Zooming into Pole Position: Formula 1 and Zoom enter into partnership to recreate corporate hospitality

July 30, 2020

3 min read

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What's going on here?

Top tier motor racing titan Formula 1 (F1) is partnering up with American video conferencing platform Zoom, to recreate its corporate hospitality experience, known as the Paddock Club.

What does this mean?

The Paddock Club is the highly lucrative corporate hospitality arm of F1, which gives exclusive trackside access across all 21 race locations. Guests enjoy lavish benefits, including gourmet cuisine, driving tours of the track and driver appearances. The Club alone generated $358m of F1’s $2bn revenue in 2019, with tickets for 2-day experiences at European races costing an eye-watering $3,800.

Meanwhile, the six figure deal between F1 and Zoom is replacing the normal Paddock Club experience for at least the first eight races of the 2020 season, which are all taking place in Europe. Live updates from the track, conversations with famous F1 figures and interactive voting polls are all on offer. F1’s Director of Corporate Partnerships, Ben Pincus, outlined that the aim of the new bespoke experience is to deliver an engaging “live sporting experience” that can be enjoyed throughout the race weekends.

What's the big picture effect?

This story initially highlights how businesses are continuing to innovate as a result of the pandemic. It is paramount that companies address ways to retain customer engagement insofar as social distancing restrictions will allow, if they are to keep their heads above water.

Whilst Zoom has leveraged the pandemic to facilitate the new working from home culture, the business experienced a 3% drop in stock value on 16 July 2020 in light of the deal, marking a stamp of disapproval from investors as the platform enters into unchartered territory. Such disapproval may stem from malpractice previously unearthed by users and regulators, in relation to Zoom’s sloppy data security and privacy methods (to see our article on that, click here). With the current agreement in mind, Zoom will be required to adhere to the EU General Data Protection Regulation (GDPR). One aspect of the GDPR places an obligation on companies who originate outside the EU to follow EU privacy regulations if they are active in EU territory. Accordingly, practices that require user consent for explicit data processing must be adhered to. This is something that Zoom has struggled with in the past, resulting in its data collection regularly assisting third-party social media advertising campaigns.

If the deal becomes a long-term venture, legal intervention will likely be required to safeguard the obligations of both parties. A formal Partnership Agreement would outline the general terms of the partnership, and include information on the allocation of capital, the management and any threats of dissolution. Otherwise, the agreement will be subject to the Partnership Act 1890 if it is created under UK law. This Act sets out a default regime for partnerships if businesses do not have a formal agreement in place. The default and arguably outdated legislation includes terms (among others) that demand equivalent shares of profits and losses, and equal management participation. Such terms may be ineffective and unwanted in this instance because F1 is likely to want to maintain the upper hand in redesigning its Club.

The reasoning behind this deal puts it in a strong position. If it is a success, there may be scope for Zoom to capitalise in the long run with a hybrid virtual and in-person Paddock Club. This would prove lucrative at a time when the balance can be struck between assured guest safety, and a wholly cohesive package focused on a distinguished sporting experience.

Report written by Evangeline Taylor

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