Insight: Next 48 hours decisive for the future of Formula 1 ownership
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Posted By: James Allen  |  05 Sep 2016   |  11:04 am GMT  |  110 comments

Formula 1 is likely to have a new owner by Wednesday, if the deal for Liberty Media to take a minority stake as a prelude to a controlling stake and then partial flotation goes through.

The deal, which values F1 at $8bn, has been a long time in the making and Liberty has offered and been rejected before, as have other entities including Stephen Ross and the Qatari investment fund.

But this time, all the signs are that it will go through and the money is due to be transferred on Tuesday for a deal to be completed Wednesday.

Bernie Ecclestone, Donald Mackenzie

Speaking to CVC’s Donald Mackenzie (above left) in Monza, it is clear that they will halve their stake, relinquishing control of the F1 business, but remaining a minority shareholder. The cornerstone investors, like Waddell and Reed and BlackRock, who came in as a prelude to the aborted flotation in Singapore in 2012, have already had their initial investment back and more, but they will make their exit. There will be a partial flotation of the business.

Mackenzie is also keen for the teams to become shareholders in the F1 business, which will tie them into the business long term and give them a share of the upside and a motive to work for the mutual benefit of all to grow F1. All teams will be offered the chance to take a stake and even smaller teams like Sauber, now they are owned by Longbow Finance, might be able to avail themselves of the opportunity.

XPB.cc Bernie Ecclestone Renault

This site has long argued that the only way to have real stability in F1 is for the teams to have skin in the game as shareholders.

There are signs that the new management, under new chairman Chase Carey, currently exec vice-chairman of 20th Century Fox, will seek to reduce the burden to circuits of hosting fees by working with their local partners in each country F1 visits to promote the sport and connect with the fan base, then sharing in the upside when the ticket sales and gross revenues increase. Making the tickets more affordable should be a part of that strategy.

Carey will have two lieutenants reporting to him; one will be in charge of the commercial side of F1, the other will be responsible for the sporting side, relations with teams, FIA and circuits.

There was much discussion on Sunday of the future role of F1 chief executive Bernie Ecclestone, who also controls 14% of the F1 stock, 5% in his own right and 9% through his family trust Bambino.

The word was that he will stay on until the end of this year; however on race day Ecclestone’s long time ally Eddie Jordan said on Channel 4 that the 85 year old would not even be at the next race. It is not clear why Jordan said this, other than it sowed some uncertainty into the situation.

It is hard to imagine Ecclestone going quietly into retirement as F1 has been his life for almost half a century and he enjoys everything revolving around him.

F1 Remote Operations Centre

Why does Liberty Media want F1?

Liberty Media’s interest in buying the sport is clear. Live sport is emerging as one of the real stars of the new media landscape. It pulls in huge global audiences and the content can be served up in a multitude of live and short take methods across multiple platforms but increasingly mobiles and Smart TVs.

Media companies like Amazon, Netflix, SKY, BT and even Google, Facebook and other players are realising the value of rich content to their growth strategy in multi-platform communications. F1 is a living circus, it has huge and valuable brands like Ferrari and Mercedes Benz as well as global sports stars like Lewis Hamilton. It has a large archive which can be monetised. It is an annual global series with frequent events and content creation opportunities, it has genuinely global reach and high potential on the monetization of the digital content side.

Simply as an asset in itself, in a media climate where Amazon, Netflix and the rest are becoming increasingly acquisitive, the value of F1 will rise. But it will rise more quickly if and when they get a comprehensive digital strategy in place and execute it.

Bernie Ecclestone

For this reason the likes of Christian Horner and Toto Wolff said at the weekend that Liberty could be good for F1, while at the same time reserving some caution for the huge cultural change that will come from the sport no longer being run by Ecclestone. Neither of them is in line to take on a senior role in the new management team.

It is hard to imagine, given that he has run it since 1981 and shaped modern F1 as it is today. But F1 is a media business and he made it what it is by harnessing first mass market free to air TV in the Senna and Prost era and then found a way to gain revenues from new circuits, Pay TV and global partnership sponsors. It currently turns over around $1.6bn a year and the teams receive around $700m of that.

Part of the reason Mackenzie would not sell the business before and send Ecclestone into retirement was because he doubted whether any entity or group of individuals could run it as effectively and profitably as Ecclestone.

F1 TV generic

The media industry has been – and continues to be – well and truly disrupted by technology. F1 is seen to have stood still while the world moved on around it and hence this will be a pivotal moment if the sale goes through on Wednesday.

F1 is well set up to benefit from that, with class leading fibre connectivity from race venues, cutting edge broadcast technology and the ability to send more or less anything to anyone around the world and to have it bi-directional so fans can connect back with the circuit from wherever they are. Meanwhile the potential to greatly enhance the customer experience on event is there to be exploited; to share rich data from the cars and drivers to users via their smartphones in the stand, to have connectivity from fans to teams and drivers during the events, to make attending the event a much richer experience than watching on TV.

Sky_TV_Malaysia'12_032

There is much that can be done but before then the deal has to go through this week. There have been many false dawns in the past and deals that fell through and this one still might.

But the sense from all the key players at the weekend was that this time F1 is set for a change of ownership and a fresh plan for the future.

I’m looking forward to answering fans questions about this and other F1 topics Live on the SingaporeGP Facebook Page this Thursday September 8, 2pm UK time #askjamesxsgp @F1NightRace

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1

its disappointing that the purpose of a paywall isn’t understood

2

“It is not clear why Jordan said this, other than it sowed some uncertainty into the situation”

Because, to put it simply, Eddie Jordan is an idiot?

3

saying “ciao amigo” thinking amigo means friends in Italian on the podium is certainly an element to answer your question 🙂

4

Is it just me or is watching Eddie Jordan doing podium interviews absolutely cringe-worthy? About as cringe-worthy as watching the Terminator up there…. I simply can’t watch it it’s so painful. Thank goodness for the PVR.

5

Is he as bad as Arnold bloody Swartzanegger was doing the Australian Grand Prix podium interview?

If Martin Brundle can get a gig doing them surely we should be able to see James get a shot.

So James, what’s the deal with who decides on the podium interviewer?

Can you yourself apply or ask to do them?

6

Bernie decides

I host the press conference afterwards so couldn’t really do both

I got the chance to host the Drivers’ Parade in Monza and really enjoyed that

7

After Bernie put him on the Monza podium he steps off it and announces Bernie’s immediate retirement? ( Most likely without Bernie’s permission .) That may have also swiftly precipitated Eddie’s unwitting resignation?

8

Americans cannot ‘do’ sport that isn’t exciting or ends in a tie, or ends in a low score, so they fix it. Just look at Nascar to see where F1 will end up. We will miss CVC one day.

9

We will not miss CVC, we will miss Bernie. He made some poor choices, but at heart he is a racer and someone who was there in the beginning. My take on what went wrong is Bernie was forced after the Kirsch debacle (which meant the banks were in control, and the bigger teams were threatening to take over or start another series) to sell to whomever was willing to buy, and agreed to have him remain at the helm. This turned out to be CVC. What happened after was Bernie desperately hanging in there by negotiating separate deals with the manufacturers. Not ideal, but possibly better than what the future will bring with new owners. CVC bled the sport dry, but they let it remain essentially intact. The new owners may want to revolutionize the sport by increasing the show. This is not the way to go.

10

Sorry if this appears twice, I’m just worried about how they will handle commercials. Pretty much all sports here are based around commercials so provide teams with time-outs. Maybe they will give teams a time-out to be used through the race to show commercials and tighten up the field. j/k… hopefully…

11

It will probably be done exactly how it is done in America now on NBCSN — the commercial is aired via split screen with the race on one side and the commercial on the other side (no audio for the race during these breaks)

12

James,

Two questions if I may:

What is Donald McKenzie really like? I have always had the impression that he has cared not for the teams and circuits short or long term but only for his employer and milking the cow dry until there’s nothing left, or is that unfair?

The takeover and its possibilities are all well and good, but the current on track product is so poor now how quickly can real change be implemented?

With each race F1 becomes less relevant as a form of entertainment, I am sure it cannot afford another season in 2017 like the last 3 to prevent it losing a whole generation of potential audiences.

Your thoughts appreciated

13

he is a very successful financier. He’s tough, pragmatic and successful. To speak to he is quite posh, clearly very sharp mentally and easy to talk to. He’s been very fair with me and we’ve had some great chats.

He’s not sentimental but does seem to enjoy F1 and clearly sees more potential with a different management team, which is why CVC retains 15/17% in the new structure. If Liberty doubles the value, that’s another $2bn.

14

Are you putting in a bid james ?

15

For what?

16

To Buy F1.

17

Sorry thought you meant to run it!

18

I’d like to see you run it.
The sport needs people who can view aspects from a balanced point of view far more than someone who’s only expertise is turning a profit for shareholder’s.

19

As long as the result is that we have someone in charge who cares about F1, who is interested in a French GP, the continued use of Monza, Silverstone, and Spa. Someone who will not be taking F1 to far off places whose only interest is not just getting their far off venue on T V, then this must be positive news.

20

Here’s hoping they make F1 more accessible moving forward…. I would happily pay $200 annual subscription for a reliable HD stream of each race weekend. Instead I pay nothing for a low quality free stream because I refuse to take out a subscription to Australia’s extortionately priced Pay TV provider.

TLDR: I’m a customer who wants to give F1 money, but they don’t give me that option to I choose the free route instead.

21

Well done james. An excellent article.

22

“will seek to reduce the burden to circuits of hosting fees by working with their local partners in each country F1 visits to promote the sport and connect with the fan base, then sharing in the upside when the ticket sales and gross revenues increase. Making the tickets more affordable should be a part of that strategy.”
Ohh… have they talked to Bernie about that? I mean let the promoter actually benefit from the race? Heaven forbid!

23

The fact of the matter is the product you see on the track is almost exclusively determined by the FIA and not the commercial rights holder, And it doesn’t matter how much of a “social media” experience you have, or how cheap the tickets are, if the product on the track is bad / boring – Liberty can’t make chicken salad out of chicken sh**.

24

That is completely false. The product you see on track is the result of the Strategy Group. Go off to Google, research the manner in which the Strategy Group operates (or doesn’t), and the balance of power within that group, and report back with what you have learned.

I am sure the FIA wish they had the ability to exclusively determine anything, but they sold off that right quite a while ago.

25

Careful what you wish for..

26

It will be nice to have n American part of Formula 1…..finally @ the top

27

If they bring in that great American idea of a mandatory safety car after 25 laps, I am out of here!

28

That kind of rubbish is my fear, and it just got a lot closer.

Mark my words, there are worse things than having CVC run F1.

29

Of course Liberty Media is just one part of the story here. Liberty Global, the sister company is the largest cable operator in the world, owns most if not all of the major European cable companies including Virgin Media in the UK.

30

So potentially even fewer of us will be able to watch the races live.

31

Any truth to the rumor that Martin Brundle will be one of the lieutenants?

32

James, could you care to explain if the stake transfer is not entirelly based on cash alone?
If there are political issues?
Veto to some potential owners?
No 100% ownership to Arabs, Russian or Chinese funds.
IF F1 has to stay within the Western world?
Has FiA some influence in it – since they hv to live together?

I’m happy w/ the change since Bernies is an old school guy and does not understand the potential of social networks and digital midia.
The process to hv access to F1 remains almost the same since I started to follow F1: to record the images from TV on race day and time.
I would splash some petty cash to hv access to – selected – on-board cameras after the race and review the race in the middle and back pelotons.
Still today you just can watch the leaders or the race the TV Director finds interesting.
The images are all there: front and back in-car cameras telemetry w/ driver’s movements.
F1 just have to make it availlable and cash, via YouTube, Netflix, Cable, etc.

33

FIA has to approve at the point where majority control changes hands – the Don King clause.

No idea if its cash or not cash alone. I know it’s partial flotation, that requires BE not to be CEO at that point

34

Thank You !
Much appreciated.

35

So CVC bought it at about 2.5billion ten years ago and might now realise 8.5billion. In terms of percentages – what is that %age on investment per year ? 😉

36

Let’s not forget the money they’ve taken out year after year.

37

BE gone? Christmas is early this year!

38

“The deal, which values F1 at $8bn,…” that’s interesting, wonder what Mr. Ecclestone’s personal worth is? Gotta give him credit for bring F1 to this point but it’s time to move on. That said, give Mr. Ecclestone a lifetime all access pit pass and he’ll be happy. Works for me and I’m only 68!

39

Can’t be much worse than what CVC have done (i.e. screw over the fans, maximum cost for minimal product)…or can it?

40

Mr Allen, in regard of almost certain ownership change of F1,your artickle is a top shelf & you deserve ( A ) for the day ! However the stambling block still remains in its place namely the FIA and its regulation of Governance,the F1 fans are up to their eyeballs in lack of consistancies when applying it. Liberty Media in my view will only colect a fees instead of Bernie Ecclestone but to Re-ignite F1 far from it, the FIA must be reconstructed in total to coinside in the broader view of Liberty media operations !

41

The question is who are the Lieutenants then? you say CH and TW are not them, then you must have a good idea who they are? I know we’ll find out in good time but that’s no fun!

I’m glad CVC are gone, however wont celebrate until F1 finally sorts out money issues. By money issues I mean, ticket prices, going to random tracks because they pay the money, Ferrari getting £300m for being Ferrari, £3bn leaving the sport altogether, engine costs… I could go on.

42

Just a reminder James that in Germany at his trial Bernie strenuously denied that he has any influence in the running or profit from Bambino.

Things are never as straightforward as they seem if Bernie is involved. it seems the deal is not done and that there are still two other contenders in the frame according to the BBC team.

43

Good news!
If they want some good ideas on how to improve F1, tell them to give me a call.

44

Darn it! Alphabetically I’m behind you. Call me after Alex! I shoud just start Formula X1 myself!

45

Seb, you can always change your name to Aardvark!
“Formula X1 -by Aardvark” has a certain V10 scream to it?

46

Having taken every available penny out of F1, Mackenzie wants to see the teams receive more from the sport. I’ve heard it all now. How many teams have/are struggling survive for the want of a few million. Why don’t teams receive a bean until they’ve survived 2 seasons in F1? Why does the 11th finishing team receive nothing for their efforts? Mackenzie should hold his head in shame and disappear back down his hole as soon as possible.

47

Is this admission that Ferrari let James Allison go because his mind and heart weren’t in it? Reads like it.

>
“Of course, we’ve failed on achieving our targets this year,” Arrivabene admitted.

“But one month ago, we took action, and since the last two races things are going a bit better.

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