The last 24 hours have seen some interesting twists in the story of a possible takeover of Formula 1 by News Corporation.
Last night we had a joint statement from News Corp and Exor, the Agnelli family company which owns a stake in FIAT and Ferrari, saying that they were “in the early stages of exploring the possibility of creating a consortium with a view to formulating a long-term plan for the development of Formula One in the interests of the participants and the fans.”
This afternoon CVC, which owns 75% of the company which holds the commercial rights to F1, responded respectfully, but firmly, “CVC recently received an approach from the Exor/News Corporation consortium. James Murdoch has informed us the approach is friendly, at a very preliminary stage, and they acknowledge Formula One is privately owned by CVC and not currently for sale.
“CVC recognises the quality of Exor and News Corporation as potential investors, but any investment in Formula One will require CVC’s agreement and will need to demonstrate that it is in the interest of the sport and its stakeholders, taken as a whole.”
It will also require the FIA’s approval under the famous “Don King” clause and FIA president Jean Todt has indicated recently that he’s looking for a better financial deal from the rights to Formula 1, which the FIA has contracted to FOM.
This story is evolving quite quickly, but there are a few points to make at this stage. First it sounds, from what I hear behind the scenes, as though the possibility of a deal is increasing.
But is it just the Murdoch’s and the Agnellis who are in this consortium or will there be funding from elsewhere?
With the historic links behind the scenes, Ferrari president Luca di Montezemolo is clearly very involved in the News Corp/Exor consortium. But one wonders whether there is another partner quietly behind the scenes too, such as Abu Dhabi? Ecclestone came out with a curious quote yesterday where he said that although Abu Dhabi was supposedly interested in F1, he had heard nothing from them. Some think that the News Corp story is a ruse designed to flush out other interested parties, but what if Abu Dhabi was part of this consortium?
There are strong links with Ferrari and Mercedes, both of whom have been linked with this initiative and strong links with the Murdochs on many business levels.
Also there is the financial side, remember that News Corp is poised to take control of BSKYB, a deal which will cost in the region of £9 billion, if it goes through.
Normally they tend to like to act alone, without other partners who might tell them what to do, so the consortium here is an interesting step.
Another point worth bearing in mind is that when they bid for something the Murdochs tend to go for the “killer blow” offer, one that puts the deal beyond the reach of rivals, as they did with Dow Jones and the Wall Street Journal recently.
As to why this is all happening now, there are two reasons from F1’s point of view. First, the 100 year agreement between FIA and FOM only came into force at the start of this year, so the rights are now in place for 100 years and as Jean Todt said recently, the deal is legally watertight and cannot be unpicked. Getting to this point, after all the breakaway talk in 2009, was important for CVC from an onward sale point of view.
Also the negotiations for the 2013 Concorde Agreement are getting underway now and after the end of 2012 everything is to play for.
An alliance with a media giant like News Corp presents other possibilities for the teams, led by Ferrari, were they to stay together. A major problem faced by any breakaway series is getting credible and lucrative TV deals together, so joining forces with a company which controls SKY in UK, Germany and Italy as well as Fox Sports in the Americas, Middle East and Australia and Star TV in Asia, presents a very strong hand.
So maybe this is a giant poker chip being played by Ferrari as the Concorde negotiations begin. CVC will not want to be left with 100 years of nothing.
Analysts are saying that the value of sports rights is set to increase in the future, driven by the way sport fits into people’s leisure time and also the multiplicity of new platforms for consuming sports coverage, like mobiles and the internet.
A bold company, which believes it can find the way to maximise those new media revenue streams is likely to see enormous potential in F1. Exor, which is run by 35 year old John Elkann and 38 year old James Murdoch may fancy that challenge.