidden variant of the COVID virus (AGE-1) that infected the young?
Or was it just by accident that we finally did something right? Put another way, maybe our product was solid all along, but we just hadn’t priced, or presented, it very well. And maybe the pandemic, which shut down every other form of boredom relief, gave us the proper exposure we needed to shine again.
While it may not seem related, Formula One auto racing was another stagnating product with similar problems. However, they recently re-invented themselves without using the pandemic. And maybe they can offer us some valuable tips for our future.
Much like gaming, F1 racing began and boomed post-World War 2. Their first race was held in 1946 in Turin, Italy, and was born from the pre-war European Championship of Grand Prix Motor Racing. Not only did “F1” make a better logo on a ball cap than “ECGPMR,” it actually referred to the “formula,” or set of rules, that all manufacturers had to follow while constructing their cars.
Today, F1 represents the ultimate in automobile performance. No other car can match the overall combination of speed, maneuverability, and technology of the Formula One car. Bloomberg Businessweek recently said, “For the uninitiated, F1 may not seem so different from other types of auto racing. Which is sort of like saying a F-35 fighter jet is not dissimilar to a Spirit Airlines plane.”
An F1 steering wheel alone costs upwards of $100,000. A pit stop of over three (3.0) seconds is way too long (complete with four new tires). Cars can reach 231 mph (Mexico City), but must also handle 32-mph corners (Monaco). Each car has hundreds of sensors that generate 3,000 or so data points/minute. Forget chalk pit boards, this methodology allows drivers and constructors to fine tune performance using high-tech feedback like the chart below. Adjustments to the car can be made in real-time while at speed using Wi-Fi.
Clearly, for the racing geek, F1 is the ultimate. And they have/had legendary stars like Stirling Moss, Niki Lauda, Graham Hill, Dan Gurney, Jackie Stewart, Lewis Hamilton, Mario Andretti, Michael Schumacher, James Hunt, and others. There have even been multiple romantic movies like Grand Prix, Rush and Senna.
So, why did some think Formula One was struggling recently? Most agreed, it was getting too expensive, failed to adopt to new forms of media and had lost favor with younger fans. (Sound familiar, Las Vegas?)
Bernie Ecclestone headed F1 for decades beginning in the ’70s. He started as a driver and builder, but advanced to rule the sport like a greedy autocrat. However, under his leadership, the sport boomed economically. Budgets soared, and F1 became more and more global (except in the U.S.). New tracks were being built worldwide (but curiously, only in oil-rich kingdom sites like Abu Dhabi, Azerbaijan and Bahrain). The lone American course was the Circuit of the Americas (COTA) in Austin, TX which opened in November of 2012. However, even that magnificent track struggled financially, despite huge crowds. COTA lost money until just recently.
While Ecclestone was racking in record revenues, many tracks and teams were struggling. When auto giants like Ford and BMW dropped out of F1, citing skyrocketing budgets, it was clear things were getting too expensive. In 2019, Mercedes spent $442 million to win the F1 title.
The fans were also negatively impacted, not just by steep ticket prices, but rather the non-competitive races. Those millions spent by the three-pointed star in 2019 meant their drivers, Lewis Hamilton and Valtteri Bottas, won 16 of 21 races and had 32 podium placements. Previous years were similar, with the other big budget teams of Red Bull, Ferrari, and Mercedes. The other teams seemed like seat fillers. Wasn’t it a lot more exciting when 80:1 underdog “Rich Strike” beat the favorite horses three weeks ago at Churchill Downs? It has been rare for anyone not from the top three teams to score a victory in Formula 1 for over a decade. And like gaming, F1 didn’t seem to be resonating with Millennials.
Their turnaround came in 2017 when U.S.-based Liberty Media Corporation (the same folks who are buying the aforementioned Strip property) purchased the racing series for $4.4 billion. They immediately made some dramatic changes.
The over-protective Ecclestone would sue anyone who posted F1 video clips on social media. Liberty, instead, encouraged the practice (check out YouTube). Under the leadership of Liberty’s Chase Carey, who had no previous racing experience, F1 quickly evolved. He recently capped teams’ budgets at $145 million. While it was not popular with the Mercedes and Ferraris of the world, it should mean future racing could be more competitive.
In another brilliant, but controversial, move Carey backed a Netflix series titled Formula 1: Drive To Survive. It began three years ago, streaming 10 episodes each of its four seasons. It has become a huge hit with younger audiences who could relate to these drivers from their own peer group. Drivers were being recognized on the street by fans for the first time in their careers. Formula One discovered what NASCAR had years ago: drivers (and their personalities) are the secret sauce for racing popularity. The old guard, like Mercedes, refused to participate with Netflix at first, but once the series became a hit, they jumped on board too.
Liberty also realized that America was another key to increasing fans. Just three weeks ago, Florida hosted their first F1 event, the Miami Grand Prix (notice the Hard Rock logo on the roof of the central stadium).
Without Liberty’s leadership, it would be doubtful this track would have been allowed, nor would any other American location since Ecclestone’s fees were excessive. He was once quoted as saying, “Frankly, I don’t care where we have it. I only care if the check clears.”
Liberty’s willingness to lower venue fees is paying off. There were 250,000 ticket requests in Miami for the 80,000-seat venue within the first hour. Yahoo reported that the race, won by Red Bull’s Max Verstappen, was “the second-most watched F1 race in U.S. history, with 2.07 million viewers for both the pre-race and race on ABC and ESPN. Over 700,000 of those viewers were in the coveted 18-49 demographic.” And the TV event had more adults “under-50” watching than the NASCAR event at Darlington on the same weekend.
Ecclestone always demanded decorum and ultra-posh civility at his races. He was probably having spasms seeing Liberty’s “Americanization” of F1 in Miami. The entertainment trackside included DJ Drew, The Chainsmokers, Post Malone and Maluma. While there may be actual yachts anchored at the Monaco race, the Miami GP had mega yachts trucked in to sit in a fake water marina in the infield. Sure, it might have been a bit tacky, but it generated a ton of pre-race publicity and became a must-see-it-to-believe-it attraction.
Food offerings included Miami Slush, Cajun Nola Bites and Soulfly Kitchen. There were VR studios everywhere. Race parties featured Snoop Dog, Norwegian DJ Kygo, Ceelo Green and Diplo. Celebrity sightings were common and ranged from Tom Brady and Patrick Mahones to Michael Jordan and David Beckham, to Matt Damon, Pharrell Williams, Paris Hilton and Michael Strahan. Clearly, this event was the place to be and was aimed at the younger demographic.
This change in philosophy also opened the door to Las Vegas. F1 had announced this April that racing will hit the Strip (literally) in November of 2023. The Nevada Independent quoted Sean McBurney, Caesars Entertainment’s regional president:
The resort industry’s initial meeting with F1 officials led to many questions surrounding the race logistics, such as getting spectators and customers in and out of the venues. But he believes they will be easily addressed. “It’s not the most straightforward type of event to execute, but everybody in the room immediately saw how powerful this would be both for Las Vegas and frankly Formula One,” McBurney said. “When you think about some of our properties – Flamingo, Harrah’s, Bally’s, Paris and Planet Hollywood – all will have front-row seats to the action.” McBurney added that F1 anticipates the race alone will attract 170,000 people to Las Vegas.
Potential gaming co-sponsors are emerging every day. The Madison Square Garden “Sphere,” now nearing completion, is one of the first, and it’s almost a certainty that others will follow. Supporting that is another recent “F1 First,” which is that they are now making past performance data available, an obvious nod to the sports betting community.
What an original idea to host an event in Las Vegas … or was it? Do you remember the 1981 and ’82 Caesars Palace Grand Prix held 40 years ago in their parking lot? It was far from a success, so why the excitement now over bringing Formula One racing back to Sin City?
For one, the changing demographic of the race fan mentioned above make this a natural to attract the younger crowd we gamblers seek. And the proposed circuit is definitely more than a parking lot.
Las Vegas will join Monaco, Australia and Singapore as a true “street” track. The high-speed straightaway will be the iconic Strip itself. And the event will be held at night. Can you imagine cruising past Las Vegas Boulevard’s neon and video signage at nearly 200-mph instead of the normal 10 to 15-mph stop and go? Try to envision the ear-splitting roar of 20, 1,000+ horsepower engines bouncing between the Bellagio fountains and Paris’ faux Eiffel Tower?
After accelerating near City Center, drivers will then have to slam on the brakes to make the 90-degree right-hander by the Palazzo and then make a broader right around the new MSG Sphere. It will be a track like no other, anywhere, ever!
The best news is that Liberty’s purchase of the property (circled above) seems to guarantee a long-term relationship with the city. Hopefully, they’ll build an entertaining paddock area that will become another year-round Nevada attraction. Local tourism officials seemed convinced, as they voted to spend $19.5 million over the next three years to help with the event.
All the changes instituted by Liberty are definitely working. The average TV audience for F1 is up 56%, social media followers jumped to 49.1 million (a 40% increase), and the exciting 2021 finale drew a global TV audience of 1.55 billion.
The F1 lesson of lowering fees for higher future returns should not be lost on our casino industry. Liberty’s newest F1 chief (who is replacing Carey), Stefano Domenicali, said, “There is a place for Michelin, and there is a place for burger.” It’s hard to say it any better.
Thankfully, the gaming industry is also focusing more on younger crowds with fantasy/sports betting and targeted resorts like Circa. The pandemic eliminated some of the annoying parking fees and other irritants like resort fees (hated by every demographic). Hopefully they don’t come roaring back to pre-COVID levels. And while some operators did not embrace “social media influencers” at first, the impact of these young trendsetters on increased slot revenues has been proven, just like Netflix did for F1. We just need more.
Formula One racing in Las Vegas this time around will be a game changer. And hopefully we’ll continue to change along with them.
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Ed. Note – Before beginning his gaming career, Buddy Frank was a news broadcaster (and an F1 geek). He did the radio play-by-play for the inaugural Long Beach F1 races beginning in 1976 alongside color commentator and Indy winner Danny Sullivan. He’s also been a frequent guest in the Everi suite for the F1 races held at the COTA in Austin, but wasn’t quick enough to get a ticket for Miami this year.
