F1's unending financial woes; or "It's the income, stupid."

[Pup]

FOM doesn't "steal" any money, with or without quotes - at least not from the teams. Just because one party makes a disproportionate amount of money doesn't mean that they are obligated to share it with others.

I'm afraid that is at the heart of it and unless you understand that then this thread is useless.

Put simply, there is more than enough money in Formula 1. When you have a team like Lotus who've finished fourth in the constructors' for two years' running, have beaten teams like Mercedes and McLaren and are going out of business then that tells you there is something very wrong. CVC uses Formula 1 as a cash cow for its wealth, pension and hedge funds. You've got teams running around hunting for 10 million here and there and CVC syphons off billions. Completely disproportionate.

The FOM money is the teams' money.

That's totally untrue. As I said, if FOM is stealing money, it's from the FIA, not the teams. And the only reason I even entertain the word 'stealing' is because of the lop-sided arrangement Bernie worked out with his buddy Max.

And as I've said before, the economics of the sport might work under an arrangement where the promoter paid the teams to compete, but it would be a substantial and unprecedented change from anything the sport has ever seen. Likewise, you could imagine the teams themselves owning the sport, FOTA fashion, but again, that's a substantial change. Both ideas are worth considering as a solution to the problem, but neither address the question of why the sport can't find sponsors when other series can.

Look at it this way, if Bernie never came along, and the FIA never sold the rights, that money would either a) be going directly to the FIA, or b) not exist. And the teams' financial position would not have changed. In fact, by your argument, they would be worse off because they wouldn't be getting the 50% of FOM revenue they do today.

And you can also consider the opposite - what if FOM did in fact give all their money to the teams? That might initially seem like a good solution until you realize that the same economic dynamic that exists now would still be in place - that is, while every team would have x dollars from FOM, some teams would have x+major sponsorships and manufacturer backing. So we'd still be in a world of haves and have nots, just that everyone's budget is higher. The classic problem of subsidies.

As I've said in another thread, the problem isn't getting the baseline budget to get cars and drivers to the races - it's getting competitive cars and drivers to the races, where the level of competition is being set by a few teams with disproportionate budgets - those with major sponsorships and/or manufacturer backing.

I think the only way an FOM funded series would work would be if no outside sponsorships were allowed, in an effort to level the field. But then you'd end up with similar issues as you have when trying to fight the expense side of the equation - teams getting funding through parent companies, sponsors who aren't sponsors (marlboro), etc. So it's not as clean cut as it seems.

And we're still left with the basic question of why there aren't more sponsors in F1.

And as for Lotus, if they're going out of business, it's because they were mismanaged - trying to compete with the McLarens and Ferraris of the world when they simply didn't have the resources to do so, in a vain effort to attract a buyer before the money ran out.

[munudeges]

That's totally untrue.

I'm afraid it is true, and I'm having very great difficulty trying to understand the thrust of your argument or your longwinded attempts at explanation because they really are quite nonsensical. If you want to be credible here then I recommend getting a subscription to Autosport and reading Deiter Rencken's articles if you are confused as to how this works.

The simple fact is that Formula 1 is having billions syphoned out of it and we've got teams hunting around the back of their sofas for the odd 50 million here and there while the 'grandee' teams get a disproportionate sum of what money is available creating inequality for other teams even if they do get results. Lotus weren't mismanaged. They got the results that netted them less money than other more favoured teams.

Without being patronising it really isn't rocket science to work out and you seem to be rather misinformed to say the least as to how unequal, and frankly corrupt, the sport is.

[Pup]

That's totally untrue.

I'm afraid it is true, and I'm having very great difficulty trying to understand the thrust of your argument or your longwinded attempts at explanation because they really are quite nonsensical.

And I have difficulty understanding why you can't see that FOM's income has nothing to do with the teams' inability to get sponsors. It might help me understand if you actually tried to address my arguments instead of just blankly dismissing them and voting down my posts.

Again, you might think that FOM makes too much money from the sport, and that's fine. In fact, I agree. I'm not oblivious to the inequity, but I understand that the issue has nothing to do with the marketability of the sport.

At least not as you present it. Just saying that FOM should give their money to the teams is simplistic, as I've shown. The better argument is to say that FOM shouldn't give the money to the teams, rather they should just make less of it. This is because part of the problem for sponsors has to do with the fact that FOM choses venues to maximize their income rather than to maximize the overall value of the sport. Were they instead to chose the venue based on sponsor value, and demand less money from the venues so that they could charge less and hopefully increase attendance and the fan base, then likely F1 would grow as a sport and become more attractive to sponsors.

Of course, both arguments are equally pointless in the end, because CVC's debt load prevents them from returning substantially more to the sport than they already do. But I would argue that a better use of the money that they do currently give to the teams might be to simply not make that money in the first place. Take in less in fees so that the sport can be held in countries that better develop its value.

[turbof1]

Pup, I have to ask, and please don't take this the wrong way:

Were you drunk last night?

Trying to engage x in a discussion is usually a pretty good sign that someone's fallen off the wagon, but in this case, sadly no.

See, I don't feel like x was out of his way. Well not until he dropped your real name; maybe that was a tad pushed too far.

I really don't want to get this personal. At all. The general view I have from you is that you are more then intelligent enough to write down decent pieces of text. I really do. This subject somehow makes an exception to that. It's not coherent, a distinctive point you are trying to make isn't clear and it turns into a mess because of it. Like we came from an article published by Infinity about sponsorship value, from a company which has actually very little to do with the FOM, to how FOM manages the cash flow structures. It jumps from A to Q suddenly, not to B.

Your last post was getting back to the expected level. Let's start back from there.

[Pup]

No worries, Turbo - I laughed when I read your post.

As I began by saying, the original story isn't much to start a topic on, but I do think the subject in general deserves a topic and you've got to start somewhere. And there are a lot of angles to it, so if my argument is taking a while to become coherent, so be it.

I don't know what x meant by having an agenda. Something about Brawn?

By the way, I expected to lose a few votes when I started the topic, just because. And getting x and seg involved was if nothing else a good way to get the issues on the table. Hopefully, the topic will settle down as it develops. And if we start to hear from some others, I'll probably even change the title to something a bit less provocative. But you've got to pull in the crowd to start off - topics about balance sheets and market research don't sell themselves .

[turbof1]

It's just that he feels the Brawn argument didn't made sense. It's merely his way of telling that .

I think the reasoning behind "starting with a good story" and then after getting to the point is kind of ok, but sadly didn't work. People started focussing on the article, then you tried getting it back to the intended topic, some more people kicked in and got back to the article, others jumped on the FOM wagon, and then confusion came by to say hello.

Atleast now I can tell where went what wrong and what was intended. So:

Again, you might think that FOM makes too much money from the sport, and that's fine. In fact, I agree. I'm not oblivious to the inequity, but I understand that the issue has nothing to do with the marketability of the sport.

It infact has, there's a clear connection between FOM and marketability, but not for any reasons or arguments here. FOM clearly is in charge of marketing (why else are we having the rediculous double points-last race rule coming season); the FOM should atleast do some more effort to give sponsors reasons to enter the sport. As it appears, you are saying more or less the same thing in the next paragraph and because I only readed that after I typed this up, it was a waste of effort... .

At least not as you present it. Just saying that FOM should give their money to the teams is simplistic, as I've shown. The better argument is to say that FOM shouldn't give the money to the teams, rather they should just make less of it. This is because part of the problem for sponsors has to do with the fact that FOM choses venues to maximize their income rather than to maximize the overall value of the sport. Were they instead to chose the venue based on sponsor value, and demand less money from the venues so that they could charge less and hopefully increase attendance and the fan base, then likely F1 would grow as a sport and become more attractive to sponsors.

I agree here. Also some incentive to have more interaction between the products of the sponsor and the sport and giving that TV time instead of just the liveless logo on the car, could be very appealing to the sport. Perhaps also a model where local sponsor get more into the picture would be a big help.

[GitanesBlondes]

There are no "financial woes" in Formula One, never was, what it's all about is that F1's manager is stealing 50% of the money.

Pretty much like Elvis Presley and "Colonel" Tom Parker.

FOM doesn't "steal" any money, with or without quotes - at least not from the teams. Just because one party makes a disproportionate amount of money doesn't mean that they are obligated to share it with others.

If FOM is "stealing" money, it's from the FIA, not the teams.

That's not to say that it wouldn't be in FOM's long term interest to share. But they aren't morally obligated to do so.

We're talking about two different streams of income - FOM get's one, and shares half of it. The teams get the other. Ideally, both parties would be selling the same thing - the value of the sport. But the value that Bernie has created as the promotor is disproportionately favorable to his end of the sport. That is, he sells exclusivity and bragging rights to countries who feel they need it. The teams can do that - they can sell out to new money billionaires, manufacturers, Arab partnerships, etc. But as we've seen, that isn't a viable long term strategy. It's more of a "get out while the gettin' is good" strategy. And we're also seeing that it probably isn't a good long term strategy for FOM either, since their venue deals of late are getting less lucrative and more uncertain.

The key is that Bernie has done very little to promote the value of the sport as sport.

The FIA is irrelevant and doesn't deserve much money from the total pie of money F1 generates.

Grand prix racing exists with or without the FIA...it does not however exist without the teams. They are the ones who take all of the risk, not the FIA.

[Pup]

Grand prix racing exists with or without the FIA...it does not however exist without the teams. They are the ones who take all of the risk, not the FIA.

You're preaching to the choir, brother - I was a big FOTA supporter at the time. I'm not arguing should or shouldn't in the ideal sense, just the practical/legal one of who owns and runs the series today.

[Pup]

Also some incentive to have more interaction between the products of the sponsor and the sport and giving that TV time instead of just the liveless logo on the car, could be very appealing to the sport. Perhaps also a model where local sponsor get more into the picture would be a big help.

Agreed. And you could argue that they should spend their money on local promotion as well.

And then there are silly rules which I think hurt the sponsor hunt - like not allowing a team to have different sponsors on each of it's cars. That alone doubles the entry price for a potential sponsor.

[Moxie]

Well, Bernie doesn't care about car sponsorships. They make him no money. To see value in them, he has to look into the very long term, and assume that stronger competition makes for a more valuable sport that then allows him to extract more money from venues and media.

One of the problems, as pointed out, is that performance disparity = exposure disparity = income disparity = performance disparity.

One way out of that cycle might be revenue sharing among the teams, but right now there probably aren't enough haves to balance the have nots. Another way would be for FOM to subsidize the teams, which they do, though not in a very egalitarian method.

Were the field/races tighter, the smaller teams would have more exposure, therefore more income. And the bigger teams would have less. FOM could artificially give equal amounts of exposure to each team of course (and they do that to an extent) but the result would be complaints from fans about the coverage.

I've always thought that this was one of the keys to NASCAR's success - the races are very tight and often (artificially) bunched, so even the losing teams get lots of airtime. More airtime = more money = more competitive. The inverse of F1's spiral.

I agree strongly with the everything you have said here, with the exception of the following statement:

One way out of that cycle might be revenue sharing among the teams, but right now there probably aren't enough haves to balance the have nots. Another way would be for FOM to subsidize the teams, which they do, though not in a very egalitarian method.

FOM doesn't need to subsidize smaller teams, but for crying out loud, FOM does need to give the small teams a chance to win something. Even though they are at the rear of the grid, those teams still spend a fortune just to place a car on the back row. That is a lot of money to spend for nothing. That is a lot of money to for which to beg from sponsors, with damned little hope of winning prize money.

F1 is a racing series, it needs the players to stay in the game. It needs to provide incentive for new players to join the game. That F1 ran with an 11 team grid in 2013, despite their stated goal of having a 12 team grid, should have been a wake up call to FOM. It was not. Instead FOM continues to subsidize Ferrari, it gives Ferrari veto power over rule changes and it gives travel subsidies to the top most well financed teams.

MeE seems to forget that race teams are also businesses. To fill the 23rd and 24th grid positions, FOM need to provide financial incentive to justify the financial risk. And the financial incentive for competing in F1 needs to be even across the board.

NOTE: I said financial incentive, not financial reward. Every team should be competing within the same reward structure. Ferrari getting a $60 Million just for showing up doesn't represent fair competition.

[GitanesBlondes]

Grand prix racing exists with or without the FIA...it does not however exist without the teams. They are the ones who take all of the risk, not the FIA.

You're preaching to the choir, brother - I was a big FOTA supporter at the time. I'm not arguing should or shouldn't in the ideal sense, just the practical/legal one of who owns and runs the series today.

For all intents and purposes F1 is "owned" and "run" by Ecclestone.

But, making the races tighter is not the answer...we've already been moving in that direction, and the result has been worst racing ever seen at any point in F1's history. The world does not need another spec series race, and it being seen as being better for F1 is illogical.

Just wanted to address this particular line of yours I forgot to mention...

And companies like Vodafone have at least in the past felt that exposure alone was enough.

It was rumored Vodafone pulled out due to the Bahrain debacle. The exposure alone was not worth it for them. As such, McLaren as no title sponsor for the first time since Bruce McLaren was alive if I'm not mistaken.

[turbof1]

But, making the races tighter is not the answer...we've already been moving in that direction, and the result has been worst racing ever seen at any point in F1's history. The world does not need another spec series race, and it being seen as being better for F1 is illogical.

The question then: what does make F1 races better to watch?

FIA and FOM obviously have whole crews working on that subject, but they stagger me and millions of other fans each time they bring out something new. The only way that is possible, is the work groups working on this are totally ignored and a big shot high on top of the hierarchy decides what changes.

Maybe there also was a pervers effect among the viewers towards death: F1 being deadly in the past could have actually contributed to its popularity in the sense of excitement. Not that anybody wants that back, but you could try to seperate the catalyst from the event and try to replicate the excitement with harmless, but raceweekend-ending, risks.

[munudeges]

And I have difficulty understanding why you can't see that FOM's income has nothing to do with the teams' inability to get sponsors.

I'm afraid arguing that FOM's income is perfectly fine and it's all the teams fault because they should be getting sponsors will not work and is just plain silly. In other sports competitor's have the lion's share of any TV and endorsement money. In Formula 1 that simply doesn't happen because it is creamed off. Sponsorship and outside endorsements are the icing on the cake around the business of actually competing.

The amount of time it took to get a Formula 1 game together when Fifa ** has been in existence for goodness knows how long is a case in point and tells you that the there is something very wrong with the commercial side of the sport, and that is not down to the teams. Even if the teams came to an agreement themselves as an outside venture, it wouldn't be possible due to absurdly amateurish restrictions you wouldn't find anywhere else. The closed shop nature of Formula 1 certainly put VW off getting involved and if this wasn't the case you might still have manufacturer teams involved because the income would be there.

Also, if you're going to argue that it's the teams' inability to get sponsors then you cannot separate that from the governance of the sport and the willingness of sponsors to get involved in the sport, not a team, on that basis. Quite frankly, some sponsors just don't want to be associated with a sport who thinks it is a good idea to host races in tin pot dictatorship countries, where human rights abuses are painted over and blood money is paid and creamed off because it isn't commercially viable to run a race on a circuit in any capitalist way.

Formula 1 is owned by Ecclestone. That's why teams are going bust.

It might help me understand if you actually tried to address my arguments instead of just blankly dismissing them and voting down my posts.

Because it's impossible to answer them. You can't have the competitors in a sport being driven out of business while the governing body makes out like bandits off the back of their work. It's idiotic and that's the central point.

As I have politely tried to tell you, I suggest you read around more and start reading articles by people like Dieter Rencken otherwise we're going to have to cover an awful lot of ground needlessly over and over and over again which I can't be bothered to do.

[GitanesBlondes]

But, making the races tighter is not the answer...we've already been moving in that direction, and the result has been worst racing ever seen at any point in F1's history. The world does not need another spec series race, and it being seen as being better for F1 is illogical.

The question then: what does make F1 races better to watch?

FIA and FOM obviously have whole crews working on that subject, but they stagger me and millions of other fans each time they bring out something new. The only way that is possible, is the work groups working on this are totally ignored and a big shot high on top of the hierarchy decides what changes.

Maybe there also was a pervers effect among the viewers towards death: F1 being deadly in the past could have actually contributed to its popularity in the sense of excitement. Not that anybody wants that back, but you could try to seperate the catalyst from the event and try to replicate the excitement with harmless, but raceweekend-ending, risks.

There are a number of things that can make F1 more interesting to watch: better TV production values, fat tires on the rear, all different types of engines (HP upwards of 1000HP regardless of engine type) interesting personalities, good looking cars, drivers on the limit more frequently, and restricted aerodynamics are what come to mind. What I've found with racing is that, if things as seemingly inconsequential as the aesthetics of the car are improved, people can be mesmerized by the car going around the circuit no matter what position it is in. Couple that with a great sounding engine, and people will be happier than I think F1 realizes. Read YouTube comments about F1 car videos, and you can see how many people miss the cars of old. Sure today's cars are quick, but they look like ---.

The elimination of the wide track cars was one of the biggest mistakes F1 made because as it pertains to aerodynamics, the gap between the have's and have nots got exponentially worse when the narrow track cars came about, and it's continued right into today. xpensive mentioned a simple rule change regarding the flat floor that would do wonders to help closer racing without resorting to silly putty tires.

This is all subjective I realize, but DRS, KERS, high-degradation tires, etc. were all bandaid fixes that did little to ever address the root of many of the problems F1 had when it came to creating a palpable TV product that fans would be interested in. Only, with those things, they are alienating more fans in my opinion.

Le Mans is a 24 hour sprint race now.

F1 is a 90-120 minute tire conservation exercise.

And people wonder why ratings are down?

[beelsebob]

And people wonder why ratings are down?

The ratings are down for the exact same reason they were down in 2004 – dominance of one team and driver.