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Maximize Shareholder Value


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#1 ch103

ch103
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  • Joined: July 09

Posted 22 November 2013 - 02:53

Some of you may be familiar with the concept of maximizing shareholder value.  Maximizing the owner's profit is the duty of all managers for publicly traded companies.  The underlying concept is the decision making is made with increasing the wealth of the owners of a firm as the top priority.  

 

Since F1 is owned by a private equity firm (CVC) I thought that it would be interesting to discuss what the primary value drivers are behind the value of F1, for CVC. 

 

Here are the one's I can think of.  Please feel free to add to this list or debate/change what is on it.  I will continue to update in a Lustigson-esqe manner.  

 

1.  Viewing audience - as more people watch the races, advertisers pay more to have their ads placed.    

 

2.  Commercial Rights - the ability to charge for race hosting, merchandise, tv rights and marketing using F1 logo's and team likenesses.  

 

3.  Driver Nationality - tied directly to #1.  Countries that have F1 drivers are more likely to have F1 fans (paying customers).  Therefore, it makes financial sense to promote drivers that could increase the viewing audience in their respective home countries.

 

4.  Regulations - the Concorde agreement is a hotly debated subject but it represents the regulations to determine how F1 revenue's are allocated between the regulators (FIA), teams and CVC.  

 

5.  Teams - the teams in F1 act as brands.  The relevance of the brands in F1 are directly linked with the fans (customers) ability to connect with it.  

 

6.  Team Nationality - closely related to #3 and #5, but influences the value of F1 due to teams such as Williams, McLaren, Ferrari, Mercedes and Force India.  Each of these teams acts as their own nations team.     

 

 

This is just a start, I think this thread can be a good mechanism to discuss the fundamentals of the "sport".  I will update as I can and greatly appreciate the debate and contribution of other fans.