Posted on March 16, 2013
XPB.cc

The 2013 F1 season is already unique in that it has got underway without an agreement binding in the teams, the FIA and the commercial rights holder. Bernie Ecclestone has individual commercial deals with all the teams, except Marussia, but the hold up was agreeing terms with FIA president Jean Todt.

However after a series of meetings recently between the two most powerful men in the sport, Todt told the Financial Times this weekend that the issues have been sorted and the FIA will sign the new Concorde Agreement,

“I think we have all the ingredients to allow the FIA and FOM and the teams to finalise the signatures of the Concorde Agreement,” he said. “All the discussions we have agreed, and we are in the situation where we need to finalise it in writing. I am confident it should happen in the coming weeks.”

Todt, who is seeking re-election as FIA president later this year, inherited the 100 year agreement from his predecessor Max Mosley. This tied the FIA to a 100 year contract from 2011 under which it licensed the commercial rights in F1 to Ecclestone’s company for around $350 million.

The contract is watertight and cannot be broken, but Todt argued that the sport had moved on commercially since it was negotiated and the FIA needed a larger slice of the revenues.

He raised the entry fee to teams to around €15m collectively for the season and sought €25million a year from Ecclestone.

The teams have already paid their money for 2013, but the FIA has not been paid by FOM as the deal was not finalised before the season started.

A new eight year Concorde Agreement is vital for F1 to proceed with a flotation later this year in Singapore. It was put off last year due to market conditions and a loss of appetite among investors after the Facebook fiasco.

CVC, Ecclestone’s partner in the commercial rights holding company, has already sold down its stock to around 35% and a flotation would provide it with an exit from the sport, which would make F1 one of the most profitable investments in the private equity company’s history.

Todt is in Melbourne this weekend for the season opener, while Ecclestone has not made the trip. It is thought that China will be his first GP appearance this year.

Regrettably, in the same interview with the FT, Todt indicated that the FIA will not intervene on cost control in F1, meaning we are likely to continue with the current “arms race” which threatens to put some of the smaller and medium sized teams under threat.

Unable to agree effective cost control among themselves, many teams had requested the FIA to intervene and regulate costs through the Sporting regulations. Last year Todt said he was willing to work with the teams if that is what they all wanted, but has now washed his hands of it,

“A lot of teams prefer to have the privilege of competition rather than reduce costs. I hope that a sensible approach from teams will be reducing costs. But it’s not something we all have to agree together,” Todt said. “We are the regulator. If they don’t want to reduce costs, that’s it. It’s not our responsibility to do things that teams do not want.”

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Todt says FIA is ready to sign new Concorde Agreement “In next few weeks”
21 Responses

  1.   1. Posted By: Jpsnorton
        Date: March 16th, 2013 @ 11:07 pm 

    Well done Bernie… You turn negotiation, manipulation and control into an art form… But without you it should be clear to everyone that F1 would have torn itself apart years ago…

    [Reply]


  2.   2. Posted By: Jock Ulah
        Date: March 16th, 2013 @ 11:11 pm 

    For heaven’s sake – Jean, Bernie – no need to rush headlong into a premature and hastily structured agreement.

    Take your time, negotiate diligently and get it right!

    [Reply]


  3.   3. Posted By: Wayne
        Date: March 16th, 2013 @ 11:16 pm 

    So……….. this boils down to the FIA taking more money off everyone and refusing to intervene in the greatest threat to the sport?

    How dare the FIA, how bloody dare they! While they blackmail the drivers for more money (basically pay x times as much or we won’t license you), reneauge on their deal with CVC and pull the same blackmail trick with the team entrance fee, they do what exactly?

    They:

    1) take money out of F1 and waste it on their road safety programme whihc no-one asked for or wanted in order to raise their own profile.

    2) Remain utterly unable to to apply the rules of the sport in a consistent manner.

    3) Have goodness knows how many members from every backwater country all over the world (with or without a genuine motorsport programme) who are no doubt over-paid fat-cats doing nothing but fattening themselves off F1.

    4) Refuse to intervene in cost control and therefore put the entire sport at risk.

    5) Make politically motivated stewarding decisons for fear of interfereing with the WDC when their role is to apply the rules evenly (backmarker or race leader).

    etc etc.

    Personally i’m on Bernie’s side – don’t give the creeps another Euro Bernie until they bloody-well start earning it.

    (I also understand that in return for the higher driver entrants fees they were given an undertaking that there would be no more fines and the FIA, now that they have the money in the bank, have changed their mind on that!

    Let’s make no mistake, people, the FIA are not some deserving charity, nor are they a shining force for good in the world. They are a bunch of fat politicians with an expensive building in Paris and a lot of greedy mouths to feed and ahotbed of crazy ideas and political schemes.

    Dump them, regulate the sport another way. I’ll still watch.

    [Reply]

    David Ryan Reply:

    …as opposed to Bernie and CVC, who have no qualms about taking c.50% of the revenue out of the sport completely for the benefit of no one aside from themselves and the relevant shareholders. Let’s make no mistake, neither side is particularly innocent in this – the FIA does at least have the saving grace of its road safety programme (including Euro NCAP) probably saving countless lives. As for the cost control point, it needs co-operation from the teams as well – last time the issue was mooted, they all but agreed to walk away – so let’s not treat them as entirely innocent either. All parties involved could do with their heads being bashed together, quite frankly.

    [Reply]

    Wayne Reply:

    Hang on though, David, Bernie and CVC are in business to make money, they are open and clear about that. The FIA is not supposed to exist to make money, they are supposed to provide a service and should have just enough money to that and no more.

    I din;t know EURO NCAP was down to the FIA, though, if that’s the case I agree that is worthwhile.

    [Reply]

    David Ryan Reply:

    Bernie and CVC may well be in business to make money as you say, but the purpose of the Formula One Group is to promote the sport and it is in that context which Bernie and CVC’s role in relation to F1 should be judged. Whether they make money out of it or otherwise is a secondary issue as far as the sport is concerned – obviously they will look to do so (as any business does) but that is not how their success as promoters is to be judged. It is the state of the product they are promoting which matters. By any standard, siphoning that level of cash out of the sport is hardly a promotion of its continued success or interests, and dwindling attendance at a large number of races and in certain TV markets isn’t encouraging either. Hence my comment that neither side is particularly innocent. In any event, the FIA retains full ownership of the sport (the commercial rights are leased to the Formula One Group) so if either side is likely to be “dumped” it’s probably Bernie and CVC.

    And yes, the FIA is a full member of Euro NCAP.


  4.   4. Posted By: Andy
        Date: March 17th, 2013 @ 12:10 am 

    Regarding cost controls, Mosely had the right idea. That’s your budget, spend it how you like. £50 million was too low though.
    I wonder if Todt has been threatened with some teams withdrawing from the championship if cost controls are brought in.
    Some teams are too competitive to either accept or stick to cost controls. They struggle to present a united front in Fota.
    I would like to see a maximum number of hours allowed for wind tunnel use, banning the shipping of parts out once a gp weekend has started etc. They are not big cost savings, but are things that may help to bridge the gap to some of the smaller teams.

    [Reply]


  5.   5. Posted By: Random 79
        Date: March 17th, 2013 @ 1:58 am 

    It was put off last year due to market conditions and a loss of appetite among investors after the Facebook fiasco.

    I missed that one – what happened?

    [Reply]

    mhilgtx Reply:

    Facebook flopped. Lots of speculation on exactly why. My guess is it is a failed business model and always has been. Once people looked at their inability to serve up advertising on mobile phones and the lack of true ROI on FB advertising schemes they were gun shy.

    [Reply]

    Kevin Green Reply:

    Not comparable in any way at all other than .com!

    [Reply]

    Random 79 Reply:

    Ah…I did know that – I thought it was something F1 related (like Lewis with his Twitter last year or something similar).

    Ta for the info anyway mhilgtx :)

    [Reply]


  6.   6. Posted By: Rich C
        Date: March 17th, 2013 @ 2:44 am 

    So, no cost controls?

    They can’t agree amongst themselves, and its too tough for FIA with their army of lawyers to handle it.

    I can hear the cash machines at RBR and in Maranello cranking up already.

    Well if there’s one thing that will keep new blood out, this is it: uncontrolled costs.

    Say goodbye to F1 as we know it, the ‘race’ is on!

    [Reply]


  7.   7. Posted By: David Ryan
        Date: March 17th, 2013 @ 1:18 pm 

    As a general observation, I would point out there is no such thing as a “watertight” contract or one that cannot be broken. Any contract is capable of being broken, either by positive act or omission – it is merely a question of what the consequences of that would be for the breaching party. Obviously the terms of the contract may make that prohibitive, but it is still possible if not advisable.

    Anyway, this all sounds like a continuation of the same old mess that has dogged the sport for as long as I can remember. For my part, I feel the only way there is ever going to be progress on this front is if certain parties (particularly Bernie and Jean Todt) are out of the equation. I have lost any confidence in them having the best interests of the sport at heart, particularly given Bernie’s intent on taking the sport to countries based on their ability to pay rather than any interest in F1 and Todt’s capitulation on sorting out issues of costs.

    [Reply]


  8.   8. Posted By: mhilgtx
        Date: March 17th, 2013 @ 3:58 pm 

    First let me say I am not a fan of NASCAR or Indycar.

    But a huge problem I see in my short career of being an F1 fan is the lack of races. Only 20? Well 19 this year. Man that has to be a huge reason that even though F1 has a better product in my opinion it isn’t as profitable for the teams as it could be.

    On to FIA and ENCAP maybe it is my American way of looking at things but aren’t these safety initiative the exact same thing that his provided by the insurance industry in the US? Many of these insurance companies do business in Europe as well. I bet they love not having to pay for crash testing and the like.

    [Reply]

    Random 79 Reply:

    The difference from F1 to NASCAR is that (so far as I know) NASCAR is run exclusively in the US, whereas F1 travels right around the globe. That’s a lot of travelling and a lot of time away from families for the teams. Even now with 19 or 20 races they say that’s about the limit of what they’d like to have.

    Personally I’d love to see more races, but it just isn’t possible.

    On the positive side, rarity always increases value, so having fewer races makes winning an F1 race just that bit more special. :)

    As for your second point, it seems that most insurance companies love not paying out for anything ;)

    [Reply]

    mhilgtx Reply:

    Thanks for the response!

    Yeah I am think along the lines of 5 more races. So 25 races over 40 weeks. Plenty of time home, enough scarcity, and more TV ad time.

    [Reply]

    iceman Reply:

    F1 already has more rounds than WTCC, WRC, World Endurance, MotoGP, World Superbike or any other international championship I can think of.

    [Reply]


  9.   9. Posted By: Geno
        Date: March 17th, 2013 @ 7:32 pm 

    It seems like there is no need to control the costs nowadays.
    With these tight technical regulations and the Pirellis, small budget teams can take it up to the top teams, as showed by Lotus and Force India in Australia, and Sauber last year.

    If Ferrari and Red Bull want to spend unlimited ressources in F1 then it doesn’t really matter anymore, does it?

    That’s actually really smart from Jean Todt.

    [Reply]


  10.   10. Posted By: Aaron James
        Date: March 18th, 2013 @ 2:21 am 

    Are they trying to wipe out Marussia by not doing a deal with them?

    [Reply]


  11.   11. Posted By: franed
        Date: March 18th, 2013 @ 11:53 am 

    Firstly, nice to have you back commentating again James.
    Secondly as CVC dump the Delta shares. (Delta Topco and Delta Prefco which control/own FOM) Then Bernie’s plus Bambino’s percentage gets more significant. But it is unlikely that the two main teachers pension funds (who own most of the rest) will want Bernie to continue as head honcho of F1. Since the most likely get-out clause in the 100 year lease was concerning unsuitable persons or organisations.
    I am also pretty sure that the new arrangement which allows Bernie participation in the rule making is against the EU Commission ruling. It was the EU commission remember that separated th FIA from the commercial rights and the rights from the governance and rule making.

    The current financial structure is unsustainable. Teams will loose sponsorship as audiences decline, how was the tv deal received in Italy James? I believe you have friends there.
    As money gets tighter so a cost cap becomes a necessity to the sport’s survival.
    The new 8 year deals will not live their full life, in the words of Juke box jury’s Janice, which only old gits will remember (I’ll give it foive)
    By then F1 will have collapsed and interest will be upon LMS or electric series.

    [Reply]


  12.   12. Posted By: 5reasonreviews.com
        Date: March 20th, 2013 @ 12:04 am 

    If I was a prospective investor in a F1 IPO, the key concern for me would not only be this contract, but also the succession plan within the business.

    It will be interesting how they deal/explain this risk in the float documentation

    [Reply]

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