The FIA World Council met yesterday in Paris and took a number of decisions, designed to try to solve some of the problems of Formula 1. The council gave FIA President Jean Todt and Bernie Ecclestone, the Commercial Rights Holder’s representative “a mandate” to make recommendations and decisions regarding pressing issues in Formula 1 “such as governance, power units and cost reduction”. They intend to come up with conclusions by the end of January.
Yesterday I tweeted that this did not amount to much and I think that is probably true. What is this mandate? Is it anything more than just words? Has CVC Capital Partners, Ecclestone’s employer (and business partner) had a Road to Damascus style revelation and realised that it is their behaviour that has created a lot of the problems? Are they now willing to stop making money? Of course, they are not. These people would be laughed out of the private equity world if they did anything other than milk the maximum from their cash cow. The FIA is supposed to deal with the governance of the sport, but it took cash to allow the Strategy Group to go ahead. How then can these deals be unwound and the constructors be pacified? It is hard to see what can be done with the current decision-making structure that they themselves put into place. Decisions must go to the F1 Strategy Group and Ferrari has a veto. We don’t know what that veto entails because it is all completely non-transparent. These are things that the sport needs to address in this age when sporting federations are under scrutiny to have everything above board. But secrecy is part of the F1 mentality in the age of Ecclestone and transparency is not going to break out overnight if he has any say in the matter.
Ecclestone and the FIA cannot simply cancel the governance structure, unless they can get the Strategy Group to vote itself out of existence, and that is unlikely to happen because if the Strategy Group goes commercial contracts will be broken with the different teams.
It will be interesting to see what they do. It must be remembered that all of this is against a background of preparations for the negotiations for the next round of agreements that must be completed by 2020. It is clear that the manufacturers and big teams are likely to take a hard line on the revenue sharing and that the Formula One group is unlikely to be able to keep its current share of the cake, without making very considerable concessions. And why should they keep their share as it is? They have taken, taken, taken and they have given very little back. They do next to no promotion and while the money raised is a decent amount, when compared to other sports these days there would seem to be a great deal of potential that has not been fully exploited.
F1 is still a mighty marketing tool and a monument to the people who have built it, but it needs to be more flexible and open to new ideas. The problem remains that even if there is change and more revenues, there will still be the simmering irritation that the Commercial Rights Holder has taken enough and loaded the sport with vast debt and has not given enough back. What comes around goes around. People don’t forgive that sort of thing. The next round of negotiation will see CVC et al struggling to get 30 percent of the revenues, which is still a high figure for a performer-promoter relationship, particularly given the limited amount of value that there is in terms of central promotion.
The only way to stop this happening is to try to break the unity of the big players, but with Ferrari under new management that will not be easy. If the big teams behave sensibly in relation to the smaller ones, giving them a better share of the take and helping out with cost-cutting, the teams are likely to remain unified – and powerful. Taken to the extreme this would mean that the commercial rights holder might struggle to put together a strong World Championship in 2020, while the federation would need to think very carefully about backing a lame duck series, if the alternative was a strong structure.
A huge amount must be sorted out and the baggage that everyone carries is not going to be charmed away. In many ways I don’t understand the FIA as, strategically, now would be a good time to ally with the manufacturers, although as the commercial rights holder remains, to a large extent, the paymaster for the FIA that is going to be pretty hard to do.
As to the detailed regulation changes there has been some twiddling with the token allowances for engine development in the hope that this will attract new manufacturers. It is a good idea but I think other things need to change before we see new manufacturers getting involved (beyond any badge engineering). Pirelli will henceforth supply three dry-weather compounds instead of two and this will open up more strategic possibilities in races – which is good. But it all seems very complicated beyond that, so explaining it to the casual fans will not be the work of a moment. The World Council has also allowed Ferrari to supply a fourth team next year (clearly Scuderia Toro Rosso) and different specs of engines will be allowed. These changes are necessary.
The rules regarding the number of events has been increased to 21 (although in some of the secret contracts between the various parties the figure is as high as 25). The calendar has been confirmed with Austin provisional, based on the fact that it is short of cash.
It is hard for the FIA to champion cost-cutting when it endorses a calendar that is simply daft when it comes to cost-efficiency. The season starts with four stand-alone long-haul races, followed by the back-to-back Canada-Baku leg, which is hardly a good example of a cost-cutting mentality. Similarly the two-week gap between Singapore and Malaysia means that people will have to travel home between races and then return to exactly the same place 10 days later. If they stay out in Asia, they will be away from home for a month as Japan follows a week after Malaysia. Clearly no-one involved in deciding these things has any kind of questions about cost or families.
The calendar is March 20, Australia: April 3, Bahrain; April 17, Shanghai; May 1, Sochi; May 15, Spain; May 29, Monaco; June 12, Canada; June 19, Baku; July 3, Austria; July 10 Britain; July 24, Hungary; July 31, Hockenheim; August 28, Belgium; September 4, Italy; September 18, Singapore; October 2, Malaysia; October 9, Japan; October 23, Austin *; October 30, Mexico; November 13, Brazil; November 27, Abu Dhabi.
* Austin is provisional.
The other point of note is that the FIA is going ahead to finalise a contract to give Formula 2 to the Formula One group, which will pretty much guarantee that the goal of making a more cost-effective route to F1 will be compromised. GP2 enjoys a 20 percent profit margin largely paid for by the competitors.
Hardly what was intended with a new F2…