The Business of Formula One
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FT SPECIAL REPORT The Business of Formula One Friday October 31 2014 www.ft.com/reports | @ftreports Inside Company man handed A spectacle in search of identity task of Ferrari revival Team principal Marco Mattiacci will need to Lack of confidence navigate politics characterises F1’s one- Page 2 man show,say Roger Funds and fun factor Blitz and James Allen Unequal allocation to the teams and a turn-off ernie Ecclestone turned 84 by TV viewers take toll on October 28 and was still in Page 2 charge of Formula One. Not badforamanwhohasbeen Trials and tribulation B writtenoffmanytimesover. The sport’s chief executive has domi- Although recently deep nated the paddock talk this season even in legal swamps, Bernie more than usual. His trial in Germany Ecclestone has kept on bribery charges has been the centre- piece of a year of sterility for the motor- himself firmly strapped sport. in the Perhaps they are connected. His driving detractors believe F1 cannot progress while he is still in charge. His advocates seat insistF1wouldbelostwithouthim. Page 2 Either way,F1 seemed transfixed and paralysedbythetrialinaMunichcourt- house. Until the case was settled one way or another, no one had much idea what would happen to this glamour sportwithhugeglobalreach. Red Bull’s star keeps The case was settled when Ecclestone handed over a cheque for $100m. The his feet on the ground charges–whichhealwaysdenied–were Daniel Ricciardo says dropped. He left Munich and went back money takes second to the day job, gladhanding Vladimir place to winning PutinattheSochiGrandPrix,talkingup One team: Mercedes has dominated the season, with Lewis Hamilton (above) and Nico Rosberg duelling for the drivers’ championship. — AP othernewvenuesandtalkingdownoth- Page 3 ers,makinghispresenceverymuchfelt. ing point – the on-track rivalry of driv- around corners. They even look spec- incidents occurring between them dur- A new generation of drivers is coming Forbetterorworse,Ecclestoneisback ers whose win-at-all-costs desire and tacular. ing both the Grands Prix in Monaco and on to the grid. Max Verstappen became Women play increasing in charge. But the business he runs is willingnesstotakeriskattheedgeofthe True,asfaras theappealoftheseason inSpa,inBelgium. the youngest ever F1 driver when he goingthroughanidentitycrisis. rulebookhasnocomparisoninsport. hasbeenconcerned,oneteamhasdom- This season has also been more tookpartinapracticesessionattheJap- technical role This may be the effect of the three This season has been far from inated proceedings, Mercedes AMG. Its watchable because of the young and the anese Grand Prix for Toro Rosso at the More female science preceding seasons, which were domi- dull. The move to hybrid turbo engines two drivers, Lewis Hamilton and Nico new. Vettel, a relatively elder statesman ageof17yearsand53days.Hewillmake graduates translates nated by one driver, Sebastian Vettel. coupled with a reduction in rear down- Rosberg, however, have fought a com- attheageof27,haslosthisauraofinvin- hisracedebutnextMarchinAustralia. Fansbecamebored. force means cars are more jumpy at the pelling duel for the drivers’ champion- cibility, upstaged by his exciting Aus- Many feel that 17 is too young, others into bigger role in F1 HissupremacydeadenedF1’skeysell- rear and less planted to the ground ship, with some controversial on-track tralianteammateDanielRicciardo,25. continuedonpage3 Page 4 2 FINANCIALTIMES Friday 31 October 2014 The Business of Formula One Inequalities and fall in TV audiences take their toll Ecclestone stays in driving seat through trials and tribulations Finance Ferrari getting about $100m, Red Bull the team because of the success we’ve leaving,” he adds. But “it’s not fantastic about $70m, McLaren $40m and Wil- had,” says O’Driscoll. The team’s title as a barometer of F1’s appeal that liamsandM ercedes$10meach. sponsor Martini “is showing growth in McLarendoesn’thaveatitlesponsor[to Back in January, the trial about a future in Bickering over revenues Akeydifferenceinstructurefrom,for market share”, he says, because of the replace Vodafone, which left at the end identity of the future which he would “look after masks the great problem example, Premier League football is the partnershipithaswithWilliams. of 2013]. You can’t imagine Manchester owners and managers of the strategy” rather than of how to make the sport gapbetweenthehighestandlowestpaid As for smaller teams barely a week United going a year without a shirt Formula One was anyone’s the details. teams.InthePremierLeaguetheratiois goes by without rumours that one of sponsor. guess, writes Roger Blitz. Yet the rejuvenated 84- more relevant and 1.5to1;inF1itis4.5to1. themisabouttogooutofbusiness. “The problem is that F1 teams have a Bernie Ecclestone, F1’s year-old, casting aside profitable, says James Allen For smaller teams a particular pres- The view of Ecclestone and the top biggerappetitethanfoodtheycanputin chief executive, was knee previous worries about his surehascomewiththisseason’smoveto teamsisthatnamessuchasFerrari,Wil- their mouth,”says Brown. “ A lot of that deep in legal swamps. He health, continues to hybrid turbo engines. They cost $20m liams, McLaren and Mercedes have is self-inflicted. They spend what they was awaiting trial in manage the minutiae of F1 F1 is one of the most expensive sports to perseason,morethandoublethecostof been around for ever and that it is right haveandthenadollarmore.It’ssocom- Germany on bribery – new teams, new venues, compete in and, while it generates good V8enginesupto2013. toprioritisethem. petitiveandyoucankeepspending.The charges and had to stand new engines, new drivers, commercial revenues, the teams get Williams is an interesting case. The decline in TV audiences this sea- cost controls don’t seem to work and down from the F1 board safety concerns. No one varying slices of the cake. Two of the Twenty years ago it was the “Establish- son, estimated at 10 per cent, is another there is a lot of waste. Do you need and get approval has been brought in to smaller ones, Marussia and Caterham ment”,but has been through a bad time worry.“There is a recognition that F1 as £200m,whenWilliamsisgettingthejob signatures from board assist him. have gone into administration in the after losing BMW as a partner and a group needs to protect its future,”says donewith£100m?” members for big contracts. He has also made some pastmonth. haemorrhaging many talented staff to Williams. “There is a greater desire to F1 has to “do more to create value, to A month later, a London effort to get back on the F1 Teamshavetwomainsourcesofreve- manufacturer-backedteams. work collectively, because we recognise ‘The bringmoremoneyin”.Hesaysthisisthe judge delivered his verdict board. According to a nue: sponsorship and a share of the Last year, it struggled to finish ninth that if we don’t act then it will have an problem is responsibilityofallinvolved. in a civil case examining number of observers, there commercial rights paid to them by in the constructors’ championship with impact on people’s commercial oppor- One obvious answer is to boost the issues similar to those to are conditions attached to Bernie Ecclestone’s Formula One Man- five points. It is back fighting the big tunities.” that F1 appeal of the sport, build up the drivers be addressed by the his return to the board that agement company, which has a 100- boys under the new management team Oneofthosewhosejobistofindspon- teams have as heroes and get more income from TV German court. He branded have not yet been met. year licence to exploit the rights from of Mike O’Driscoll and Claire Williams, sorship money is Zak Brown, founder rights.Comparedwithothersports,F1is Ecclestone an unreliable CVC remains, along with the governing body, the Fédération daughter of Williams’ founder Sir and chief executive of Just Marketing a bigger missinghugeopportunitiesinmerchan- and untruthful witness. Norges Bank Investment Internationaledel’Automobile(FIA). Frank. Sponsors have renewed their International. He says F1’s sponsorship appetite dising to fans and increasing revenues The man himself seemed Management and the Theincomefromrightsisdividedinto interest. market is “stable”, but he goes no fur- fromonlineactivity. ready to give up the wheel. Lehman Brothers estate. an equal payment to the top 10 teams; a Williams operates on a racing budget therthanthat. than food Unfortunately, according to Brown, “I’ve been looking, over the So do US mutual fund percentage of the prize money based on of £100m a season, about half that of “We’re not fighting them off with they can put F1 suffers from dysfunctionality.“Adis- past few years, for company Waddell & Reed, a team’s results in the previous season; Mercedes, Red Bull and Ferrari. Yet it is sticks,”says Brown, who in the past five proportionate amount of time is spent somebody who can join me BlackRock, Ecclestone and and a $10m payment to new teams. fighting Ferrari for third place in the years has brought brands including in their arguing over how to split one dollar,”he to assist with what I have Bambino, the Ecclestone Anotherfundthatisworthsome$230m constructors’championship. UPS,MartiniandUBSintoF1. mouth’ says,“asopposedtoworkingouthowwe to do,” said Ecclestone. family trust. is reserved for the top five teams, with “We are seeing enormous interest in “Most sponsors are renewing, not aregoingtomaketwodollars”. “I will eventually be in a Talks with Malone’s position, if I decide to retire media empire have – or unfortunately become dragged on. Liberty is said dead – to have someone to to want all F1’s media step into my shoes.” rights to be included in any It was possible to paint a deal – which could cause scenario where CVC problems with media Company man Capital Partners, F1’s competitors that own F1 leading shareholder, would rights, such as Rupert at some point this year Murdoch’s Sky. have to announce the end Malone and CVC have handed task of of the Ecclestone era, and different ideas about how appoint at least an interim to value F1. CVC has successor. extracted substantial This scenario also amounts from F1 for itself effecting Ferrari envisaged CVC bringing its and other shareholders. investment in F1 to a close.