“The Ecclestone era ending is a pretty big thing,”
The words of Toto Wolff, current world championship team boss on what has been a momentous two weeks for the sport. But he added, “We need to embrace the future and we shouldn’t be too nostalgic about the past.”
The Formula 1 roadshow rolls on with a new management team and a new ethos. So what will it look like and what does it mean for fans?
They will need to move to new offices very soon, as F1 Management was based in a building in Princes Gate, London that belongs to Ecclestone. Rather awkwardly he lives in the flat upstairs; ‘living above the shop’ as the saying goes.
The new office building on which they sign the lease will need to be future-proofed against the growth of staff over the coming years that will be working there. Under Ecclestone F1 Management had no marketing department and only one person in sponsorship. To match other Tier One sports bodies like the Premier League, NFL or NBA there will be over a hundred across those two departments in no time.
That is how F1 will grow. As Chase Carey the new CEO observed, one of the problems was that everything, from new races, to TV deals to sponsorships had to pass across Bernie’s desk for approval and that inevitably greatly restricted the speed of growth.
But there is also an important strategic point here.
At Ferrari Luca di Montezemolo oversaw massive growth in the company, but he deliberately had a ‘rarity value’ built into the Ferrari brand that meant he would not allow more than 7,000 cars to be built and sold in a year. Sergio Marchionne got rid of him and replaced him as chairman partly because he wanted to open it up and sell 10,000 cars and more every year. (It was also because he wanted to float Ferrari on the stock market to help deal with FIAT Chrysler debt, which Montezmolo didn’t agree with)
Whist the comparisons between Montezemolo and Ecclestone are limited, the notion of exclusivity value is important to understand. The price was high because Ferrari was exclusive and that’s how Bernie saw F1 and how he built it.
But that only washes in today’s world with a certain kind of person and a certain kind of (ageing) demographic. Millennials hate what is not transparent.
Digital natives don’t mind paying a few dollars or pounds for content they really want, but they want it here and now and without any ‘friction’ in the technology or process that slows down or complicates how they consume it. F1 under the old guard just did not get that at all.
Today the more nuanced term, which will be fundamental to the new F1 order is ‘inclusive exclusive’, which allows for millennials to feel they can easily access a sport or a property, so they can pick and choose what they want from it on their terms. And the exclusive bit means that they don’t mind paying a bit of a premium for something special, if they are attracted by the exclusivity of it.
So what this all means for the new look F1 is now beginning to emerge; Carey, whom F1 fans are getting to know and Brawn, who has massive awareness and credibility in the field, have been dropping hints and notes about what we can expect from their new management approach.
For example, promoters who are screaming because their race hosting fees are unsustainable will be helped. They won’t necessarily get a discount on the fee, because Liberty’s model requires growth from race hosting fees, not a decline.
But they will get infrastructure support and far more for their money than an F1 race and some Porsche Supercup and maybe GP2 action bundled in. They will be given a week long festival of activity and year round promotion to work with. Over time, collectively the race host and the series will make the pie bigger and both share the upside.
Meanwhile Ecclestone, who is not used to having time on his hands, has suddenly found himself with a lot of time on his hands.
He needs to feel at the centre of the wheel, not outside it. So he’s begun to disseminate hints that he is looking to set up his own rival series. He’s also pressing hard on the FIA and its perceived ‘conflict of interest’ in approving the sale of F1’s Commercial rights, knowing that it’s own small stake would net the Federation around US$80 million.
It would be hard for anyone to set up a rival series without Ferrari, as the events at the end of the Mosley FIA presidency in 2009 graphically illustrated. The major teams are all dialled into agreements that take them to 2020, when Bernie will be 90 years old and any major sports series needs a digital growth model.
The last time F1 was owned by a media company it was a catastrophe. Kirsch owned it briefly in the early 2000s and then went bust, which put the business in the hands of the banks that then sold it to CVC, who took billions out of the business and invested almost nothing.
Along the way Kirsch and Ecclestone did things like restrict on-board camera shots to Pay TV channels only. So the free to air TV in the early 2000s – which needed all the excitement it could get as Schumacher and Ferrari won everything – had almost none of the high value camera shots that fans love.
For example, Mika Hakkinen’s legendary pass on Michael Schumacher at Spa, either side of Zonta on the Kemmel Straight at 200mph, was seen live only from a side shot by 95% of TV viewers around the world. Only those watching the F1 Digital pay channel saw the money shot live on board with Hakkinen.
It’s an example of how not to deal with ‘exclusive’ when trying to grow a sport.
But that is all in the past..