CHANGE comes from the top, and the global marketing machine that is Formula 1 now enters 2017 with a new owner and a fresh management team.
In mid January, the shareholders of US conglomerate Liberty Media approved the company’s acquisition of Formula 1 from its former owner, private equity firm CVC.
A complex transaction that involves cash, shares and various financial instruments values the sport at $US8 billion ($A10.5 billion), but that figure includes $US4.1 billion ($A5.1 billion) of F1’s debt.
Liberty Media, owned by US multi-billionaire John Malone, moved quickly, installing ex-senior Murdoch executive Chase Carey as the sport’s CEO last week.
Bernie Ecclestone
Thus ends the reign of Bernie Ecclestone, the undisputed king of F1 for the past 40 years, and the man who created enormous wealth by packaging and selling the sport’s TV rights around the world.
Mr Carey had previously been appointed as Formula 1’s new chairman last September when the Liberty takeover deal was first mooted. At the time Mr Ecclestone was tipped to stay on for another three years.
Reporting to Mr Carey are two newly installed managing directors, Ross Brawn and Sean Bratches.
Mr Brawn is well known in Formula 1 circles as an astute team boss and technical director, and will oversee all sporting matters.
Mr Bratches has a strong track record as a marketing man in American sports TV and will take charge of the commercial side of F1.
There is plenty of praise for the often controversial Bernie Ecclestone, a man who has publicly referred to women as “domestic appliances” and praised Adolf Hitler for his ability to “get things done”. But it is accompanied by a general acceptance of the need for change.
“The problems are across the board,” Mr Carey said. “We’re not marketing the sport, we’re not enabling fans to connect with it on the platforms that are available today, our sponsorship relations are one-dimensional, the events feel old, the hospitality feels as if it’s at least 15 years old.
“As we looked at the business, particularly over the last four to five years the sport had not grown to its full potential and we needed to put a new organisation in place that was able to grow the sport in today’s world in the way it needs to grow.”
Of the ten teams still in Formula 1 only Mercedes, Red Bull, Ferrari and McLaren are financially secure, while the others are more or less struggling to make ends meet. The Manor Formula 1 team folded in the same week as the Liberty ownership deal was finalised.
Formula 1 has 400 million TV viewers worldwide, but has struggled to win audiences in the US or to establish more than a single event there. The sport generates about $US1.5 billion ($A2 billion) per year.
The teams receive just over half of Formula 1’s profits but the payment system favours the most successful, making it near impossible for those at the rear of the grid to catch up.
Ferrari get an extra $US90 million ($A118 million) just for being Ferrari, the only team that has been competing in Formula 1 continuously since the championship was launched in 1950.
Formula 1’s new bosses have plenty to do. Ten teams fielding a grid of just 20 cars looks a bit thin. Worst of all, the racing is mostly rubbish.
Mercedes has totally dominated for the past few years with the best of the rest fighting for second place. The hybrid green racers sound awful, if you can hear them, and more overtaking can be seen in a single MotoGP bike race than almost a whole season of F1.
Plenty has been tried to fix this. Drag reduction systems to allow closely following cars to overtake in a straight line. Tyres are designed to wear quickly so they need to be changed often to mix the field up. It’s all artificial, extraordinarily complicated and none of it works very well.
In fact, Formula 1 is now so complicated that only most of those in it and the very keenest of viewers actually understand what’s going on. Hardly the way to build the fan base and revenue.
If anyone can design and implement a set of sensible, effective technical rules it is Ross Brawn, but he will need to be supported by a governance system that actually allows change.
According to Chase Carey: “The governance structure that has been put in place isn’t working very well so we need to make decisions more effectively, more efficiently.”
At the moment, unless everyone agrees, nothing changes.
Assuming the racing is made understandable and interesting to the common man, and that is quite an assumption, the next challenge is where to race and how often.
The Ecclestone model of Formula 1 sought to grow profit from ever more astronomical race sanctioning fees which became so high that, with the exception of the British Grand Prix, only governments can afford them.
Chase Carey, Bernie Ecclestone and Christian Horner
Even with government support many races in Europe, the heartland of the sport and its main fanbase, struggled to meet Ecclestone’s high demands.
This has resulted in Formula 1 GPs being run in some dodgy places whose name ends in “stan,” where none of the locals understand F1. Hence, few of them bother paying high ticket prices to go and watch.
The solution is to run more races in locations people want to see or visit, and where they know what Formula 1 is. The good news is that the sport’s new boss is right onto this.
“We’re engaged with a number of markets that we think have the potential for a race,” said Mr Carey. “We’d like to have a race that really is a major event in the US, at a destination city, so that means one of New York, Los Angeles, Miami, Las Vegas.
“A city where people would want to go for three days, four days, or a week, and have this race be the centre piece of this event like a Super Bowl is.”
If Formula 1 were to sacrifice some sanctioning fee revenue to help make that happen, they could potentially make it back from the dead by moving to fully embrace new media and the digital marketplace that Mr Ecclestone so steadfastly ignored.
There is a trade-off here however.
Extra engagement via social media will very likely introduce Formula 1 to a new generation of followers, but the extra images and coverage via social media may dilute the value of the TV rights. There is also, for the same reason a delicate balance to be struck between free-to-air and pay TV.
Hopefully for Formula 1 it is the right time in its history to be owned by a large, successful US media company. The expertise of Chase Carey combined with his commercial and sporting directors Sean Bratches and Ross Brawn might just be enough to stop Formula 1 disappearing up its own environmentally friendly tailpipe.
By Daniel Cotterill on 2nd February 2017 Comment Carey, Ecclestone, F1, Formula 1
CHANGE comes from the top, and the global marketing machine that is Formula 1 now enters 2017 with a new owner and a fresh management team.
In mid January, the shareholders of US conglomerate Liberty Media approved the company’s acquisition of Formula 1 from its former owner, private equity firm CVC.
A complex transaction that involves cash, shares and various financial instruments values the sport at $US8 billion ($A10.5 billion), but that figure includes $US4.1 billion ($A5.1 billion) of F1’s debt.
Liberty Media, owned by US multi-billionaire John Malone, moved quickly, installing ex-senior Murdoch executive Chase Carey as the sport’s CEO last week.
Bernie Ecclestone
Thus ends the reign of Bernie Ecclestone, the undisputed king of F1 for the past 40 years, and the man who created enormous wealth by packaging and selling the sport’s TV rights around the world.
Mr Carey had previously been appointed as Formula 1’s new chairman last September when the Liberty takeover deal was first mooted. At the time Mr Ecclestone was tipped to stay on for another three years.
Reporting to Mr Carey are two newly installed managing directors, Ross Brawn and Sean Bratches.
Mr Brawn is well known in Formula 1 circles as an astute team boss and technical director, and will oversee all sporting matters.
Mr Bratches has a strong track record as a marketing man in American sports TV and will take charge of the commercial side of F1.
There is plenty of praise for the often controversial Bernie Ecclestone, a man who has publicly referred to women as “domestic appliances” and praised Adolf Hitler for his ability to “get things done”. But it is accompanied by a general acceptance of the need for change.
“The problems are across the board,” Mr Carey said. “We’re not marketing the sport, we’re not enabling fans to connect with it on the platforms that are available today, our sponsorship relations are one-dimensional, the events feel old, the hospitality feels as if it’s at least 15 years old.
“As we looked at the business, particularly over the last four to five years the sport had not grown to its full potential and we needed to put a new organisation in place that was able to grow the sport in today’s world in the way it needs to grow.”
Of the ten teams still in Formula 1 only Mercedes, Red Bull, Ferrari and McLaren are financially secure, while the others are more or less struggling to make ends meet. The Manor Formula 1 team folded in the same week as the Liberty ownership deal was finalised.
Formula 1 has 400 million TV viewers worldwide, but has struggled to win audiences in the US or to establish more than a single event there. The sport generates about $US1.5 billion ($A2 billion) per year.
The teams receive just over half of Formula 1’s profits but the payment system favours the most successful, making it near impossible for those at the rear of the grid to catch up.
Ferrari get an extra $US90 million ($A118 million) just for being Ferrari, the only team that has been competing in Formula 1 continuously since the championship was launched in 1950.
Formula 1’s new bosses have plenty to do. Ten teams fielding a grid of just 20 cars looks a bit thin. Worst of all, the racing is mostly rubbish.
Mercedes has totally dominated for the past few years with the best of the rest fighting for second place. The hybrid green racers sound awful, if you can hear them, and more overtaking can be seen in a single MotoGP bike race than almost a whole season of F1.
Plenty has been tried to fix this. Drag reduction systems to allow closely following cars to overtake in a straight line. Tyres are designed to wear quickly so they need to be changed often to mix the field up. It’s all artificial, extraordinarily complicated and none of it works very well.
In fact, Formula 1 is now so complicated that only most of those in it and the very keenest of viewers actually understand what’s going on. Hardly the way to build the fan base and revenue.
If anyone can design and implement a set of sensible, effective technical rules it is Ross Brawn, but he will need to be supported by a governance system that actually allows change.
According to Chase Carey: “The governance structure that has been put in place isn’t working very well so we need to make decisions more effectively, more efficiently.”
At the moment, unless everyone agrees, nothing changes.
Assuming the racing is made understandable and interesting to the common man, and that is quite an assumption, the next challenge is where to race and how often.
The Ecclestone model of Formula 1 sought to grow profit from ever more astronomical race sanctioning fees which became so high that, with the exception of the British Grand Prix, only governments can afford them.
Chase Carey, Bernie Ecclestone and Christian Horner
Even with government support many races in Europe, the heartland of the sport and its main fanbase, struggled to meet Ecclestone’s high demands.
This has resulted in Formula 1 GPs being run in some dodgy places whose name ends in “stan,” where none of the locals understand F1. Hence, few of them bother paying high ticket prices to go and watch.
The solution is to run more races in locations people want to see or visit, and where they know what Formula 1 is. The good news is that the sport’s new boss is right onto this.
“We’re engaged with a number of markets that we think have the potential for a race,” said Mr Carey. “We’d like to have a race that really is a major event in the US, at a destination city, so that means one of New York, Los Angeles, Miami, Las Vegas.
“A city where people would want to go for three days, four days, or a week, and have this race be the centre piece of this event like a Super Bowl is.”
If Formula 1 were to sacrifice some sanctioning fee revenue to help make that happen, they could potentially make it back from the dead by moving to fully embrace new media and the digital marketplace that Mr Ecclestone so steadfastly ignored.
There is a trade-off here however.
Extra engagement via social media will very likely introduce Formula 1 to a new generation of followers, but the extra images and coverage via social media may dilute the value of the TV rights. There is also, for the same reason a delicate balance to be struck between free-to-air and pay TV.
Hopefully for Formula 1 it is the right time in its history to be owned by a large, successful US media company. The expertise of Chase Carey combined with his commercial and sporting directors Sean Bratches and Ross Brawn might just be enough to stop Formula 1 disappearing up its own environmentally friendly tailpipe.
Comment by Daniel Cotterill
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