Is F1 being run as a cartel? EU Commission to investigate?
Discussion
Good to see the smaller F1 teams making a (last) stand.
The small Formula 1 teams have written to Bernie Ecclestone asking him to reconsider his position regarding the distribution of prize money and bringing to light some interesting figures about what it costs to run an F1 team today. The letter, signed by Bob Fernley of Force India, was sent to Ecclestone, the other F1 teams, the FIA and to CVC Capital Partners, the owners of the Formula One group. It says that Lotus, Sauber and Force India F1 “clearly see the direction of Formula 1 towards customer cars/super GP2″ and says that “it is equally clear that the Strategy Group has no intention at all to reduce costs”.
In order to highlight the scale of the problem the letter says that they received money from FOM this year ranging from $52 million to $64 million.
“The costs of the power unit together with the installation costs amount on average amongst us three to $43 million. This clearly shows that 70-80 percent of the FOM income has to be allocated to the engine.”
The letter goes on to say that “unlike manufacturer-owned teams, our core business is Formula 1. Yet, we have no choice but to spend most of our income on the engine, and the remaining 30 percent is by far not enough to construct, enter and run a team over a 20-race season. The generation of further funds though sponsorship is achievable but we all recognise that other global sporting competitions are chasing the same sponsors which are at lower levels than even two years ago. It is challenging when the Commercial Rights Holder of F1 is also competing against the teams”.
The teams say that they have been focussing on the reduction of the costs but noted that allegations that they are not running good businesses are unjustified as all three teams have recorded podium finishes in recent times.
The letter says that Red Bull and Ferrari are receiving in the region of $160 million each and says that the 2014 Prize Fund will be around $835 million but around $412 million is going to the four teams in the Strategy Group.
“The current skewed position is a direct result of the massive increase of costs and the lack of willingness to reduce the costs.”
The letter goes on to say that “we cannot accept the current distribution of funds in view of the massive increase of expenses. We understand that the distribution is based on our bilateral agreements. It is, however, known to us all under which circumstances we signed these deals. The shareholder’s focus during the negotiations was on securing the co-operation with big teams in view of the planned IPO; we were effectively given no room for negotiation. Furthermore, the impact of providing various share options to key people and entities may well have clouded their judgement in respect of creating what is effectively a questionable cartel comprising, the Commercial Rights Holder, Ferrari, Red Bull, Mercedes, McLaren and Williams, controlling both the governance of Formula 1 and apparently, the distribution of FOM funds.
“Whilst the FIA are involved in The Strategy Group, they are impotent to act, as demonstrated in the recent cost control process which saw the FIA issue a media statement confirming their intent to impose cost controls and their subsequent climb down when over ruled by the CRH, Red Bull, Ferrari, Mercedes, McLaren and Williams.”
The teams say that F1 remains “one of the strongest global sporting platforms. However, circumstances within and around Formula 1 have changed, and our collective inability to react is damaging the sport. Pursuing a direction towards third /customer cars is creating fears. Such a move, representing a misuse of power, will not only change the DNA of Formula 1 but also damage the value of our enterprises and lead to job losses. A two-tier system can only be considered a short-sighted vision. It is evident that the current developments are dramatically reducing the value of Formula 1 and massively undermining its reputation as a sport.”
The letter adds that “our teams have, like the others, a clear intention to continue as constructors in Formula 1, however, unlike the manufacturer teams, who could exit on the whim of a Board decision, Lotus, Sauber and Force India F1 are bound to the sport as it is their only business focus. The issues we are facing are related to financial matters which can only be resolved by financial measures. In our common interest and for a sustainable future of the sport, we request you, together with the other stakeholders, to implement a more equitable distribution.”
The teams have requested a meeting with Ecclestone over the Abu Dhabi weekend.
more details here
http://joesaward.wordpress.com/
The small Formula 1 teams have written to Bernie Ecclestone asking him to reconsider his position regarding the distribution of prize money and bringing to light some interesting figures about what it costs to run an F1 team today. The letter, signed by Bob Fernley of Force India, was sent to Ecclestone, the other F1 teams, the FIA and to CVC Capital Partners, the owners of the Formula One group. It says that Lotus, Sauber and Force India F1 “clearly see the direction of Formula 1 towards customer cars/super GP2″ and says that “it is equally clear that the Strategy Group has no intention at all to reduce costs”.
In order to highlight the scale of the problem the letter says that they received money from FOM this year ranging from $52 million to $64 million.
“The costs of the power unit together with the installation costs amount on average amongst us three to $43 million. This clearly shows that 70-80 percent of the FOM income has to be allocated to the engine.”
The letter goes on to say that “unlike manufacturer-owned teams, our core business is Formula 1. Yet, we have no choice but to spend most of our income on the engine, and the remaining 30 percent is by far not enough to construct, enter and run a team over a 20-race season. The generation of further funds though sponsorship is achievable but we all recognise that other global sporting competitions are chasing the same sponsors which are at lower levels than even two years ago. It is challenging when the Commercial Rights Holder of F1 is also competing against the teams”.
The teams say that they have been focussing on the reduction of the costs but noted that allegations that they are not running good businesses are unjustified as all three teams have recorded podium finishes in recent times.
The letter says that Red Bull and Ferrari are receiving in the region of $160 million each and says that the 2014 Prize Fund will be around $835 million but around $412 million is going to the four teams in the Strategy Group.
“The current skewed position is a direct result of the massive increase of costs and the lack of willingness to reduce the costs.”
The letter goes on to say that “we cannot accept the current distribution of funds in view of the massive increase of expenses. We understand that the distribution is based on our bilateral agreements. It is, however, known to us all under which circumstances we signed these deals. The shareholder’s focus during the negotiations was on securing the co-operation with big teams in view of the planned IPO; we were effectively given no room for negotiation. Furthermore, the impact of providing various share options to key people and entities may well have clouded their judgement in respect of creating what is effectively a questionable cartel comprising, the Commercial Rights Holder, Ferrari, Red Bull, Mercedes, McLaren and Williams, controlling both the governance of Formula 1 and apparently, the distribution of FOM funds.
“Whilst the FIA are involved in The Strategy Group, they are impotent to act, as demonstrated in the recent cost control process which saw the FIA issue a media statement confirming their intent to impose cost controls and their subsequent climb down when over ruled by the CRH, Red Bull, Ferrari, Mercedes, McLaren and Williams.”
The teams say that F1 remains “one of the strongest global sporting platforms. However, circumstances within and around Formula 1 have changed, and our collective inability to react is damaging the sport. Pursuing a direction towards third /customer cars is creating fears. Such a move, representing a misuse of power, will not only change the DNA of Formula 1 but also damage the value of our enterprises and lead to job losses. A two-tier system can only be considered a short-sighted vision. It is evident that the current developments are dramatically reducing the value of Formula 1 and massively undermining its reputation as a sport.”
The letter adds that “our teams have, like the others, a clear intention to continue as constructors in Formula 1, however, unlike the manufacturer teams, who could exit on the whim of a Board decision, Lotus, Sauber and Force India F1 are bound to the sport as it is their only business focus. The issues we are facing are related to financial matters which can only be resolved by financial measures. In our common interest and for a sustainable future of the sport, we request you, together with the other stakeholders, to implement a more equitable distribution.”
The teams have requested a meeting with Ecclestone over the Abu Dhabi weekend.
more details here
http://joesaward.wordpress.com/
Because they are about to be forced out of business, by a cartel operating in their own interest.
Their case is strong and clear-cut. And it is not as though Bernie does not have form.
The CVC IPO is dead, now is the time they should bow out, with some grace, and give F1 a sporting chance.
Their case is strong and clear-cut. And it is not as though Bernie does not have form.
The CVC IPO is dead, now is the time they should bow out, with some grace, and give F1 a sporting chance.
Take a bow, the night is over
This masquerade is getting older
Lights are low, the curtains down
There's no one here
(There's no one here, there's no one in the crowd)
Say your lines but do you feel them
Do you mean what you say
When there's no one around
(No one around)
Watching you, watching me, one lonely star
(One lonely star you don't know who you are)
I've always been in love with you
(Always with you)
I guess you've always known it's true
(You know it's true)
You took my love for granted, why? Oh, why?
The show is over, say goodbye
Say goodbye
(Bye, bye)
Say goodbye
This masquerade is getting older
Lights are low, the curtains down
There's no one here
(There's no one here, there's no one in the crowd)
Say your lines but do you feel them
Do you mean what you say
When there's no one around
(No one around)
Watching you, watching me, one lonely star
(One lonely star you don't know who you are)
I've always been in love with you
(Always with you)
I guess you've always known it's true
(You know it's true)
You took my love for granted, why? Oh, why?
The show is over, say goodbye
Say goodbye
(Bye, bye)
Say goodbye
Still no-one has explained why these teams who are now in desperate trouble signed the Concorde Agreement last year ?
Either they had absolutely no idea of their costs for this year onwards (I find that unlikely) or they just signed it anyway in the vague hope that some sort of miracle would happen and they'd find money growing on trees.
I agree that equalising out the distribution is what should happen, I do not understand how they've let themselves get in to this state.
If they had grouped together with Caterham/Marussia last year Bernie would have had half the teams not signing the CA and something would have had to give to make sure that happened.
I suspect that they were all too concerned with getting one over on each other, now the s
t has hit the fan and they are looking at the very difficult prospect of having all teams agree to re-write the T&Cs of the Concorde Agreement.
The whole thing is a mess that everyone (all teams, Bernie, Delta Topco owners, FIA) all share the blame.
ETA: I don't see what the EU can do, they've all willingly signed commercial contracts - no-one forced them to.
Either they had absolutely no idea of their costs for this year onwards (I find that unlikely) or they just signed it anyway in the vague hope that some sort of miracle would happen and they'd find money growing on trees.
I agree that equalising out the distribution is what should happen, I do not understand how they've let themselves get in to this state.
If they had grouped together with Caterham/Marussia last year Bernie would have had half the teams not signing the CA and something would have had to give to make sure that happened.
I suspect that they were all too concerned with getting one over on each other, now the s
t has hit the fan and they are looking at the very difficult prospect of having all teams agree to re-write the T&Cs of the Concorde Agreement.The whole thing is a mess that everyone (all teams, Bernie, Delta Topco owners, FIA) all share the blame.
ETA: I don't see what the EU can do, they've all willingly signed commercial contracts - no-one forced them to.
http://www.darrenheath.com/blog/begging-bowl-f1
"It appears that after having bought their way in to the intoxicating world of motor sport’s highest echelon, they’re not happy. Why, they inquire, why is Formula 1 not run akin to a fistful of dollars, begging-bowl hand-outs, welfare state?
The level of hypocrisy is mind-boggling."
"It appears that after having bought their way in to the intoxicating world of motor sport’s highest echelon, they’re not happy. Why, they inquire, why is Formula 1 not run akin to a fistful of dollars, begging-bowl hand-outs, welfare state?
The level of hypocrisy is mind-boggling."
Norfolkit said:
Did they have any choice? Don't sign, don't race, simples.
So the alternative is sign up, let two of them go bust and then the other three plead poverty in a very public way, damaging the sport that they are so desperate to complete in ? Then demand that the contract they and all other teams signed should be voided and a new agreement reached ?Sure, thats a better way isn't it.
If 5 teams refused to sign the CA Bernie/CVC would have a problem on their hands, he can't run F1 with 10/12 cars. It would give those teams a bargaining chip.
As it is they signed a commercial contract that they couldn't comply with (and most likely knew it then).
If its going to change now the CA has to be ripped up with the agreement of all the other teams and the whole agreement process re-started with the bigger teams having to accept less money, boo-hoo right ? the problem is that they also have budgets (set by the parent companies), if the finances change the parent company either has to stump up or get out.
Trying to undo contracts is much harder than agreeing it first time around.
If Bernie/CVC wouldn't budge on the CA and they were in the situation where they sign a contract that kills the team or get out, enter another series and get in to a financial situation where the could re-enter F1 what would be the best solution? it seems they opted to kill the team.
As I said, everyone should be taking a bit of the blame. I can see why Bernie would be annoyed, equally I can see that the teams are/were desperate to be in F1.
ETA: Funny that Fernley is speaking on behalf of the teams again. If the teams have a problem then let the owners (Mallya, Lopez etc) speak up. If they are using him as a mouthpiece I don't think he puts them in a good light. If he's doing much of it off his own back he'll be made a scapegoat sooner or later.
Either way I don't like his manner.
Edited by Crafty_ on Monday 17th November 21:08
Norfolkit said:
Crafty_ said:
Still no-one has explained why these teams who are now in desperate trouble signed the Concorde Agreement last year ?
Did they have any choice? Don't sign, don't race, simples.However, Berrie had also gained the FIA's support by ensuring they also got a slightly bigger slice of the cake in fees. Divide and rule is his Alma Mater. He achieve's this by financial inducements. The cartel, FIA, bankers, courts etc. Money can make most pain go away. In Austin, the small teams clearly thought at one point that they might be helped, but were proved wrong.
The only recourse now is for the small teams to go to the EU. Forgetting the sporting aspect, there are literally many hundreds more jobs depending on a fair determination of this issue.
Sport is all about level playing fields etc. F1 is currently a big business masquerading as entertainment.. Yes the Lewis Vs Nico has been great this year, but a much better story would have been Davids slaying Goliaths.
Agent Orange said:
http://www.darrenheath.com/blog/begging-bowl-f1
"It appears that after having bought their way in to the intoxicating world of motor sport’s highest echelon, they’re not happy. Why, they inquire, why is Formula 1 not run akin to a fistful of dollars, begging-bowl hand-outs, welfare state?
The level of hypocrisy is mind-boggling."
I read that blog when he first published. Only problem with it e is an accredited photographer, that means he is not going to upset Bernie which in turn means the blog is not necessarially true. Whilst it does seem strange the teams have signed up to the Concorde agreement in reality they had little choice."It appears that after having bought their way in to the intoxicating world of motor sport’s highest echelon, they’re not happy. Why, they inquire, why is Formula 1 not run akin to a fistful of dollars, begging-bowl hand-outs, welfare state?
The level of hypocrisy is mind-boggling."
rdjohn said:
Sport is all about level playing fields etc. F1 is currently a big business masquerading as entertainment.. Yes the Lewis Vs Nico has been great this year, but a much better story would have been Davids slaying Goliaths.
Every professional team sport is like that - multinational corporations, oligarchs, and hedge funds, all pretending to be running a team when they're just running a business. There's just too much money swilling around, and too much opportunity for the manufacturers to tilt the playing field. Crafty_ said:
Norfolkit said:
Did they have any choice? Don't sign, don't race, simples.
So the alternative is sign up, let two of them go bust and then the other three plead poverty in a very public way, damaging the sport that they are so desperate to complete in ? Then demand that the contract they and all other teams signed should be voided and a new agreement reached ?Chrisgr31 said:
Agent Orange said:
http://www.darrenheath.com/blog/begging-bowl-f1
"It appears that after having bought their way in to the intoxicating world of motor sport’s highest echelon, they’re not happy. Why, they inquire, why is Formula 1 not run akin to a fistful of dollars, begging-bowl hand-outs, welfare state?
The level of hypocrisy is mind-boggling."
I read that blog when he first published. Only problem with it e is an accredited photographer, that means he is not going to upset Bernie which in turn means the blog is not necessarially true. Whilst it does seem strange the teams have signed up to the Concorde agreement in reality they had little choice."It appears that after having bought their way in to the intoxicating world of motor sport’s highest echelon, they’re not happy. Why, they inquire, why is Formula 1 not run akin to a fistful of dollars, begging-bowl hand-outs, welfare state?
The level of hypocrisy is mind-boggling."
Caterham, Marussia and Force India are not pure racing teams that only exist to race. Caterham was to promote Tony Fernandes brand, Marussia was bought to promote Nikolai Fomenko's supercar brand and Force India to promote Vijay Mallya and his brands. Lotus might be argued to be a pure racing team but they only exist due to Dany Bahar wanting a F1 team to promote his Lotus brand.
Sauber is probably the only team at the middle to back of the grid that is a pure racing team.
F1 today is a brand promotion tool for billionaires. It seems very odd then that billionaires want hand outs to help with promotion of their brands.
Red Bull has come in and shown the other new teams how to do it - why can't they?
Edited by Agent Orange on Tuesday 18th November 11:59
maffski said:
For the teams in question F1 is their business - if they don't race they don't get any income, so they would all go with in a few months. Plus F1 was preparing for an IPO at the time - so the big teams would run 3 cars (or create junior teams like Torro Rosso) and Bernie would tell everyone 'the small teams were trying to hold us to ransom'.
But they don't have the income to race, at least not on the terms that they agreed with Bernie.What I'm suggesting is they find other income streams to make F1 viable for them, as apparently they are saying it isn't any longer.
a lot of people complain about the top teams, through prize funds and historical payments, getting over $200m a year, over 3 times that of the smaller teams.
After engines have been paid for, there's not much else left for the minnows. A redistribution of funds would make racing better, with all teams on a similar level. Smaller prizes for championship finishing place would make it more difficult to justify the levels of overspending we're seeing at the moment. and arguably the 'pure' racing teams would flourish amongst the manufacturers.
However, I think Bernie and CVC taking over $600m out the $1800m pot each year is the bigger problem.
After engines have been paid for, there's not much else left for the minnows. A redistribution of funds would make racing better, with all teams on a similar level. Smaller prizes for championship finishing place would make it more difficult to justify the levels of overspending we're seeing at the moment. and arguably the 'pure' racing teams would flourish amongst the manufacturers.
However, I think Bernie and CVC taking over $600m out the $1800m pot each year is the bigger problem.
Crafty_ said:
But they don't have the income to race, at least not on the terms that they agreed with Bernie.
What I'm suggesting is they find other income streams to make F1 viable for them, as apparently they are saying it isn't any longer.
Meanwhile, here on planet earth, the red lights are flashing on the world economic dashboard.What I'm suggesting is they find other income streams to make F1 viable for them, as apparently they are saying it isn't any longer.
There is no GP in France, Silverstone is loosing money, Germans can't be bothered.
McLaren can't aquire a title sponsor.
Williams lost €20million in the first 6 months of this year.
2 teams have already gone bust making 400+ people redundant
The rights holder now deems it necessary to do deals with Putin, generally regarded as a pariah.
Next year F1 goes to Azerbaijan one of the most corrupt regimes in the world.
The year has been dominated by one team, who, with the wick turned down, are still 1s per lap quicker than their nearest rivals.
All set against a background where the rights holder bought the rights from the FIA for an unbelievable paltry sum and then sold them with the assistance of a guy who is currently serving time for corruption.
Just what would it take to convince you that there is something fundamentally wrong?
The old business model no longer works. There is a lot of money available in the sport, it just tends to end up in the wrong hands. The 50% skimmed off by the rights holders is greatly to the detriment of fans, teams and the few remaining circuits that are actually free enterprises.
Edited by rdjohn on Tuesday 18th November 20:49
rdjohn said:
Just what would it take to convince you that there is something fundamentally wrong?
No need for the condescending tone. If you bothered to read what I wrote above I said its all a mess and everyone takes a bit of the blame for arriving that this point. That includes small teams who have signed a commercial contract that they cannot comply with.
You go right ahead and take Bernie out of the situation, it will solve absolutely nothing without other changes.
Chrisgr31 said:
Agent Orange said:
http://www.darrenheath.com/blog/begging-bowl-f1
"It appears that after having bought their way in to the intoxicating world of motor sport’s highest echelon, they’re not happy. Why, they inquire, why is Formula 1 not run akin to a fistful of dollars, begging-bowl hand-outs, welfare state?
The level of hypocrisy is mind-boggling."
I read that blog when he first published. Only problem with it e is an accredited photographer, that means he is not going to upset Bernie which in turn means the blog is not necessarially true. Whilst it does seem strange the teams have signed up to the Concorde agreement in reality they had little choice."It appears that after having bought their way in to the intoxicating world of motor sport’s highest echelon, they’re not happy. Why, they inquire, why is Formula 1 not run akin to a fistful of dollars, begging-bowl hand-outs, welfare state?
The level of hypocrisy is mind-boggling."
joe Saward said:
The only other story worth mentioning today is Bernie Ecclestone talking about press passes. These stories come from Ecclestone’s pet journalist and they are quite obviously flawed. The Commercial Rights Holder, Ecclestone has no influence over accreditation, although he did try to buy control of the media passes from the FIA not long ago and was rebuffed.
The story comes from a source who knows exactly how the system works because he cannot get press passes from the FIA for his own activities.
Perhaps it would be better to ask Mr E for a pass as the Formula One group’s press officer.
The story comes from a source who knows exactly how the system works because he cannot get press passes from the FIA for his own activities.
Perhaps it would be better to ask Mr E for a pass as the Formula One group’s press officer.
thegreenhell said:
Chrisgr31 said:
Agent Orange said:
http://www.darrenheath.com/blog/begging-bowl-f1
"It appears that after having bought their way in to the intoxicating world of motor sport’s highest echelon, they’re not happy. Why, they inquire, why is Formula 1 not run akin to a fistful of dollars, begging-bowl hand-outs, welfare state?
The level of hypocrisy is mind-boggling."
I read that blog when he first published. Only problem with it e is an accredited photographer, that means he is not going to upset Bernie which in turn means the blog is not necessarially true. Whilst it does seem strange the teams have signed up to the Concorde agreement in reality they had little choice."It appears that after having bought their way in to the intoxicating world of motor sport’s highest echelon, they’re not happy. Why, they inquire, why is Formula 1 not run akin to a fistful of dollars, begging-bowl hand-outs, welfare state?
The level of hypocrisy is mind-boggling."
joe Saward said:
The only other story worth mentioning today is Bernie Ecclestone talking about press passes. These stories come from Ecclestone’s pet journalist and they are quite obviously flawed. The Commercial Rights Holder, Ecclestone has no influence over accreditation, although he did try to buy control of the media passes from the FIA not long ago and was rebuffed.
The story comes from a source who knows exactly how the system works because he cannot get press passes from the FIA for his own activities.
Perhaps it would be better to ask Mr E for a pass as the Formula One group’s press officer.
The story comes from a source who knows exactly how the system works because he cannot get press passes from the FIA for his own activities.
Perhaps it would be better to ask Mr E for a pass as the Formula One group’s press officer.
It would appear, at least on the surface, that the regime change has cleared the air and reasonable criticism seems to be accepted at the moment. The threat to livelihoods of journalists has not been used recently to stifle criticism. That might be through a number of reasons, one of which could be, of course, that those who control the passes might want criticisms to be directed at a particular person or process.
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