The initial post, and this reply are probably better suited for x's more general thread. Nonetheless, some comments...
la stradale wrote:So how is it possible that this crisis is the result of the teams' excessive spending when they're spending only half as much as they did 10 years ago but the sport is far more profitable?
There are two issues: one is the total spending, yes, but also there's the difference in spending from the front to the back of the grid. In addition, we have the problem of static incomes, even at the top - thus this thread.
Most importantly, the figures we see for team budgets are wildly divergent. This is particularly true for Ferrari, since no one outside of the company ever gets to see them. For teams who's numbers are verifiable, the figures are typically lower than rumored. Here, for example, are McLaren's expenditures, which come from their published financial reports (credit to Ross Stonfield on the autosport forum for the research - I've converted his numbers to dollars):
2012 - $201,967,000
2011 - $165,678,000
2010 - $147,737,000
2009 - $143,684,000
2008 - $134,386,000
2007 - $129,459,000
2006 - $129,549,000
2005 - $137,019,000
2004 - $131,578,000
2003 - $141,162,000
2002 - $123,201,000
2001 - $108,155,000
2000 - $87,711,000
1999 - $76,566,000
1998 - $63,172,000
1997 - $46,013,000
1996 - $49,942,000
1995 - $47,285,000
Thanks for the link. Is there a way to see the entirety of this without the paywall?
la stradale wrote:Every race and every test session, for instance, Formula One World Travel, a subsidiary of the FOG, receive advance notice of the schedule dates. They block-book all suitable lodgings near the circuit, which leaves the teams no recourse but to book through FOWT, who charge them double what they otherwise would have had to pay.
This is news to me. I know that I've read comments from the teams in the past talking about making arrangements themselves, so is this a new arrangement?
la stradale wrote:The teams are obligated to use DHL, the FOG's official logistics partner, for shipping all freight in excess of a 10,000 kilos to the fly-away races. Even in the post-refuelling era, teams all still need to ship well in excess of 10,000 kilos, and are charged a king's ransom for the overage. Rencken cites as a source "one team boss," who stated that the excess surcharge was well more than what a non-FOG-encumbered shipper might have charged for the entire shipment. When asked why he didn't use the less expensive option, the team boss stated that their non-DHL shipments wouldn't clear customs in time (implying that the speed of the customs officials was influenced by the name of the shipper).
This is a bit one-sided of Renken. It should be pointed out that FOM ships everything up to the weight limit for free, and the reason the extra goes on the same planes is, as Renken's source says, necessity. It's obviously much easier to put everything together in one shipment for customs than it is to allow teams to chose their own. And Bernie can't allow the teams to ship essential items on their own, since if they get lost or held up, then he's on the hook for not providing the circuits with 22 cars. But non-essential items are shipped separately all the time.
la stradale wrote:FOG's standard fee for hosting a race weekend is $30 million...
Agreed, the fees are excessive, and I've said elsewhere that I think it would be in the sport's long term interest to lower them. One of the problems now is that the teams are getting the lion's share of this money, so they aren't as likely to make a fuss over it as they may have before.
la stradale wrote:Perhaps most bizarrely, once having won funds from the FOG in the guise of World Constructors Championship prize money, they still aren't exempt from Bernie's pocket-picking. The following season's entry fee is graduated, according to how much WDC money a team was paid on the preceding.
These fees are the FIA's, not the FOM's. And I think making the fees progressive seems fair.
la stradale wrote:The outcome of all this price-gouging is eminently predictable. Marussia, who have shown a considerable financial acumen outside of F1, and who were lured to the sport by Mad Max Mosely's promise of a ￡32m/$40m budget cap, after three seasons find themselves ￡140m in the hole. Williams recently posted a ￡5m loss. Sauber had to sell part-ownership to the Russians to remain afloat. Lotus famously could not afford to pay its drivers (not even its reserve and test drivers, just come to light).
In 2012, McLaren won six races and came third in the WDC, yet profited a mere ￡3.1m in the doing (almost ￡19m less than in 2011). The 2014 entry fee alone for the team coming third in the 2013 WDC (Ferrari) is ￡1.4m. And surely the financial acumen of any F1 team which has managed amass more than ￡1 billion in on-track revenues must be beyond reproach, so accusations of mismanagement on McLaren's part should be greeted with a healthy portion of skepticism. And both Force India and Caterham remain on the F1 grid entirely due to the largesse of their billionaire benefactors.
The counter argument is that none of these teams had to spend what they did. Racing teams in every category will spend what they earn, and often then some.
la stradale wrote:On the other hand, in its most recent financial statement, the outcome of all its penny-pinching, usurping and --- is that the Formula 1 division of the CVC Capital Partners posted a combined total profit from the sport of a bit more than ￡2 billion.
That would be $3B US, which is a full $2.5B more than has been reported elsewhere. I suspect that number includes what they received for selling part of their stake, and may even including payouts from refinancing. Again, Renken seems to be fudging the numbers here, and must be why he's able to argue that F1 has the same income as the Premier League, as I questioned below.
This link gives a better idea of their yearly finances. Income is around $1.4B, while profit is around $450M, pretax (It mentions a 1-time payout of $2.1B from selling shares, and another 1-time payout of $350M from restructuring - so there's Renken's missing $2B to $2.5B): http://www.telegraph.co.uk/finance/news ... -865m.html
la stradale wrote:Bernie is wont to point out that the FOG's payout to the teams now is 62% of profits (increasing to 68.7% in 2014), as opposed to the 47.5% previously stipulated under the most recent (now expired) Concorde Agreement, conveniently omitting the fact that the teams occupying the more destitute half of the grid will never see so much as a single farthing of the additional 14.5%. He simply distributes it among the top five, thereby quelling all incentive to form a break-away series, and leaving the lesser teams without a rebellious leg to stand on.
I didn't know that the teams share was increasing from 50% to almost 70%. I think we all agree that the payment is doled out inequitably. But I don't think you can blame FOM for this so much as you can Ferrari, McLaren and Red Bull, etc. The inequitable distribution is mostly a reflection of the inequitable influence these teams have. But yes, it should be changed.
la stradale wrote:Give only as much as is absolutely necessary to the most influential of recipients, and the rest goes to defraying Tamara's and Petra's bills for Cristal and Beluga caviar.
For the record, Bernie does still have some ownership, but his money was made when he sold the rights initially. So what CVC earns may well be paying for caviar and champagne, but not Tamara's.
la stradale wrote:Rencken speculates that it is Bernie's undeclared objective to strangle one of the remaining teams to financial death, then to divide the 10 that remain into an 'A' (constructors) tier and a 'B' (customers) tier, a structural change which will afford opportunity to further reduce the pay-outs to the B-tier teams.
I don't know why he'd have to eliminate a team to do this. All it takes is a new concorde, and looking at the distribution percentages, it seems obvious that the small teams have little to no say in how the sport is organized.
Personally, I'd agree with Bernie in this case - customer teams are really the only way to eliminate the rich-team/poor-team problem. The issue in restructuring in this way doesn't lie so much with the financing of the sport going forward, as it does with the smaller teams worrying about the initial hit the move would take on their value.
la stradale wrote:To cut to the chase, the F1 teams are starving while CVC Capital Partners and the Formula One Group grow fat(er) off of the sweat of their collective brows.
I think the biggest problem with this thesis is the fact that the teams take the lions share of what CVC earns. If they're getting 70% of whatever CVC can make, then it's impossible to argue that CVC making money is what's starving them, even if it might be in the worst interest of both the teams and the sport in the long term.
la stradale wrote:I see Dieter Rencken's name already has been taken in vain.
Call me a heretic.