| By Dieter Rencken | |
| Special Contributor |
Following last week's prognosis that the Formula One Group, F1's new commercial rights holder following Liberty Media's takeover, faces revenue squeezes from teams demanding greater income slices on one side and promoters, partners and broadcasters on the other, senior sources confirmed that the formation of a "modern day FOTA" was under consideration. Not surprisingly, enquiries kicked off a 'blame game'. Fingers were pointed every which way: independent teams suggested the so-called Constructors' Championship Bonus teams, namely Mercedes, Red Bull Racing, Ferrari and McLaren - which, between them, carve up 65% of revenues and enjoy Strategy Group status - were collectively planning "to protect their positions", as one source phrased it, after the prevailing bilateral contracts expire in 2020. Members of the 'Big Four' played round-robin by blaming each other; respondents, though, stressed they wanted no part of such a body, although some admitted that cohesion among teams could prove beneficial when it came to negotiations, with the recurring refrain being "We must all work together for the good for F1 by helping [FOG]." Independent teams did not escape unscathed, either: there were suggestions they were the instigators of a proposed 'FOTA revival' given that they had the most to gain, and so the merry-go-round continued. Such team bosses, though, denied all culpability before singing off the same "good for F1" hymn sheet - with the deeply-instilled fear of being 'caught' being evident in some comments.
As revealed in September 2015 two independents, Force India and Sauber, had in any event stirred up matters by filing EU complaints over abuse of power and monopolistic practice by the then-rights-holder, but apart from loads of political hot air from London, Brussels and Strasbourg that has been highly effective at providing publicity for all concerned, any discernible action is conspicuous by its absence. Informed opinion is that the closer F1 edges towards its 2020 break point, the less the chances of the EU's Commissioner for Competition, Margrethe Vestager, devoting valuable resources to a largely UK-based activity, particularly as ongoing investigations into Apple, Amazon and McDonald's are concentrating her mind. Although the European MEPs backed an investigation into F1's covenants during a vote on Tuesday, the Commissioner is under no obligation to instigate it and only time will tell how matters progress. Asked this week to comment about progress on the F1 case, a commission spokesperson said: "The Commission has received a complaint and will assess it. We will now look carefully at the content of the complaint and cannot prejudge the next steps. There is no further information available at this stage concerning the complaint." However, few teams deny they have recently attended individual and group meetings with FOG executives, nor that they strategise among themselves, ostensibly 'for the good of...' There's no denying the original 2008-14 FOTA served a common purpose, both for the teams and, albeit less so, F1, by forcing change on both the 2010-12 revenue and governance structures for all teams.
In fact, if anything, FOTA can largely take credit for revisions to F1's clearly flawed 1998-2009 governance process - 'which process?', many would reply - and a doubling in disbursed revenues, from an effective 23% of underlying income to 47.5% for all but Ferrari. That, though, changed with the bilateral process, which enabled then-rights-holder CVC Capital Partners to pick off teams in vulture fashion ahead of its (aborted) plans to list F1 on Singapore's stock exchange. F1 CEO Bernie Ecclestone, a past-master at divide-and-rule tactics, certainly split them - in turn spelling the end of FOTA in 2014. The question, then, is would a 'FOTA' representing all teams serve a constructive purpose? At one end of F1's divided structure are the privileged few that benefit enormously from skewed revenue and regulatory structures; at the other is the disenfranchised majority, left with bare pickings and secondary votes. Ne'er such twains could meet, surely? So parallel team alliances are more likely, with the Big Four (or three, given McLaren's lesser shares of CCB revenues mean it could therefore welcome a redistribution of revenues) bandying together to protect their present privileges, while the rest regroup to extract financial and regulatory equality from F1's new owner. Imagine this tripartite fight spread over four years: FOG's faction, led by managing director Ross Brawn - the multiple-title-winning technical/team boss who needs no further introduction - versus a faction comprising the best brains trust Mercedes, Ferrari and Red Bull can pool, versus seven street-smart independents. Ringside seats, please, for F1's fight of the decade...
That, though, covers just one side of the vice. Ratcheting up further pressure are FOG's primary customers: race promoters, broadcasters and commercial partners, all of whom have some or other issue regarding increasing fees versus declining eyeballs. Could they, too, be digging in for a fight? As was the case with team contracts, so Ecclestone was extremely proficient at imposing non-disclosure clauses in promoter agreements, and, when they turned vociferous, he 'blessed' the formation of the Formula One Promoters Association - founded and presided over by his long-standing friend Ron Walker of Australian Grand Prix fame - to quell dissent. For proof of this secrecy, consider that in Texas (Land of the Free and all that), disclosure about the Austin circuit's estimated annual $20million (£18m) subsidy is prohibited by legal decree. As recently reported in USA Today, this decision was formed by a request from "Formula 1 that details of total payments, rights fees and negotiations with the circuit remain secret. F1 attorneys said releasing those details would have harm negotiations for other races." If ever there were an imperative for the formation of a bona fide race promoter association - and not some buddy-buddy sham - this surely is it.
Imagine, then, the formation of an independent FOPA - one charged with negotiating reduced hosting fees and improved fan access for 'the good of F1', i.e. fees that enable affordable ticket prices as they were before the advent of CVC's greed, and improved support programmes and activities. FOG is talking '20 Superbowls' each year - all well and good, but they must be affordable for families and accessible to fans. However, the promoter base is split between organisers of 'traditional' grands prix - mainly in Europe, although events in Australia, USA and Japan are included - and hosts of 'money races', namely rounds staged in such as Abu Dhabi, Bahrain, China, Singapore and Azerbaijan, usually for national promotion purposes. Where Monaco is said to pay zero for the 'privilege' of hosting F1 - clearly, then, the tables are reversed - Monza is believed to shell out around £20m per annum, and Baku double that, even before escalators are factored into the equation. Although the Azerbaijan event is on a 10-year deal there is believed to be a break clause after five races, which should, though, be triggered after the third race, i.e. 2018. Already Malaysia, stung by the triple whammy of escalating fees, a date two weeks after Singapore's glamorous night race and declining audiences, has cried 'enough' despite the massive costs of building what became the blueprint for super stadiums across Asia and Middle East. Then consider the similar earlier fates of India, Korea and Turkey's grands prix, all consigned to the history books after short stints on the calendar.
While traditional circuits are agitating for fee reductions - or, at the very least, easing of punitive escalators in times of declining audiences - the money faction, aware its members are effectively subsidising traditional events, is demanding fee parity and greater input into calendar structures. However, their first priority is to retain their rounds, staged in enormous venues constructed at eye-watering cost. Something has to give, particularly if the FOG delivers on its ambitions of three US rounds, an increased footprint in Europe and a return to Africa, and here a FOPA could protect entrenched interests. So two or more promoter alliances are likely to eventuate as organisers push to protect their positions, or fight to remain on the calendar at reduced hosting fees, as the case may be. Again, battle lines are likely to be drawn - even before similar confrontations are triggered by broadcasters, split into free-to-air/pay channels, with such allegiances being further complicated by Liberty's commercial interest in certain terrestrial and satellite broadcasters. Consider a FOBA to protect broadcaster interests - even that is not beyond the bounds of possibility. As F1 edges ever closer to its 2020 contractual cut-offs, so the jostling will become increasingly frenetic as groups and sub-groups align and some unlikely allegiances form, in the process testing FOG's ability to wring change 'for the good of F1' to the absolute maximum. In closing, the most intriguing question is: Which group could persuade ex-F1 tsar Ecclestone, unceremoniously forced into an emeritus role, to head up its alliance? The overwhelming feeling in F1 circles is that the 86-year-old, who, back in the 1980s, turned the original FOCA into an omnipotent force before acquiring F1's rights for his own account, has one last card to play. He is, after all, footloose and fancy-free, and knows the rules of the game better than anyone else, plus negotiated F1's original contracts - so could he favour FOTA, FOPA or FOBA?
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| By Dieter Rencken | |
| Special Contributor |
Following last week's prognosis that the Formula One Group, F1's new commercial rights holder following Liberty Media's takeover, faces revenue squeezes from teams demanding greater income slices on one side and promoters, partners and broadcasters on the other, senior sources confirmed that the formation of a "modern day FOTA" was under consideration. Not surprisingly, enquiries kicked off a 'blame game'. Fingers were pointed every which way: independent teams suggested the so-called Constructors' Championship Bonus teams, namely Mercedes, Red Bull Racing, Ferrari and McLaren - which, between them, carve up 65% of revenues and enjoy Strategy Group status - were collectively planning "to protect their positions", as one source phrased it, after the prevailing bilateral contracts expire in 2020. Members of the 'Big Four' played round-robin by blaming each other; respondents, though, stressed they wanted no part of such a body, although some admitted that cohesion among teams could prove beneficial when it came to negotiations, with the recurring refrain being "We must all work together for the good for F1 by helping [FOG]." Independent teams did not escape unscathed, either: there were suggestions they were the instigators of a proposed 'FOTA revival' given that they had the most to gain, and so the merry-go-round continued. Such team bosses, though, denied all culpability before singing off the same "good for F1" hymn sheet - with the deeply-instilled fear of being 'caught' being evident in some comments.
As revealed in September 2015 two independents, Force India and Sauber, had in any event stirred up matters by filing EU complaints over abuse of power and monopolistic practice by the then-rights-holder, but apart from loads of political hot air from London, Brussels and Strasbourg that has been highly effective at providing publicity for all concerned, any discernible action is conspicuous by its absence. Informed opinion is that the closer F1 edges towards its 2020 break point, the less the chances of the EU's Commissioner for Competition, Margrethe Vestager, devoting valuable resources to a largely UK-based activity, particularly as ongoing investigations into Apple, Amazon and McDonald's are concentrating her mind. Although the European MEPs backed an investigation into F1's covenants during a vote on Tuesday, the Commissioner is under no obligation to instigate it and only time will tell how matters progress. Asked this week to comment about progress on the F1 case, a commission spokesperson said: "The Commission has received a complaint and will assess it. We will now look carefully at the content of the complaint and cannot prejudge the next steps. There is no further information available at this stage concerning the complaint." However, few teams deny they have recently attended individual and group meetings with FOG executives, nor that they strategise among themselves, ostensibly 'for the good of...' There's no denying the original 2008-14 FOTA served a common purpose, both for the teams and, albeit less so, F1, by forcing change on both the 2010-12 revenue and governance structures for all teams.
In fact, if anything, FOTA can largely take credit for revisions to F1's clearly flawed 1998-2009 governance process - 'which process?', many would reply - and a doubling in disbursed revenues, from an effective 23% of underlying income to 47.5% for all but Ferrari. That, though, changed with the bilateral process, which enabled then-rights-holder CVC Capital Partners to pick off teams in vulture fashion ahead of its (aborted) plans to list F1 on Singapore's stock exchange. F1 CEO Bernie Ecclestone, a past-master at divide-and-rule tactics, certainly split them - in turn spelling the end of FOTA in 2014. The question, then, is would a 'FOTA' representing all teams serve a constructive purpose? At one end of F1's divided structure are the privileged few that benefit enormously from skewed revenue and regulatory structures; at the other is the disenfranchised majority, left with bare pickings and secondary votes. Ne'er such twains could meet, surely? So parallel team alliances are more likely, with the Big Four (or three, given McLaren's lesser shares of CCB revenues mean it could therefore welcome a redistribution of revenues) bandying together to protect their present privileges, while the rest regroup to extract financial and regulatory equality from F1's new owner. Imagine this tripartite fight spread over four years: FOG's faction, led by managing director Ross Brawn - the multiple-title-winning technical/team boss who needs no further introduction - versus a faction comprising the best brains trust Mercedes, Ferrari and Red Bull can pool, versus seven street-smart independents. Ringside seats, please, for F1's fight of the decade...
That, though, covers just one side of the vice. Ratcheting up further pressure are FOG's primary customers: race promoters, broadcasters and commercial partners, all of whom have some or other issue regarding increasing fees versus declining eyeballs. Could they, too, be digging in for a fight? As was the case with team contracts, so Ecclestone was extremely proficient at imposing non-disclosure clauses in promoter agreements, and, when they turned vociferous, he 'blessed' the formation of the Formula One Promoters Association - founded and presided over by his long-standing friend Ron Walker of Australian Grand Prix fame - to quell dissent. For proof of this secrecy, consider that in Texas (Land of the Free and all that), disclosure about the Austin circuit's estimated annual $20million (£18m) subsidy is prohibited by legal decree. As recently reported in USA Today, this decision was formed by a request from "Formula 1 that details of total payments, rights fees and negotiations with the circuit remain secret. F1 attorneys said releasing those details would have harm negotiations for other races." If ever there were an imperative for the formation of a bona fide race promoter association - and not some buddy-buddy sham - this surely is it.
Imagine, then, the formation of an independent FOPA - one charged with negotiating reduced hosting fees and improved fan access for 'the good of F1', i.e. fees that enable affordable ticket prices as they were before the advent of CVC's greed, and improved support programmes and activities. FOG is talking '20 Superbowls' each year - all well and good, but they must be affordable for families and accessible to fans. However, the promoter base is split between organisers of 'traditional' grands prix - mainly in Europe, although events in Australia, USA and Japan are included - and hosts of 'money races', namely rounds staged in such as Abu Dhabi, Bahrain, China, Singapore and Azerbaijan, usually for national promotion purposes. Where Monaco is said to pay zero for the 'privilege' of hosting F1 - clearly, then, the tables are reversed - Monza is believed to shell out around £20m per annum, and Baku double that, even before escalators are factored into the equation. Although the Azerbaijan event is on a 10-year deal there is believed to be a break clause after five races, which should, though, be triggered after the third race, i.e. 2018. Already Malaysia, stung by the triple whammy of escalating fees, a date two weeks after Singapore's glamorous night race and declining audiences, has cried 'enough' despite the massive costs of building what became the blueprint for super stadiums across Asia and Middle East. Then consider the similar earlier fates of India, Korea and Turkey's grands prix, all consigned to the history books after short stints on the calendar.
While traditional circuits are agitating for fee reductions - or, at the very least, easing of punitive escalators in times of declining audiences - the money faction, aware its members are effectively subsidising traditional events, is demanding fee parity and greater input into calendar structures. However, their first priority is to retain their rounds, staged in enormous venues constructed at eye-watering cost. Something has to give, particularly if the FOG delivers on its ambitions of three US rounds, an increased footprint in Europe and a return to Africa, and here a FOPA could protect entrenched interests. So two or more promoter alliances are likely to eventuate as organisers push to protect their positions, or fight to remain on the calendar at reduced hosting fees, as the case may be. Again, battle lines are likely to be drawn - even before similar confrontations are triggered by broadcasters, split into free-to-air/pay channels, with such allegiances being further complicated by Liberty's commercial interest in certain terrestrial and satellite broadcasters. Consider a FOBA to protect broadcaster interests - even that is not beyond the bounds of possibility. As F1 edges ever closer to its 2020 contractual cut-offs, so the jostling will become increasingly frenetic as groups and sub-groups align and some unlikely allegiances form, in the process testing FOG's ability to wring change 'for the good of F1' to the absolute maximum. In closing, the most intriguing question is: Which group could persuade ex-F1 tsar Ecclestone, unceremoniously forced into an emeritus role, to head up its alliance? The overwhelming feeling in F1 circles is that the 86-year-old, who, back in the 1980s, turned the original FOCA into an omnipotent force before acquiring F1's rights for his own account, has one last card to play. He is, after all, footloose and fancy-free, and knows the rules of the game better than anyone else, plus negotiated F1's original contracts - so could he favour FOTA, FOPA or FOBA?
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