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Will Branson put real money into Brawn?
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Will Branson put real money into Brawn?
Posted By:   |  29 Apr 2009   |  10:08 am GMT  |  0 comments

There seems to be a division of opinion about what is going on between Brawn GP and Sir Richard Branson’s Virgin Group.

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There are stories that a deal has been done for this year and next, while there are strong suggestions coming out of the team that other parties are interested and Branson should pony up some more serious money if he wishes to go forward.

Branson was in the Bahrain paddock at the weekend, holding a press conference to announce that Rubens Barrichello and Niki Lauda had both paid €200,000 to fly into space on the Virgin Galactic spaceship. Lauda, who is on crutches after a hip replacement, is due to take a turn at flying the craft.

The Real Honda website, which has close links with the Brackley team, is reporting that a deal is done for Virgin to sponsor the car for the season at less than £1 million.

However in the Times today, Brawn CEO Nick Fry gives a very interesting quote,

“Richard has made an offer. The issue for us is whether or not it is the best offer we can get.”

Fry goes on to say that,
“We’ve got between 20 and 25 companies talking to us either about sponsorship or some wanting to buy into the team. Ross and I need to come to the correct decision, not the quick decision.”

Branson has a track record of getting the maximum exposure for the minimum spend. Already the media value to his brand of the exposure from the first four races plus his appearances in Australia and Bahrain is estimated at £10 million. That proves to him on the one hand that F1 and Brawn in particular, is a great way to get exposure, but it also shows him that he can do it very cheaply.

But this is not going down very well with the powers that be in F1 and Brawn is now coming to the point where they are asking him to invest serious money for the long term.

They have a ‘budget to impress’ in Ross Brawn’s words, from Honda to get them through the 2009 season, but they need more money to develop the car to stay ahead of the rest and win the world title and they also need money to get started on next year’s car.

The word I heard in Bahrain is that Brawn are looking for a three year commitment from any prospective partner. The discussions with Virgin have revolved around the rest of this year and a commitment to fund the development of the 2010 car.

Discussions will of course have been hanging in recent weeks, waiting for the FIA to set the level of the budget cap. Many teams are nervous about sponsors’ reactions if the budget is set at £30 -50 million, as they fear the sponsors will be asking for the price to come down proportionately.

However the price they pay is not related to the team’s needs, it is related to the media value of the exposure they get, based on camera time, press cuttings and so on, something Branson and his team will be all to aware of given their success in that area in the last month.

The budget cap will redefine the business model of F1 and if the price is low enough it may make it attractive for Virgin to consider more than a sponsorship, but to buy an equity stake in the team. F1 teams are set to become profitable under a budget cap, so as an owner/partner you still get your exposure and you make money too. Time will tell.

As Honda the team was very close to a deal with Emirates airlines, a deal which was linked to the Earthdreams concept. But it never happened. The team has not been the market leader in attracting sponsors at any time in its history. As BAR they didn’t really need sponsors as the whole thing was bankrolled by a tobacco company. When it became Honda and BAT pulled out, the same attitude continued.

Fry and his new commercial team are under pressure to deliver a full roster of sponsors to take the Brawn team forward and make sure that this year’s championship leading performance is not a flash in the pan.

An announcement about Virgin’s ongoing involvement is expected at the Spanish Grand Prix in a few weeks time.

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  1. Steve says:

    If people think Branson puts ‘real’ money into sponsorship – think again. Branson loves to put the brand on stuff, but I doubt he’ll put the cash in… The Virgin business is all about taking average non-label, generic products (coke, broadband, insurance) and sticking the Virgin label on it to make it more interesting and therefore more valuable. This is not the case with Brawn. Brawn is the added value here, not Virgin. Personally, I see Branson’s appearance at Melbourne and Bahrain as nothing more than self-promotion.

  2. Neil says:

    If anything helps them to get rid of that hideous paintjob (and make their car look less like Force India and BMW) then I’m all for it. A space themed car would be very cool!

  3. Tim says:

    The Spanish GP is in ‘a few weeks time’?

  4. Garry says:

    The one thing that really has amazed me is the lack of a Virgin logo on the race suits – maybe Brawn are withholding that and using it as a carrot for full sponsorship?

  5. The Kitchen Cynic says:

    Interesting but not unexpected. As you mention, the bearded one has a way of attaching his brand to projects with very little cash outlay. That’s his business model if you like, and he’s had a lot of success with it. Usually the other party benefits because they are obscure compared to the Virgin brand, but the balance of power here would seem rather different to that norm. However I’m sure Brawn and Fry have been round the block enough times to know what they’re getting into.

    James, is there any gen from the team as to how much of Brawn’s performance is down to the engine – or to put it another way, if this had been a Honda car with a Honda engine would it be doing as well as it has done this year? If so, and combined with Toyota’s resurgence, are there some very embarrassed executives in Japan right now?

  6. MartinWR says:

    According to the Times today, Brawn are speaking to a number of possible sponsors. There is also the suggestion that Branson could throw his toys out of his pram if he can’t get his own way and be Brawn’s “title sponsor”, whatever that is. I notice also that he might drop out if someone else comes up with a “silly offer”, as I believe he put it.

    None of this augurs well for the future. F1 is all about “silly” money, about millions being thrown at involvement in the sport without any significant chance of coming out on top, at least for the vast majority of teams.

    Branson seems to think he can try to do F1 on the cheap. If he does he is horribly, horribly wrong. He also gives me the impression he will cut and run if the going gets rough. But in F1 the going is always going to be rough, because it is the pinnacle of motorsport, employing the best of the best, and incredibly competitive. If Brawn can land the necessary sponsorship, they could well be front runners in future, but even that isn’t guaranteed. If you don’t believe that look where Williams are now, because there can hardly be a team with a finer record.

    IMHO this is not the way to go.

  7. alex m says:

    Richard Branson might think he is being clever blagging £10 million worth of exposure for 250K, but he is in real danger of looking like a shabby cheapskate trying to shark Brawn onto handing over the lot on the cheap.

    Not such a clever idea Richard, especially as some of us do actually know how you started out…..

  8. Glen D says:

    I think if Branson doesn’t come up with a good deal to fully sponsor Brawn then i think he will end up loosing credability as it will be seen that he has just used and abused Brawn for his own ends.
    I like the entrepreneur in Richard Branson but maybe this time he need to put his money where his mouth is!

    Either way it would be good to see some sponsorship on the Brawn cars and race suits

  9. Luke Robbins says:

    Thanks for this James, i read the said article in the times and i think its absolutely correct that the Brawn team should go for as much money as possible.

    Could you clarify a few things for me?

    Firstly, i know that Honda have made a significant contribution to this seasons budget, but just how much has Ross Brawn had to dig into his own coffers?

    Secondly, when would they need the investment by with regards to building a car for next season? What kind of time do teams at the front usually start developing, i presume they can’t do an early job on next years car as they did last year for this one due to having to actually advance the current car.

    Thanks, Luke.

  10. Gary Davidson says:

    Real money? Has he been paying Brawn with Monopoly money so far?

    Seriously though, the noises that I’m hearing from both sides appear that he is a bit stingy, wants it all for nothing at all kind of dealer. Can’t say that it hasn’t worked for him though….

  11. Colin S says:

    There is something very superficial and lightweight about Richard Branson that makes me think he will not be prepared to commit to a long term deal with Brawn.

    The Virgin brand, in all but a very specific areas, is defined by big glittery launches and then long slow decline. No question about the quality of the products and services they might offer under the brand name, but there doesn’t seem to be any real long term drive to succeed. I think only the airline makes sense.

  12. Alistair Blevins says:

    Given that Honda have already furnished BrawnGP with a substantial ’09 budget would it be correct to assume that they are more than able to compete in the development race with the likes of the bigger teams, or was there a resource defecit in the Honda days too?

    Or is it more a case of being able to apply sufficient resources to developing this years car and laying the groundwork for next years car?

  13. rpacp says:

    Well as I pointed out a few weeks ago Mr Branson has been having a free ride. It’s time for Ross to take his Virgin logo’s off the car and let Richard see that.

    Ross also needs to send him a bill for the £10m or he will never see it. Bernie is not the only man with a cunning plan. Branson is for ever getting cheap publicity, but people should be wise to it now.
    Ross is not stupid though and must have some motive in letting Branson get away with it for so long.

  14. Ben G says:

    I guarantee Branson will not commit on a large scale. He has had his fill of publicity, even claiming, ridiculously, that he “saved” the team before Melbourne.

  15. Kamran Tunio says:

    Hi James,

    I wish BRANDson would stop he usual tactics, grabbing the headlines with half ditched or false offers.

    I still have not forgiven him for his empty Concorde (the plane) offers.

    Obviously these are factors to his wealth, but people at Bracknell have jobs depending on it, as well the fans of the sport.

    KT

  16. Phil Huff says:

    It’s RealBrawnGP.com now, not RealHondaF1 ;-)

    I’ve perhaps not made it clear enough in the article, but I’m not suggesting the Virgin deal is for just £600k for the year – that’s the value I understand it’s at for the first four races only. Extrapolating that, it’ll be around £2.5m for the season, although I’d assume there’s been a small increase since the original deal.

    If I was a betting man, I’d suggest a figure of around £3.5-4m for the season wouldn’t be far wrong.

    As an aside, could you drop me an email…

    Regards,

    Phil.

  17. sean says:

    rice people don’t get rich by throwing there money away.Branson doesn’t need brawn for exposure he already has a world wide brand and as for him being cheap and getting more for less what’s wrong with that he doesn’t need to put 100 mil into brawn .Brawn’s biggest problem is that there isn’t the players lining up as there has been in the past so unless he court’s branson and puts up with his preening he an’t got many option’s .Remember renault & williams & bmw have lost there title sponsors how hard is it going be for them to replace these name’s in the current enviroment.With all these race’s going of shore maybe bernie may have to visit tobacco sponsorship many of the country’s they are now in have very liberal or no policy on this type of sponsoring with fewer and fewer large corporations able to extend there bugget’s to f1 level’s this maybe his only option.Mr brawn may have to live with the fact that they may not be front runners in the future through lack of funds and the can’t put on the update’s he needs because they can’t afford them.THis is the reality williams ,forceindia have to live with every day.

  18. James Allen says:

    Ross hasn’t had to pay anything as far as I’m aware.

    The design phase will be underway now, the expensive R&D phase coming up over the coming months, then tooling, pattern making, fabrication over the autumn into winter.

  19. Richard Mee says:

    I mean no disrespect Kamran, but you are incorrect on Concorde – Branson tried everything to get hold of Concorde but its owners, British Airways, refused to play ball – preferring instead to let them rot on air museum tarmac than continue flying for a competitor. Bloodied noses and schoolboy pride. Anyway, your points about RB seemingly wanting to have his cake and eat it at the expense of Brawn GP employees are perfectly valid.

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