The Singapore Grand Prix is always busy, with a lot of heavy-hitters in town. Finding sponsors these days is not easy because not only are the teams competing against other teams and rival sports, they are now having to fight off the Formula One group as well, and it’s not really a fair fight as FOM insists these days on knowing the names of all the guests brought to the paddock by the teams. No doubt this will lead to the big CEOs visiting the paddock wearing false moustaches and using pseudonyms to stop any poaching.
The Singapore paddock is a place to catch up with old friends from Asia and the Pacific and this year it was fun to bump into Craig Lowndes, one of the biggest stars of the Aussie V8 Series, who was in town doing some sponsor work and was invited to the GP by Red Bull.
I also bumped into Chung Yung-cho, otherwise known as Joe Chung, who was the power behind the Korean Grand Prix in Yeongam. I won’t forget the day of the first race there as Joe was battling to make sure everything went to plan, up until the very last minute. We don’t often get to see the emotion involved in being a race promoter, with all the highs and lows involved, and Joe’s face at the end of that race that day will always be remembered. He was unlucky in that the global recession hit at the wrong moment and the plan to build a city around the track, in order to develop the entire coastline area, never happened, leaving the Koreans with a racetrack without a raisin d’être in the middle of a marsh. He was thrown out and blamed for the disaster, but I never felt he was the one at fault. The bureaucrats messed things up and slowed things down so much that making the race happen cost more than the budgets allowed.
Today Joe is working on a new plan for a street race in the Seoul region. This is a better idea because the people and infrastructure are there. Joe saw Bernie Ecclestone and showed him the project and Bernie is interested as Korea is still an economic powerhouse where F1 should be. The hope is that the new race, based on the same model as Singapore, could be ready for 2016. We’ll see.
Racing is gaining traction in Korea with a new track opening recently at Incheon, just up the road from Seoul. This is an unusual permanent street circuit, which has the facilities there all the time but with normal traffic using the roads when there is no racing. The Incheon track was built into a new city laid out on reclaimed land and is designed only for national events. It is however a blueprint for similar schemes. It is a great deal cheaper than a temporary street track as the costs and time involved in the set up and tear down of such facilities is greatly reduced. The pits are permanent and the barriers remain in place, so I am told, but the debris fencing and grandstands are built each year.
Efficiency and cost-effectiveness are becoming more of a feature in F1 races these days, not only in terms of circuit construction, but also in the TV coverage. The Singapore event proved to be the first trial for the latest 4K quality TV feeds, with the data from the cameras being sent down cables in real time to FOM’s remote production facility at Biggin Hill where increasingly the organisation is editing the coverage into live shows that will be sent out to TV companies using Tata Communications’s data networks. I think it is only a matter of time before the FOM television production facility at races disappears and only cameramen are sent to events. The Biggin Hill facility is already producing a prototype feed along these lines for the Dutch TV channel Sport 1 and I think the trend towards cable and away from satellite will continue.
This helps to explain the interest being shown in F1 by US cable magnate John Malone, who understands that driving subscriber numbers up involves not only multiple broadband functions, such as Internet and phone access at sensible prices, but also good quality and sensibly priced content. This is probably the best possible compromise when it comes to the question of freeTV or payTV. If coverage is bundled with other things it is effectively free and the whole business benefits. Thus if a cable company owns F1 it can benefit from smaller profit margins on each subscriber but larger numbers of them, while also maintaining high TV rights fees in markets that it has yet to develop.
So the one area which still needs better cost-efficiency is the racing itself with teams needing to find a way to make themselves more sustainable. Cost cutting is the only way… If they don’t find a solution soon, the Formula One group is in danger of failing to meet the requirement for 20 cars at each race. This is why Bernie Ecclestone is currently talking about third cars, although agreements in place mean that this is almost impossible to achieve because the extra cars will not score points, nor win prize money. However the results they gain will stand, thus pushing the smaller teams further back in the pecking order. Consequently no small team is going to agree to change the contracts in place, and the so-called Strategy Group cannot change contracts without the agreement of all the signatories. Nor will the FIA want to change the deal because the failure of FOM to provide full fields could lead to the cancellation of the 100-year commercial deal, which would give the FIA control again. That in turn could lead to a better (and fairer) deal for all the teams, with a bigger share of the revenues. So those who will benefit from third cars are a smaller group than those who will lose out. The existing arrangements are, in any case, only an emergency measure and they are not compulsory if teams can prove that they cannot afford to run an additional car. If third cars are needed in the future only about four teams can really afford to run them, which means that if four of today’s teams fail and disappear (which could conceivably happen given the state of some teams at the moment) the sport would lose eight cars. The current 22-car field would be reduced to 14 but there would be only four non-scoring cars to replace them. That would make 18 cars, an insufficient number to satisfy the FIA contract.
The idea that all eight surviving teams would be happy to run three cars is flawed because those in the midfield know that FOM’s failure would open the way for a better deal for everyone (except perhaps Ferrari).
The irony of this is that cost-capping will slow this process, so it is in the interest of the middle-ranking teams NOT to cut costs so as to push the small teams out of business, to end the reign of FOM and usher in a new era where the distribution of revenues would allow all contenders a fairer share of the money. One can even argue that some small team failures with liquidation processes to wipe out the debts would provide the current owners with the chance to buy the assets cheaply and come back into a renewed F1 in a better shape.
If FOM was to lose the commercial rights, the FIA would still need a certain number of teams and those applicants with the best proven records and resources would be best-placed to win the available franchises…
There are times when going out of business is the most profitable route to take.