FT SPECIAL REPORT The Business of

Friday March 13 2015 www.ft.com/reports | @ftreports Sport needs dash of excitement Inside

Concerns over funding to the competitive tension between Hamilton and this fellow team driver damp hopes for a more NicoRosberg. His solution is a makeover,with more competitive season, exciting-looking cars, and noisier say Roger Blitz and engines producing in excess of 1,000 James Allen horsepower which are more of a chal- Interview: Red Bull’s lengefordrivers. Christian Horner Others think the solution is to move ewis Hamilton, Formula on from the long and colourful Eccle- A ‘eureka moment’ led One’s reigning world cham- stone era. The 84-year-old survived an him to stop racing and pion, is hoping not to have it end-of-season coup attempt engineered manage instead all his own way this season as byDonaldMackenzie,theco-founderof Page 2 L he sets off in pursuit of F1’s biggest shareholder CVC Capital anothertitle. Partners, who wanted to shoehorn on to “You’rehopingthatit’sabitofabetter the F1 board a new chairman with exec- Off colour yearforthelikesofMcLarenandFerrari utive powers. Ecclestone would have Teams are struggling to sothatwehavemorepeopletorace,”the noneofit,althoughitwouldbeastretch make their brand more 30-year-old Briton said in an interview to say that his position is now unassaila- thismonth. ble. visually appealing Stars such as Hamilton, who drives However,this is not the first season to Page 2 for Mercedes, are meant to have an begin with question marks about Eccle- unsentimental, single-minded stone’sfuture.Inalllikelihooditwillnot The search for the approachtotheirsport.Anddeepdown, bethelasteither.Somehow,theshrewd, Hamiltonclearlydoes. F1 chief finds a way of hanging on — to perfect fuel formula Buthishankeringforamorecompeti- the frustration of some and the admira- The days when cars ran tive season speaks volumes for the state tionofothers. on a witches’ brew of ofF1.Foralltheglobalreachofthesport But regardless of his survival pros- and the excitement associated with fast pects, the long-term problems have not chemicals are long gone cars, wealthy backers and exotic race gone away. Maurizio Arrivabene, Fer- Page 3 locations,thesearedifficultdays. rari’steamprincipal,wantsa“realrevo- Funding issues are proving trouble- lution” in the way the sport presents The logistics race some.ThebigquestionamongF1’steam itself to fans. So does McLaren’s chief principals, owners and investors is: executive,RonDennis. behind the scenes Whereisthemoneycomingfrom? For this season, F1 may struggle to set A small village has to BigTVrightsdealssecuredinthepast the world alight with an exciting cham- be transported each 12 months by the English Premier pionship. Certainly,the early signs from time F1 moves on League — £5bn over three years in the pre-season testing are unpromising. Page 3 UK market alone — and the US National acutely on the grid. Towards the end of $10m each from a separate fund, from On track: Hamilton’s Mercedes team has looked Basketball Association ($24bn over last season, two teams went into admin- whichtheotherteamsareexcluded. Mercedes F1 confident and is working hard on nine years) make sports such as F1 istration,CaterhamandMarussia,while Thisunbalanceddistributionwillper- driver Lewis improving reliability — the only factor tremble. If football and basketball are questions remain over the financial sist through to 2020. But there is little Hamilton brakes that prevented it from winning every On FT.com picking up bigger slices of the TV rights resilience of Sauber, and sign of the big teams being willing to during a testing race last season. It remains the team to pie,wheredoesitleavetherest? Lotus. yield on this. No surprise, then, that the session at the beat. F1receivessome$1.5bnayear—nota StayinginF1,letalonebeingcompeti- smaller, less-established teams have Catalunya circuit has shown some signs of sig- bad showing. But growth is hard to tive, is a daunting challenge. All teams started to voice their frustrations pub- in Montmelo, nificant improvement but will not be envisage. F1 appears to be in managed are struggling to find new sponsors, licly. near Barcelona title contenders. McLaren is back to the decline, on the basis of most indicators while the hybrid turbo engines, intro- Thereisarealprospectthatoneorall Reuters/Albert Gea drawingboardasitbedsinanewhybrid such as TV viewing figures, race ticket duced last season, more than doubled a of the independent teams may fail enginewithpartnerHonda. sales and number of participants, while team’senginebillto$20mayear. beforetheendoftheseason.ForceIndia This leaves Red Bull and Williams as TV rights fees are fairly static. Sponsor- Marussia (now renamed Manor is struggling to make it to the first race, the main challengers to Mercedes. But shipdealstrickle,ratherthanflow. Marussia F1) has been thrown a lifeline becauseofproblemswithsuppliers. they must catch up fast. Red Bull man- The , a mainstay and is being rescued by a consortium Although there are signs that F1 chief agedthreeGrandsPrixwinslastseason, ofF1,maynottakeplacethisyeardueto including Ovo Energy boss Stephen Fit- executive is willing to Williamsnone. financial issues with the promoter, as zpatrickandex-Sainsbury’schiefexecu- offer a financial leg-up to the three Williams uses the same engine as Do safer cars make for interest in the tiveJustinKing. teamsstrugglingforsurvival,suspicions Mercedes, so it will be hard for it to beat less exciting viewing? declines. Fitzpatrick is a brave man. He has remain that he is eyeing a new make-up the works team. The best hope for a F1 is seeing a decline in Some good news is that race hosting Staying in committed to a budget of £60m a sea- of the grid, involving fewer teams field- competitive season rests with Red Bull fees are increasing, thanks to deals to F1, let alone son, funded from the team’s prize ingeitherathirdcaroraBteam. anditsRenaultengine. its global audience stage Grands Prix in Mexico, Azerbaijan money from last season and from spon- To his detractors, Ecclestone is a bar- Itdoesthesportnogoodifteamssuch and Qatar. But stakeholders question being sorship linked to its drivers, but also rier to the change that teams and other as Ferrari and McLaren are uncompeti- High cost of moving on the long-term viability of hosting three competitive, fromhiswallet. stakeholders consider vital for the tive. As Hamilton said: “The more peo- races in the Middle East — Qatar joins The plight of Caterham and Marussia sport’sgrowth.Forexample,heeschews ple,themerrier.Ifthecarsareclose,you to the grid Abu Dhabi and Bahrain on the calendar is a hasthrownaharshspotlightontheune- socialmedia. can have real races where you’re over- Caterham collapsed last — and Germany is not the only Euro- daunting qualdistributionofF1prizemoney. He is not blind to the sport’s short- takingandbattlingandthat’swhatIlove year with large debts pean Grand Prix where promoters are Ferrari receives a fixed upfront fee of comings though. F1 narrowly avoided a doing.” strugglingtomakethenumbersaddup. challenge $100m, Red Bull $70m, McLaren $50m “lousy” championship last season, he For the world champions and F1’s ft.com/reports Lack of new money is being felt and Mercedes and Williams roughly said in his end-of-season review, thanks fans,itmayjustbewishfulthinking. Traditional heartland cedes Innovations sound a to non-European venues note of controversy right about the cost. A supply of engines Engines to customer teams went from about Tracks Grand Prix. The race is scheduled to corporate hospitality, nearly all their $10m per season for the V8s to more take place on July 19, but there appears revenue comes from ticket sales — and Some teams stand to benefit than$20mforthehybrids,andplayeda virtually no chance it will be staged at since the onset of the financial crisis, more from the new hybrid role in the collapse of two teams (Cater- Longstanding events have the Nürburgring circuit, as planned. fanshavebeenlesswillingorabletopay ham and Marussia) and financial diffi- disappeared to be replaced The sport’s official schedule states the anywhere between €100 and €500 for a turbo, says James Allen culties for three other teams, Lotus, by Grands Prix in Asia, the venueas“tobedetermined”. race weekend. Meanwhile, in many SauberandForceIndia. The track is currently owned by auto casesthehostingfeespaidbyorganisers The noise issue is more subjective. Americas and the Middle partscompanyCapricornafteritsprevi- are subject to a 10 per cent automatic Motorsport has always been a labora- While for some the ear-shattering East, writes Simon Gray ous owner collapsed into bankruptcy.A increaseeveryyear. tory for the automotive industry. It was exhaust note of a racing engine is a vis- deal to stage the race with F1 chief exec- Financial issues were a factor in the ’s circuit in racing that innovations such as disc ceralthrill,toengineersitisthesoundof utive Bernie Ecclestone — who bid disappearance from the calendar after brakes, belts and steering wheel- energy wasted. Hybrid turbo engines As the 2015 Formula One season begins, unsuccessfully to acquire the circuit 2008 of the , another bers, but it would be nice to get more mounted gearshift levers were pio- are quiet because they are the most effi- there are still uncertainties about the from the state government of Rhein- of the original events, after plans to support from the British drivers and neered,allstandardequipmenttoday. cient internal combustion racing calendar. Despite revenues that in land-Pfalz—isthoughtunlikely. buildatracknearParisfellthrough. someoftheteamsandofcourseBernie.” Butwhenitcomestotheoveralldirec- engineseverproduced. recent years have topped $1.5bn, track In the heyday of seven-times world Italy, another country that once Warwick acknowledges that Britain is tion of travel in automotive technology, Covertly, the manufacturers and the owners and organisers of the 20 races champion a dec- hostedtwoGrandsPrix,isalsofacingan reaping the benefits of an outstanding it is the road car industry that maps out governing body have worked on solu- struggle to make money and in some ade or more ago, the passion of German uncertain future in F1. SIAS, the com- crop of drivers, led by current world the route. F1 brainpower is then tionsusingenginemappingandexhaust casesjusttostayinbusiness. fans for F1 was such that Grands Prix pany that runs the , is dis- champion . He believes engagedtogettheremorequickly. pipe modifications with the result that The past two decades have seen a were staged at Nürburgring and Hock- cussing an extension to its contract, the public interest in was proba- This was never more true than with the 2015 engines are clearly louder, steady shift away from F1’s traditional enheim, near Heidelberg, each season. which has two more years to run. With bly eroded by the dwindling number of the 1.6 litre V6 hybrid turbo engines, judgingfromthepre-seasontesting. heartland in Europe toward new ven- More German drivers have emerged at F1Managementdemandinghigherfees, FrenchF1drivers. introduced to F1 in 2014 to replace the More pressing is the issue of competi- ues, especially the Middle East, two the top of the sport, yet attendances there are fears that the world’s oldest It is a longstanding complaint at cir- 2.4litreV8enginesthathadpoweredF1 tion.Achangeoftheorderofhybridtur- racesthisyear,Asia,four,andtheAmer- have dipped and the two tracks have surviving Grand Prix circuit may no cuits in Europe that motor-racing does fortheprevious10years. bos brings a risk that one manufacturer icas, four. Longstanding events in staged a Grand Prix alternately, saying longer be staging a race by the time its not benefit from the same public finan- Their introduction was not without willgetitmorerightthanothers. France, Magny-Cours; Portugal, Estoril they cannot afford the losses incurred centenarycomesaroundin2022. cial backing as in Asia and the Middle controversy; F1’s veteran ringmaster In this case, Mercedes saw the oppor- and Italy — the San Marino Grand Prix byholdingaraceeacheveryyear. At one point it looked as if the British East, where a Grand Prix is perceived as Bernie Ecclestone was opposed to the tunity and invested heavily in the at — have disappeared, perhaps The talk of last year’srace at Hocken- Grand Prix at Silverstone, where Eccle- a nation-branding showcase. Energy- hybrid formula from the start and has hybrid energy recovery side, producing forever. heimwastheemptyspacesinthegrand- stone repeatedly warned that facilities richstatesarenotscaredoffbytheesca- notsoftenedhisstance.Theimpetusfor an engine that was head and shoulders There are fears European race organ- stands. However, there is speculation were substandard, might go the same lating fees they have to pay for the right the engines came from the governing above the efforts from Renault and Fer- isers cannot compete with the public that some financial help from world way as France. But the BRDC has won a tostageanF1GrandPrix. body, the FIA, backed by the automo- rari. As a result, the Mercedes team subsidies that enable events elsewhere championship team Mercedes, based in deal to stage the race after changes to However, Warwick is optimistic F1 tive industry. Manufacturers such as dominatedlastseason,winning16ofthe to be run at a loss. “We do face a disad- Stuttgart, might pull together a deal for the cicuit’s layout and the construction will not abandon its European roots, Renault and Mercedes pushed for it and 19 races. It looks set to clean up again in vantage,” says , presi- another race at Hockenheim in 2015. ofpitsandahospitalitycomplex. pointing to the revenues accruing to the Hondasaiditwouldreturnifhybridtur- 2015, if the pre-season testing form is dent of the British Racing Drivers’ Club, Furtherahead,however,itlookscloudy. “Yearafteryear,wehavetostruggleto series organisers from TV rights on the bos were introduced. Honda has been anythingtogoby. theBritishGrandPrixhost. The problem for race organisers is make it work financially, by extracting continent.“Wewillbeherewhenothers good to its word and has partnered with F1 is a merciless sport where progress The main uncertainty this year con- that with Ecclestone’s Formula One as much revenue as we can from the disappear. There are races happening McLarenstartingthisseason. waits for no one. Which is precisely cerns a mainstay of the series since its Management and its subsidiaries cor- Grand Prix weekend,” says Warwick. now in faraway places that won’t be But Ecclestone had two main con- what makes it such a valuable hotbed of establishment in 1950, the German nering the income from TV rights and “We have great backing from our mem- therein10years’time.” cerns; cost and the lack of noise. He was innovation. 2 ★ FINANCIALTIMES Friday 13 March 2015 The Business of Formula One Ecclestone still firmly seated at the top of the F1 pyramid

Ecclestone has made many enemies. leading shareholder, while grateful for CVC co-founder proposed bringing in a put his plan on hold. What was clear hybrid turbo V6 engines, which came Succession But he has resisted all attempts to Ecclestone’scontribution over the years new chairman of the F1 board, one with was Ecclestone’s opposition to the into effect last season, and wanted a unseat him, and having succeeded in to F1 profits, has long been exasperated new executive responsibilities. This idea. He had set his face against it and return to the old V8 and V10 engines. The chief executive shows foiling the latest attempted coup, he at his chief executive’s way of doing chairman would take on some of Eccle- made it known he was determined to But there is little prospect of winning no sign of wanting to step remainsfirmlyincontrol. business. stone’s duties, and F1 would phase out carryon. thatbattle. down from his role, The billionaire former car dealer, is More pertinent is CVC’s long-term andreplaceEcclestone. Mackenzie blinked. A frustrated Inotherareas,F1’sprogressis,asever, widely praised for turning F1 into a glo- plan to exit F1. It continues to harbour Paul Walsh, former boss of Diageo, Walsh withdrew his interest in the down to the wily old dealmaker. The writes Roger Blitz bal sport, taking it to new markets. He hopes for floating the business. But was lined up to take on the role. The F1 chairman’s position, no longer trusting financial struggles that led to two teams hasdonesoinhisinimitablestyle. Ecclestone, who has been involved in a Mackenzie to invest in the role the nec- being put into administration continue Sitting among a group of journalists As he happily acknowledges, much of number of high-profile legal battles and essary power to effect change, although to blight F1 and it is largely down to after the end of last season, Bernie F1’s dealmaking with heads of govern- opposes a listing, is seen by CVC advis- To some extent he later agreed to come on to the board Ecclestone to grant support to those Ecclestone has Ecclestonemusedonhisfuture. ment, race promoters, sponsors and ersasastumbling-block. emerged from asanon-executivedirector,withformer cash-starved teams battling for sur- “My ex used to say I’ll die in a motor- teaminvestorsiscompletedwitha“typ- Lastyear,helosthispositionontheF1 this coup attempt FerrarichairmanLucadiMontezemolo. vival. home on the circuit,”joked the 84 year- icalEcclestonehandshake”. board when he was called to stand trial with his position And back on the F1 board is Eccle- And so the start of the 2015 season oldFormulaOnechiefexecutive. People trust him, he says. “When I in Germany on bribery charges. The strengthened stone, his seat at the table having been looks very much like the start of many The way things are going in F1 politi- shake hands with them, they don’t need charges were dropped midway through restored. So to some extent, he has previous ones — Ecclestone at the top of cal circles, this may well come to pass. a contract, they know it’s done, that’s the trial when he agreed to pay the Ger- board was all set to expect the change. emerged from this coup attempt with the F1 pyramid, looking down on the There is a body of opinion among teams theendofit,”hesays. mancourt$100m. F1 team owners, sponsors and others hispositionstrengthened. structure he largely created and all its and F1 shareholders that he is holding “Ittakesanawfullongtimetogetthat Mackenzie concocted a plan to push waitedforittohappen. At the end of a year which began with componentparts. backthesport’sdevelopment. sortofreputation.” Ecclestone aside. Towards the end of At the last moment, Mackenzie the looming prospect of jail, he is free to Hemaybeolder,butthosewhowatch Yet F1 has singularly failed to prepare Donald Mackenzie would rather con- last season, he began sounding out the appearedtogetcoldfeet. managetheF1circusinhisveryindivid- him regularly say he has lost none of his forlifeafterEcclestoneandthenewsea- tractswerethenorminF1business.The F1hierarchyabouthisstrategy. The F1 board held a meeting but the ualway,ashehasdonefordecades. drive. Ecclestone is wedged in the F1 sonisnodifferent. co-founder of CVC Capital Partners, Ecclestone would stay on as F1 chief proposal was never put forward. Why? Not everything has gone his way. He driving seat and proving impossible to Over his decades at the F1 helm, the private equity group that is F1’s executive — for the time being. But the No one has established why Mackenzie vigorously opposed the introduction of shift.

inthevariouscategories.Ihadavery together.Notjusttrackside,butbehind clearfocusofwhatIwantedtodoandbe thescenes . . . Onceyouhavefeltthat,it atthatage.” becomesaddictive.” Fascinated by Hisformalcareerasaracingdriver Thedriversgrabthetrophies,butthe beganwhenheleftWarwickSchoolin effortbehindthescenestoprovidethem 1991.HewontheFormulaRenault withawinningcarisvast.Eachteam scholarshipandcompetedintheBritish buildsacareachseason,rollingitoutfor FormulaRenaultChampionshipthe atestprogrammesixweeksbeforethe speed, and followingyear.Hewasmoderately firstraceandthendevelopingittofind successful,workinghiswayupthe moreperformanceastheyeargoeson. racingladder. “ThecarwewillraceinMelbourne However,his“eurekamoment”came wascreatedby200designengineers,” driven by the inthefeederseriesforF1.HesawJuan Hornerobserves. PabloMontoyahurlinghiscarintothe “Itwasproducedwithinfouranda firstcorner,atanangleHornerknewhe halfweeksandassembledwithinfive couldnotachieve.Itwastimetogrowup days;that’s6,500componentsthathad andstopracing. tocometogether—that’steamworkat fear of failure “Iimmediatelythought:‘Ican’tdo itsultimate.” that,’”saysHorner.“Theskill,the Lastyear,theMiltonKeynes-based courageandcommitmentthathehad,I RedBullRacingsquadslippedbehind knewIcouldn’tmatch.Itwasthe Mercedes.Thereasonwasthe Interview Red Bull’s Christian Horner thrives turningpointofmylife.Iwas25whenI introductionofhybridturboengines. stoppedracing,Ilovedtheteamwork Mercedesinvestedmoreresourcesearly on the adrenalin of the sport, writes James Allen andIwantedtoapplywhatIknewabout onthanRedBull’senginepartner itintobuildingandrunningateam.” Renault,leavingHornerfrustratedby Withhisfather,Garry,Hornersetup thelackofpowerhisdrivershadattheir herehavebeenseveral awardedtheOBEforservicesto thefamilyteam—ArdenInternational disposal. outstandingteam motorsportin2013,hasnodesireto Motorsport, amultipleformularacing “Their[Mercedes]carisfantasticand managersinthehistoryof leavethecuttingedgeofinter-team team—in1997andoverthefollowing theyhaveagreatengine,”saysHorner. FormulaOne.“EnzoFerrari competitionforthechiefexecutiverole yearshefocusedondevelopingthe “Wearegoingtodoallwecantogive T wasone,AlfredNeubauer inF1management. team. themahardtime.We’vehadapositive ofMercedesinthe1950sanotherandSir “Bernie’saremarkableguy,”says Helookedatseveraloptionsfor runintestingsofar.Thedriversthink FrankWilliams.ChristianHorneris Hornercautiously.“He’stakenF1to obtainingcontrolofanF1teambefore thatthecarisastepforward. undoubtedlyoneofthem.” whereitistoday.Butnoonepersoncan DietrichMateschitz, owneroftheRed “[Renault]hascomeupwithsome ThewordsofF1commentator replacehim.AsfarasI’mconcerned,I Bullenergydrinksbrand,headhunted morepower.Whetherit’senoughto MurrayWalker,describingamanwho enjoywhatIdo,Ienjoythecompetition, himtomanagehisF1team.Inthe10 takeonMercedesisadifferentmatter, wonhisfirstworldchampionshipasa workingwithagroupofpeopletogetthe yearssinceRedBullenteredF1,Horner butthegreatthingaboutthisyearisthat teamprincipalattheageof36andwent bestoutofthem.Ilovecompeting.” hasledtheteamtofourworld wehavedevelopmentallowedduring ontowinfourinsuccessionwithRed Fromtheageof13Hornerwantedto championshipsand50GrandsPrix theseason. BullRacingbetween2010and2013. becomeanF1driver.“Iwasalways victories. “So,whatwestartwithisnotwhatwe Hismanagementcredentialshaveled fascinatedbyspeed . . . Myfatherwas ButhowdoyoukeepanF1teaminthe willfinishtheseasonwith.” toHornerbeingtippedonnumerous alwaysanenthusiastandonceIfounda sweetspotyearafteryear?“It’sthefear ItisclearHornerishungrytoregain occasionsbyBernieEcclestoneasthe passioninracing,Ihadsomethingin offailure.That’swhatdrivesus thecrownhisteamenjoyedfrom2010 manhewouldliketoseesucceeding commonwithhim,sofrommy forward,”saysHorner. to2013.And,withtheMelbourneGrand himwhenthetimecomestoretire. childhoodonwardswespentalotof “WhenyouwinaGrandPrix,it’sthe Prixalmostuponhim,theracefor Howeverthe41-year-old,whowas timegoingtokartingtracksandracing Christian Horner ‘eureka moment’ led him to stop racing — Daniel Lynch culminationofeverythingcoming supremacybeginsagain. Combining forces harnesses Cars painted with lack of imagination

paint its cars that will shout “McLaren”. Claire Williams, deputy team princi- Livery Teams struggle have been silver since the pal of the team named after her father, commercial opportunities to make their brand days of their association with Mercedes, Sir Frank, accepts the mantra is ‘If it which ended in 2009. The silvery-red doesn’t make the car go faster, then it’s more visually appealing, hybridliverytheylaunchedthecarwith of secondary importance’. But she says Sponsorship Teams their VIP guests, they are now consider- mercial rights’ holder Formula One writes James Allen last month met with disapproval from her marketing group puts significant ing creating spaces within the paddock Group,runbyBernieEcclestone. fans, so it is back to the drawing board effortintomakingthecarslookgood. are realising that whereguestsfromcompetingteamscan The combination of supply deal and beforethefirstraceinMelbourne. “The livery is a tool; it’s a simple can- meetanddobusiness. sponsorship gives Pirelli greater expo- For a sport where the participants go to Given the range of materials available vas to showcase our partners,”she says. collaborating off the For the bulk of F1 sponsors, however, sure and has been part of the Italian endless lengths to refine details of their to make a visual impact, the lack of “We take it seriously because I want to track brings benefits, the public platform is what they seek company’s F1 marketing strategy since cars using the latest technologies, it is imagination in F1 liveries is disappoint- makeourbrandlookpremium.” and for companies wanting interna- 2014, three years after it became the disappointing that the design of most of ing,saysNickDownesofInterstate.The This year the Martini stripe is painted reports Kate Walker tional brand awareness — global TV sport’styresupplier. the liveries for this year’sseason appear London-based design company devised on to the cars, but last year, as the deal viewers number 500m — F1 is seen as Early praise for Pirelli’s efforts to rootedinthe20thcentury. the serpent look for ’sBen- came in quite late, Williams had to Formula One has been accused of being the sport with the best business-to- improve the quality of racing was fol- The colour scheme of an F1 car is the son and Hedges sponsored cars in the apply stickers. It took five hours to out of touch with reality. In an era of businessreach. lowedwithheavyandpubliccriticismin team’s identity statement, it defines late1990s. “dress” the cars each time before they tightened belts and environmental Since ending its partnership with 2013 when the tyres supplied suffered who it is and whatit stands for. This is “F1 is about going beyond what is wentoutontrack. responsibility, the sport has been Vodafone at the end of 2013, McLaren numerousspectacularfailures. quite straightforward for manufacturer accepted; it’s innovation,” he says. “It Ferrari has the most iconic livery in viewed as an anachronism, running on has run without a title sponsor. But the However, more conservative tyre teams such as Mercedes and Ferrari; should be about creating personality.F1 F1, a scarlet car is what fans expect, but excessandfossilfuels. British race team has been taking a dif- development in 2014, coupled with a they have to reinforce their automotive used to be the best, but other sports this leaves little room for innovation. At Much of this is down to title sponsor- ferent approach to sponsorship for focus on promotion through race spon- look and feel in silver and red respec- have caught up. They [F1] are not the best Ferrari can add some white accent ship: corporations offering vast sums to many years, creating symbiotic rela- sorship and trackside signage, has seen tively. pacesettersanymore.” colours, but it cannot overdo it and lose racingteamsinexchangeforprominent tionshipsinwhichbothpartnersreceive Pirelli remain a vital part of the F1 cir- But for teams such as Williams and Innovative thinking was responsible thepurityofthebrand. advertisingandaccess. somethingofvalue. cus. McLaren, the livery changes according for one of the most famous Grand Prix As it faces declining popularity, espe- However, things may now be chang- In 2011, it partnered with Glaxo- Long-time McLaren sponsor Johnnie to which sponsor is paying the bills and team liveries in 1934. Grand Prix cars cially among younger generations, F1 is ing. Ron Dennis, chief executive of SmithKline in a deal that initially saw Walkeralsoincreaseditspresenceinthe the thinking has not evolved much in were then coloured according the coun- going through a process of reinvention. McLaren,madewavesthisyearwhenhe market-appropriate GSK branding sport last year when it became the offi- the past 40 years. In the 1990s glory try of origin; Italy was red and Germany Teams are trying to devise a new look said: “Title sponsorship doesn’t exist appear on the car at F1 races. As the cialwhiskyofF1.TheMcLarendealcon- days of and , was white. Mercedes was preparing its forthecars,tobeintroducedin2017. anymoreasaconcept”. partnership has grown, however, GSK tinues, however. By working with the Williams cars were blue and white. cars to race in the new 750kg weight- It is hoped that this will provide more “If you look at what title sponsorship started working with the parent commercial rights holder, Johnnie Today they are predominantly white limited formula and found they were of a “wow factor”to attract younger would normally be, it would be some- McLaren Group, drawing on McLaren’s Walker’s parent brand Diageo will withaMartinistripeacrossthetop. overweight. The white paint was viewers. where between 40-50 per cent of your secure more exposure: trackside sig- The 1980s McLarens of Senna and stripped off to save a few vital kilos and Perhaps this is also the moment for budget,” he said. “Where the budgets nage will treble and it will see increased Prost were red and white for the-then Mercedes raced with polished alumin- teams to take a fresh look at liveries and are for a competitive team, no company paddock access and more flexibility sponsorMarlboroandLewisHamilton’s ium bodywork. The ‘Silver make their cars not only visually will come in and give you that kind of Entrance to the paddock with corporate ticketing opportunities, 1998 title winning car was silver and red Arrows’legendwasborn. stunning, but also imaginative, money. brings access to business bothareasoutofasingleteam’scontrol. forVodafone. giving the teams more of an “Therefore, what you do is cut it up Perhaps one of the biggest signs of the Today, with no title sponsor for a sec- individualbrand. into bite-sized pieces, so you get a range leaders and politicians changing approach to sponsorship in F1 ond season, McLaren has a real of companies with similar philosophies since the tobacco money disappeared quandary about what colour to Williams racing car tojoinyouonthecar.” canbefoundatFerrari,wheretheroleof But it is not only about the car. The experiences in racing, manufacturing, team principal has been filled by Mau- fabric of F1’s global audience is largely data analysis and management to rizioArrivabene. middle class and entrance to the pad- improve efficiency,streamline the R&D Afamiliarfigureinsidetheconfinesof Contributors dock brings access to global business processanddrivedevelopmentofGSK’s the F1 paddock, Arrivabene went from leaders, politicians and decision mak- products. managing Philip Morris’s Ferrari spon- Roger Blitz Rohit Jaggi and Linda Anderson For advertising details, contact: ers. F1 is also about the unique business sorshiptorunningtheraceteam.Oneof FT reporter and contributor on the Commissioning editors Liam Sweeney, +44 (0)20 7873 4148 In an attempt to take advantage of opportunities the sport affords. Official his first acts has been the creation of a business of sport [email protected], or your usual FT this, teams such as Ferrari, Force India tyre supplier Pirelli — whose logo dedicated commercial department, a Steven Bird representative. and Red Bull are starting to work appears on every car run and team uni- firstforFerrari. James Allen Designer together to offer their sponsors and form worn over the course of a Grand With the Philip Morris deal due to F1 correspondent, FT and BBC Sport For all FT Reports: ft.com/reports partners shared networking opportuni- Prix weekend — is also the title sponsor expire at the end of 2015, even the big- Andy Mears tiesatraces. of the Spanish and Hungarian Grands gest brand in the sport is having to Simon Gray, Roger Baird, Kate Walker Picture Editor Our advertisers have no prior sight of, or Where once, each team would guard Prix as part of a separate deal with com- reviseitscommercialapproach. FT contributors influence over, our articles Friday 13 March 2015 ★ FINANCIALTIMES 3 The Business of Formula One Trucks, boats Oil companies search for a perfect mix

and planes, wider economic benefits. The regula- Fuel tions require fuels to be predominantly composed of compounds normally The days when racing cars found in commercial fuels; only minus- ran on a witches’ brew of cule amounts of non-hydrocarbon com- a race behind poundsarepermitted. chemicals and additives are The teams must supply the governing long gone, says Simon Gray body with two five-litre samples of the fuel blend they plan to use before each race for approval. Further samples are the scenes Forthepastdecade,F1rulemakershave tested during the event to ensure the tried to ensure that the fuel used on the fuel complies with the composition track closely resembles that used by rules and is identical to the ‘fingerprint’ ordinary drivers. Now,changes over the ofthepreviouslyapprovedsamples. Logistics Early planning is essential to ensure pasttwoyearsaremakingfueleconomy The risk of losing world champion- as critical to teams as it is to everyday shippointsthroughevenaninadvertent seamless transportation, writes Roger Baird motorists. breach of the regulations is one reason The days when F1 cars ran on toxic why teams and their suppliers are not inutes after the first car Our first meetings to discuss flights witches’ brews of ‘rocket fuel’, contain- constantly looking for fuel upgrades crosses the finishing line for the 2015 season took place last Sep- ing chemicals and additives, are long throughouttheseason. at the Grand Prix in Mel- tember, before the calendar was fully gone. Oil companies see motor racing as “In the past, we have done four or five bourne, a second race confirmed,” says Boughton. “You then a way of raising their profile and a test- upgrades a year,” says Andy Cowell, M begins. need to be able to react quickly should ing ground for developments that will managing director of Mercedes AMG This is the scramble to move up to 10 dateschange.” benefittheirmainstreambusiness. High Performance Powertrains unit at teams, comprising 300 tonnes, or Teams take about 80 people to a race, The switch last year from normally Brixworth in Northamptonshire. “But 20,000 individual items of F1 kit, to the comprising drivers, engineers, caterers, aspirated V8 engines to turbocharged you risk putting so much effort into the in Kuala Lumpur and marketing and management staff. High life: races outside Europe present the greatest logistical challenge — DHL V6 power units, coupled with a one- twoweekslater. Teams also invite their sponsors, and at third reduction in the maximum Mainstream: A small high-tech village has to be blue-ribbon events, such as Monaco, director of DHL Global Forwarding and Kapadia heads a team of 18, three of amount of fuel F1 cars can use in a race, rule changes transported each time F1 moves on. numbersswellto200peopleforthebig- has handled motorsport cargo for the whom arrive at the track on the Friday has changed companies’ approach to are making fuel This includes racing cars, generators, gestteams. companysince1982. the week before race weekend. They formulating fuel, according to Guil- economy as critical TV cameras, right down to industrial What teams describe as ‘flyaways’, “You must never forget you are takethreedaystosetupcomplexITsys- laume Biondi, F1 technical co-ordinator to teams as it is to ovens, coffee machines and manne- races outside Europe, present the great- putting on a show,” he says. “And our tems that are in place when the teams atTotal,whichsuppliesRedBull. everyday motorists quins that allow teams to display their est challenges. Of the 20 races, 11 are passion is that everything gets there on begin to arrive in the middle of the “You are limited to 100kg of fuel for merchandise outside their 6,000 sq ft outside Europe this season, meaning time.” week. therace,”hesays.“Ifyouwanttodeliver prove-out and in transporting fuels motorhomes. that teams will ship the cars and other New circuits tend to offer the biggest F1’schief technical consultant, Eddie the maximum horsepower, you have to around the world that not enough brain In this year’s 20-race season, includ- essential items by aircraft, while more headaches he says, because relation- Baker, says that it traditionally takes 30 make it the most efficient possible — timeisgoingintothenextfuelandmak- ing test days, an average F1 team will general equipment such as electrical ships and ways of working have to be days to set up and test the systems that efficiencyequalsperformance.” ingthatperformancestepbigger.Weare spend 170 days away from their bases, cables and catering equipment go by established. thisgrouphandles. Thechangeinregulationsisanoppor- better off having one or maybe two big clocking up 100,000 miles by land, air sea. Because of the complex timetable, The maybe the Tata provides 1 gigabit of bandwidth tunity for fuel to make a significant con- upgradesperyear.” andseaatacostofalmost£10mateam. teamshavefivesetsofseafreighttravel- most glamorous highlight of the season, at the track. Kapadia says that when tribution to the cars’ performance and Biondi says that Total’s challenge in Williams race team co-ordinator ling the world and as a result have five but it is one of his team’s biggest chal- TatafirstbegantosupplyF1,ituppedits reinforces the importance of collabora- F1, delivering the maximum perform- James Boughton says: “We do not nor- sets of general items to furnish their lenges,addsFerrari. capacity 10-fold. That has now been tion between fuel suppliers and engine ance over a 300km race distance with mally source things locally, so abso- motorhomes. “Monaco is a small tight space. It can increased by 100-fold. This allows F1 to builders. 100kgoffuel,isnowthesameasprovid- lutely everything we need has to come The key partner of the teams is DHL, be tricky for taxis to operate. So for transmithigh-qualitypicturesinthelat- Chan Ming-Yau, a fuel technology ingfuelforroadcarswhosedriverswant with us. We are self-sufficient and this whichsignedacommercialandmarket- almost200trucksitisverydifficult.” esthigh-definitionTVandalso todirect specialist at Petronas of Malaysia who maximum mileage from a tank. “That’s means we can guarantee the quality of ing agreement for an undisclosed fee Another key element in the F1 season some of the cameras at tracks around has worked with Mercedes, says fuel is whythereisnotaspecificteamworking ourequipmentatalltimes.” with the sport’s commercial rights is information technology. Tata Com- the world from F1’s technical base in not developed in isolation. “The key to on F1; they are the same people respon- The planning for this vast logistical holderin2004,tohandleitsfreight. munications signed a multiyear deal BigginHill,inthesoutheastoftheUK. success is the synergy of engine, vehicle sibleforproductsforroadcars,”hesays. operation begins a long time before the DHL’s motorsport unit runs a dedi- with the sport’s commercial rights “The relationship helps us innovate and fluids, including lubricants and “WeuseideasfromroadcarsinF1and race calendar is provisionally an- catedteamof80staff,170trucksandup holderforanundisclosedfeein2012. and create products and services. It is functional fluids, which are developed generate ideas from the racetrack that nounced in December. For example, to seven Boeing 747 freighters to ship Tata Communications managing also a showcase for potential new cus- togethertomaximiseperformance.” willfeedintoournextgenerationofcon- rooms for the 2016 Australian Grand theF1circusaroundtheworld. director of F1 business Mehul Kapadia tomers. The sport’s authorities are also anx- sumer products. It is an interesting way Prix will be booked as the team checks Pier Luigi Ferrari (no relation to the says: “At the track, WiFi is as important IfwecandothisforF1,thenwecando ious to demonstrate that F1 is not wan- of working and the most flexible and outthisyear. sport’s car family) is deputy managing aswater.” itforanyone,”saysKapadia. tonly disregarding the environment or efficient.” 4 ★ FINANCIALTIMES Friday 13 March 2015