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What would a Rupert Murdoch takeover do for F1?
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What would a Rupert Murdoch takeover do for F1?
Posted By: James Allen  |  22 Apr 2011   |  9:36 am GMT  |  189 comments

The news this week that Rupert Murdoch’s News Corp is looking at buying Formula 1’s commercial rights from CVC in a consortium with Carlos Slim has elicited a range of reactions; an almost instant denial by Bernie Ecclestone, some media coverage giving the idea some credence and many seasoned people thinking it’s a smokescreen, or negotiating ploy aimed at other interested parties.

News Corp does make bold acquisitions. But it is also frequently trotted as a possible buyer of eye catching assets, when there is no substance to the story; it was linked with Facebook at one time. And Bernie Ecclestone and Rupert Murdoch know each other well and have spent plenty of time together in casinos.

So a leaked story like, this, particularly as it was leaked by a News Corp owned property, Sky News, could have a variety of tactics behind it.


But, in a changing media world where newspapers are in decline, the company is always on the lookout for the right assets to grow the business. It looked at buying Manchester United a few years ago, for example and has long had aspirations to control a global sport, which it can exploit commercially.

F1 is a fabulous global platform and a relatively simple structure with 12 teams, 24 drivers and a 19 race calendar.

There are some areas of F1 which have huge potential for commercial exploitation in the future, like online and mobile, which make an acquisition by a big media company in partnership with a mobile phone giant a sound idea.

The company already has extensive business with Formula 1; it buys rights for Sky Sports Germany and across Asia with the Star Sports Network among others. In the UK Sky dipped its toe in the water in the 1990s with the FOM pay per view platform, but it only lasted a few years.

But it has a wide reaching global platform of its own and the ability via a deep understanding of the market, of how to exploit the commercial rights of a sport.

A consortium with someone like Carlos Slim, who owns an extensive global mobile phone business has obvious sense behind it.

But at the same time, such a consortium, were it to be real, would not be the only interested party. The investment arm of Abu Dhabi, for example, has been looking at the sport for some time, but would probably have to form a consortium with at least one other partner, with a strong media profile in Europe and/or Asia.

As for how a News Corp takeover might work for the consumer, the fan, many fear the onset of pay TV, judging from comments sent in this week.

The Concorde Agreement, which binds the teams, the FIA and FOM together, explicitly sets out some conditions for free to air TV in certain key territories. This is to protect the interests of sponsors and manufacturers in particular. The media value of the sponsorship goes down if the broadcasts do not reach the huge audiences you get with free to air TV. But the revenues from the TV could offset that and make the teams less dependent on finding sponsors, which they find very tough.

There has been a toe in the water exercise going on recently. In a number of countries in recent years F1 has moved to a model whereby the race is on pay TV, which also screens all practice sessions and qualifying and then there is a delayed telecast on free to air later in the day.

This is what has happened for a few years now in Japan and Finland, for example, where the live race is on MTV Max and the highlights re-run is on MTV3. There was resistance to start with, especially in Finland at the peak of Raikkonen’s career, but it seems to have settled down.


There is a cost to the fan, of course. Figures of around €70 a year (€3.50 per race) have been seen and there’s no doubt that the fanbase is big enough and mature enough to support that.

The English Premier League is an interesting comparison, however, as it has similar global appeal to F1 but has significantly higher commercial returns and a fanbase, which has been very strong despite having to pay to watch games.

EPL has been on Sky in the UK for almost 20 years and is a commercial powerhouse. Its UK TV package is worth £600 million a year while overseas sales are slightly higher.

The 20 Premier league teams collect £40 million each with the champions earning £70 million for a season, more than F1 teams, of which there are only 12.

It’s not possible to buy the EPL, but it is possible to buy F1. It has changed hands a couple of times already and is clearly approaching a turning point. CVC deny that they want to sell, but given the nature of their business, private equity, by definition there is always a sale due at the right time and at the right price.

But there are complexities, which have caught others out in the past. The Sky News story this week said that News Corp was being advised by JP Morgan, which is one of the banks left holding F1 stock when Kirsch went bust in 2002 (News Corp was also one of the creditors back then). JP Morgan know quite a bit about F1.

There are many possible reasons why this story came to life this week; to confuse the picture, to blow the cover on News Corps’ plan and derail it, to prompt someone else into action, to send a warning…the list goes on.

It could just be the journalist, who broke the story, flying a kite, but given the number of stories emanating from CVC sources via Sky News in recent times, that’s unlikely.

Central to all of this is the negotiation of the new Concorde Agreement, which is due to come into force in 2013. Until the terms of the new deal are resolved, a sale is unlikely. The teams and the FIA want more money, CVC wants to protect its investment and maybe make a profitable exit, while Ecclestone wants to come out on top, as he always has in the past.

The racing this year looks pretty exciting and the business off track is shaping up to be just as lively!


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1

I used to watch football till it went to sky, cricket too, I have given up on both as far as tv goes and listen on radio. If f1 goes to sky I will give up on watching it and switch to radio coverage, radio isnt the same experience obviously but its better than paying sky. At least with fewer hours in front of the tv watching. Sport I get a lot more fly fishing done.

2

If F1 goes to Sky we will have to pay for the package, and then pay for the race. Maybe I could wear that. Maybe.

But then Sky would put ads in every 15 minutes, with bumper ads from their sponsors, which ruins the experience of watching the race.

There is no way on earth I am PAYING to watch adverts. None. If F1 goes to Sky I will stop watching after 20 years, simple as.

3

I think this can be what the sport really needs. Maybe there can be a new engine regulation instead of the silly one that’s proposed right now. I think this is exciting news!

4

Dead simple from my point of view, if Murdoch were to buy F1 from CVC then I will totally dissociate myself from F1 and that will be the end of it.

I can’t express the contempt and revulsion I feel for the man, the companies and their methods.

End of discussion.

5

I love F1, and I love golf. To me, the pinnacle of ‘viewer golf’ is the Ryder cup. I’ve spent thousands to be at The Belfry, The K Club and Celtic Manor to watch the Ryder cup. When it is in the States, I listen on Radio 5. I would rather use £20.00 notes as toilet paper than get Sky.

6

Didnt Sky do some kind of deal with ITV not so long ago?
Maybe it could end up back on there?
Definately NO to PPV or subscription tv!

7

Personally I won’t pay for SkySports. I used to have it, but cancelled it years ago because it costs far too much money for something I hardly used. F1 on Sky would not change my mind, it would only give them an excuse to raise their already extortionate prices.

My main thought though, is that I thought there was some legal condition in place for the UK, where certain events have to be shown on free to air TV, with these events including things like Wimbledon, the football world cup and F1? Any comment on this?

8

oh, and a quick afterthought….

Funny how there was never any of these rumours during the Schuey ‘borefest’ years

Seems F1 and the BBC must be doing something right for Murdoch to decide now is the time to try his luck

9

James,

just my tuppence-worth, as an F1 fan who honestly cannot remember a time when i didnt watch F1 (im 39 now)…

This whole story does seem like a smokescreen/bush beating exercise, but i sincerely hope the people involved have the good sense to read your original article and many of the comments posted – if that doesnt tell them the way the wind is blowing, then clearly they deserve to fail in their efforts to milk our beloved sport for every penny they can get (we all know its Murdoch’s raison d’etre)

I will feel like i’ve lost an arm if F1 goes to Sky, as i simply cannot afford it, and will be hoping for a few internet options appearing if it did come to pass

And, just for the record, barry latour’s idea sounds like a good one to me – James Allen as the 21st century’s Bernie?

10

I don’t think football and and F1 are comparable when it comes to subscription and advertising.

Football advertising is just a means to put a brand in front of the viewer — if a drinks company sponsors a football team they’re not hoping people will think that that team does well because the players drink their brand. On the other hand, sponsors of F1 want real association: Mercedes, Ferrari and McLaren want fans to think of their car being the best because it as incorporates their technology. It’s the same also for watch manufacturers and communication technology companies etc.; they want the association of the high-tech involvement in F1. Only sports shoe manufacturers have the same high-tech relationship with football and that’s nothing like such a big market.

Having spent so much on sponsorship I’m sure the sponsors want — and arguably have a right for — the spectacle to be available to as wide an audience as possible. Charging for viewing actually works against this by reducing audience size, and is likely to reduce funds available from sponsorship.

11

would it matter to the owners of F1 if the live audience isn’t as big as right now.

As long as the event remains newsworthy, so the win is replayed countless times on 24 hour news channels then that would be job done.

Reaching the “right” audience may not necessarily be the audience that would actually like watching motor racing.

12

I don’t like it any more than the rest of us, in fact I plain HATE it. But to be honest, I would pay Satan for F1, I love it, am addicted and will probably never be able to stop watching it, no matter where it is. Although it would break my heart. God knows, this might even finish Murray off.

13

I grew up surrounded by football fans and was a real odd one out as an F1 obsessed 10 year old. I found it hard to believe that those football fans seemed happy to pay out more and more each year for their sport, particularly since the creation of the Premiership, with ridiculous ticket prices, constantly changing merchandise and pay per view. So many posters here say they will stop following F1 if Sky acquire it, which makes me wonder whether football fans are just stupid to keep on shelling out, or are they more devoted fans of their sport?

Much of this resistance to Sky is founded in a personal animosity people have towards Murdoch, which begs the question, how would a Virgin bid be received by the F1 viewers? I suspect there would still be grumbling, but less reluctance to line Bransons pockets further due to the unique place he seems to occupy in our national consciousness.

For what its worth, I don’t think that I would be able to afford Sky, don’t really want it anyway, but have felt for a long time that sooner or later F1 will go PPV.

As a 10 year old, the only TV coverage I saw was a highlights programme on a Sunday evening, usually on too late for me to be allowed to stay up. Todays live coverage is fantastic by comparison and probably worth paying for, I just think we don’t know the costs involved yet.

14

I would pay if I had to, but I wouldn’t feel good about it, and for sure I would rather pay anyone else than Sky. An online sub for HD streams would do the trick, but I would need the whole BBC team for coms and stuff. What a big deal this story has turned into.

15

Any management team that allows DRS should be shot. For the sake of desperately needed change, I’m all for change of ownership – just maybe, F1 can get back to geniune racing, and celebrate the true strength of its driver’s skill… its a huge gamble, but anything is better then the status quo…

Bernie should be completely eradicated from F1 – I only see him as a leech type character, to be honest…

16

If Rupert Murdoch launched a successful takeover of F1’s promoter and moved the coverage onto pay TV, my response would be quite simple: I’d watch the BTCC and take out a subscription to Autosport or similar to catch up on F1 instead. It’d still be cheaper than the comparative Sky package and probably a lot more enjoyable as well. I’m a dedicated fan of F1 but not at any price I’m afraid.

17

Murdoch or no murdoch, F1’s underlying weakness is its dependence on public money to stage races worldwide. Could the circus survive without taxpayers shelling out to Bernie and co.?

18

I have no market research or crystal ball to tell me what other F1 fans will do. It will be what it will be. I know I won’t pay. Already here in Canada I watch it in French to get it free on high definition TV. In English, here, to watch it in high definition I must pay and I choose not to. My French is getting better.

Unlike the Premier League this F1 buy out would not own the teams which could withdraw and take their ball to play elsewhere.

If it happened it would be a great time for a new racing championship to begin. We could call it the European Grand Prix Championship. McLaren, RB Racing, Ferrari, Mercedes, et al could create their own show. Here’s the schedule for the first season. To discourage the drivers jumping ship to the Bernie show all drivers would have a 30% stake in the team they raced for, for as long as they raced with the team.

1. Portuguese GP

2. Sicilian GP

3. Nice GP – the streets of

4. Spanish GP

5. Budapest GP

6. Marrakesh GP

7. Le Mans GP

8. German GP

9. Mexican GP

10. U.S.A. GP (Laguna Seca-great track)

11. Canadian GP

12. Swedish GP

13. Russian GP

14. French GP

15. Polish GP

16. British GP

17. Scottish GP

18. Dutch GP

19. Belgium GP

20. Danish GP

19

“What no Australian GP”

20

If F1 went to some sort of pay-to-view or subscription TV that would be it for me as a viewer. I’m not really interested in any other sport and wouldn’t want to add crappy boxes or dishes.

I just hope the BBC (or ITV, 2nd best) will continue to provide ‘free’ coverage on Freeview and I’ll happily continue to pay my licence fee, which provides such amazing value for money. We British viewers don’t know how lucky we are to have around 5 hours of completely uninterrupted coverage in stonkingly good HD each GP weekend, with commentary by people who really know their onions. It just can’t get any better. So there’s sure to be something come along, like Murdoch, to upset the apple cart. Just my luck.

21

A Murdoch owned F1 would be similar in comparison to a home cooked roast over a cheap McDonald’s quarter pound combo.

No thanks to the latter.

22

Hello all,
Many people around the world are aware of the News Corporation “culture” — first instinct when faced with a decisipon: “What would Rupert do?”: second instinct when something goes wrong: “Who can I blame this on? It wasn’t me.” — but perhaps only Australians know about how News Corporation greed and over reach virtually killed rugby league Down Under.
When News couldn’t buy the TV rights, it decided to buy the league, player by player, club by club. Result? Sky rocketing player payments, clubs failing all around and therefore, the need for News to own clubs, most famously the Melbourne Storm.
The Storm had a glorious first few years in the league, attracting several of the best, most valuable players and winning two premierships.
But — shock, horror — it turns out that Melbourne Storm — owned by News Corp — had been [making – mod] secret payments to those high-profile players, in direct contravention of the league’s rules. In fact, it is the main rule when it comes to ensuring the integrity of the competition.
As subsequent court rulings and other statements have revealed — in the rugby league case, in an unfair dismissal case down here and in the phone hacking scandal in the UK — News Corporation directors are unfamiliar with the integrity word. And, of course, they knew nothing of the [matter – mod]….
The News Corp culture was laid bare in the decision in the case brought by an editor (Guthrie) for unfair dismissal. Those that gave evidence included News Corp Australia chairman John Hartigan, and the company’s senior executive in Melbourne, Peter Blunden.
Here’s a quote from one judge:“In my view Hartigan was an unreliable witness in respect of the negotiations that proceeded the formation of the contract.” That’s legalese for saying Mr Hartigan was not telling the truth.
And another: “I also consider that the explanations given by Mr Blunden in evidence, for not revealing to Mr Guthrie, at the time, that he was advocating his removal as editor-in-chief of the Herald Sun, do not survive scrutiny.” That’s legalese for saying Mr Blunden was not telling the truth.
That’s the News Corp culture for you. And, if you think the F1 teams will get a bigger cut of the TV revenue so they can improve the racing when News Corp is running the show, think again.
Picture this: a desk in Los Angeles in the News Corp building with $US1 billion stacked on top. Now ask yourself: “What would Rupert do?”

Bye for now

23

I think it would be a travesty if F1 went to sky-Im not alone there then….

But, alas, in this day and age corporate greed is everything, and the only motivation for this would be to make even more money than they do currently(greed)

I appreciate the fans being up in arms about this, I for one would be truly gutted and would NOT pay any subscription, but to put it in context would any of the paying masses that turned up for China really care if some folks in the UK had to pay to watch it?

I fear that the argument/threat put forth that some distgruntled fans here would never watch F1 again will not even register with the guys whom stand to make money from this. They would think ‘We can fill the grandstands with Chinese/Indians/Mexicans/insert up and coming 3rd world countries here/ who don’t really understand the sport on the whole(sorry if you are from there and do!), don’t care much to follow it, but will pay up to turn up and watch the ‘spectacle’.

Organisations right now are DESPERATE to generate more capital, and the sad truth is that an ‘F1 fan’ will never get in the way of that. If someone(or more usually someones) can get a whiff of making cash at this, it WILL be done. This would obviously only be the case if the business model worked for sky(which Im sure some counto’s are making happen as we speak)

I don’t think I have the time or inclination to whirl the numbers, but I would guess that ad breaks every 20 mins would lose X customers(viewers) but the ad revenue would generate X+100.(Advertising..another false world where money flies! How many people went and bought a Hublot watch after the race, or went to Halfords and said I don’t want Bosch spark plugs, they gotta be NGK cos they just won the Chinese GP?)

F1 advertising is for brand presence, not a call to action, and so our exodus from the sport wouldn’t hurt it at all if it was still simply played/advertised on a TV channel, and folks were paying for and getting paid for advertising around about that.

Dont mistake my comments for complacency or any endorsement of the proposed venture, simply the case as I see it and am happy to stand corrected….

24

He is a [mod]l man is Murdoch. It would kill the sport if it happened.

25
Rubinho's Keyfob

I’ll make my comment before I read everyone else’s – so I apologise if it’s been said already.

Although I got into motorsport through F1 (because of the general popular marketing etc), motorsport has many, many aspects. Try watching the Formula Ford races currently on C4 – they are very entertaining. The lack of aero, the homogenous nature of the cars and therefore the raw _racing_ can be quite refreshing compared to F1’s current reliance on gadgets. Sure, it doesn’t have the amount of coverage that F1 has and you might not know who the drivers are etc …

… but if F1 were to leave free-to-air, then I think that enough of the audience would go to find their racing elsewhere that F1/FOM would be shooting themselves in the foot – FF, GP2 and others would be quick to jump on that lucrative sponsorship bandwagon. What F1/FOM/BE need to recognise is that’s it’s a different world – some of them have pioneered this mass-market televised motorsport phenomenon, so now it doesn’t take an entrepeneur/innovator/visionary (like Bernie) to spend years convincing people and building things up, it just takes someone to notice that they’ve dropped the ball and then to pick it up.

Selling F1 to pay-per-view, in my opinion, is dropping the ball.

Of course, what we have to rememeber is that CVC are there to make money for their investors. If they can make a decent return on their investment by selling, then I suspect it makes not a jot of difference to them if F1 is dead in a year or not through that action.

26

To be fair to Sky both football and cricket coverage improved considerably and no doubt they could do the same for F1

I though could not afford PPV and would not watch it if I had to pay per race = this despite watching F1 since the late 70’s. There are too many other things I have to pay for – F1 is a a nice to have – not need to have,

27

Don’t current tv stations have on going contracts anyways? For instance ORF mentioned during the malaysian GP that they had made a new contract for several years.

How would that work?

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