Racing’s Second Revolution - Part 1: Why Motorsport Racing Teams Must Move Beyond Sponsorship
Motor racing has gone through several phases since its start at the end of the 19th century. First, cars being cutting-edge technology at the time, racing was a hobby for the aristocracy, who self-funded their exploits (and catastrophes).
Sometime later, not until 1968 in fact, Formula 1 teams introduced sponsor-influenced liveries to help fund their racing operations (incidentally, and perhaps unsurprisingly, it was tobacco companies setting the stage for this new paradigm).
Nevertheless, the teams being sponsored were still in what we might call the “garagiste” phase (to borrow a term from Enzo Ferrari), and if teams needed money from sponsors, it was because they were running on a shoestring and their operations reflected it.
It wasn’t until the early 1980’s, under the influence of Ron Dennis, that McLaren ushered in the age of motor racing that we see today, when teams became highly professionalized in search of the ultimate goal: becoming as attractive as possible to sponsors (and again, Big Tobacco led the way as Ron Dennis worked very closely at the time with Marlboro).
Ron Dennis created the economic playing field for the races that we enjoy today, with garages looking far more like high-tech laboratories than dirty factories, but other than things looking much more professional in 2025 than they did in 1968, it’s still the same motorsport business model .
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In less than 500 words.
There is no such thing as a free lunch…or sponsorship
In racing, there’s Formula 1, and then there’s everything else. But even in F1, the richest championship in the world, the current business model is precarious; consider that in 2023 Williams, with no factory backing yet still riding the post-Covid Drive To Survive wave, lost over 84 million British pounds!
This comes down to high costs, certainly, but also limited opportunities to generate racing team revenue:
Prize money: Teams earn payments from the secretive Concorde Agreement based on results and history within F1.
Licensing revenue: A small share from F1’s centralized licensing, merchandise, and games.
Sponsorship: The biggest and most visible revenue source, split between commercial sponsorships (logos on cars, activations) and modern-day patronage from private equity investors.
And yet, even with F1’s billions in annual revenue, several teams have only survived because they were able to attract private equity lifelines and over time, some times have in fact not made it.
Outside F1 (in IndyCar, WEC, IMSA, or GT racing), finances become really stretched because prize money and licensing are comparably negligible.
If you don’t have OEM support, sponsorship is effectively your only oxygen, and if a sponsor cuts back or disappears, the cycle starts all over again.
This is the fundamental problem: how sponsorship looks or is activated is of course going to follow Ron Dennis’s playbook and be much more polished than it was in the 1960’s, but it’s still the same paradigm, and remember, even Ron Dennis’s playbook is now nearing 50 years old!
That paradigm includes a lot of work after the sponsorship sale.
Teams have to work very hard to sell their image to sponsors in the hopes this will allow them to break even on track, let alone turn a profit. Sponsors, rightly, expect something in return, and the whole team, from the drivers to the engineering department to the logistics team, has to pitch in above and beyond their race duties to deliver on their end of the bargain.
Then if a sponsor goes under or wants to spend their marketing budget elsewhere, racing teams have to start the process all over again.
Generally speaking, sponsorship creates short-term lifelines but long-term weakness:
Short-term ROI obsession: Teams want the money, sponsors want quick delivery and results. That’s a lot of effort going into creating something so unstable.
Fragility: One lost deal can sink a season. Fans have seen it time and again, teams folding overnight when a sponsor pulls out.
Lost connection with fans: Do audiences really connect with disparate logos around a car? What about in less-known motorsport series? People don’t connect with unfamiliar logos, but they can connect with teams, drivers, and stories. If you don’t believe that, have you honestly never gotten really engrossed in a documentary that was so well done it pulled you in to a world you had no idea existed?. Yet, teams continue to outsource their survival to external brands.
What this calls for is a new paradigm, one in which teams are far more dependent on their own efforts than the whims of sponsors.
From marketing platforms to content platforms
At all levels of motorsport, teams are still trapped as marketing platforms. Their value is measured by how well they can sell other companies’ products.
That has worked well, even taking people like Zak Brown to the very top of the racing pyramid after he founded JMI, a firm which professionalized the sale of sponsorships.
But the next revolution is clear: tomorrow’s motorsport teams must become content platforms.
They must leverage their intellectual property, heritage, and brand identity to build self-sustaining revenue streams (merchandising, storytelling, experiences, and cultural collaborations) that reduce reliance on external sponsors.
Other sports such as basketball, football and skateboarding have excelled in these areas and if you need convincing, consider these examples of how icons in these respective areas have become cultural touchstones:
Michael Jordan, Jordan Brand and the Jumpman logo
The powerhouse video game that is Madden (the NFL and EA made a legend out of a coach! Could motorsport do the same today out of a team principal?)
The Tony Hawk’s Pro Skater series contains some of the highest rated and beloved games in history. They hold a special place in the hearts of an entire generation, yet even Tony Hawk’s Pro Skater is still only one tiny sliver of the impact skateboarding has had on global culture.
These sports have reached “escape velocity” beyond their respective fan bases by leaning on storytelling, merchandising and cultural capital.
Motorsport, as much as it might try to convince you otherwise, is still basically chasing logos.
From marketing platforms to content platforms
What if motorsport teams stopped seeing themselves as billboards and started seeing themselves as creators of culture and intellectual property?
The best analogy for the current situation in motorsport is that basically every team operates on a salary basis: they have to work for sponsors in return for money, and keep repeating the process to keep the lights on. If the company goes under or fires their employee (the race team) that’s trouble.
You probably know the frustration with this type of relationship, and it’s this frustration that has lead so many entrepreneurs to strike out on their own, creating something over which they have ownership; the work to do so is incredibly difficult, but the end result is yours, and, more importantly, once it’s out in the world, its value is no longer tied to the amount of hours you work.
The opportunity is huge, and truly available to teams in all series, of all sizes, because almost no one has even scratched the surface of what is possible:
Technology and core competency spinouts: An obvious first choice for an industry built on cutting-edge tech
Merchandise & lifestyle products: Not just caps and polos, but identity pieces. Think Jordan Brand, not “team shop.”
Storytelling & content: Not just short clips for TikTok, but truly cinematic videos utilized for storytelling and mythmaking
Experiences & spaces: Garage bars, immersive era-themed fan houses and sim racing hubs; the limits are really only creativity and the willingness to try new things
Cultural collaborations: This is the holy grail of brand building. Fashion, music, art collabs, anything cool that resonates and that places teams in the wider cultural conversation.
Other industries have proven the model, and despite some discrete examples here and there, motorsport is far behind.
What’s even more shocking is that there are creators out there already experimenting, creating “cool stuff” featuring motor sport as the backdrop.
The creative work exists, the talent exists, motorsport teams just need to listen, look and bring in their resources and official licenses.
If you’re not an F1 team, this lack of great motorsport IP is actually good news because if you start your efforts now, you have a good chance of making a big impact, far more so than if you wanted to, say, launch a brand aimed at skateboarders.
To be clear: every team in every series will not magically have to stop cold-calling sponsors because they made a nice video or two.
However, for those teams with a goal and game plan, at the very least this could cut down on some of that cold-calling and who knows? With an increased profile and a dynamic audience, potential sponsors may eventually be calling them!
This is such a huge topic that it needs to be broken down into several parts. This series on moving away from sponsorship to IP that motorsport teams (not their respective series) can monetize will cover:
The league that provides the blueprint for epic storytelling
The cultural elements that must be in place for motorsport to reach “escape velocity” outside of its fanbase, and perhaps create a transcendent icon
Examples of how motorsport teams can creatively generate buzz and become intertwined with popular and youth culture
Stay tuned…
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Photo credit: Danny Sleeuwenhoek via Unsplash