Concerns regarding the financial situation for F1
Discussion
http://en.f1-live.com/f1/en/headlines/news/detail/...
Somne very interesting comments on the link regarding the reasoning behind the rumours of a breakaway series. Also there's a comment near the end about 'approaches' regarding a new F1. I suppose it should interpreted in the knowledge that this bloke has an axe to grind with the loss of the Canadian GP. But the financial facts are a bit worrying, especialy if you have any connection with CVC. And there's a nice dig at Eccs so it's obviously repays reading.
A bit worrying though.
Somne very interesting comments on the link regarding the reasoning behind the rumours of a breakaway series. Also there's a comment near the end about 'approaches' regarding a new F1. I suppose it should interpreted in the knowledge that this bloke has an axe to grind with the loss of the Canadian GP. But the financial facts are a bit worrying, especialy if you have any connection with CVC. And there's a nice dig at Eccs so it's obviously repays reading.
A bit worrying though.
It does not have to be nearly as bad as the article suggests. All the numbers mean is that a load of extremely greedy characters each want to take out their many pounds of flesh.
IINM, in '07 the Formula One Group ("FOG"?) took in revenue of a bit less than $1B. Let's be conservative as we look forward into the slump and call it a sustainable $800M.
Let's say that we're going to have a ten-entrant formula, in which there is a $50M/yr budget cap, and that FOG has to kick in half of that. It seems entirely realistic that each entrant could raise the other $25M in sponsorship. That would cost FOG $250M, leaving them with $550M.
My assumption, for another thread, was that it costs FOG $150M/yr to run the show. That's a wild guess, but it ain't going to be 50, and it ain't going to be 500.
If their costs were $400M/yr (250 + 150), that would leave them with $400M in return, pre-tax. This is a fairly risky business, so maybe someone would need a 10% return to buy it. If the tax rate were, say 30%, then there would be $280M/yr AT return, for which, I'd guess someone would pay $2.5-2.8B; certainly something more than $2B.
So the money is there; more than enough.
The problems are:
- even if FOG just wants to mediate and make nice, so long as the FIA are at loggerheads with FOTA, the business model is vulnerable,
- there has to be a cost cap in order for FOG to get its payments to the entrants down,
- CVC has entered into some sort of agreement that requires it to amortise principal at an agressive rate, and pay a high interest rate. This is simply because they were the wrong buyer, notwithstanding the fact that their acquisition of F1 was approved by the FIA.
FOG (as I believe CVC have niftily refinanced and no longer have the obligations themselves) could default on their loans, but the show would go on. The pity is that, because CVC were such a bad buyer, they need to squeeze far more out of the sport than the owner ought to do, which causes them to over-charge circuits, displacing the races to countries where the impoverished citizens are given the honour of paying for Bernie's jet fuel bill.
Of course, I have no idea how it will all turn out, but it doesn't have to be a disaster. The sport is still awash with tidal waves of cash. It's just washing up to the wrong shores.
IINM, in '07 the Formula One Group ("FOG"?) took in revenue of a bit less than $1B. Let's be conservative as we look forward into the slump and call it a sustainable $800M.
Let's say that we're going to have a ten-entrant formula, in which there is a $50M/yr budget cap, and that FOG has to kick in half of that. It seems entirely realistic that each entrant could raise the other $25M in sponsorship. That would cost FOG $250M, leaving them with $550M.
My assumption, for another thread, was that it costs FOG $150M/yr to run the show. That's a wild guess, but it ain't going to be 50, and it ain't going to be 500.
If their costs were $400M/yr (250 + 150), that would leave them with $400M in return, pre-tax. This is a fairly risky business, so maybe someone would need a 10% return to buy it. If the tax rate were, say 30%, then there would be $280M/yr AT return, for which, I'd guess someone would pay $2.5-2.8B; certainly something more than $2B.
So the money is there; more than enough.
The problems are:
- even if FOG just wants to mediate and make nice, so long as the FIA are at loggerheads with FOTA, the business model is vulnerable,
- there has to be a cost cap in order for FOG to get its payments to the entrants down,
- CVC has entered into some sort of agreement that requires it to amortise principal at an agressive rate, and pay a high interest rate. This is simply because they were the wrong buyer, notwithstanding the fact that their acquisition of F1 was approved by the FIA.
FOG (as I believe CVC have niftily refinanced and no longer have the obligations themselves) could default on their loans, but the show would go on. The pity is that, because CVC were such a bad buyer, they need to squeeze far more out of the sport than the owner ought to do, which causes them to over-charge circuits, displacing the races to countries where the impoverished citizens are given the honour of paying for Bernie's jet fuel bill.
Of course, I have no idea how it will all turn out, but it doesn't have to be a disaster. The sport is still awash with tidal waves of cash. It's just washing up to the wrong shores.
The reason CVC have such large debts is because they paid Bernie so much in the first place. If anything ever happened to CVC then Bernie would be there with his cheque book to pick up a bargain and take 100% control again. CVC are also in a fairly powerful position if they ever wanted to renegotiate their debt, as the peope they owe the money to are scared that they would be left with something which is worthless without Bernie.
Love him or hate him you cant deny he is a clever little fella.
Love him or hate him you cant deny he is a clever little fella.
FourWheelDrift said:
1 said:
The reason CVC have such large debts is because they paid Bernie so much in the first place.
I thought they took out loans, or loaded debt onto their new purchase, something along those lines.CVC took out big loans (as per its raison d'etre) to buy the banks' stakes.
FourWheelDrift said:
1 said:
The reason CVC have such large debts is because they paid Bernie so much in the first place.
I thought they took out loans, or loaded debt onto their new purchase, something along those lines."In Montreal, there were more people on Fridays than several GPs have on Sunday. And the spectators weren't soldiers in civilian clothing as is the case in a few countries I won't mention!"
The report says that the government of Canada and host province Quebec did not better their offer to Eccs because of "the uncertainty surrounding Formula One's future."
So one should consider this antipathy when considering what emphasis to place on his next comments about the possibility of FOTA cutting ‘its links with the FIA and FOM in order to set up its own independent championship with the same teams and drivers’. He said he’d be ‘consulted frequently’ about it. By whom is not specified.
I can’t find the quote at the moment, but on one of Mossy’s press releases recently he all but threw Eccs/FOG to the wolves by saying that he (the FiA) would consider recognising any rival series set up by FOTA.
I can’t help but think the way McLaren are dealt with in the latest debacle will be a watershed. Firstly, of course, for the sake of spectacle and F1 in general he must defuse the situation ASAP, although he’s let it run too long already. But he mustn’t be seen as weak. His antipathy towards McLaren and the manufacturers is hardly a secret so can’t be seen to be backing down. He’s already set a standard by the obscene $100,000,000 fine so has backed himself into a corner. But an exclusion of McLaren, either in fact or by a massive fine, could well generate a backlash.
A couple of the normal suspects, including famous drivers and Ralph Schumacher as well, have come out already but thee does seem to be a lot of pro Mossy rubbish in the newspapers, especially from the likes of Gorman in the Times and other hacks. If you put anything in one of the blog posts that is slightly critical of Mossy it won’t get accepted.
Mossy is at his weakest for some time. Most of it was of his own making. He reacted poorly to the Trulli incident and could have got some kudos out of a swift and reasonable early decision – the mark of a good leader, so perhaps not that surprising it didn’t come.
Mossy said that he would say whether or not he would be seeking re-election around June. Given the FiAsco of the ‘vote of confidence’ I would suggest that if he does put himself forward and is voted in then the FiA will be weakened tremendously.
Things are on hold at the moment but time is running out for Mossy. He might well think that eliminating McLaren from the championship might well damage FOTA. I can’t see him thinking that being reasonable will convince anyone that he’s got the interests of the sport at heart.
I’m worried, I must say. The current financial situation with regards to sponsors and income is bad enough. To have internecine battles just makes it worse. If you were producing a for and against balance sheet for a breakaway you might well think that the risks are very low. The worst that could happen is that you have to abandon the new sport but that would be less likely than having to abandon F1.
A1GP is on TV. Is that the future for F1? It’s hardly grabbed the imagination of the spectators.
The power shower is now vacant after the attentions of my two kids and my wife so I’m off for a while.
The report says that the government of Canada and host province Quebec did not better their offer to Eccs because of "the uncertainty surrounding Formula One's future."
So one should consider this antipathy when considering what emphasis to place on his next comments about the possibility of FOTA cutting ‘its links with the FIA and FOM in order to set up its own independent championship with the same teams and drivers’. He said he’d be ‘consulted frequently’ about it. By whom is not specified.
I can’t find the quote at the moment, but on one of Mossy’s press releases recently he all but threw Eccs/FOG to the wolves by saying that he (the FiA) would consider recognising any rival series set up by FOTA.
I can’t help but think the way McLaren are dealt with in the latest debacle will be a watershed. Firstly, of course, for the sake of spectacle and F1 in general he must defuse the situation ASAP, although he’s let it run too long already. But he mustn’t be seen as weak. His antipathy towards McLaren and the manufacturers is hardly a secret so can’t be seen to be backing down. He’s already set a standard by the obscene $100,000,000 fine so has backed himself into a corner. But an exclusion of McLaren, either in fact or by a massive fine, could well generate a backlash.
A couple of the normal suspects, including famous drivers and Ralph Schumacher as well, have come out already but thee does seem to be a lot of pro Mossy rubbish in the newspapers, especially from the likes of Gorman in the Times and other hacks. If you put anything in one of the blog posts that is slightly critical of Mossy it won’t get accepted.
Mossy is at his weakest for some time. Most of it was of his own making. He reacted poorly to the Trulli incident and could have got some kudos out of a swift and reasonable early decision – the mark of a good leader, so perhaps not that surprising it didn’t come.
Mossy said that he would say whether or not he would be seeking re-election around June. Given the FiAsco of the ‘vote of confidence’ I would suggest that if he does put himself forward and is voted in then the FiA will be weakened tremendously.
Things are on hold at the moment but time is running out for Mossy. He might well think that eliminating McLaren from the championship might well damage FOTA. I can’t see him thinking that being reasonable will convince anyone that he’s got the interests of the sport at heart.
I’m worried, I must say. The current financial situation with regards to sponsors and income is bad enough. To have internecine battles just makes it worse. If you were producing a for and against balance sheet for a breakaway you might well think that the risks are very low. The worst that could happen is that you have to abandon the new sport but that would be less likely than having to abandon F1.
A1GP is on TV. Is that the future for F1? It’s hardly grabbed the imagination of the spectators.
The power shower is now vacant after the attentions of my two kids and my wife so I’m off for a while.
Forums | General Motorsport | Top of Page | What's New | My Stuff