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Entries in Money (8)

Money

They say money makes the world go round, and it certainly makes the F1 world go round. In fact it has enough money to go around, it just isn't being split up correctly at present. The Resource Restriction Agreement, RRA, was raised again by Horner, and Whitmarsh continued in the  "we must be more relevant and not be seen as gas guzzlers" vein. F1 engines are I believe the most efficient engines around when you consider the power they produce from each gallon, and not just look at the miles per gallon. And there is that old "relevant" again. I guess the World Cup is relevant because most of us have kicked a ball around at some time in our life, but there again most of us have driven a car.

Bernie in responding to the Mayor of Melbourne about the value of an F1 GP compared it to the Olympics and the World Cup, and as far as the Olympics goes he is dead right. I was in Barcelona in 1992 and watched the Sydney Games lead up, and what a con job that is. Go and spend $6 bn  on facilities you did not need and will not use again for two weeks of exposure that no one cares about afterwards. At least you get an F1 race each year. The World Cup  has been different as the stadiums are used afterwards, although we now have South Africa looking for someone to run them and Qatar building stadiums in the desert.

Mark Hughes writing in Autosport the other week said "The sport can't afford to allow money to haemorrhage out." His article concentrated on the cost to promoters of staging a GP and where that money is going. The basic problem is it is not going back into the sport, it is going to a bunch of investors who have done no more than buy the rights. No one begrudged Bernie making a lot of money, he built this sport over many years and with his own abilities, and made others rich along the way, but the current situation with CVC is unsustainable. Hughes questions how many new countries there can be that will keep paying for GP's, and when the existing ones will get tired of it, like Malaysia and Bahrain. Now I met both those track chiefs in Cologne last year and they are already asking those questions. In Bahrain the Parliament is asking what they get for their money, and the circuit chief has a good answer. "What would it cost us to send everyone who watches the race a postcard?" It is a good argument, and has worked till now, but for how much longer? Malaysia says it has achieved it's objective of putting the country on the world stage, now they need the track to make money.

Joe Saward asks the question what these latest popular uprisings mean for F1? It is OK to go to all these exotic places with loads of money, but how safe and stable are they? Apparently there are stirrings in Bahrain today, and the F1 circus is headed there shortly. Would a new popular government be so keen to spend millions on a rich man's toy?

In a somewhat related article Sebastian Vettel is asking if the wheel has turned too far towards making F1 a "show" rather than a sport? Movable wings, KERS buttons, all to make the show better, but not for the driver. Alonso does not think it will be any easier to pass a car that is similar in speed, only those pesky back markers, and as I said a week or so ago, timing when to turn the wing back at the start of the braking zone is going to be a tricky problem, with some drivers missing it in early testing. So, we are spending loads of money on "widgets" that we are not sure even work. OK, KERS or some form of energy recovery system is going to be part of future automotive design, but that is being developed in spite of F1, not because of it. Porsche and Williams kept on developing their system when F1 had given it up.

So we have a situation where there is an incredible imbalance between the three parties to the deal. The promoters are not making money, the teams are getting some of the money coming into the sport, and a third party who are a silent partner effectively is creaming most of it off. Is this sustainable? Add to that the alienation of the traditional supporters of the sport by removing the opportunity to see it live and pandering to an elite who will lose interest and move on to the next big thing. Ask NASCAR how that is working for them. And while we are at it let's think about the "Car of Tomorrow" where the rules are so tightly proscribed it is almost spec racing. The teams spend enormous amounts on the smallest, silliest parts just to gain a thousand of a second, and as soon as they find it the part is banned. Does any of this sound "relevant" or "sustainable?" Oh yes, and now we are to have tires that wear out faster to make the "show" more fun, is that being efficient or relevant, or even safe? Interesting how the word "green" has disappeared from most of the motorsport vocabulary, apart from good old ALMS.

Money

Today's news seems all about money. Max Mosley accused Red Bull of exceeding the Resource Restriction Agreement, i.e. overspending, in 2010. Red Bull denies this, but this agreement is so full of get out clauses it will be hard to tell. The boys cannot agree on what is "Restricted" in 2011, and presumably they have committed most of their spending already. The RRA was a way for the teams to do what Max wanted and reduce spending without him unilaterally decreeing it, so of course it is full of loopholes on what is restricted and what is not.

Then there is the great article by Dieter Rencken in this weeks Autosport on the problems F1 tracks have making money. It is really a case of restricting the losses, and reflects what I have been saying here since I started the blog. All fans of motorsport need to read this to see the mess it is in, and how it is unsustainable. As we saw with manufacturers, as soon as Governments wake up there will be no more billion dollar race tracks, and we will need all those great tracks that have been cast aside in the name of CVC's wealth generation.

Dun and Bradstreet have just released a report card on when F1 teams pay their bills. Red Bull pay promptly, which may be why they are over the RRA. If you delay paying, like Lotus which is the worst offender with 180 days late, then presumably you can delay recording the expenditure? The bottom line seems to be suppliers know they are going to get paid. One supplier commented that "if Yijay Mallya sold his yacht he could pay the team bills for the next two years." Now paying bills late is not unusual, it is "good business" for lots of companies, including the one I worked for back in the eighties. I was running a State Branch of a construction company in a small town and would meet my subs and suppliers every day, and be asked when they are going to get paid. Now they knew they would be paid, but it got wearing, so I complained to our accountant, who was also a co-owner, who just told me the money was better in our bank than theirs, and putting up with the whining was what he paid me for. Touche.


And of course there is the ongoing "Banker Bribery" scandal to fully unfold, and the situation with "pay for ride" drivers, but we all knew F1 was really about money didn't we?

Monetise

Monetise, what an interesting word. George Lopez followed up on Martin Whitmarsh's comment the other week about F1 doing a better job to promote itself. Speaking to Autosport Lopez said, "Formula 1 does need to promote itself better as it is a global sport," Lopez told AUTOSPORT. "It probably also needs to monetise better, which is a different thing. Promoting means putting money into something and hoping you get known, monetising means making money."

So, what he wants is more money, not necessarily more fans. He goes on to talk about exploiting the Internet, "Lopez believes there are many other avenues on the Internet that can be pursued that would raise good finance for the sport.

"There is all the historic video content for example - and people would pay," he said. "I would, for example, love to really look at the Ayrton Senna/Alain Prost Suzuka accident, and I would pay to have monthly access to any race I wanted to watch." Well he may pay, but what he is really saying is that we can make money from existing fans by charging them to watch the good old days. Aren't existing fans getting soaked enough by high track entry fees? And didn't Bernie try to get us to pay for HD? That failed badly, one of Bernie's only missteps.

He has lots of other good ideas such as on-course betting. Again, getting money from those already at the race. His idea for new fans? Letting his drivers walk to the paddock without minders.

But maybe George has it correct. We had the Goodwood Revival race meeting over the weekend, a sell out, watching the old stars, both the cars and the drivers, so perhaps watching old races will pay? Perhaps returning racing to these good old days might also increase the audience.

Martin Whitmarsh had another interesting pronouncement the other day on Team Orders from a different perspective. He made the point that motor racing is dangerous, potentially lethal, and no driver should be asked to take that risk just to support his team mate. Good point.

The discussion continues on LinkedIn on spectator decline. A post today from David Harris, who presumably works for SPEED, tells us that viewing figures have grown from 20m when it was Speedvision in 1996, to 80m as SPEED today. Considering most people could not get Speedvision in 1996 I am not surprised. The problem is, are the 80m race fans or motoring soap opera watchers? Pinks, Dangerous Roads, etc. etc. to me do not constitute race fans. As I said yesterday there were great races going on all over the world that we did not see. Now, I do not blame Fox for chasing audience numbers of whatever sort, that is their business, to make money, but there is more to racing than endless NASCAR and "reality" shows.

That is George Lopez's business too, he runs a venture capital group like CVC, who own F1 and are in it for the money. That is great so long as that is not your only objective, all businesses have to make money to survive, but I doubt if you ask Sir Frank Williams, Patrick Head, Peter Sauber, and yes, that epitome of corporate correctness, Ron Dennis, what matters most, they will say the racing. Enzo Ferrari only built road cars to make it possible to go motor racing, not the other way round. Perhaps we have reached the root of the problem? Today's racing is run by "the suits," the grey men who only see the balance sheet, not the timesheet. They have forgotten what made the sport worth investing in in the first place, and will ruin it all.

Finally a mention for someone who does get it and lives it. Garry Dickinson returned to the track that nearly killed him two years ago and rode a couple of laps, virtually his first time back on a bike. Well done Garry, that takes real guts, not some fabricated made for TV BS. Where were SPEED when you did that?
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