While the television screens are filled with the action on track, the real action in the paddock this weekend happened far from the madding crowds.
F1’s drivers might be battling for their championships, but the teams are fighting
for their share of the sport’s spoils. And if recent rumours concerning the division of profits under the forthcoming Concorde Agreement prove accurate, the big boys will be profiting at the expense of those backmarkers for whom life is an eternal struggle.
It has long been accepted that Ferrari earn additional money from the Formula
One prize fund thanks to their position as the sport’s most iconic brand. But leaked documents that purport to explain the future division of prize money will see the likes of Ferrari and Red Bull claim extra millions from the same size pot,
leaving the rest of the field somewhat empty-handed.
According to an in-depth report that appeared on the Sky Sports website before hastily being removed, Ferrari’s status as F1’s longest-serving team will enable the Scuderia to apply for a share in the Formula One holding company, giving the Italian racers a greater say in the way the sport is operated.
“The Commercial Rights Holder shall procure that Holdco grants to [Ferrari] the
right during the term [2013-2020] to apply for the allotment to it of (and upon such application to be allotted) one redeemable ordinary share of $0.01 in the capital of Holdco (the LST share) for cash at par subject to Holdco’s articles of association,” Sky claim the document said.
“The LST share shall rank pari passu with an ordinary share of Holdco including as
to voting rights and dividend entitlements save only that…the LST share shall
confer on the Longest Standing Team the following special rights until a Listing.”
A representative from Red Bull will also reportedly be invited to join the board,
although with a lower-status seat than Ferrari.
Bernie Ecclestone is famed for his negotiating skills, and Red Bull and Ferrari are not the only teams lined up to benefit from the alleged terms of the new
Any team that signs up to the new deal and has won the constructors’ championship since 2000 without leaving the sport or changing their chassis name
is in line to earn $10 million. Teams that have won the WCC since 2000 will earn
$5 million per title, while teams that have competed using the same chassis name
since 2000 will also earn $5 million.
Finally, Red Bull look set to earn an additional $35 million thanks to a clause
that awards the hefty financial prize to any team that has won the World Constructors’ Championship “in any two or more consecutive seasons including or after the 2008 season”.
Ferrari’s Longest Standing Team award and Red Bull’s Double Champions haul are stand-alone prizes that do not come from the F1 prize fund, believed to stand
at 47.5 percent of the sport’s commercial profits. The other awards, however, do
come out of the kitty, leaving a vastly reduced prize fund for the other 10 teams
on the grid.
To benefit, teams must have signed on to the new deal before 15 February 2012, which GPWEEK believes has left all FOTA members out in the cold.
The GPWEEK article pretty much says it all. The cards are stacked against all the non-Ferrari-Red-Bull teams. I suppose if these are one-off payments, then the other teams will just have to grin and bear it.
There is very little chance of a successful breakaway unless the FOTA teams could find themselves some heavyweight financial backers such as Rupert Murdoch and Carlos Slim who can provide not only the money but also the broadcasting and marketing capabilities required to make it a success.
They will not be able to use the F1 name and logo. They will have to come up with something like GPWC again.
McLaren is a team that F1 cannot do without. But McLaren is THE team that Bernie wants to do without.
wunderkind wrote:There is very little chance of a successful breakaway unless the FOTA teams could find themselves some heavyweight financial backers such as Rupert Murdoch and Carlos Slim who can provide not only the money but also the broadcasting and marketing capabilities required to make it a success.
raymondu999 wrote:how do you mean sell out?
Who is winning the fight for F1's future?
As F1 exploded into life in Melbourne, it emerged that talks to secure a new deal between the teams and Bernie that shapes the sport's future are taking place. But who is the big winner in a potential new Concorde Agreement? Dieter Rencken investigates.
Formula 1 generally staves off all important discussions, on whatever subject, until the last possible moment, in the hope that a solution will miraculously present itself. So it has been with negotiations over the renewal/extension of the 2010-2012 Concorde Agreement, which expires at the 2012 season's end.
The team principals swore they had learned from the extremely vitriolic experience that last time took three years to (not) agree the sport's covenant; the one which outlines the obligations of the governing federation (FIA), the commercial rights holder (headed up by Bernie Ecclestone on behalf of capital venture group CVC Partners) and the teams collectively. They indicated that this time they would commence discussions during the winter just gone.
So much for their good intentions… Their umbrella body, the Formula One Teams Association or FOTA, failed to kickstart the talks.
There seemed to be little action during most of the winter – save for rumours that Red Bull Racing and Ferrari, having exited FOTA would haggle for their own accounts – with many fearing the matter would again be delayed. (See here and here).
Whispers in Melbourne however, from a variety of sources, suggested that a series of meetings had in fact taken place between Ecclestone and selected teams, convened specifically to cut deals for the future. Thus, went the rumours: Bernie had met with Ferrari president Luca di Montezemolo and Red Bull overall CEO Dietrich Mateschitz with a view to offering their teams advantageous terms on the basis that with the Scuderia and Red Bull Racing onside the rest would cave in and follow.
Allegedly, Ecclestone had offered Ferrari a minor shareholding in a to-be-floated company – some said 2.5 per cent; others half that, but an annual bonus payment worth 1.25 per cent of EBITA (adjusted earnings before interest, tax and depreciation). Red Bull meanwhile is said to have been offered a sweetener worth 2.5% of the same to sign up, thereby keeping what is ultimately a (highly profitable) lifestyle drinks company active in a sport it could leave at any time.
F1's underlying revenues currently run at around US$1bn per annum, with teams to splitting half of that under the prevailing deal. Thus Ferrari and Red Bull would each benefit to the tune of US$20-25m per annum – to be taken from the CRH's 50 per cent share – to add to their performance income.
Simultaneously, Ecclestone is believed to have offered four other teams – McLaren, Mercedes, Lotus and either Force India or Williams (but not both) – an extension (by seven years, thus covering the period 2013-2020) of the current agreement subject to their appending duly authorised signatures. One source suggested McLaren had rejected the deal, while Mercedes is believed to have referred its (uniquely heads of agreement) offer to the motor manufacturer's main board.
Indications are that Lotus and Force India and/or Williams have accepted the terms on offer, which in turn would guarantee them participation in the Formula One World Championship (note lack of 'FIA' in the term, of which more anon) until 2020. With at least four on board, those behind them in the pecking order, such as Sauber, Toro Rosso (inextricably linked to Red Bull despite some foreign interest) and the three new teams are likely to fall in sooner rather than later (despite there being doubts over the long-term futures of at least two).
Thus, it's a done deal to all intents and purposes, although various sources suggest the team bosses concerned realise fully it is hardly the deal of the decade for them, particularly financially – but one they felt squeezed into accepting as there is currently little tangible activity in the sponsorship market, which is unlikely to wake up soon.
In fact, the overriding sentiment in the Melbourne paddock was that through its immediate acceptance of the terms offered, Red Bull had weakened the bargaining position of all teams and that they could have done better – as they did in 2009, when collective discussions were held.
However, the key to obtaining agreement hung not so much on money offered, but rather on promises of money saved over the seven-year period. Here Ecclestone is believed to have promised that costs would be more tightly controlled – see last week's column andnews broken by AUTOSPORT last Friday, and elaborated on during the official FIA Press Conference.
Tired of having expensive regulations imposed on them by the governing body, the intention is for the teams to formulate the regulations jointly, then hand the technical rule book over to the FIA for regulation. Under this system the 2014 technical regulations, including their 'green' V6 turbo engines, would not reach the FIA's World Motorsport Council for ratification.
(In fact, should all teams subscribe to the offer in the near future, said engines and associated regulations could be canned before the teams throw never-ending funding at a technology most are opposed to on cost and racing grounds, and feel was forced on them.)
The key here is that negotiations have so far been restricted to two sets of parties: the commercial rights holder on the one side, and the teams on the other – thus bipartite, rather than tripartite, as had been the case with all Concorde negotiations conducted since Ecclestone acquired the commercial rights at a bargain basement price from an FIA led by Max Mosley, his friend of over 30 years.
Some history: the 1981, 1986 and 1992 agreements were all negotiated between the governing body and FOCA, the then-teams collective, with the 10-year 1998 and 2010-2012 covenants agreed between FIA, FOM and FOTA.
Thus, by initially sidelining the governing body, which the teams and, possibly even Ecclestone, believe is increasingly encroaching on their business side of F1, the parties hope eventually to present the FIA with fait accompli, giving the governing body a stark choice: fit in or fade off, or FIFO, as it was described to this column. In terms of its EU mandate, the FIA would still be required to administer the championship – as it did A1GP and does myriad other championships, subject to their complying with the FIA's (safety) standards.
The FIA may have less say over future shaping of F1 regulations
The FIA may have less say over future shaping of F1 regulations © XPB
However, the teams would prefer to have the governing body on board, if only to give the championship credibility. In which case, it would continue to be known as the FIA Formula One World Championship.
It is no secret that, having sold the 113-year commercial rights to Ecclestone – for $313m – and ringfenced the funds in the FIA Institute, the FIA finds itself cash-strapped particularly as the $10m-odd the governing body had annually been paid by Ecclestone's entities to administer the championship ceased in 2010 due to an inexplicable contractual quirk. In fact, early last year current FIA president Jean Todt is believed to have attempted a renegotiation of the contract, and, not surprisingly, received short shrift from Ecclestone.
Thus, were Ecclestone to offer a fee in exchange for 'FIA' title in the championship title and to administer the series, there is little doubt the body would accept, particularly as it would still be perceived to be governing and regulating the world's premier motorsport championship, one it let slip through its fingers during the Mosley era. Thus the 2013-2020 Concorde would be a tripartite agreement, on paper at least.
The secret to successful negotiation – and Ecclestone is renowned for his skills in this regard – is win-win, or in this case win-win-win, for all three parties are seen to have benefitted: CVC by having the teams on board at a bargain-basement price for reasons that will shortly become apparent, the teams via the seven-year financial stability on offer, and the governing body by continuing to be seen to be in charge (even if the reality pans out slightly differently).
However, the big prize for CVC is that, with a seven-year deal it is able to publicly list F1, as Ecclestone had originally planned back in the 1990s, but found himself thwarted by the City at every turn.
Where Bernie had wished to list in London, the plan appears to be to go east, likely Singapore. Ecclestone had recently alluded to such a step, justifying the listing of a predominantly western business on an Asian stock exchange on the basis of the region's current economic boom. But sources indicate that Asia is the preferred choice due to laxer rules.
EU and North American stock exchanges would invariably impose disclosure clauses on the listing, meaning the terms and conditions of Concorde would need be to made public – anathema to Ecclestone and Co – whereas such as Singapore would be only too pleased to accommodate the sport's special requirements. It is for this reason that Williams listed on the Entry Standard segment of the Frankfurt Stock Exchange, where little disclosure is required.
Dreamers, and those who wouldn't know a paddock turnstile if it hit them in the face, have suggested that Formula 1's market capitalisation could be as high as $10bn. But the paddock itself suggests that half of that is more accurate – still a tidy earner given that just 14 years ago the rights were sold for 0.06 per cent of that.
In conclusion, it is increasingly likely that within a year or two the FIA will no longer directly control the championship it created, while a bunch of moneymen will run F1 for their own accounts. The destruction of Formula 1 as a sport may finally be complete. For a precedent look no further than the US CART single-seater series, which was killed as a sporting and business entity within five years of going public.
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