In Formula 1 there is rarely a rumour that does not have a purpose. Often there are stories that are designed to throw people off the correct scent. Sometimes information is leaked in order to scupper a project. There are other times when a story is designed to make things happen, to warn what might happen as part of a negotiation.
It is a complex world and very hard to follow, although later when the pieces fall into place one can often see why such a certain story played a role in the development of a situation. The problem is that most F1 new sources simply parrot the headlines, while some of those who try to analyse the situation often have axes to grind, or are in thrall of one party or another.
The story that News Corporation is in preliminary discussions with potential partners, including the world’s richest man Carlos Slim, to take over the commercial rights of Formula 1 is an interesting one. The source of the story is Sky News, a News Corporation company. Does that mean anything? What I think is interesting is that Sky News has had a number of F1 business scoops in recent months which seem to have emanated from CVC and its related bodies. So is this an attempt to show the world that CVC is negotiating without discussing matters with its chief executive officer Bernie Ecclestone, as it has a right to do, or is it putting up a sign to say that the F1 group is for sale. CVC may say it is not intending to sell, but it is a venture capital company which has been knocked slightly off-balance by some of the activities to which the group has been linked. The signs are that it will cut and run. There is no emotional attachment involved. It is just about money and venture capitalists have no emotion in these things. Perhaps it is a lever being used in another negotiation. At the Malaysian GP Bernie Ecclestone spent some of his time with Abu Dhabi-related people, and talks have been going on with them for at least nine months. They have money coming out of the ground and may be pondering an involvement. Producing another bidder may help them decide.
Then again it may not be that complicated. Rupert Murdoch pays out a lot of money each year to the Formula One group, to buy various rights to broadcast the sport through his many outlets. At a certain point it makes little sense to do that any longer and it becomes wiser to buy the business and find partners to help pay for it. Thus, one can imagine why News Corp might be interested. Carlos Slim is a suitably rich person to partner such a bid, based on the justification that he supports some young Mexican drivers moving through the ranks at the moment. He is close to Peter Sauber, although that link is often underplayed. To give one an idea about this it should be noted that Sauber was a guest at Carlos Slim Jr’s wedding not long ago. The other hint that has been leaked is that “a car manufacturer” might be involved. There is only one manufacturer that is permanently linked to F1. The others come and go. And this week Ferrari President Luca di Montezemolo was making noises about Ferrari leaving F1 if the sport does not do what Ferrari wants. Do we believe that? No way. Bluster.
JP Morgan is also involved. The US bank is already a shareholder in the Formula One business, owning three percent of Delta Topco, the ultimate holding company of the F1 business. It came to the sport by accident in 2002 when Kirch went bankrupt and was none too impressed with what happened during the sale of the business from BayernLB to CVC back in 2005, indeed there was even talk of legal action at the time. The bank stayed involved to try to earn back some of the value it had lost. There is financial logic in that, but perhaps too there is a desire to pay back those who caused the problems originally.
Add to this mix the fact that Carlos Slim Jr is a member of the FIA Senate and you have a really interesting story because we all know that the FIA would like to have a rethink about the way the commercial rights of the sport are owned and managed in the post-Mosley era. He did a super deal for his mate Bernie Ecclestone but the men in the FIA blazers are still unhappy about what happened. Finding the right partners and buying out the venture capitalists might be a way to do that…
CVC are money men and they will sell to the highest bidder. They can say otherwise but that is simply not true. Every venture capitalist has a price and if the price is right they will sell. Perhaps this story is a hint to get their interest.
Time will tell us what it all means, but there is no doubt that somewhere at the bottom of this story the issue is about the long term future of the F1 commercial rights – and the negotiations over the Concorde Agreement.
Murdoch is looking to take Sky branding to the Americas. News Corp is “kicking the tyres” but only to guage the F1 market. I think it is more likely that you will see News Corp become either majority sponsor or part owner of a F1 team (preferably manufacturer team). News Corp is currently looking to buy 100% of BSkyB which is subject to government approval and I cant see Sky being allowed TV rights (as pay-TV setup), I cant see team sponsors allowing it. F1 needs to be run like a dictatorship otherwise teams and sponsors run amok like spoilt little children.
Busy time for Bernie. Your last two posts are as illuminating as ever; it must be tricky to balance the truth and lawsuits.
Jazz, No offence, but I think you’re wrong. Cant see them wanting to be an owner of a team, and I also cant see any government having an issue with F1 going pay for view (sadly).
I do think you are right to look at the bigger picture (as in South America, not just the UK which must be a tiny fraction of F1′s earnings, tv rights or sponsors).
F1 seems to be a sport that does well in emerging markets, I can see how that would be attractive to Murdoch.
But I can only see it pay for TV wise. I know what you are saying re-sponsors, but then this has happened for other sports reliant on sponsors and they have survived.
My big fear is F1 has made tentative steps in getting more fan interaction. BBC has done really well at this I think (with little help from F1).
I can only see this door getting slammed shut if sky get it (but again that’s just looking through the microcosm of UK)
Reading that article gives one a headache! The main thing with News Int/ Murdoch is that they are not stupid and are doing all this for a reason. MONEY. Murdoch and Slim know how to make money and the teams want more money, so they could be a very comfortable mix if the right balance was struck. Mr. E is coming to the end of his reign, so there are plenty who want to take over. I think it will get messy and the legal dept are salivating. The big manufacturers won’t stand idly by either, especially if the BayernLB investigation shows F1 in a bad light. As I say,Messy.
At this point in time I would view most ownership stories in relation to the money. I.e. The Concorde agreement. My guess is that the sky story has come out of the FIA but you can never tell.
Any sale indicates a number of, important things:
1. CVC bailing out means the vampire squid can no longer see explosive growth potential in F1, and they want to free up capital to invest somewhere they see as more profitable.
2. That CVC want to cut a deal before negotiations over a new commercial deal with the teams.
3. News Corp are desperately trying to work out how to keep making money when people stop watching broadcast TV and stop reading newspapers. Their apparent interest in F1 is interesting as F1 has a sophisticated and relatively wealthy fan base.
This frees up News Corp to develop a media model around the new media consumption channels like smart phones and tablets,
Also, there is giant potential for motorsports in the Asian market, markets News Corp do not have a great foothold in. Asian fondness for gadgetry and new media consumption channels really lines up with the image and reach of F1.
Add potential for growth, and it’s not hard to see why News Corp are interested. They would have to take profit from ‘value adding’ on the media side of things rather than the direct commercial activities around race weekend though.
Having just read the Bernie Ecclestone book (which is quit poorly written, a mon avis) I am amazed at the constant struggle between the teams, FIA, rights holders etc… It seams to be a constant battle.
Do you think this is still a follow on from the first FOTA/FIA war of 1970′s/80′s?
Personally, I don’t think the previous war has ever ended.
Jean Todt:
“Under the 100-year agreement, the FIA and its president has a right of veto if they consider the potential (F1) purchaser to be inappropriate.”
I hope that means anyone who’d put F1 behind a pay-per-view wall.
Where’s the Abu Dhabi Investment Authority and Mubadala when you need them
Karen,
Selling TV rights in the modern age is not as easy as once it was.
It will be a seasn full of rumours and hints and things like that. I just hope no threats of brake away series this time, no one is seriously going for that one now.
I saw Bernie already dismissed anything happening, falls perfectly into the trend then.
If Todt and the FOTA manage to work close enought together its just the question how much can they get out of the deal.
Then CVC can sell on or loan a new bag of money to get cash out of it.
An interesting afterthought, after reading Jazz’s commment. What about the recent TV stations dealing with teams as sponsors (CNN with Lotus, CNBC with Virgin), maybe News Corp is getting in as well.
BasCB,
Look more at the Apple TV deals with sporting organisations. This is probably more like the future.
Be interesting to see how it plays out in the UK. ITV can’t afford to take it on anymore, Channel 4 have no money and the BBC, despite impressive and growing viewing figures, is intent on ditching their massive F1 outlay as soon as they can.
The manufacturers and sponsors may be extremely wary of a sport going to pay tv only – but with the BBC giving up the fight, I can only really see it migrating to SKY in the UK.
As far as I’m aware there is no enforcement of F1 to be on terrestrial TV and so nobody could block it on those grounds.
The BBC’s only hope is to get the cost driven down and that’s not going to happen, regardless of who owns F1.
I believe Bernie is supposed to have a veto on who it may be sold to?
Its an interesting story, and does make sense. Would CVC be worried about keeping F1 without Bernie? He’s not getting any younger and there can’t be many people in the world with Mr E’s skill set.
The only real problem with Murdoch’s involvement would be the potential removal of F1 from free to air TV. I would have thought the sponsors and manufacturers would be un happy about this but as you said Joe it’s all about money now, and what ever is the most profitable route is the one that will be taken.
Joe, could Mercedes be the phantom manufacturer?
TimW,
I have no idea who is involved. To my mind there is only one true F1 manufacturer: Ferrari. They are always there. The others come and go as it suits them.
Mr. E has just said:
“It is all rubbish. Formula One is not for sale. And, anyway, we would not sell to a media company because it would restrict the ability to negotiate with other broadcasters.”
Karen,
Does that mean that Mr E would be 100 percent involved in all decisions about a sale? If CVC wanted to sell its 66 percent share, he might get first option but if someone was willing to pay more than he was what could he do to stop it happening? And, as a rider to that, why would anyone tell him if a consortium to take him out was being built? CVC would probably tell him if there was an approach, but what if there has not yet been an approach. As I said before money men drop their trousers when the wallet is big enough…
One point that probably shouldnt be ignored are the ties between Abu Dhabi and News Corp.
Rupert Murdoch Spoke at a Media Conference in Abu Dhabi last Year (Yas Marina Circuit of all places!)
News Corp’s middle east HQ is based in Abu Dhabi rather than Dubai. They are building production facilities in Abu Dhabi and plan to operate a number of satellite TV stations from there.
There is every chance they could be getting together in this
Considering the Gribkowsky situation it is interesting that you should mention JP Morgan Bank in this article. It led me to wonder if CVC may be planning on taking a lead from founder John Pierpont Morgan by cancelling their trip on the Titanic before it sails?
I had to laugh when I read this:
“[JP Morgan] stayed involved to try to earn back some of the value it had lost.”
I wonder what JPM were/are doing to EARN anything from F1? The same goes for many of the top-level investors and owners.
If F1 should go to Sky then it would loose a huge audience. (Including me.) This would lower the perceived value of F1 advertising and in particular, sponsorship. With the BBC budget being squeezed and ITV now just breaking even I wonder if any free to air broadcaster could afford to pay Sky’s fees, there is already some doubt about the BBC’s continuing involvement in the long term.
Hey Joe,
This is from one of your older post, not this one but you were credited with the story. At least they didn’t claim the story as their own right?
http://www.planet-f1.com/driver/18227/6884444/Heads-to-roll-at-Ferrari-and-Merc-
Of course they didn’t have a direct link to your wonderful blog. Thanks for all that you do, I for one appreciate free insight from an insider such as you.
It will be sad sad day if Murdoch ever gets his grubby hands on F1.
This might turn out to be a messy situation….
Just keep things they way they are. Like the old saying “If it ain’t broke don’t fix it.”
Interesting. I had also noticed that f1 is getting a lot more coverage on sky sports news this season as well.
Murdoch’s previous bid to own a sport/team was blocked by the UK government (Man Utd), too much control. If (and it will happen) he becomes 100% my boss
i seriously dont think the UK will allow any foray into F1 with a view to Sky owning exclusive broadcasting rights. For one its a breach of the concorde agreement and secondly (I believe) that the some teams may have exclusive behind the scenes access to certain teams (i.e. Team Lotus and CNN).
Now when News Corp owns Sky 100% it will also include Sky Germany and Italia plus all other News Corp channels (Fox, Star etc), so to use F1 as a global advert sign is kind of logical. I do honestly see News Corp being involved with a team in some way rather than F1 entirely.
But think of it. Global broadcaster that appeals to younger demographics, the worlds richest man and the world biggest “and fastest” advertising board. Bernie and the FIA have got to be thinking about this. Right?
I think Elliot Carver is behind this!
Bernie said the story is “rubbish”, which in my mind means it must be true.
Joe,
and everyone really,
think about it this way: it’s a distraction game.
So, i believe any rumors to simply deflect from whatever was decided much longer ago. Call me old fashioned, but i believe in courtships.
That means, that any “likely suspects” are just in the lineup to amuse the Inspector, not normal witnesses like us.
Translation: done deal, already.
Ok, admission, i’m not keen on thinning the smoke on this one. I don’t think i’ve got a clue. Joe’s headline is on the money, as in “smoke!” and “where?!!”
Joe,
bit harsh likening Karen to Sylt, ain’t it? I mean Karen hasn’t yet turned a companies house filing into an “exclusive”!!
otherwise i know when i’m, beat, and i’m beat if i have to suss any of this in reality.
best to all,
– j
John (other John)
Who knows? Maybe Karen is Sylt? This absurd Internet idea of hiding behind fake names is rather tiresome. I think if you have a view, put your name on it and have the balls to stand up for your beliefs…
I think Sky’s strategies with other sports could be providing a useful smokescreen for whoever is driving this story, here we are pondering whether F1 could become pay per view and ruminating on the Murdoch’s jealousy of the BBC’s funding model when the real story is likely a lot bigger. Not even Joe knows where this is leading, but the timing of these rumours interested me being only a couple of days after Bernie seemingly received his get-out-of-jail-free card from the German prosecutors.
Were vultures waiting to see if he was taken down and the 100 year lease was annulled or at least brought into question? Does his apparent ‘innocence’ in the scandal mean that a ‘plan B’ for a takeover was initiated the next day by whoever the agitators are? I’ve no idea of course, but it’s intriguing. The fact that this came from News Corp itself shows they are probably more than merely pawns in whatever is happening, surely they wouldn’t publish total fibs about themselves if they didn’t have an interest in F1 and CVC? If it’s simply part of Sky’s game to discredit the Beeb then I’d be surprised.
raceoftwoworlds
Get out of jail free card? How do you figure that? What makes you think that this is over? I have no idea but I don’t imagine that the Germans are going to decide on anything for a while yet.
Ah well folks, Bernie has now stoutly denied the rumour, so there must be some truth in it.
Though as some have pointed out above, the FIA does have a veto upon new owners.
Max must be spinning in his ……..
Still think there is mileage in investigating exactly who owns what… and who can veto what.
Does CVC own the rights, or the rights to the revenue from the rights?
Fundamental question with large implications… particularly if the FIA want to renegotiate their contract…
StephenAcworth
I know exactly who owns what, but articles of association and shareholders agreements are not something one can do much about. The only known veto is the FIA on a change of ownership.
Perhaps this is all a smoke screen? There are many interested parties who want to be involved in F1.
What we need is a consortium of global businessmen/corporations who have the long term interests of Formula One at their heart.
Just because the global viewing numbers are big doesn’t mean people pay any attention to the logo’s, etc.
Without the fans and supporters the sport wouldn’t exist…
The teams would be crazy to allow News Corp (or any broadcaster) to purchase the F1 companies.
While the teams don’t own a single penny of the F1 companies, they have more than enough power to prevent such a sale. As Joe often points out, the teams have not yet signed a new Concorde agreement. Without the teams, the F1 companies are worth nothing.
The reason the teams should never, ever allow a broadcaster to buy the sport is because revenue from TV rights is the single largest source of income for the sport. Putting F1′s largest revenue source in charge of negotiating the highest amount of revenue from themselves would be madness.
In Hollywood, there has been a long and sordid history of joint production/ broadcast companies selling TV shows to themselves for well under market rates. Lawsuits follow, but this sort of thing is terribly hard to prove. What this has taught the industry is that market rates will rarely be achieved if there isn’t open bidding on TV rights. Why else would a broadcaster wish to purchase F1 if not to save themselves rights fees? From where would these savings come? From the pockets of the F1 teams, that’s where.
Allowing News Corp to be in charge of collecting TV revenue for the sport would be no different than allowing a ‘Fox’ to guard the hen house.
It’s also been suggested the News Corp is perhaps only interested in purchasing the worldwide TV rights, then selling the rights on to other broadcasters. Clearly, the same, insurmountable conflicts of interest would remain. Any company charged to sell a product to themselves or their partners will rarely achieve the best price.
The mere thought that the F1 teams would allow a broadcaster to purchase the F1 companies is so outlandish that I have to suspect this is just another of Bernie’s ruses. Perhaps a shell game to make some other less-than-optimal purchaser look all the better in comparison?
Look at the American LeMans Series. This year the idea was to save some money( the $5 million is being “invested” in Panoz’s Abruzzi road car) and all the races are being broadcast over the internet via ESPN3. The quality of streaming and production is excellent, but ESPN only streams in certain regions and only to ISPs that carry ESPN or have paid.
The downside has been huge. The car counts are down and the sport is much worse for it. F1 needs to expand its coverage because most casual F1 fans will not pay. And all it takes is one executive to try to tune in and not get coverage for the sponsor to be lost.
@joesaward
It all depends on the detail of the deal(s)
I suspect this story is quite convenient for several parties, and it will probably run for a considerable time.
I’m reminded of what Max said with regard to his ‘squabble’ with the EU …
“Formula One is the only major world sport to ensure that every citizen of the EU can watch each event on terrestrial television entirely free of charge.”
I can’t see Jean Todt being happy to see the jewel in the FIA’s crown being hidden away behind a PPV wall.
Karen,
Interesting you did not answer the Sylt question… The TV world is changing. Look at the Apple TV deal with various US sports to see the future. The days of national TV deals is probably very limited. In future it may make more sense to have a global unit selling advertising (free-to-air) rather than using middle men to do it, as now happens. That would up the profit margin for a company that did not need to expand to do the job.
News Corp are going to have to ditch Sky News as part of the BSkyB deal, but god knows whether that has any relevance here at all…
You’re quite right Joe, I was just wondering if the timing of the rumours after Bernie’s trip to Germany was connected. I’d assumed that if they didn’t charge him there and then he was out of this, but it’s not over til it’s over as you say, so maybe the timing is just coincidence. You’ve got me on conspiracy theorising here! Thanks for daring to keep your mind open and share it with us.
Is this a warning shot across bernies bows with QPR nearly promoted, I.e. Don’t even think about playing silly beggars with the Premier League TV rights?
Quite right Joe!
I’m Spartacus…?
Interesting notion about the TV content for mobile devices Joe.
That sounds pretty logical, get worldwide acces/rights to content, sell advertising with it and get deals to show that package on mobile devices (+internet streams and TV sets if needed) for another chunk of money.
Could be what News Corp is looking at to stay involved for the long term instead of getting cut out as the middle man with declining fixed set viewers
@joesaward
Sorry I didn’t see the question.
I certainly hope not, my boyfriend would be shocked if I was.
As for broadcasting, you’re right, ‘Blocks’ are replacing national broadcasters especially in the new markets, and this can only increase. Profits go up for the broadcaster and initially for the ‘product’, but when a monopoly is reach the product being broadcast has no room for negotiation.
The broadcasting of F1 has changed dramatically in the last 30 years, who knows what the next 30 will bring.
Karen…
One would hope that Murdoch might have an idea.
If F1 viewing in the U.S.A. were on a pay-per-view basis, you can forget about attracting new attention to the sport – with or without a new venue. I’ve been to 5 races at Indy and have never seen a single advertisment or inkling to promote the race outside of Speed TV and the 4 races they bring to Fox television.
In F1, generally “where there’s smoke, there’s a smoke machine.”
Joe,
Off topic but what is your take on the Team Lotus, Caterham story that Autosport are running. I guess it comes under the smoke and fire heading.
http://www.autosport.com/news/report.php/id/90907
I am in Malaysia. For many years I was able to watch the Formula One races on terrestrial television. But this year they are not broadcasting the 2011 races. There is obviously some hidden agenda to force F1 devotees to subscribe to the satellite sport channels in Malaysia. This is leaving a bitter taste in my mouth. The satellite sport channel which shows the F1 races in Malaysia has very poor commentary, I do miss Brundle’s, Coulthard’s and Jordan’s excellent input.
Futhermore the is a huge problem with weather affecting the satellite signal over here…..I was watching the Malaysian race and after 30 laps the transmission was lost for an hour due to a rainstorm overhead, so I did not discover the results until the news later.
No vulture funds, no Murdoch, no banksters. Full, live F1 access free-online to viewers worldwide. By the FIA. Go for it, Jean!!
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