Formula 1’s expansion in the U.S. is in motion, now it needs a star American driver

It took roughly five years, but Formula 1 finally landed another race in the United States.

Formula 1 will race the next decade in the Miami market after securing a venue, landing the financial backers, and with it, parent company Liberty Media‘s U.S. strategy is taking shape.

“Now things are coming together,” said Chris Lencheski, chairman of private equity consulting company Phoenicia.

“It’s going to be huge for the series, especially here in the United States,” added legendary motorsports driver Michael Andretti.

F1 agreed to a 10-year deal to bring a second race to the U.S. last weekend. Financials of the deal weren’t released, but motorsport insiders estimate F1 netted in the range of $17 million to $20 million per year under the pact. The Miami Grand Prix will join the U.S. Grand Prix in Austin, bringing four total races to North America as F1 also races in Canada and Mexico.

“The USA is a key growth market for us, and we are greatly encouraged by our growing reach in the US which will be further supported by this exciting second race,” said new F1 CEO Stefano Domenicali in a statement.

Lencheski credited former F1 CEO Chase Carey “for seeing this through” before relinquishing the role and taking a non-executive chairman title. He added Liberty Media would benefit as the race gives it access to a prominent South Florida market that favors top F1 automakers like Ferrari and Aston Martin.

But the next step in F1’s U.S. play could be essential.

“If I’m the CEO of Formula 1, I’m doing all I can to get an American driver in the seat and successful,” Lencheski added.

Lencheski served as CEO of sports and entertainment marketing firm SKI & Company before selling the agency in 2008. The company formulated F1 sponsorships.

He said for F1 to market effectively market in the U.S., having a native driver would be critical in a sport fueled with nationalism, as it travels worldwide.

Currently, there are no American drivers in F1. Michael Andretti’s father, Mario Andretti, is the most successful American driver to dominate F1, winning the 1978 championship.

And Gene Haas’ F1 team is the only American team in F1 but has no American drivers, something U.S. drivers long ago noticed.

United Kingdom native Lewis Hamilton is the most popular driver in F1. But Hamilton is 36, and the retirement chatter has started. He only signed a one-year deal to drive for Mercedes, further fueling speculation about his future.

“I don’t feel like I’m at the end but only in the next eight months or so I’ll find out whether I’m ready to stop or not. I don’t think I will, personally, but you never know,” Hamilton told F1’s website in March.

With Hamilton nearing the end, Lencheski nominated American IndyCar driver Colton Herta as a driver that could convert and thrive in F1 as a future star.

“He’s already proven he can win in IndyCar,” Lencheski said. “He’s won on the Formula 1 circuit in Austin. He’s lived in Europe training, and he’s the correct age.”

The Andrettis concurred.

Said Mario Andretti on Kyle Petty’s show: “As a young lad, his dad sent him to Europe, he was doing Formula 3, and he knows most of the circuits there, for one thing, and he’s trained. He’s showed in his rookie season in IndyCar, and he won some premium races like (in Austin) … beat two of the very best Indy has to offer. The entire race, he held off Will Power and Scott Dixon. This is one kid I’d love to see him get a break over there because to the U.S. colors again – Formula 1 is like the Olympics in a sense.”

Michael raced in the 1993 F1 World Championship series. He also praised F1 for building on their brand, which includes a streaming series to educate and generate new fans in the U.S.

“I think Liberty has done a lot of good things with the F1 series, including that Netflix show,” Andretti said. “That has done wonders for F1 and people understanding more what it’s about.”

Liberty, which also owns the Atlanta Braves, purchased F1 in 2016 for $4.4 billion, gaining access to a global fan base of over 400 million. It trades F1 as a tracking stock under the ticker “FWONA” on the Nasdaq. Tracking stocks are used by companies to track the success of a particular division in its portfolio.

With attendance restricted due to the pandemic, F1 revenue declined from $523 million to $485 million in 2020, according to its fourth-quarter earnings report. Liberty CEO Greg Maffei also linked the F1 stock to a $575 million special purpose acquisition company, searching for companies including digital media properties to take public.

A key metric on the report: There’s an average 87.4 million viewers per race. It’s a global stat, as over the years, F1 struggled in the U.S. market. F1 did not race in the U.S from 2008 to 2011 before returning with the U.S. Grand Prix in 2012 after a track was built in Austin. And part of Carey’s mission was to build on the U.S. market; hence, adding Miami and growing the media market.

ESPN returned F1 to its lineup in 2018 and pays the organization a rights fee though Comcast‘s Sky Group and F1 produce the races. It’s growing slowly on the viewership front.

The 2021 series opener, the Bahrain Grand Prix, saw an average of 879,000 viewers tune into the network’s ESPN2 channel on April 4. The second race in Italy attracted 905,000 average viewers, according to ESPN. And before the pandemic, F1 averaged 671,000 viewers in 2019 on ESPN channels, up from 554,000 viewers in 2018.

F1 could also be looking to expand on the media front, and Amazon could be in play, according to the Financial Times.

But F1’s future in Austin’s Circuit of the America is in question. The deal is set to expire after the 2021 season. The track sold out its 2019 race, missed 2020 due to the pandemic and is set to host this year’s event in October, part of a 23-race schedule.

Should it remain in Texas and thrive in Florida, Lencheski forecasted more U.S. expansion.

“If they bring an event to Las Vegas or the Pacific Northwest, it will sell out there, too,” he said.

F1 did not provide an official for this article after a CNBC request.

But whether the world’s top motorsport company will capitalize on the U.S. market is unclear. Michael Andretti said the newly installed salary cap would help balance the sport.

F1 established a new cost cap system, limiting teams’ spending. Think of it like the National Football League or National Basketball Association salary cap. For the 2021 season, it’s $145 million and fluctuating after the year. Hence, with a balanced field, bigger brand cars’ teams can’t outspend to win.

Michael Andretti, who himself is a part of a SPAC, Andretti Acquisition Corp., targeting the automotive industry, likes the cost cap system, believing smaller teams will benefit.

“They know how to deal with a smaller budget so they won’t have to downsize, whereas the bigger teams will need to learn how to downsize,” he said. “It’s going to be quite interesting to see what happens a couple of years down the road. I really believe the competition is going to get a lot better.”

“They should be very bullish about their future,” Michael added, “especially here in the U.S.”

Disclosure: Comcast is the parent company of NBCUniversal.