Toto, thank you so much for
taking the time today. Thank you for having me. Tell us a little bit about
your background, how you got Into racing. So I come from Vienna and
racing wasn't part of any of My my upbringing. We didn't have any
financial means to do go Karting or such thing. But when I was 18, I got
invited to a junior Formula Renault Formula three in
Europe and I really, really Didn't know what to expect
came there. And this is really where I
found my identity, and I did Everything I could to raise
sponsorship and and then Race in junior formulas. And this is, this is how my
first few years of started In the business. And how did you go from that
to then leading a team? Well, I never expected that. Obviously everything was
focused on the on the racing Career, but that ended in
after 4 or 5 years in Because of the terrible
accidents that happened in Formula One around Ayrton
Senna dying because my Sponsor wanted to pull out. And that was basically the
end of my ambition, because It was a key, key investor
in my racing. And then I forgot about it
and went into M&A and then Venture capital and stayed
there for a long time and Started racing as a, as a,
as a hobby. And, and from there started
to sponsor some young Drivers because it felt a
bit silly in your early 30s To do racing on the
weekend. And that became a Business in itself and
invested in a, in a Formula One team in Williams bought
bought a stake there as a Non-executive with the aim
to exit eventually.
And three years in, our CEO
quit and I was asked by Frank Williams whether I
wanted to do this with him, And I did, and we won a
race. And this is how the Mercedes conversation
started. You're unique because you
are a CEO, principal and Part owner of Mercedes. How does that happen? Yeah, I'll have to pinch
myself every day to be a co Shareholder with with
Mercedes in a joint venture. So with three equal
shareholders and I'm in a Way the managing partner. But it's like you say three
different heads that I need To wear from the team. Principal responsible
responsible for all racing Activities is basically
like Belichick. And then on the other side,
the CEO who needs to look After the commercial
aspects of the team and Growing in. And then with
my third hat is the Shareholder value that I
need to create for my for my Two partners and myself in
order to grow the franchise Value and, and come up with
a strategy that's suitable In the context of the wider
F1 picture. So yeah, that there is
quite an interesting, Various interesting aspects
of my life and job. Which one takes the most
time? Well, the engineers will
always say that I'm spending Too much on the CEO side,
and I need to remind myself That in our business, it's
the stopwatch. If we win, financial
success is going to follow. And in that sense, my
priority must always be to To create a framework where
our performance people are Able to thrive. And, and sometimes, you
know, deviate a little bit. But I quickly come back to
what I really love and that
Is that is racing and the
performance. So you've been doing this
for a long time. How did the how did F1
change after the Liberty Acquisition? I think it was unthinkable
back in the day that someone Else than Bernie Ecclestone
could run the sport. He's made it big, but with
Liberty coming in, they they Introduced a new way of
looking at things and, and To their credit, also drive
to Survive became. We were skeptical at the
beginning. Ferrari and us Didn't participate in the
first season of Drive to Survive because we felt we
are you know, we are here For racing and not for
Cirque du Soleil. And eventually we realized
that the way, the Entertainment way of
looking at the sport is, is Good for all of us. As long as entertainment
follows sport and not the Other way around, we're not
scripted content. So what liberty has done
for the sport is really Bring a completely new
angle to what was a very European and very South
American sport. What's it done for the
valuation of the team? Well. We are we're getting a part
of the top line revenue of Formula One that goes to
the teams and is being Divided by all of the teams
in a certain part, equal Share, and the other one
based on performance. So as as the revenue of
Formula One has been going Up, that teams are benefit
from that. And on the other side,
Chase, back in the day, was Adamant of introducing a
cost cap in order to stop The big teams outspending
each other. And he said, I need to
protect you from yourself. And the the blueprint was
the American leagues where
When the salary caps were
introduced, the businesses Became sustainable. So he pushed very hard on
that front. And that was introduced two
years ago with also the aim Not only to make the
business sustainable, but Also to create a more level
playing field. So let's talk more about the
economics of it. You mentioned the revenue
share with Liberty on on F1. What about the teams
itself? How do you run that Business? What does it
involve. So our our business today
generates about $600 million In revenue. And we are growing with
ten. To 15% annually. We have predictable income
streams because sponsorship Contracts normally between
5 to 10 years. So this is what we're
aiming for. And and so that's one part,
one pillar of revenue. The other one is TV. And that is basically F1
money, which is also growing Strong because the F1
pillar is promotional deals. Countries or promoters that
want us to raise there and Pay us sponsorship income
from F1 itself and TV and Media deals. So that's our
second income stream. And the third one are side
activities, be it our Engineering arm or
hospitality. And so with the cost cap
that is locked in at 135 Million, excluding drivers
and marketing activities, That has become a
sustainable cash flow Structure. What about the prize money? How does it work that you
get the points and that Actually directly relates
to revenues you can bring In, doesn't it.
Yeah, absolutely. That is
that is what comes from the Formula one pot. It's split. It's two columns. We call them two streams. One is divided equally by
all ten teams and the other One divided on historic and
current success. And that works well. But doesn't it also
influence which partners you Can bring in sponsorships
and how much they invest? Yeah, I think investing in
Formula One as a sponsor Partner is a very
transparent exercise in Finance. We need to
generate a return on Investment for our sponsor. Mercedes has won seven
championships. You're currently in eight. Excuse me Lewis has won
seven, Mercedes eight. You're currently number
two. Doing very well. How much easier is it for
you to attract those kind of Sponsorships than some of
the competitors, which who Aren't doing as well? More success gives you more
screen time. It gives you reputation. Our brand Mercedes is very
strong. So there are some companies
that want to align with the Mercedes brand that stands
for certain values and all Of that, including the
drivers and the Personalities in the team,
provide a different provide A value proposition that a
sponsor is going to buy in Or not. So that's the key
element. And what are those
relationships like? Because they put their
names on the car. But it goes deeper than
that doesn't it.
Yeah, I think the the
sticker on the car is almost The is the least important
of all of those things. When you come back to
saying, we need to earn Money for those teams, what
is it? We need to define what the
objective is. Do you want to sign up more
clients, more customers? Is it C-suite executives
you want to tap or more Middle management? What are the kind of values
you want to communicate Around your brand? What is
the perception you want to Have? Which are the
initiatives that we can take Together in terms of
advertising? How do you want to be
positioned? Et cetera, et Cetera, et cetera. You mentioned the growth of
the sport clearly over the Years. You've seen that.
And then Drive to Survive Came. And now there's this
big push in America. We're adding races. What has that been like? The experience to expand in
America, have people on the Floor of the New York Stock
Exchange recognize who you Are, speak at leading
business conferences. How different has it been? Yeah, it's very different. We've we've seen that
phenomenon in a lot of Places before where Formula
One has been traditionally Big, but never in the
United States. And I think since Drive to
Survive and the on track Action, we have a lot more
fans in the US. It's still niche. I think our our target
group is affluent. Interestingly, the
strongest growing group is Young females and future
fans. You do. You mentioned that
you use the word niche.
I think it does have a
reputation to only serving Affluent to being primarily
focused around men. How much of a limiting
factor do you think those Things are to the growth of
the sport? Formula one is a technical
sport. It's an engineering
competition. It has traditionally been
positioned, like Bernie Said, as the hospitality,
as a michelin restaurant and Not the burger joint. It's not very accessible
because the tickets are Very, very expensive. And I think all that
created this high tech, Highly affluent fan
community. But as we grow bigger, the
sport is is an is an Interesting entertainment
proposition now also and and Plus the streaming over
Netflix I think we are going Wider and more more
mainstream. More people have access. And that's why in the US we
are particularly successful In selling out live in
Austin. We had last year 440,000
people, and those tickets Are affordable in some. Of the tickets are
affordable and we're trying To provide a good show. So
I think we're we are growing Strong, but it will always
it has always been a little Bit of this affluent group. Should it be more
accessible. Is that a good Thing? I'd love to. I think we
still need to keep our Exclusivity because it is
expensive to run these two Cars. We have 2500 people
that work for two F1 F1 Cars, so it is what it is. But I think we are creating
a product that becomes more Available and goes a little
bit wider.
And I would love to tap to
tap more, more markets in The US and access more
people. So this becomes a US wide
sport in the next years. So you're happy about adding
the third race in Vegas this Year? Yes, I think I was. Austin was such a long term
partner of ours and we had a Difficult years there and
then obviously it's Prospering. Miami was a
blast second time around. Now the organization got
everything right and I think It was great entertainment
for the fans. And Las Vegas is blowing
everything out of the park. I mean, as we hear it's
going to be big. I guess this is what Las
Vegas is big and expensive. Yeah, big and expensive. So maybe we need to create
also other ways of accessing It. Obviously we're limited
in space. But yeah those three
destinations in the US are Great. Do you think we. Can accommodate more even
races in the US? While I think we can because
America is such an important Market, but I'm really
happy with the three that we Have that we have today. But obviously racing around
here would be would be mega. Around here in New York. You
mean. Yes. You think I guess we'd
have to go out. I don't I don't want to
create a rumor. Of course we we are where
we are. But New York is the is the
last remaining city that That would be great for
formula one. But again, that's Greg's
and Stefano's call. And for me it's rather just
having a laugh here. Can it ever be as big as
football in the US or soccer Globally?
I think we need to be
realistic. When you look at those
three sports, soccer is a Global phenomenon. It's it's it's mainstream. Everybody can take a
football and kick around in The backyard. And there is and that's
being done all around the World. If you look at
social media following of The biggest football stars,
we're talking 500 million Plus Instagram followers. Louis, on the other side is
also a global phenomenon. But with the more niche
fans like I mentioned Before. So the ratio is 1
to 10 in a way. And then you have this
traditionally national big Sports like American
football. I thought the Other day that New York can
Louis can probably go around New York and have an okay
life. That's why he's also
spending time in the US. Tom Brady wouldn't be able,
but Tom Brady could in Europe because the sport is
not as big as it is. And I think it's we need to
say we need to set realistic Objectives. Can Formula One
be as big as the NFL in the US? I don't think so. Can the NFL be as big as
Formula one in all of the Other continents? I don't
think so either. Can it operate more like the
NFL, where it's league First? Because it feels
like it's been very much Team first kind of
mentality? Yeah, we have a different
structure. I think in in the NFL the
teams own the league and in Our case it's Liberty that
owns the league and the Teams are having a share of
that. So that is structurally
different. I think we still have the
same objectives.
We want to grow the we want
to grow the the sport in Popularity and in revenue. And so it's not too
dissimilar. You mentioned how many
people did you say work for The team for two cars,
2500. And how big is that
relative to some of the Other teams? So half of it is basically
doing engines, designing the Engine and producing the
engines. And the other half is the
chassis, the car. I would say that on the
chassis side, we are Probably as big as Ferrari
and Red bull. And then there is, I would
say, second tier teams in Terms of size, the McLarens
of this world that are going To be probably just below a
thousand people, eight, 900, And then there are smaller
entities that will be around 6 or 700, but not big
differences. How many of the people that
work for you are men? Because when I go to the
track and see the teams, Mostly men. Yeah, mostly white men. But we are, we are, we are
changing that. And our team Mercedes,
we're we're trying to be Trailblazers. We have set
ourselves initiatives like What we call accelerate 25,
that all new hires we want To we want to employ 25%
from underrepresented Groups. And year one has
been 38%. So I'm really proud of
that. And you can. To see that our population
changes, you know, that it's Just different. And I
strongly believe that this Is going to bring
performance because I want Different backgrounds, be
it cultural and or skin Color. I want ambition and
determination. If traditionally we would
look at Cambridge or Oxford
Students, we are now
looking also at universities That are more accessible
from for for young students From underprivileged
backgrounds. And and we're Seeing we're seeing that
it's working. And on the other side it's
about females case. How important is that to the
growth of the sport, do you Think? What you know, what I
mentioned is the strongest Growing audience is young
females. Why is that? I don't know, maybe young
drivers that do some social Media. They're very handsome. They are, I can't judge, but
if you say that and I think It's just good
entertainment in a way. And so I think if we were
able to have a competitive Girl in a car as a sport
that has been traditionally Men only, that would make
me super proud and I think Would do the sport very
good. The other knock against the
sport right now is that Max Verstappen is winning all
the races, and we look at Indications like ratings in
the United States, they're Actually down. Is it bad for the sport to
have one team so dominant? I realize that you were in
that position for many Years, but doesn't that
hurt the the fun and the Appeal? I think when we won eight
times in a row, that was the Kind of same opinion that
are we damaging the sport Because it's not variable
and unpredictable enough. And I think that comes with
with domination. But rather than some of our
competitors have tried to Reach out to the FIA to
change the regs, I think we Just need to respect the
team and the driver have Done a better job than than
everybody else.
It's a it's a meritocracy. It's about fastest man and
fastest machine wins. And Red bull car at the
moment is is the benchmark. And it's up to us to do a
better job to to catch up And not complain too much
about it being too boring. That's an issue for for
formula one overall, that we Need great entertainment,
but it's up to me and my Team to just keep pushing
and deliver a car that is Good enough so Lewis and
George can win a Championship. Which is it? Is it the car
or the driver which matters More? I often get that question. It's interesting. So I
think the best driver in the Worst car will probably not
qualify last, but will maybe Qualify seconds. The worst driver in the
best car is going to win Races but not the
championship. So how do you get a car as
good as the Red bull car Right now, especially with
the cost cap? Formula one is about
physics. It's not mystics. We there is within a
certain framework of Regulation, you have to
create a car that is quick On track with the most
downforce, but efficient on The straights. And so it's
up to us to take decisions, The right decisions of what
does that car need to look Like? What do we need to
design and develop and Produce that that
correlates to that Objective? How do we think about
valuations on a team like Mercedes? We see these eye
popping valuations across Boards for for different
teams. Is F1 similar?
I think when you look at
sports live sports Generally, it has proven
pretty crisis resilient. We at least formula one was
able to put on races behind Closed doors, but we were
able to broadcast them. And live sports can't be
replicated in an easy way. It has taken many tens of
years to create these Leagues and create these
teams. So you can't just enter and
start it on on your own. And so it's a high entry
barrier. Sports. And so that's why
franchise values have Increased because it's
simply a supply and demand. We generate revenue. We generate EBITDA. We generate net profit. We have predictable income
streams going forward. And then put on top, let's
say a value for for limited And limited franchises. And that gives you a
certain valuation. But like all valuations
it's it's worth what Somebody else wants to pay. And that only if you want
to sell. So do you ever. Think about selling your
stake. No I think we have a
structure now where we have Three equal shareholders. Each of them is bringing
their part to to the to the Sport and to the team. And we want to keep it long
term. That's our main
concentration now and for The foreseeable future. I think the. Two big questions that, that
we're sort of asking around The sport is, first of all,
how big it can get, which we Talked about, but also how
big it can get and grow
Without compromising the
integrity and maintaining The brand. Is that
something you're worried About? We need to. Be always
careful of finding the right Balance between offering
entertainment in the right Dose. You know, it's like
like selling a luxury brand, But always selling just one
product less than you could And make it desirable. Because if you oversaturate
the market by pursuing top Line revenue, it's not
going to do the sport well. But I think our
shareholders and Stefano Domenicali have a clear
objective in that sense that They understand what
Formula One stands for, Which markets we need to
tap, which sponsorship or Which revenue pillar needs
to grow. So I think we're in a good
place. What stresses you out the
most as CEO of the Mercedes Team? What stresses me out? I think there is no such
factor that stresses me out. I'm getting annoyed by
Nonperformance here. I love New York and waking
up in the morning and Thinking about that. It's like all encompassing,
but it's also the challenge I love. I love trying to
solve problems. I feel in my comfort zone
when when the pressure kicks In, I'm more at risk of a
bore out than a burnout. But as we all, trying to
balance family and work is Not always trivial. And but this is this is the
problem of many. So there are ten teams and
20 drivers should F1 expand The number of teams? I think we need to be open
to any expansion that is a Creative for the business.
We are a limited amount of
ten franchises and we've Been teams that have been
committed for a long term. Ferrari has been there 70
years. We've gone through really
difficult times and now the Sport is in a better place
and we share the revenues. But at the end of the day,
if Formula One, the Organization and DFA decide
that another team would Contribute to the sport's
growth being in a particular Market or because it would
grow the revenue of the Series, we just we just
need to acknowledge that as A team, we have no say in
that beyond giving our Opinion around, is it
logistically viable to have Two more cars? What is it? What is it that
influences what we do? But the decision is up to
the FIA in the commercial Rights holder. But it wouldn't make you
angry. I know the Andretti Family wants in. Yeah, I think it's for the
teams. From the team's
perspective, it's dilutive. 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 over, let's say, mid Term, that team would
compensate us for the 10% We're losing because they
are bringing new audiences, New market, they're adding
to the show, then it becomes A no brainer. And Formula
one obviously needs to say, Okay, what is it that the
team can bring? Is the American team a
great value add, or is Gene Haas as an American team
enough? What about that prospect of
an American team? I think should we have one? Should you have one?
I think we have an American
team today, and I think this Is what we need to support
utmost. And I have been always
skeptical about another Additional entry being an
American team or or another Entry. But I'm coming back. If the team can demonstrate
that it's adding to the top Line growth of the sport,
be it in terms of audiences, Storytelling or revenue,
the teams will be absolutely In favor of of of
committing to another entry.
