For the last few days there have been a number of sources reporting that Ferrari and Red Bull Racing have reached a deal with the Formula One group over the future commercial structure of F1. The deal is believed to give the two parties shares and voting rights on the board of the Formula One group (although it remains to be seen what that will include). The strategy is not very different from January 2005 when Ecclestone played his ace in the negotiations for the current Concorde Agreement when the FIA, Ferrari and Formula One Management announced that they had agreed a deal between them to extend the Concorde Agreement until the end of 2012. The announcement came as a major blow to the GPWC, an earlier team organisation, that was under the mistaken belief that Ferrari was one of its membership. Things are a little different now in that the FIA is not quite as willing to march hand in hand with the Formula One group, as once it was, although if there is an incentive to do so there is little doubt that the federation will join the party. What happened after that was that while some teams folded up and joined the arrangement, others became more hardline in opposition and a new organisation called the Grand Prix Manufacturers’ Association began looking at creating its own championship. Things are not very different now, apart from the fact that the manufacturers involved are fewer in number. Mercedes is the key player in this respect, while Renault does not have its own team at the moment. McLaren will be opposed to the deal as well, but the rest of the teams are largely irrelevant as they are not brands that F1 can live without. Red Bull is relatively unimportant in the overall scheme of things because the Austrian drinks company is regarded in the sport as an organisation that will depart as soon as the sport has served its purpose, just as Benetton or several car manufacturers have done. However, having the drinks company as an ally is valuable at the moment for Formula One, because it has been successful in the last few years and the firm controls two teams. Ferrari also has an element of control over Sauber as the Swiss team needs engines.
The other teams have a right to feel betrayed as Ferrari and Red Bull were members of the Formula One Teams’ Association and went through the motions of looking for a better way for the commercial side of the sport to be organised before swapping sides to feather their own nests. The collapse of any realistic collective bargaining means that the teams have once again been divided and will be conquered and will end up with a smaller share of the sport’s revenues than perhaps they should have had. The lack of unity means that once again the sport will be used as a cash cow by financiers and money that is being generated will disappear, rather than being used to strengthen the sport.
The next step will be to try to float the business on a stock exchange to allow CVC to take yet more money out of the sport, while leaving control in the hands of the current management. This has also been tried before but proved impossible because of questions about the way that the commercial side of the sport operates. CVC may well have asked Goldman Sachs to sell its stake in the business but there are hurdles that must be cleared. The primary problem is that of Bernie Ecclestone. He runs the business and there are questions as to how effective any successor would be in the same role. At the same time there is no obvious succession plan and with Ecclestone turning 82 this year, the sport really needs a solid concept for a post-Ecclestone era in order to get investors excited. On top of this there are the questions that still hang in the air over the Gribkowsky trial and the reported tax investigations. These are the sort of things that make big financial institutions uncomfortable. Flotation may not be possible and in that case it will be back to the devices used in the past, with private sale followed by bond issues. These will make the sport a cash cow for financiers once again and while Ferrari and Red Bull may be willing to scramble for what they can get now, the other teams will not be so keen. F1 needs a full grid and while some of the current teams will likely be lured over to Ecclestone’s side, others will resist. This is probably why there have also been rumours that in the future teams will be allowed to run single cars and can buy chassis from the big teams for the first few years of their existence. This would, in theory at least, open the way to create enough small fry to fill the tarmac behind the big teams. Some teams are completely dependent on the sport although others that have learned from past failures are now businesses that could survive without F1 if necessary. They could, in theory at least, sit out a few years until they are offered a better deal from F1.
The goal of CVC Capital Partners and Bernie Ecclestone is to raise as much cash as they can, while retaining as much control as possible. In the case of CVC the question of image is important because while they have gained a lot of money from the sport, it has not done their image much good, particularly when boss Donald MacKenzie stood up in court in Germany and said that he had no idea what was going on during the sale process. Investors are not impressed by such things. Ecclestone is an unlikely boss for a quoted company as transparency has not always been his idea of how business should be done and while the stock exchange in Singapore might allow him a little more flexibility than London or New York, in terms of disclosure, the value would be less. At the moment there is a move to try to make F1 look as though it is worth $10 billion, but this seems like a lot of drum-banging.
The value of the company depends not only on a Concorde Agreement involving all the major parties, but also a solution to the question of succession. CVC tried to bring in a possible Ecclestone successor in David Campbell at Allsport Management, but he has gone already. The trouble here is that the sport wants an insider in charge, while the markets want someone with a proven track record in another business. Ecclestone fits the bill at the moment, but he cannot go on forever.
Elsewhere in the paddock there is good news for the team currently known as Lotus F1 Team. This has been surrounded by worries about its links with the troubled Group Lotus, but it is now emerging that the team is in fact not dependent on Group Lotus at all, and is simply using the name under a licence agreement, not dissimilar to the arrangement in the past with Tony Fernandes’s 1Malaysia operation, which ran Team Lotus last year. In the end Fernandes was convinced by the Malaysian government (the owner of Proton, which in turn was the owner of Group Lotus) to give up his Lotus ambitions in exchange for a share of Malaysian Airline Systems. Fernandes then embarked on his Caterham strategy, leaving Group Lotus and Lotus F1 Team to sort out their relationship.
The team, under Gérard Lopez, has negotiated its way out of the arrangement, although a complete divorce is difficult because the F1 car is now called a Lotus, and to change it again would be a nightmare. Keeping the Lotus name, but not a Lotus type number (as is currently the case) suggests that Lotus F1 Team sees a value in continuing the link with Group Lotus. The only logical explanation of that is that Lopez still has ambitions of getting his hands on the car business. The Malaysian government has sold Proton in order to escape from losses being created and the new owners are now deciding what to do with Group Lotus. The logical course of action would be to sell it to someone. However, it will not be easy to find anyone willing to take on £250 million in debt attached to a company that needs several more years before there is a new product range – and no guarantee that the old Lotus customers will be buying the new vehicles.
Lotus F1 Team in the meantime has been finding its own funding through GenII, which has produced some nice deals with Unilever and Microsoft. Team sources suggest that there are no budgetary problems as a result and the team’s performance in Australia was very promising.
joeblogsf1 
Very interesting article.
Why does McLaren not get the respect they deserve in these sort of negotiations? McLaren are now almost equal to Ferrari in terms of heritage. They are the most popular team for the British supporters, and I notice as many McLaren flags in the grandstands as there is Ferrari flags. And McLaren have been consistently successful in F1 for decades.
Even the $100,000,000 fine a few years back smacked of personal bias against McLaren. I don’t think Ferrari would have ever received a fine like this.
This is not very fair in my view? Why is McLaren not treated as they should be?
Maybe just like with the EU – they ( I mean the ‘Latins’ not the Germans ) do not like ‘us’ ( Anglo Saxons ). I have no idea why – if true – as we generally like them.
I think this is one of the reasons McLaren will try and hold onto Lewis Hamilton – even if his career goes off the rails a bit, as he’s one of the few global names in the sport, especially in the big target market of the USA. His presence gives McLaren a global face that outweighs even the drivers of Ferrari and most other teams combined (leeway given for Schumacher of course).
McLaren can’t lay claim to the same heritage as Ferrari until they have a regular line of road-going sports cars being lusted after on Rodeo drive as status symbols. I totally agree that McLaren seem to be snubbed in this regard to F1 standing – but the real world truth is that there’s hardly a person alive in the western world who doesn’t know what a Ferrari is – whereas McLaren doesn’t strike the same chord. I imagine Ron Dennis is smart enough to be trying to change that – along with making McLaren technology a part of the UK hi-tech sphere to the point that they get a lot more cache. Ongoing success in F1 will also help. Red Bull Racing dominate a few seasons and they get the sop to them – if McLaren spend a couple of years taking control – I suspect this will alter perceptions again – though obviously this will be a bit late to alter the current negotiations.
I wrote previously that I’d be surprised if Renault continued with the Lotus name through the year.
However, your point is well made. It would be ‘clunky’ for Renault and Genii to change the name mid-season. But the 2 main reasons for keeping it are – If Genii are looking for a future controlling interest in Lotus, and/or by using the name you do buy in to a certain cachet.
However, if Genii cannot put together an investor group prepared to swallow the outstanding quarter of a billion debt, (and lets face it – unless they do that and then reverse Lotus into an existing successful company so that it can be sold on at a profit quickly) there’d be little point in continuing to license a name associated with a perennial inability to turn a profit and a perennial ability to stumble from business failure to business failure.
Gut feeling – Lotus name is on a count down to oblivion in major part.
Good engineering group though – but again still very small and very low profile when you think of the successes they’ve had and the position they occupy in the industry.
I disagree, Lotus in F1 terms is a strong brand, even if its not quite as strong as it once was.
Lotus Racing (2010)/Team Lotus (2011) would have struggled a bit more for recognition without the Lotus branding and from nowhere the Lotus F1 Team have got new sponsors without having to take on pay drivers etc. Lotus was only missing from the grid for under a decade and a half, so a few more seasons as a consistent front to mid-field team and they might have a fan base and recognition that make them the stongest F1 team brand outside of Ferrari and McLaren.
Any new owner of Lotus is unlikely to withdraw their support for the use of the name by such a successful F1 team either.
Most of all though what else would they call this team? Genii F1? Thats not going to entice fans and sell sponsorship space or merchandise. Unless they do a deal to become another manufacturers works team, I don’t see the name disappearing for a long time, whoever owns Group Lotus.
Hi gus82
I sort of agree !
As I said – the Lotus name does give cache. I’m not so sure that this years sponsorship is due entirely to the name though. I suspect that Mr Lopez is a bit of a force when it comes to networking and dealing, Lotus or not.
But sure, its nice to see ‘Lotus’ there – even if its not really Lotus and not really there !.
Any sponsor CEO who said that he was racing with Lotus would be sorely misinformed as most people realise that Lotus have no tech input (really no presence) whatsoever with the team – its a paint-job. A good paint – job granted – and designed to hark back to the good-old days. I suspect in support of Genii’s ongoing interest in acquiring the brand. Same as the license fee they appear to be paying to use the name.
And that’s my problem with it all – as a purist. We’re watching a commercial play, which is fine. But don’t let’s pretend the cars are being designed, engineered, entered and developed by Lotus. Unless Lotus have just bought the Enstone facility – which would be something I missed.
Lets face it, Lotus haven’t even got an engineer in the place.
As for the name, when Genii decide to stop paying the license fee – when Lopez loses interest or loses out in his bid to gain control of Lotus – Renault would be good. If they can then rein in the Genii ego assuming they’re still around, they could say – ‘sponsored byGenii’.
I wish Renault and Genii all the best, especially with the Kimster.
But Lotus it ain’t
Joe,
A quick question about the concorde agreement… Until the end of this year doesn’t Eccelstone have to offer all teams the same deal?
I know the agreement isn’t published but I think you said something a few weeks ago about one of the clauses or rumoured clauses is that Eccelsotne can’t just give one or a few teams an option and not others before a certain date either the end of this year or next.
Apparently not.
Thanks.
Makes me wonder why I follow F1 when its more back rooms deals giving Red Bull the money to pay the best designers and Ferrari the money to outspend everyone else.
From what I understand of the way Bernie’s mind works (admittedly, likely very little) you have to read a contract every which way and make sure you understand all the potential interpretations. If everybody gets offered a contract that gives Ferrari a 2.5% skim off the top then you could very well argue that they had all been offered the same deal; its just that that deal isn’t equitable.
LOL
January 1st 2012
Maybe Ferrari will be able to write the new rule book too?
Don’t they always?
Great article Joe – can’t get this stuff anywhere else!
I’ve been thinking about Force India’s lack of relative performance to Williams, Lotus and Sauber in the last GP. Surely a concern for attracting investment with Kingfisher’s financial worries. Did the team say anything positive last weekend?
The Lotus with the F1 car lot are fast heading into The Artist Now Known As A Squiggly Symbol route. Those interviews of that song smith from the time he couldn’t get anyone to call him by his new moniker are ripe for plagiarism, i reckon!
Any move out of the current investment by CVC I believe has to happen in a number of stages, because any share at the really is just a warrant for the forseeable. I am hoping they will make an offering that comes under the watch brief of John Hempton, since I have been thoroughly enjoying his debunking of all sorts of companies who turn out to have very little in the way of real assets or operations.
I suggested before that the value of any public issuance is to provide a marker, to attract teams to the end value of what they can expect to get by way of value if they make long term commitments.
I don’t believe 85% will happen, or even is possible or sensible, and neither do I believe at all that teams should simply be handed equity because they need to stick about to earn it, if only because all that has gone before has been hocked, just like the capital in the mutual societies (UK thrifts) which was built up over generations and squandered in an orgy of hand outs. No, nothing to hand out. But i might look hard at buying shares which eventually dilute to the teams over time, because the whole becomes greater the longer they are prepared to stay. It is tempting to wonder if such an offering might not be easy to get past regulators for sale to general public, but then again it might just be the reality (embedded price) of a nominal share which can be sold simply.
Just to add, if team equity does not vest immediately, that could be used to simplify La Concorde Nouvelle, removing the multilateral aspects and the severality.
In my mind, that goes a long way to the teams finally working “for themselves” because there could (some will say should, and so will I) be a single counterparty for what they are doing, not the gossamer web spun so adroitly over the years by Papa Bernie.
By simplify, I mean ensure adherence to core rules, carrot not stick. As the sad “DNPQ” of HuRT showed to me, reading the comments, sticks are not used very well or very consistently, certainly not perceived to be used consistently.
If instead you imagine bonuses for team engineers and so on being measured ultimately in shares in a single entity that actually profits, well you motivate everyone to consider common good.
Oh, it may not work in practice, but it is a nice way to think about the future. Why cheat or mess with team orders if it means your bonus tracks downwards sharply when the sport suffers from disgusted fans turning off their telly?
Bottom line it has to be a Single All-in F1 Entity (SAFE) not yet another slice and dice effort.
What the teams get, not even going near the 85% mark, if it is all rolled up into a proper normal management structure, is far beyond what they can get by mucking around with preferential deals for purported contract revisions and extensions.
I think both Ferrari and RBR are extremely short sighted in their actions, if the rumors are to be believed. That is, if you believe the rumors, because I don’t think this partisan split idea is very popular out here in fanville.
Hullo John (other John)
Good comment about John Hempton.
When F1 was considering flotation on the New York and London Stock Exchange some sixteen years ago,? i seem to remember it was valued at around $1.5bn? What the money men couldn’t understand then was the only assets the business had was a building in Princes Gate and a briefcase full of contracts.
Hi Patrick,
I’d say inflation from 16 years ago takes us to 5BLN very conservatively, but that is if you take the original number as given. Like trading anything illiquid, the last price really isn’t very helpful. My mental ballpark is they are asking 10 and maybe get 5, but as with all these things, I doubt much of that is going to be hard cash. Usual thing to do if going IPO with uncertain planning (WGP is guilty here too, they are in a process of changing the way they operate) is to leave only a tiny amount on the market. In that the London rules are very good, except they do not apply to overseas registered companies, explaining the uselessness of the FTSE 100 index for anything it was intended to be. I think there is a fantasy land in which all the players are hoping to take out their buckets and spades and build castles. I actually don’t believe Prince’s Gate has even started to begin to think this through. In fact I reckon they cannot, because that would involve diligence across entities made sensitive by the Grib trial. Though this must be the slowest story in F1 (leading to all sorts out there claiming they have imminent revelations, oh dear, but taking in everyone that there might just be a discernible shift they can propose might be tectonic) I give it another 5 years to unravel the mess it has become. That is assuming translucency, not transparency, is an aim.
Definitely a fan of John Hempton. Took the time recently to read his whole catalog of commentary. Curses I cannot invest in his outfit! More seriously, it’s good to see the slow reversal of the Chinese Wall conundrum posed post Glass – Steagal abolition. Seems to be a generic mistake to make, to think that structural changes have quick effect when every man and his dog are far too far overweight on the last desperate gamble.
all best,
– john
Same old same old as far as the ‘divide and rule’ goes. You would have thought that the clever people that run many of these companies would have learned better by now. Red Bull (version 1 and two) and Ferrari (plus Sauber?) do not a show make. Perhaps the rest of them should take their toys somewhere else or at least play extremely hard ball in organising a potential exit route to a new series
And Mercedes or Renault could offer Sauber an engine deal, as I cannot see Peter Sauber wanting to side with the cynics.
Money also exchanges hands. What Ferrari wants, he has to do at the moment
yep, can only hope with the likes of MBenz on same side of fence as McLaren that BE’s feudal cleverness may backfire yet.
none of it really matters. F1 is soon to be dead anyway. Only 500,000 people watched the race on Sky. That’s 75% down on the bbc last year. Shame.
The UK is not the world
Half a million viewers is for the first race of the year is very strong. The figures only for the race as live, nothing about viewers over the course of the weekend, for the live sessions or replays.
Whilst I didn’t enjoy the pre and post-race coverage, Sky did a good job of everything else.
Assume 50% of the 500,000 viewers of the race are new to Sky paying the minimum £360 a year for a subscription, Sky will see a £90 million revenue increase. I think that can be deemed a success and should not be forgotten by the teams when renegotiating a new deal!!
Great for Sky – not so good for the likes of Vodafone, Red Bull, Santander etc etc.
Half a million might be a good number for Sky for the first race of the year. BBC numbers for this race last year? 2.2m
It is as far as most of the sponsors are concerned. F1 is very much a British business, and it’s core fan base is in the UK, as are most of the teams and infrastructure. If you were the CEO of a main teams sponsor, you would have to seriously consider continued investment into a sport in which the core fan base is already 75% down.
Not really at all.
Most of the sponsors are also after appearences in other parts of the world. Hence why Bernie wants to expand into Asia so much, part of the reason being that certain brands want awareness in Asia.
It’s hardly a British business at all when Britain only has 2% of the viewing public or so.
it’s ‘core fans’…. so guys in Brazil following Senna, Spaniards following Alonso, the whole of Ferrari for goodness sake isn’t ‘core’ to you?
It doesn’t matter where the teams are based because that is the back end of it and what people see is an international (btw spain as twice the number of races as Britain currently) sport that is followed world wide.
And quite honestly it’s getting rather pathetic that British fans think they are the centre of the universe just because the back end of a majority of the teams are based there due to history.
That’s like saying Britain is the centre of the world because lots of countries speak in English…. try that one in America..
It’s not down 75% though – and F1 although mainly based in the UK is very much a worldwide sport – why do you think there is such a push to get races in the USA if sponsors are only interested in the UK market?
Your vies seem to be very short sighted and based purely on what you want rather than how F1 actually is.
No Joe the UK is not the world, but as you pointed out yourself recently, it is the country most associated with F1 in that most teams live here, and we hate to see it being taken away from us with no regard for the eventual damage that sponsors will see and fall away from the sport. The fees may get bigger from pay tv but the audience and OTS considerably smaller.
Well it’s done now and it’s not coming back, the BBC highlights show was a poor substitute; as I wrote elsewhere, it was like a 100Watt bulb had been unplugged and substituted with a 15 Watt. The R5Live commentary was good, better than the highlights commentary, but it’s not seeing.
Just wait until it’s on the BBC again. The viewers will go up….Even Dutch people will watch because the Dutch tv sucks and its commentator is an idiot.
mdewals is spot on!
complete nonsense.
What will be interesting to see is how badly the ratings suffer for the Beeb live races when they are back – firstly will viewers prefer the Beeb or Sky when they’re head to head but secondly will as many viewers in total be prepared to watch either?
unfortunately the BBC one (Ben Edwards) isn’t much better on the basis of the first race – but let’s give him a chance
I’d disagree! I really like Ben Edwards from his early CART days, I thought he was always the natural successor to Murray. I wasn’t going to watch the race on Sunday, but he made it very worth while. And the racing too!
Ben Edwards was always an excellent motor racing commentator and he’ll be fine.
More than ten years’ after its demise, I still miss Eurosport’s coverage with Ben and John Watson.
We get the UK feed in Australia, and whilst I missed the occasional awkwardness of the competitive personalities of DC and Brundle, it’s fantastic to hear Crofty commentating.
Anyway, I’m sure the time that the race ran in the UK had nothing to do with it at all.
But Crofty went to Murdoch’s Sky didn’t he ?
Act normal man!
Olaf Mol is a beacon within F1. Consider the alternatives: Allard Kalff, good for interviews, but always on ADHD mode while commenting and those other guys Winkelman and what’s his name… No no no!
Also, in marketing terms, it tends to be the people that only watch ‘now and then’ and are not pure F1 nuts that are valuable to sponsors.
The folks that moan about Sky getting the rights (especially ironic given the BBC practically dumped them on their doorstep) are seldom ever valuable members of the audience. Also, as history has shown, the chances of Sky letting the rights go are almost as slim as the BBC ever taking them up again.
24.6% drop in unique viewers compared to last year.
The BBC coverage was reasonably good – only a little of the usual silly features. And Ben Edwards was a decent talker, and brought the best out of DC. If only they could get rid of that small grey bearded clown …
I think the BBC got very good numbers for its show
It did.
I believe it beat Sky – but maybe due to the times shown
I’ve already watch the Aussie race three times. (Yes, JB won all three). There is a hard core group of Formula One fans in the U.S., and yes, we have to pay for it, but we always have done. There are a few token free to air broadcasts, on the networks, but they are always tape delayed, and the commentary used to be awful. It’s not fun watching a race when you know more than the commentators know about F-1. (This has improved in recent years, since the SPEED team also handles the free broadcasts.) Television, at least free television, is a thing of the past. I would say that is true for all of North America. Most places in the US require cable or satellite in order to get reception. You cannot blame low viewing figures on pay TV. Besides, isn’t the clientele that F-1 is trying to reach the sort that paying for television really isn’t that big a deal?
But 500,000 is a big audience for early Sunday morning on a channel you have to pay for – and how many watched it on BBC in the afternoon?
F1 won’t be dead anytime soon – just because you can’t accept that F1 has followed the money does not mean it will die
Holy crap, seriously, do you really believe that England actually will control the survival of F1. Put down the cool aid.
F1 moving to Sky Sports will kill the sport, just like football in England is dead now that live matches are only shown on Sky.
Oh, wait a second…
While the Sky pre-race show and post-race analysis was awkward and minimal and seemed tailored to giving the BBC something to brag about (whether you like Jake, Eddie and DC – their post highlights show was far slicker and more informative than charisma free Lazenby bumbling about asking the same question while Damon Hill looked lost and then cut the programme about 90 minutes less than the BBC offered – all this on a 24hour Sky channel dedicated to one sport!!)
Sky really doesn’t need much more than 500,000 paying viewers. It’s simply an attraction for their sports or HD package upgrades. I ended up with the F1 HD channel by accident as I had the HD SKY already, though I wouldn’t have paid for the Sports package just for F1, my money and the money of others is enough for them to outspend the BBC and it’s victimisation by a Beeb hating Tory-led government.
Sky Atlantic HD gets as few as 100,000 viewers for premium HBO shows but this is enough to massively outbid UK terrestrial channels.
As long as F1 remains controlled by short-term interests, investors and the teams can barely agree on minute details – the sport will continue as it is. Even a relatively minor interest audience tuning in from the USA will more than outweigh the lost UK viewership…
The problem, I think, is that The Bernard doesn’t care about the sport as much as he cares about The Deal. The most important thing is ensuring that he has more F1™KING POWER than anyone else.
So He goes up against broadcasters, and he wins. He goes up against promoters and governments, he wins. The teams are just one more flock of lambs, obediently waiting to be fleeced.
And the reason there is no succession plan, surely, is that he doesn’t want one. Après Bernard, le deluge.
It reminds me of maneuvers in the playground at primary school.
I read that three teams already had shares, albeit non-voting ones, from several years back. However with companies being formed on a frequent basis each time Bernie makes a move, it must be very easy to sideline any existing influence and/or shareholders.
It is a bit sad that Bernie is always right in his assertion that the teams can never agree about anything between themselves. Is it greed or total sport?
I think a share issue most unlikely to succeed for the same reasons as the last which twice failed and was eventually substituted by a Eurobond which again did not sell well at first. The valuation of $10Bn must be on a P/E of about 20, much too high!
Trouble is, apart from his books, or lack thereof, that there are too many people around who have done deals with Bernie. His reputation not only precedes him, but comes with a marching band and a flypast. If he sold me a car I would not be surprised to find that I had only bought the rights to a car, but it was already leased out to someone else with actual ownership used as collateral against part shares in three other cars, oh, and I was responsible for all running costs of all four cars. He supposedly lost his minority golden share, which overruled all others combined, in the last sale to CVC, but no doubt that is either untrue or he has a way around it.
One day he will drop dead and the whole thing will fall apart, meanwhile he is the dictator that F1 needs, if teams cannot show any loyalty to their common interest now, what chance will they have after Bernie, when they need to be a solid cohesive force?
I doubt it will fall apart.
Oh, it will not fall apart. But doubt it will not be without serious challenges to the current structure.
The car sale analogy is very funny – and looks horribly close to the truth too!
Too true!! Didn’t Bernie start out selling used motorcycles?
Any truth in the rumour News Corp, owners of Sky TV, will bid for the bankrupt Lehman Brothers 15.3% stake in Delta Topco? News Corp are cash rich and this is an asset i’m told has to be sold by the end of 2013.
Mind you other bidders will appear, such as the sovereign wealth funds from the Middle East, The Mubadala Investment Company from Abu Dhabi springs to mind and they love Formula One.
Teams come and go in Formula One, it will survive without the big names and new big names, because the new wave of Formula One fans around the world are more interested in the racing spectacle of the show.
Joe,
absolutely brilliant article there, as usual. I was looking for a way to describe the whole issue for a friend, and admit I came up short when I tried to inform how it worked. I re-directed him here, he sends his thanks!
joe cowan maybe bernie and the f.i.a., no offence, dont like ron dennis….i agree with you mclaren deserve better treatment in negotiations. you ought to read bernies book ” NO ANGEL” for clues….
What makes you think No Angel is a good portrait of Bernie?
“Red Bull is relatively unimportant in the overall scheme of things because the Austrian drinks company is regarded in the sport as an organisation that will depart as soon as the sport has served its purpose, just as Benetton or several car manufacturers have done.”
But the sport needs investors and team owners like Mateschitz and Fernandes. They bring money, new ideas and much else to F1. So while Red Bull might be “relatively unimportant” (what would that make Caterham?) it is vital for F1 that the sport contiues to attract people like Mateschitz and Fernandes – even though they use F1 mainly for (gasp!) fun and marketing.
And when Red Bull do leave there will probably be someone else to take over the team, just like Red Bull did from Ford and Ford from Stewart (to say nothing about Toleman/Benetton/Renault/Lotus). Not sure that the same thing will be true for Caterham.
By the way, how long will Tony Fernandes stay in F1?
We will see won’t we? He has been in F1 twice as long as you think already. And he has a car company which means that the incentive to stay is more than that of a fizzy drink firm or a jumper manufacturer
I know about Fernandes earlier involvement in F1 so don’t jump to conclusions about what I “think”, please.
The “fizzy drink firm” (nicely put, Joe) has been in F1 longer then some car companies. And been more successfull.
Who am I to argue?
a successful f1 journalist who has been at every race for 24 years (rough guess) whose opinion is highly regarded by most within the f1 circles.
Just saying
Caterham board member, perhaps?
What is your point?
I think Red Bull might stick around longer than people in the motor industry expect. With the continuing crackdown on advertising for beverages – especially anything to do with ‘energy’ – now more or less outlawed by the EU and heading for a crackdown in the USA – even selling Red Bull the drink as ‘giving you wings’ has met serious regulatory issues. Much like smoking before it – food manufacturers are desperately flailing around to link to image and sports. You can see Red Bull have built a long term strategy by promoting ‘extreme sports’ from X-games to F1.
In the same way Marlboro hung in with Ferrari despite the tobacco ad bans I think Red Bull might hang in there – even if they end up morphing from a team owner to a major sponsor alongside the Renault/Infiniti group.
Of course I could be completely wrong but working with food giants in advertising the Red Bull strategy is getting a lot of praise and is considered quite ahead of the curve as they’ve laid the groundwork well ahead of others.
I have sky and whilst the race had all the familiar faces, I found that I wasn’t that impressed with the run up, or Simon Lazenby. I watched the run up/highlights on the BBC and found that Jake and DC deffinatelly still have the edge. I’ll probably watch the bbc pre race when it’s live and then switch to sky for the race.
I just hope sky hasn’t killed F1 in the UK.
Again with the Sky ogre comment. The BBC DUMPED F1 and by all accounts ensured no other terrestrial channel could get their hands on it. They are the ones I’m bitter at not Sky.
Actually I’m only bitter about the fact I’m forced to carry on paying the full license fee ‘tax’.
I think you’ll find that their hand was forced by the Government who froze the licence fee and the fact that this Government is very Pro-Sky & News Corp so it was hardly any surprise. Plus, they dumped the World Service on the BBC and so they had to find the budget to pay for that as well. The real issue is that the richest sport in the world want more and more money for people to access it’s product. As crash will be coming soon when ordinary folk like us will simply give up and realise that they’re not worth it.
I’ve not tuned in more than 5 minutes before the start of a race for years – too many repeat features on tyres/steering wheels/pit stops etc. The BBC also had an issue with doing silly top gear style chummy junky features so they were an instant turn off.
I did watch The F1 Show on Sky Anytime though (after the race) and although TK was a little uncomfortable, it was a pretty good show. The girl is utterly repulsive.
What did you think of the warm-up lap soundbites to music?! I thought it was naff but somewhat inspired!
Will this deal mean his idiotic daughters can continue in the lifestyle F1 money has given them? I hope not. Who needs a £1m bathtub? Tamara Ecclestone.
Outrageous spending on weddings, daft houses and bath tubs – all shown on TV – might be viewed as a good thing if you were under investigation by the tax authorities for having too much influence on the decision-making processes of a trust fund. It certainly would do no harm to be able to say to a tax inspector: “Look at this madness. If I was in control of the trust it would not happen”. All hypothetical, of course.
One only has to look at the American Presidential race and the nominees and their SuperPACs to realise that often puppet strings aren’t the most visible
Ooooh Yees.
There are rewards for long term commitments to sports and then there a distorting, anti-competitive structures that do the sport a great deal of damage.
I would not miss Ferrari, keeping them is not worth 2.5% and inequity. For me, their brand is tarnished by their behaviour in F1 to the point where I would never buy from them. Perhaps Red Bull now too.
LOL
Never gonna buy a £200k Ferrari, perhaps never buy a £1 can of Red Bull.
Absolutely brilliant 🙂
Instead buy Lucozade sport, the logistical drink of GSK that now support McLaren, or is it the other way round?
That’s what you call principles.
Ferrari make a fair amount from merchandise, not just cars. And who says I couldn’t afford one? 😉
Joe – I would be interested as to why you think RB weren’t committed to F1? After all, they own two teams (yes there were rumours of the TR sale).
From RB’s parent’s perspective, their involvement might not cost them very much at all. A bit like Virgin’s structure. Their other sponsors would be paying a few pence to be associated with one of the world’s largest youth brands. None of the other F1 brands/teams has the same demographic attraction that certain marketers seek. This profitability will only be further enhanced should they get a cheap shareholding in the F1 parent organisation. RB will essentially have a business that funds itself (even in the current down market) and would therefore have no incentive to leave.
It would be interesting to see what obligations the F1 parent organisation have to keep the teams in the competition. If there were none and the remaining FOTA teams wanted to leave, then Monte could field his three car team whilst the field was rebuilt. Whereas if by granting the teams licences, that guarantees them a right to be in the competition, you would guess that gives the teams more bargaining power.
Because Red Bull makes fizzy drinks, not cars. Thus the commitment to F1 is not fundamental, but rather a matter of choice. If the sport is one day deemed to be of no further use to Red Bull, the company has no reason to stay involved, whereas professional racing teams such as Ferrari, McLaren, Williams and so on exist to race. They may have added to their empires, but in the case of Red Bull the motor racing is an add-on to the drinks business. The same is true of car manufacturers which tend to use the sport when they want to, but without the historical commitment of the racing organisations.
Looking at it commercially, Red Bull is in a prolonged investment phase, growing not just market share but the very market of energy drinks itself. They’ve forced the only serious incumbent, Lucozade, to completely rebrand (incidentally, seen the McLaren rear wing?) and inspired half a dozen “me too” follower brands.
At some point they’ll decide they’ve reached a plateau and look to cash in by reducing this kind of investment. It would be interesting to take a look at Red Bull’s books and see the flow of income, profit and marketing spend over the years.
Of course, the founder dying and the 2% shareholding son presumably inherting 49% could very well spark such a change…
Could have fooled me, I thought Williams just provided the movable chicanes.
The decades-long involvement of Marlboro in F1 by PM undercuts that argument,no?
No, I do not believe PM was ever a team owner.
I understand your point. Essentially the only teams with firm commitments to the sport are professional F1 teams such as McLaren, etc who’s main business is F1, not ancilliary ones. However, regardless of RB wanting to remain in the sport, they would not simply shutter their business and walk away. They would find a buyer for their interest and the team would remain in the sport (aka the Lotus Renault situation). So therefore the team (regardless of the owner) IS important, being one of the 12 with licences to race.
Joe, is this $10 billion correct or not? You made the statement that F1 has a value of 15% of $10 billion. Will the shares have the $10 billion value or do you think they will not get the price and it will not float?
Something is worth what someone will pay for it. If there is a schmuck out there F1 is worth $50 billion. But I doubt any sensible financier will give it a valuation of $10 billion. I feel it is worth about 20 percent of that, at the moment.
$2bn in the grand scheme of things does not sound like that much, if you break it down per team it would be about $182M per team to outright own the commercial rights to the sport. Seems like it should be no brainer to the big teams to structure a deal to borrow a big chunk of the money so that the smaller teams could afford to participate. The debt could be payed by the additional revenues that the teams would be getting and soon enough just like CVC did, they would be making a serious profit…while controlling the fate of the sport.
Joe, wouldn’t this bring teams like Ferrari and RB more money than anything Bernie could be offering currently?… or is the hassle of putting together such a deal not worth the potential gains? what ever happened to the intentions of the Exor group in these regards?
the other question is if CVC would be willing to give up their cash cow for something in the neighborhood of $2bn?…or would they hold up until the schmuck with 10bn shows up.
What do Red Bull do when they start losing, particularly to a car emblazoned with Lucozade? Do they pull out as they did in Nascar? What if Ferrari embark on another 20 years of being average as they have done in the past. Mclaren seem to get shafted every which way, Bernie putting Red Bull above them in the pecking order is outrageous. Great post Joe
Great investigative work as usual Joe.
Are you suggesting then that Group Lotus are not in fact paying to sponsor Renault / Enstone / Lotusish thing F1? ..that the reality is just badge engineering by the team formerly known as Renault, as they feel that the Lotus name gives them a brand, and they are in some way possibly even paying Group Lotus for the privilege, or maybe some kind of contra deal?
Fascinating.
Joe, when racing in the Britcar 24 hour race a couple of years ago, we shared our pitbox with a German entered Lotus Exige. During the long night time stints I got chatting with some of the personnel, and the topic of Lotus and Bahar came up, one gentleman had just resigned his dealership saying that for his country there was nothing salable in the range. He went on to say that he thought that when the Malaysians got completely fed up with grossly excess spending going on by the CEO and wanted to rid themselves of it, Mr. Bahar’s old boss would step in and pick the Company up for a song ! Suddenly fizzy drinks manufacturer becomes car manufacturer, what do think ?
Regards
I think Mr Fizzy Drink has sufficient teams for now.
Joe i find the comments about Ferrari re their cut of the purse a bit unfair, over the history of F1 they almost entirely were the only team that built the complete team ie engine as well as chassis, of course in recent times Toyota Renault BMW and Honda. Now only Renault have stayed as engine supplier only . I do remember an interview with Sir Frank Williams some time ago when he said was only right that Ferrari got more because of their longievity to the sport plus they have much more expense because they made there own engine, in passing he also mentioned that unfair critisism when Ferrari did so much testing back when the teams were allowed to do so as they had the foresight to buy their own track all those years ago. People mention it was unfair to Mclaren that they got more money, certainly macca has been in F1 a long time but Ferrari have been there nearly two decades longer Mclaren have never had to build their own engine which would be very expensive to do so. This is the main reason they get more money. I should mention that i am a New Zealander and of course i want Macca to win after all Bruce Mclaren started the team it was full of Kiwis some are still there, remember Ron Dennis started off as one of Bruces mechanics. Just trying to put a little balance to the argument. Go the Maccas Bruce W PS Sorry about spelling
Group Lotus apparently isn’t delivering on its IndyCar promises, having failed to provide Bourdais with a power plant ahead of Sunday’s race at St. Pete: http://www.autoweek.com/article/20120321/INDYCAR/120329968
Did Bourdais’s team provide the deposit?
They had one engine to test at Sebring. Then again, the team was short of funds last year. Maybe the number of engines you receive depends on how much of a deposit you can scrape together. Bourdais blames Lotus but who know where the truth lies?
Lopez has made some smart moves with the team. He comes out looking a look better than Bahar.
joe, no offence can you give me an idea why mclaren are not treated more fairly in the negotiations? as for ” NO ANGEL” i read it, its my own opinion, no offence. Who will tell us about the real bernie???
The real Bernie is probably like Verbal Kint in The Usual Suspects…