Formula 1 fans pretty much agree that the cost of tickets is too high. You don’t hear many people singing the praises or the Formula One group, Bernie Ecclestone, or CVC Capital Partners. They are seen to be greedy and exploitative. They do not much care because they are printing money which they then give to bankers who have already loaned them vast sums of money, secured on the future profits of the business. The question that fans often ask is whether the Formula One group can go on pulling rabbits out of hats, finding new promoters in the countries that are relevant (as opposed to totalitarian dictatorships and other such unsavoury locations). Judging by the fact that we will have a 19-race calendar in 2013 some think that this may not be the case, even if there are due to be two new races in 2014 (Russia and New Jersey) and possibly another two new events (Mexico and Thailand) in 2015.
The Formula One group makes its money selling four major things: races, TV rights, concessions and advertising. It has few assets beyond a filing cabinet full of contracts. There are a raft of things that could be done better, such as promoting the F1 brand more successfully, marketing the entire championship, working with media companies to create movies and so on, and making more cash from official supplier/product deals. As previously mentioned, the TV deals are pretty impressive. The race deals bring in a lot of money, the rest is fairly patchy. It is a very good business but their customers are not all happy. Race promoters have the problem of how to fund their businesses with a mix of ticket sales and public and private investment. This means that the circuits are always under pressure and that this means that they squeeze the fans for every cent they can get. There is little incentive for the circuits to do anything that improves the F1 experience, unless it is demanded of them. The structure also means that tracks cannot easily upgrade their facilities, or increase the number of seats because they do not have the cash to do it. Track ownership is an attractive business if one does not deal with Formula 1. As we have seen in a number of places, the regional authorities want the economic impact brought by an event, but they do not want to have to pay for it.
Thus F1 may have strategic aims around the world, but it cannot go everywhere it wishes to go, unless it can find someone willing to take a risk on its behalf.
There is an economic model that would increase the assets of the Formula One group and create much more enthusiasm among the fans… It would mean that governments would no longer HAVE to help, and so would be more willing to do important things such as new access roads, mass transportation links and even such things as event promotion. It would also take out the middle men. And if the new business model was well-managed it could also create more profits and useful economies of scale. Perhaps that is not the kind of thing that a here-today-gone-tomorrow private equity firms would like, but longer-term investors would no doubt see the benefits of this “miracle cure”.
The answer is one that NASCAR worked out a long time ago. Rather than keeping around half the profits of the business, NASCAR gives 65 percent of the money it makes to the circuits. It gives 25 percent to the teams and it keeps just 10 percent for itself. The circuits are allowed to do their own trackside signage, sponsorships, VIP hospitality and concessions, in addition to keeping the ticket revenues. This gives them a lot more money than is currently the case, although as part of the deal they have to pay the teams substantial sums in prize and appearance money, which boosts the team revenues to around the same figure as they are now getting with the F1 model. The teams add to their revenues by selling sponsorships, merchandise and so on, as is already happening.
The secret of NASCAR that the France family, which controls NASCAR, also owns around half of the tracks, through its International Speedway Corporation (ISC). They make money from this so that their share of the overall business is not far short of that of the Formula One group. They are careful to avoid questions of monopolies, by allowing Bruton Smith’s Speedway Motorsports Inc (SMI), another listed company, to promote a significant number of other races, and there is even room for a few independent operators.
What this means is that while the money is spread around a little differently, the incentives are all aligned. The NASCAR brand has a positive image and ambitious promoters want to buy into it. Taxpayers will not complain that their money is being spent on frivolity and, most important of all, the tracks have the money they need to provide better facilities for the fans. They can afford to build and maintain grandstands and thus can charge more reasonable prices for tickets, while also creating better concessions, better comfort, additional entertainment attractions and better access. The whole motor racing experience is thus constantly being improved, keeping the audience happy.
And, of course, well-run circuits that do not have to stretch to pay F1 fees can turn very decent profits in a year, with tests, track days, hotels, presentations, conferences, functions, exhibitions, museums and even shopping malls.
Perhaps when they crunch the numbers, the suits at CVC Capital Parties will see that this could create even bigger profits, perhaps not, but what is clear is that everyone involved would be happier and more positive about F1.
It makes utter sense, doesn’t it? Shame Bernie/CVC doesn’t see it like that.
Extremely well put !
CVC/BE have never shown that they care about the F1 fan base, or even acknowledged that it exists, their current position is to maximise receipts to the death.
Long-term, as you have said many times here, it is not a good strategy, and the circuits in particular are struggling badly, but as soon as world economies pick up again, all will be forgotten and they’ll carry on as before.
If the circuit owners and the teams can’t work out how to do it, then they deserve all they get.
Hi Joe,
It must be difficult for someone who is raking in easy money (especially the sums involved in F1) to take the risk of changing the flow of income…
But your suggested model makes sense and appeals to me because of the sharing principle which means everyone gets a slice, not too big and not too small. But if we are sat in CVC’s position, or that of Bernie; why change? Would we change the system were we in their position?
I suppose the only thing we can be sure of in life is that things change, let’s hope they don’t damage the goods too much in the meantime!
It’s high time people write about how F1 can do without the Big B. No sport can afford to be hijacked by one person and F1 is no different. I got many calls and so many of my good friends told me not to write about the ring master. Hats off to JS. Its time one-man show comes to an end…..
Think you will find New Jersey won’t make the 2014 calendar, look for 2015.
Joe Saward for President! I guess an attraction for them if they ever did it would that they could run around snapping up the loss making tracks (through the big contracts with FOM ironically) on the cheap before pretty instantly returning them to (now their) profitability! I’m guessing it wouldn’t take scary amounts of capital to pick up circuits like the nurburgring or spa et al in the present scheme of things?
Another well thought out essay with a real life comparable. The only fly in the logic is that the suits have no vested interest in the “happiness” of anyone but their investors.
There is no incentive for them to change or invest more on a speculative return and “happiness” is not negotiable at the teller’s window.
And at the end of the day if the money flowing would all be about the same, how do ticket prices to the fan get reduced?
The NASCAR model has always been about putting fannies in seats at the tracks, from which sprung the lucrative TV rights and the purchase of the tracks themselves. This model has evolved and grown over the 50+ years of the series history.
CVC and Bernie’s model is that of the robber baron, going from country to country exploiting a seemingly endless supply of gullible governments who think they need the prestige and nominal residual economic impact of an annual race.
If I understand the NASCAR model correctly, the key to its owners making comparable profits to F1′s is their simultaneous ownership of many of the venues. In F1 this isn’t the case … and would it be desirable given CVC’s non-interest in motorsport as anything other than a cash cow?
I think NASCAR’s success is based on shared interests and ambitions being cleverly and co-operatively managed, which cannot happen in CVC’s world where the only interest and ambition is the single-minded pursuit of its own profits. Everything is expendable, including F1 itself if it cannot continually provide sufficient income until the exit strategy is finally determined.
The building of new circuits is currently almost entirely confined to countries with little or no F1 or even motorsport heritage, some of which could be considered to have unsavoury governments (even by political standards!) that foot the bills for political gain. It maybe that F1 has a long term future in these places but it could also be seriously detrimental to the television rights income. The main TV fanbase is in Europe and Europeans tolerate the growing number of races in other parts of the world because they can watch a race in Asia from their couches with as much ease as one from their own country (if the Asians are not too fussy about the local timing of the event they are paying a fortune to run).
The question is for how long will the European networks be willing to pay huge sums of money to broadcast a championship largely taking place in parts of the world unfamiliar to its audience and indeed often either misunderstood or downright frowned upon by its audience? And how long before European governments put pressure on the networks to spend their money on sports with a more homegrown base? Politicians are even more parochial than venture capitalists.
F1 needs Europe as much as it needs Asia and the Americas for hard business as well emotional heritage reasons. I believe, therefore, that a revision of the business model is vital so that non-government funded events are financially viable but I cannot see this happening while CVC is the major stakeholder. The dream would be for CVC to sell to a consortium of circuit owners, promoters, teams and other interested parties but of course this will never happen because of the sums of money involved. In the meantime, F1′s future as the global pinnacle of motorsport is unnecessarily precarious because it cannot afford any slump in popularity or profitability, as it is unlikely to be supported through any period of difficulty by CVC if it should perceived its exit windfall to be jeopardised.
Oh yes, and it would be nice to read positive press about F1′s business dealings for a change and that people were happy!
What makes you think they haven’t already thought of this idea?
It is self-evident.
Or perhaps they have thought of it but decided they’d rather not deal with assets that require more work than maintaining a file cabinet full of contracts. Why do a good job if it’s harder than doing a lousy one?
IMO, it comes down to whether they care about the sport itself. What seems self-evident is that they don’t.
p.s. The OP is excellent… it could not have been said any better.
Exactly. Let’s face it, there’s an 82 year old running things seemingly for the continuing intellectual challenge (and the ability to exercise his power) – the long-term good of the sport is of little or no consequence as long as the money continues to roll in for the next couple of years.
Venue churn takes care of that, for now. Talk things up in a new region, take their millions for a few years while cars run around in front of empty stands, then say you don’t need them and repeat somewhere else. Turkey! Valencia?! Korea anyone?!
Even if Bernie avoids time in a German prison he has maybe 5 or 10 years left at best. Where’s the need for long-term vision? Name another multi-national, multi-billion dollar company that has an 82 year old in charge. Can’t?! Maybe there’s a very good reason for that.
Warren Buffett, Chairman and CEO of Berkshire Hathaway, is 82 y.o.
Rupert Murdoch in several weeks time.
Great article Joe!
Bernie would say “don’t move my cheese!”
Sadly for everyone Joe, I fear your ideas are far to sensible to be taken any notice of…… But we can always hope.
If only you were on the board of CVC
I agree with all you have said there Joe and have often commented along similar lines.
However there is one part that you have not included in the picture which it may be possible to change at some time in the future, but only with difficulty. That is the FIA monopoly and it’s effect upon circuits. History tells how the FIA was used (albeit willingly) by Bernie to guarantee a tv monopoly for the series he was promoting, tracks refusing to play ball got no FIA series at all. Non FIA series were duplicated and run down. Even today most major formulae are FIA controlled, fortunately the BTCC is FIA free and is the other series I follow.
Tracks should be free to host whatever they want, and sell their own circuit tv rights maybe shared with the formula sponsor and MSA, this could bring inexpensive series back to tv. Sports 2000, formula Libre, Trucks, Rallycross etc.
Doing this also requires a degree of common sense that gas been missing for F1 for a long time
Frustrating as it is why would CVC want to change anything about the business model currently employed – they’re making a buttload of cash and apparently look to be ready to sell up.
CVC won’t do it because, as you say, Nascar only make it work by owning and running half the tracks. CVC would have to buy/construct 10 race tracks and be tasked with running and promoting races in a big way, an outlay of hundreds of millions of pounds (plus time and effort) and end up getting the same revenue figures in return. Far easier and more sensible to just to take the money from the ever flowing stream of countries willing to pay for a grand prix. Less risk and, frankly, CVC don’t care about the grandstand fans, and why should they, they only care about the money. Most of the value of F1 is from TV exposure, and armchair fans don’t concern themselves with ticket prices. I see no trend in the number of countries looking to host a gp reducing, and why would it – you always say hosting a GP is a bargain for governments compared to the economic benefit.
Great article. Really got me thinking. That approach is certainly long term. There is enough money in F1 for all to be happy, but the way it flows and the way it is spent means no amount of money is enough! It is outrageous really. This suggestion would get all on the same page I think. I big key to this suggestion working would be a well-policed RRA agreement.
Obviously you are right. But it will never, ever happen unless completely new and decent people come into the sport.
CVC have a responsibility to maximise profits for their investors. The current simple business model – as in it’s not a complicated business model which doesn’t mean it’s easy to execute – works so well there will be no change. if the rate of return began to fall and didn’t look like improving all good investment bankers would look to exit an investment.
Joe, Sorry this is coming late in the game but one area you don’t comment on is the quality of the TV show put on the in the various countries.
The UK has the Sky-TV which shows everything. Any idea what their sub numbers are like after 12 months?
Australia – yes, small population with quite small F1 fan base – on the other hand only shows F1 races on free-to-air TV. No practise. Live quali. Live races – sort of. Awful pre-race and during race comments from people who like the sound of their own voices and add nothing new in any way. 2 minutes of ads every 7-10 mins (if you’re lucky). Result – fans get treated like proverbial numb nuts.
This has been the problem for over 30 years. 20 years ago it was shocking. The last 5 – 10 years is marginally better.
Does F1 care about the show it’s fans actually get to see or does the fact that some TV exec has handed over a cash mean the rest of the transaction is over once the signal has been sent?
To add insult to injury Australia only has one pay-TV operator which offers a very narrow selection of products. So even if F1 went pay tv here you have the problem of spending a reasonable level of cash on stuff you don’t need or want.
Result – a lot of people (not me!) go looking to watch illegal web re-broadcasting.
I don’t comment because I am not in a position to judge, as I don’t see these shows as I am always at the races.
Sure understand you attend the races. I would love to do the same but my family needs to eat and a place to live and I don’t write well enough.
Anyway without eyeballs there is no F1. In simple terms the way F1 is delivered to lounge rooms around the world is very important especially as it’s major revenue stream is TV rights. This will be the case even if FOM seeks additional revenue as you’ve suggested it could. Unhappy viewers means less TV revenue means … less or no travel for Joe.
Any idea how well Sky TV in the UK has gone with subscribers?
I am not sure I understand your argument.
Do you accept the proposition that if less people are watching F1, FOM will get less money for the TV rights because TV executives will argue that a smaller audience means a smaller fee?,
They will try but that will not work as long as F1 pulls in decent numbers of viewers, which it does.
Yep sure does draw a reasonable crowd at present. Profits wouldn’t be so high for FOM if this wasn’t the case. Do you accept the proposition that more people would watch F1 if the broadcasters and their commentators provided a good show?
It is all broadcast by the same people and generally they do a good job. As to the commentators, that is down to individual stations.
Everyone keeps saying, Why would CVC want to change when they are making buckets loads of cash now, but my question is why aren’t CVC changing when they could make buckets loads more cash on a longer term time frame?? Wouldn’t this make it a far better prospect for future buyers?? So what is really holding CVC back?? Themselves or the people who advise them????
Very interesting to see the comparison with NASCAR – would it be possible sometime to explain how the Indy series is financed, please…?
Wishful thinking Joe but a nice thought anyway. BCE and CVC far too greedy to follow that route
Bernie is the Colonel Tom Parker of Motorsport and is not about to relinquish his monopoly, he gives just enough to all to keep the house of cards standing. The next regime will have a hard time maintaining this obsolete model based on financial excess and frivolity that has to now be found in developing countries where F1 is a novelty. The problems you’ve been describing such as a lack of new fans will come home to roost and there will be rationalizing and rebuilding to do. Intelligent people are fed up with being extorted $300+++for a 1 1/2 hour race, being gouged is a turn off and it’s pretty easy to find more meaningful use for money these days.
It would be nice if after a life’s work of building up F1 Bernie’s legacy was a healthy sustainable F1 rather than a burnt out faltering cash cow. Is he aware he can’t take any of this with him? How much more crap does he want to leave his daughters?
We’ve never seen a hearse with a uhaul behind it, maybe Bernie will be the first, he can use an F1 transporter on the house no doubt
Totally agree… Bernie shows a totalitarian style not conducive to a set-up such as NASCAR’s – and alas he will know he doesn’t have the 10 years needed to change his model, even if he could or wanted to, which he clearly can’t and doesn’t.
Bernie’s legacy is a very interesting one. A driven racer who’s made some incredible deals to get to the top but also perhaps dismissed some important open goals – stubbornness over online media etc which could really open up the sport. Again, likely a fear of letting it get too far from his direct control.
But I think in legacy terms, results speak loudest and Bernie will go down as a demi-god of the sport.
Did I say NASCAR was not totalitarian?
Just way too sensible (and indeed shrewd) for the likes of the CVC’s and BernieCorps of this world.
Ironically, if you charged them a six figure sum for this advice there is probably a much greater chance of it being listened too.
I was at the Dubai24hours over the weekend. It was a great event, but the virtual opposite of F1. Entry was free, everyone could pretty much walk wherever they liked in the paddock and on the grid, and it was about a hundred times more low key. Whilst the crowds were nowhere near what F1 attracts in Abu Dhabi, it is working, there seemed to be 2-3 times as many people watching the start, and far more at the finnish than the last couple of years.
I suspect noone is making a fortune out of the event, but it is doing a decent job of getting people more interested in motorsport, something F1 seems to have forgotten about somewhat recently.
The reason BEC offered to organise things for FOCA was that the circuit owners ruled the roost and would only pay the team owners peanuts in prize money.
BEC quickly realised that the team owners could not agree tiddly-squat, and even now (FOTA) they can’t and so BEC also made the FIA completely impotent to get a free reign.
Once BEC made his first $billion, he knew he was onto a good thing, CVC are part of his exit strategy and not vice-versa.
Sadly, a lot of history would need to be re-written for your scenario to prevail, but I really wish that somehow, it could be. Much as I would love to see at least one live GP each year, I find the cost just too much. I am now faced with paying to watch live TV coverage. The fan always looses out.
AT LAST A SOLUTION THAT COULD VERY WELL APPLY TO OUR “B……Y” FRENCH GP FINANCIAL SITUATION….BRAVO JOE, I WAS DREAMING ABOUT IT, YOU EXPRESSED IT…NOW LET’S DO IT, MISTER PRESIDENT!
Bernie has done a fab job considering how bad the old business model was from before the late 70′s, now the problem seems that bernie/ cvc only care about money and their own business model, ”I love money and money loves me” is ok but the fans and the other business partners who are not happy may at one point may say ”No thank you”. What will cvc do then when a raft of curcuits refuse to hold a GP and not willing to pay them what they demand.At some point the dam is about to burst, especially in this economic strife, even when this financial troubles are over, they may not be so willing to be foolish with their cash again…
Hi Joe, very intelligent and logical way forward.
Problem is Bernie got into bed with the devil bankers (I do use that term in the biblical sense!) and that does not provide for anything other than a profit at all costs, short-term approach to business with no regard for the ‘customers’ or indeed the participants. Anonymous shareholders with greed in their DNA can stimulate a business but rarely provides for long-term growth and investment strategies. I respect Bernie and what he has undoubtedly achieved but to place an entire sport in the hands of these people shows a lack of judgement and questions governance. I guess it dates back to the FIA signing away the Commercial rights all those years ago….feels to me as if the sports finances are in the hands of the banking cartels…not ‘ideal’ I would suggest.
If only human nature would allow all interested parties/participants to gather together for the common good and buy themselves out of this deal then think what could be achieved…we can dream
Why take on extra risk to make the same money? Or if you argue they could make more, does that little bit more make it worth the very considerable extra risk.
I agree with you 100% it would be better for F1 but I could never imagine them doing it unless they had to and while more and more races go to ‘totalitarian dictatorships’ (very impressed you actually stated that) and the fans continue to spend a similar amount of money as a nice family holiday to go to race this is how it’s going to be.
I’d be very interested to see a circuit version of FOTA setup where 19 promoters site down and say here is what you want, and there is what we offer (what you want / 3). Take it or have no where to race.
But there is no more chance of that than the teams doing it is there.
Is it Ebanezer Ecclestone, or Bernard Scrooge? I always wondered why tracks even bothered to hold events in F1, as under the current way of doing things, they need to attract the very wealthy, and very many of them at that. I have an old friend who lives two hours from Austin, but didn’t go this year because overall costs, tickets and hotel, were too high. This is a man who earns $200k a year. As an American, one of the things I’ve noticed with F1 is that when they are in a position where they just have to adapt something from another series, they’ll change the name of it to appear it was their idea all along. Richard Petty discovered when following another car close enough to take advantage of the c
Well said Joe. I dropped in to Spa just after the GP and was surprised at the lack of decent facilities for spectators – like going back to the ’70s. We all know the circuit’s status on the calendar is rather precarious, which is a shame since it ranks as one the best in TV. It’s shameful that venues such as Spa struggle to survive.
The model will likely be used when NASCAR fully takes over sportscar racing in the United States on the marketing standpoint. COTA will receive 65% of revenue, for example, from the March 2 sportscar weekend that’s NASCAR-sanctioned via their Grand American division. That also comes with the rights for COTA to place branding (such as their Pepsi deal, which allows “Gatorade Victory Lane” to be posted if Pepsi desires) of their local sponsors around the circuit.
When CVC doesn’t want the circuits to make any profits, we have an issue. In Austin, Pepsi would want to have a “Gatorade United States Grand Prix” for the F1 race but Bernie? And speaking of which, SMI even ran aground during the World Touring Car Championship race at their Sonoma Raceway. The FIA assigns an official Sparkling Wine (champagne) for the Championship, and the victory podium at Sonoma is branded by a local winery, known as Wine Country Winner’s Circle, and Korbel is a direct competitor to the official FIA wines.
Typically, the circuit offers the special winner’s wine in its own goblet (cider for drivers under 21), and the driver receives a wine barrel-inspired trophy. The FIA would not allow the track’s signature traditions.
Most pit lanes have sponsors, some circuits have Winner’s Circle sponsors, paddock sponsors, and huge billboards. Some billboard regulations for F1 would make Sonoma impossible as they eliminated most footbridges to increase spectator visibility
Joe,
A well written piece of very solid logic that will never happen while Bernie is still around…… but that may not be that long now so it could be well timed if it got in front of people who could make a difference post Bernie.
Why do I think it has no appeal to Bernie, because he is an old dog that does two tricks, as you list, and these days not that well. TV Rights and Tracks. That is it, he has figured out how FOM does TV production, got a good team and can sell a package. But he really has not done well at selling the many feeds he could do in a digital age. Each station with the rights to the race could stream to subscribers the on car footage for example, but they don’t, even though he has some big deal for digital data links world wide! He could package up for the teams a video twitter like feed for them to promote team sponsors and FOM make some cash there too. But he does not…. The possibilities are endless.
So for your well thought out, fundamental revision of the business model requires two things. That CVC goes away or changes heart on the business model and someone is found to lead FOM who gets the bigger opportunities that are currently getting squandered. So who would that person be? Planning on giving up writing and going into business if the prosecutors in Germany get busy Joe?
Joe,
Is there enough cash flow in the sport for CVC to sell out and for the new owners to borrow more cash in order to buy up tracks?City based races like Monaco, Canada, Australia, Singapore, etc cannot be bough for obvious reasons. But if the cash flow could support it, they could invest in purpose built tracks over ten years and have 8-10 permanent circuits in their portfolio.
CVC will look to maximize the sale price, and with teams wanting more and more of the cash, would there be enough money to reinvest into the sport????
In Canada you either buy F1 licenced gear at the race or perhaps a couple specialty shops in Montreal or Toronto, but short of that and some Shell gas stations with a Ferrari on a poster, F1 has no presence in Canada even after 40 years of racing here. I can buy NASCAR licensed products of every description everywhere for a few dollars more then a standard version of the product; to buy a F1 T shirt I have to order it from the FOM store and it cost me close to $100.00 by the time I recieve it.
I read an article a couple days ago that said that 48% of Americans make less then $25000.00 a year (75% under 50k, 6% over 100k), which is likely about the same through the western world. It is a pretty limited market that has an extra $1000.00 (after tax income) to spend for a race weekend and that’s without taking the kids.
I love F1 but in 2013 there are alot of things to do with $1000.00, a quality T shirt is $20.00 and I, like many others, am trying to give less of my money to those who give it no value.
Is it Ebeneezer Ecclestone, or Bernard Scrooge? The U.S. style plan, be it NASCAR or IndyCar, is one to look at. Throughout history however whenever F1 has utilized something from the States, they felt they had to change the name, so it appeared it was an F1 thing from the get go. In the early sixties, NASCAR champion Richard Petty discovers that by running right on the bumper of the car in front of him he obtained an aerodynamic advantage. They named it “Drafting”. Later when F1 started doing the same thing, they changed the name to “Slipstreaming”. In the U.S. when incidents took place on the track, they would bring out the “Pace Car”. After this system was in use for fifty years, F1 started using it, however they re-named it a “Safety Car”. The American system is an excellent system and it not only works for NASCAR, but likewise it also works for IndyCar, who don’t own any tracks, save for Indianapolis. Should F1 ever decide to utilize a system similar to that used in the U.S. I’d be willing to bet my entire bank account, stocks, and home that they would never say “After reviewing our own system and looking to upgrade it in the interest of expanding our market with new fans, we’re consulting with NASCAR. We want to ascertain their style of marketing and promotion, which appears to be a benefit to both attracting new fans and making the racetracks more profitable at the same time.” No. Just like Drafting and Pace Cars (among others) that will never happen. However, regardless of what they decide to call it, who cares? Let them inflate their own egos, so long as the sport doesn’t implode in the next seven to ten years. And implode it will. The path that they are heading we’ll next see the Idi Amin Grand Prix replacing the British GP. Where will this leave manufacturers? Honda, Toyota, and BMW have already left the series. Would Mercedes, Ferrari, and Renault still be interested if races are taking place in markets where they sell 5,000 cars per year, yet in markets such as G.B. Germany, France, Belgium where they sell millions, are abandoned?
Just for clarification, not all US Motorsport models are the same. It is not right to say, “the American system” is right. There is no universal American motorsport economic model. Joe is analysing (and i think suggesting) the NASCAR model specifically. A model that has many merits. Judt because both series run in the US, Indy Car is not the same as NASCAR. Not in the actual racing discipline, the product it sells, nor in its management and ownership. The financial models are very different. US open wheel racing is only now just now recovering from debilitating in fighting, a split and fundamentally poor economic management. It is not a ringing endorsement of how to do things at all. Despite the known flaws in cash flow within F1, it has certainly done much better than Indy Car / Champ Car / CART etc considering it has survived reasonably well in a unified state for decades. US open wheel racing has not. NASCAR’s success owes much to the French family, not the fact that US Motorsport economic models are uniformly better, which they are not.
I often find that “Karen”‘s silences say more than her posts…
Nothing much to say, I don’t really do random ideas, I tend to supply a bit of detail, even then many of the fan boys think they know better because they’ve read something on Wiki, which always amuses everyone.
I’ve come to this one a bit late… but… I used to manage all the sponsorship and licensing for Silverstone (employed by the circuit) and when I started I was told I couldn’t sell anything inside the ‘payline’ during the GP. This I thought was nonsense, so carried on my merry way and sold whatever I wanted to. I did a rather large deal (for the circuit) with Vodafone (which still carries onto this day) where they bought an entire grandstand and then plonked a load of experiential activity on the back of it with driver interviews etc. Now if I was to have operated to the letter of the contract with FOM and Allsport no one would have had any money out of it, but instead I incurred a few days of grief from Allsport before I then offered them a slice of the pie. For them, they got free cash and effectively a free marketing agency service to deliver a decent sized deal. Silverstone won big out of it too. This is one of many examples where I sold sponsorships (based around activation of a bigger deal elsewhere) inside the ‘payline’.
Allsport used to tell me that no one else with the same contract as Silverstone dared to do this yet always felt happy in moaning that there was no money in the hosting of a race other than tickets sales.
The truth of it is, that both Allsport (whats left of them) and FOM are happy to do a deal if it is good for all parties concerned. Meaning that if those involved in the sales of marketing rights in F1 (be it teams, circuits etc) could look beyond their noses they would probably make a bit more money.
But wouldn’t it just be easier if what was Allsport simply changed the contract to say “we take X% of any sponsorships inside the ‘payline’”, instead of forbidding them outright? Seems a bit rich (no pun intended) of them to moan about the other circuits moaning, when they could have sorted it by just amending the contract.
Who’s fault is that then Karen? ‘Rubbish in rubbish out’ and it’s not always sloppy journalism. Even BE himself has been known (yes, really) to tell the odd porky.
Just realised – thanks for saying fan ‘boys’. I feel younger already.
Indeed. Very much so.
What chance that Adam Parr might succeed Bernie? Parr is one of the few people I could have any faith in: well versed in contracts and contract law, fan friendly, intelligent and lastly but no means least, great integrity.
Whilst Joe’s idea has some merit, I don’t think it would make sense for the FOM to own tracks. Given that Bambino (or a related corporate entity) already owns a track in France, I would imagine some crafty banker has already looked into the idea. After all its not a historic track preservation charity!
I think the problem with locking yourself into owning a number of tracks is that you can’t react to changing demographics. F1 has realigned itself to the areas of global growth. If F1/FOM owned only European tracks, it would not be able to have reacted the way it has over the past 5-10 years. It would be locked into the wrong structure. Similarly, should the F1/FOM organisation be picking winners? What if it got it wrong? Say owning Turkey or Korea?
Should the promoters/taxpayers of a successful GP be sponsoring a loss making one owned by the F1/FOM organisation? Imagine the squealing from the fans attending Silverstone if their ticket prices go up in order to subsidise losses from say Bahrain? These are the sorts of problems that are raised.
+1 Some really good contra points.
Incidentally, did anyone see Joe use an emoticon?! Well done Joe.
You must like this “Karen”.
First a proper reference to Link and now the use of emoticons. Waiting for the “omg” or “wtf” in an article title.
YDU, AAMOF BTDT BBB BFN :}
Nothing will change before the short one is pushing up the daisies, sadly.
Fine article, thank you. F1 has long been my favorite, was looking forward to Austin but passed given the expense. Never thought I’d say it but Nascar gets a bit of interest from me these days simply because it respects the fan much more. What I wish for the bean counter brigade of F1 you would not print.
Isn’t F1 now caught up in a model that it’s hard to break out of? The current model evolved from a situation in which the teams decided that they should have more money and more power, so Bernie’s model is team oriented and is not designed to benefit the circuits.
Now, it is the case that eventually somebody has to look after the circuits or else there will be nowhere to race, but how does F1 now break out of the old model and introduce a new one?
Until quite recently the model has looked sustainable, or close enough that Bernie could defend it. Now, we have the 2013 calendar short a race and serious doubts about a couple more races. Maybe this will give Bernie an excuse/kick up the jacksie to start revising the model. Though even that’s difficult because he has long term contracts signed and new tracks working on a basis that may be changed and thus invalidate their financial model.
Bernie is not stupid, but this may be beyond him.
Thanks Joe; a thousand words of pure commonsense. Would B. Ecclestone read it? Let us hope so.
I’ve never really fathomed why The Bernard / FOM / CVC acquired the rights to F1 for 100 years and yet insist on running the sport based on such short-term thinking.
I suspect that he does not believe he will live another 100 years.
Joe, you are the only blogger that I openly laugh out loud to. You truly have a knack for pointing out the obvious… Or what should be obvious.
There is that.
Great article Joe.
Bernie’s Business Strategy — If it ain’t broke, don’t bother trying to improve it.