One thing learned about Ferrari going public

Ferrari owners caring about Formula 1 VIZSLA? You sure?

j/k

have not been invited to F1, but did get invited to Corsa Clienti - that was fun to drive on the track. Looking forward to next year...the food and open bar was a welcome surprise. All for a nominal (dirt cheap fee $250)?

I definitely appreciated it.

Strange that never happened when I drove an NSX? Didn't seem to happen with my Bimmer or Mercs, also never got an invite by VW/Audi/Porsche either...
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Not so much F1 fans (although I know more than a few) as liking the insider treatment.

If Ferrari were to leave F1 thing would have come full circle from the days when Enzo only sold road cars to finance the racing.

Ferrari is all about the myth.

 

Agree 100%

I argue that Ferrari without racing is Nike without sports.

Not saying all Ferrari owners are F1 fans, but I say overwhelming majority of Ferrari F1 fans would love to be a Ferrari owner.

 

I think the only solution to this calamity is for all doomsayers to sell me your Ferraris for pennies on the dollar. I will accept the very likely risk that all Ferraris will eventually be worthless now that SM is in charge.

I will also accept medium size shirts, jackets, 8 1/2 shoes and 612 luggage for free and you can write off the donation on your taxes (but don't come to me if you get audited).

 

And owners love knowing that.

The Nike comparison isn't quite on as Nike supplies competitors and Ferrari competes,

I was a bit surprised when the man in the sweater scolded the team for not winning. In its long history Ferrari has had many more losing seasons than winning ones. As someone once observed, ninety percent of life is just showing up. Ferrari doesn't need to win every, or even most, years. They do need to show up, fly the flag, and fight the good fight.

 

Thanks VIZLA for your thoughts.

I use Nike as an example because the other cases would be rhetorically ludicrous (based on the reaction on this thread by some..maybe not). Nike could theoretically pivot, and focus more on lifestyle branding (see Lululemon) and away from professional sports. I think this would be disastrous, but that's why I brought it up.

Using an actual competition organization would only bolster my case more. What would the Lakers/Yankees/Patriots be if each team left their respective league? Joined the B/D development league? Or stop competing all together? Of course, the raison d'etre of a team's marketability would all be gone. No reason to buy a Laker jersey/merchandise/tickets (in our example Ferrari race garb,F1 tickets) if they aren't on the court/track? Perhaps as a retro homage to the Showtime aughts/Schumacher era?

Heck, the S/F would be meaningless..and would be referred to as a byproduct of when Ferrari 'used' to race...Can it happen? Sure, but so can Nike pivoting and trying to go the Skechers route. Possible, but in my opinion unlikely.

In the end does F1 help or hurt Ferrari? In my humble opinion - it definitely helps..with 30% of revenue coming from sources outside their cars....and the fact that Ferrari gets sweetheart treatment, not just in terms of their veto power, but higher share of revenue as well.

 

Damn Paul (from another Paul)

You beat me to it!

 

this is a topic about business not about your perception of the brand right? Nobody is going to deny that there's some visceral reaction to driving an amazing car. But an amazing car by itself is not going to drive a company to profits. Too many people talk about how much they love it and how awesome and super duper cool it is but nobody is actually talking about the business. You don't have to be a naysayer or a doomsayer to know that it's not going to continue the way we have it today all you need to do is introduce a different angle to the topic.

 

Thanks TestShoot for your response...fair enough - as I've reiterated to many here - I have no crystal ball to foresee the future. Will Ferrari become yet another mass market mainstream company? (some would argue it already has)

At least you acknowledge we do seem to have it good 'today' - that has been my point all along. Of course Ferrari may "Porchefy" itself - we'll see the FF SUV - can this happen? Off course! However, many here seem to contend that Ferrari (Today) has no relationship or connection to racing. - that I simply cannot comprehend...say it will leave F1 in the future, say that it won't have any long-term impact in the future, heck - say that people wouldn't even notice in the future...but don't tell me that racing is not a component of Ferrari *Today*:

Scuderia Ferrari Value 2014
Team value: $1.35 billion
2013 Revenue: $460 million
2013 Budget: $400 million
Owners: Fiat Chrysler Automobiles, Piero Ferrari

A part of Formula One since the very start, Ferrari is far and away the biggest name in the sport. No team spends more than the Italian squad, and its longevity ensures a unique bonus worth 5% of F1's total profit.

Source: Forbes
Ferrari - In Photos: Formula One's Most Valuable Teams 2014 - Forbes
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haha good to see your chime in here Mitch...apparently some people seem to argue F1 has nothing to do with Ferrari anymore...since this is the case, no point in Ferrari staying...I guess they can make up the 30% of revenue derived from racing with a new SUV.

Hope to see you in the next FOG drive.

 

The folks that love Ferraris but don't own them likely do not know much about its racing heritage. This is evident to me by the many times I'm asked what the SF means in the shields. However, those that step up to own one of these cars seem to have a good grasp on the racing element. Some even know where the horse came from.

 

I'm baaaack...

Thanks for the earlier apology Paul, I accept it and will refrain from making further bold, outlandish, or divisive comments. Edit to add that I also apologize if I offended you or others in any way in expressing my views.

Now, that out of the way, you have mentioned 30% of revenue from F1?

I read the filing (quickly) and my own estimate (admittedly rough) is:

Total revenue (USD) ~3.2bn

Of that, "Sponsorship, commercial and brand" seems to be the line item that makes up bulk of their F1 business. Their engine revenue appears to be dominated by their sales to Maserati rather than their engine rentals in F1, but I give that 50% F1 credit, for about $180mm.

If I give 100% of sponsorship, commercial and brand all to F1 (which we know isn't the case), I get about 20% revenue from F1 (being very generous).

If we look to F1 and see that they derive around $150mm/year from their share of F1 business (the direct share Ferrari receives, excluding all the merchandise monies), we can assume around $320mm remains in that sponsorship/commercial/brand bucket to be split between F1 sponsorship proceeds, F1 merch and other general merchandise... if we assume 50% of those remaining sales are not F1 (i.e., Ferrari licensed models, any non-F1 merchandise), then we get about 15% of revenue from F1. If we also argue that "nostalgia" F1 isn't really direct F1 revenue, the number goes down (much like Porsche still sells products that celebrate racing series of years past, not tied directly to recent races, so too does Ferrari benefit from past successes).

Perhaps they attach more value elsewhere in their filing to F1 that I didn't catch, but my admittedly rough math suggests that F1 revenue is ~10-20% of their total.

Obviously, still a significant piece of business but I didn't catch the 30%.

BTW, I've known what SF stood for since I was maybe 8 years old. I don't think ownership is the criteria for knowing the racing heritage as any book that any fan might read on Ferrari history, covers the racing aspect. The F1 history and brand are inseparable.

The F1 "future" and brand, at this point, may be less consequential to the business, but clearly open to differing opinions.

 

In 1947 Il Commendatore started selling road cars in order to fund the scuderia. That arrangement was inverted long ago... For the past 10 years or so, more revenue has been earned from merchandise sales. It is a 'brand' now, just happens to sell cars. They'll need to keep the cars great to stay in front as as a brand.

 

Q3 Earnings Presentation released yesterday

http://corporate.ferrari.com/sites/ferrari15ipo/files/ferrari_q3_2015_results_presentation.pdf

600 MM full year run rate for Non-Car (F1 & Merchandise) related activities.

 

I think you're partially right - hate to say it, because Ferrari and Porsche are the two marques that interest me most. But the Porsche Macan is looking to be a huge sales success, and the Ferrari California is also a pretty mainstream car -- direct competitor to the Merc SL, which has only the most tenuous ties to track machines like the 300 SL. None of these modern cars belong anywhere near a track, and their features aren't all that related to motor sports.

But, a lot of the value in the Ferrari and Porsche names has to do with pedigree -- much of it based on their reputation in motor sports. In Porsche's case, their cars have been entered in competition almost from the start. Ferrari had more separation between road and racing cars, but the association is there. (Contrast with Lamborghini, which has zero motor sports associations...)

I'd guess that many buyers of serious performance cars like the 488 and 911 GT3 RS are aware of the marques' fortunes in competition.

I've owned a couple of cars from Ferrari and Porsche. I actually bought my 356 in part because this specific car racked up a lot of wins back in the '60s and won an SCCA title in 1963, but regardless I think you'll find buyers of the hardcore sports cars actually do care. The PCA calendar is full of autocross/track events. Probably Porsche owners do more racing and Ferrari owners watch more racing on TV.

The attached ad is, I think, one of the best car ads ever. Sums up how many Porsche sports car owners think. (Not my car, btw.)

With regard to Ferrari and Porsche ownership, I'd agree that my Ferraris attracted more attention, and that the brand has more cachet. To the general public, though, that has as much to do with perceived price tags as anything else. But the general public doesn't buy GT3 RS's or 488's.
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This investor conference call for shareholders is very interesting.

 

I don't see it, unless you're taking 110+51 for latest quarter, x4 and dividing by the 2,900mm euros?.

I see the same split as I ran the numbers on based on the prospectus, or about 10-20% F1 related. Not a big deal either way but remember that biggest chunk of that "engines" category is Maserati and nothing to do with F1. Even if we take all their merchandise and call it "F1" revenue, it would be <20%.

Again, still a significant chunk but likely more reasonable estimate is that revenue from F1 is in the 10-15% range.

Now, what F1 does provide is marketing, which is clearly a big positive...

I personally hope they continue in F1.

The most interesting current racing category for me is LMP because it feels more directly relevant and more innovative of late. Would be great to see an effort in that direction too...

 

Yeah, I thought "RACE" was a bit lame too. I would have preferred "ENZO". Now THAT would be a ticker symbol.

 

What if . . . ?

What if . . . ?

Enzo sold road cars to finance his race cars. What if today's Ferrari sold its SUV to the public in order to more easily finance its F1 team/extend the halo/continue the cachet?

Jacob

 

Difference is Porsche used their racing as direct marketing in the same way Ford etc do. Ferrari road cars were originally just a way to finance the race cars. If direct association was most important, Lamborghini's main demographic would be farmers
Porsche ad is great and we could probably find Ferrari with similar claims. Difference is, we don't have many great Ferrari ads because they generally don't do much direct advertising.
BUT things are changing and poster Jacob Potts is on the mark, in my opinion.

 

Dave is 100% spot-on correct with the above statement. Between Justin Bieber, Kim Kardashian, the Real Housewives of wherever, the Chinese & Arab ultra-rich who don't know what to do with all their money.....that's where most of Ferrari's sale come from nowadays.

Sure there are some of us who are drawn to Ferrari because we have the passion, the racing history and all that good stuff but even We like to "show off" our cars to a certain extent (some more than others) and take a certain pride in owning one.

Most young playboy rich kids don't even know who Enzo is...who Villeneuve is....and sadly, soon they won't even know who Schumacher is.

Ferrari's total whoring out of their brand and their marque has not helped....and it will get worse over time especially with Marchionne at the helm.

 

2015 Full Year Outlook

F1/Brand = 421 Projected based on 414 (2014 Rev - F1 Rev Share) current 9% growth rate PLUS higher revenue due to Final Formula 1 Payoutpayout (2nd place) - Ferrari got 4th place in 2014. - yields at least an additional 30MM more revenue over 2014 = 451...lot happens with final payout.

Engines = 172 * 25% (est based on filing) = 43 (for 3 Qs) - 57 full year
Page 41
Mugello Racetrack 2009 Revenue (16MM in 2007, est 20MM 2015)

See footnote (5) & (7) & (8)
Ferrari Corporate | Ferrari posted a record Q3 2015 performance
-------
451+57+20 = 528 MM (fx) = 580 MM USD

Engines = 172 * 25% = 43 (for 3 Qs) - 57 full year
Page 41

528 MM / 2800 MM = 19% (assuming zero percent F1 Equity/Marketing/effect on the 100% of cars purchased) & like any other sports team, merchandising revenue (and in F1 Prize Money) is directly correlated to success; Ferrari has had 8 year dry spell.

It contributed 209MM in Pure F1 Revenue (not chotchkies) in 2014 - this does not count lease agreements with Marussia & Sauber.
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Seems like our numbers generally agree.

I am just saying that not all of sponsorship/brand/commercial is F1 and even if we assume all of it is (as you do below) we hit ~20% (the high end of my estimate).

If we are factoring in how much the F1 pulls up the car sales, that is a different story. Then we can ask how much benefit from F1 R&D in terms of translation to road car tech (vs. directly investing those funds in road cars). I there are arguments both ways on that, though likely in years past there was more transfer than most recently.

 

Looks like I hit it right on the dot.

I said F1/Merchandising would come in at 580 MM $USD for full year 2015...

well whaddya know...

Ferrari Corporate | Best ever results: FY 2015


2016 Forecast says 638 MM USD or 22% of revenue. 22%! Can you imagine any other car maker making 1/5 of their revenue on jackets and toys?

But, maybe they should just abandon all that and just make a SUV like Porsche.

 

Paul
I am really interested in your calculations but Commercial Spinsorship and brand is not just F1. It includes ecommerce and licensing. How much is the licensing? F1 is a big contributor to the number above. How much if the revenue is licensing is what I am interested in as they never split that out.