Cases for a new series and the existing F1 championship
As Formula One as we know it seems set to pull itself into two opposing and competing factions, we take a look at the pros and cons of two very differing championships. Of course, there could always be a last minute
deal but more likely is a long drawn out court battle ahead of a final solution and two rival series competing for the same fans.
While fans and pundits alike have fierce views one way or another with many looking at the carnage in the US open wheel racing scene as the Indy Racing League went against the might of CART, there really is no parallel to the situation facing Formula One and FOTA at the moment.
To put the CART issue to bed once and for all - as I doubt the likes of Damon Hill or Eddie Irvine know Chris Pook from a hole in the wall - the newly formed IRL had the golden ticket in the Indy 500 and after poor management at CART, the manufacturers defected to the new series.
CART reinvented itself as Champ Car following its stock plummet, but as a spec-series, it was doomed. The situation here is very different and a new series as well as an old series could co-exist. Couldn’t they?
The case for a FOTA championship
Ahead of the first practice session for the British Grand Prix, the eight members of the Formula One Teams Association announced their intention to form a breakaway championship and no longer compete in the FIA Formula One World Championship from 2010.
Disagreement with the sport’s governing body dates back years with the former team alliance - the now defunct Grand Prix Manufacturers’ Association - proposing a similar breakaway back in 2005.
This time the FOTA members are fully serious and there is no reason to doubt that they will fail to follow through their actions and will race in a new series in 2010, especially when considering that the car manufacturers themselves promised support.
The reasons behind the breakaway are numerous, but most revolve around the FIA and the way in which the sport is run in terms of rule changes and the way in which those rule changes are applied. Money of course also play a factor.
The straw that broke the camel’s back - so to speak - has been the insistence from the FIA that a budget cap of €45m (US $62m) be introduced for next season. Many of the top teams and FOTA members spend many times that level and such reductions would result in massive staff reductions.
I won’t get into the decision making process or the reasons behind it, but instead what can be gained by the FOTA eight breaking away from the FIA Formula One World Championship.
As it stands, roughly half of the revenues generated by the sport go to the commercial rights holder and half go to the teams. CVC Capital Partners, a global private equity firm, purchased the commercial rights to Formula One in late 2005 with the deal given the green light early the following year.
To make things simple, effectively CVC purchased the rights from Bernie Ecclestone and his collection of companies. Ecclestone had previously purchased the commercial rights from the FIA for a 100-year period.
Now the precise details regarding the financing of the deal is complex and tedious, but CVC borrowed the reported two billion plus US dollars to purchase the rights to the series. Bernie Ecclestone was retained as CEO at CVC and remained in control of the sport he had nurtured and developed.
Now with massive debt to pay, CVC needed Ecclestone to go out there and make some serious money. New venues with state funding willing to pay top rate for a Grand Prix were given the nod by Ecclestone as the series began its drift away from its traditional heartlands of Europe and North America, to new venues in the Far East.
The teams meanwhile were dismayed when first the United States and then Canada disappeared off the Formula One calendar with both unable to meet the increasing financial demands put forward by Ecclestone and his sanctioning fee ‘escalator’.
The new series, dominated by the car manufacturers, would be able to select the markets that are important to them and would undoubtedly look to the North American markets. They would have plenty of choices in terms of circuits with Indianapolis and Montreal prime targets as well as former Grand Prix venues such as Imola, Estoril, and Mexico City able to cater to their needs. Silverstone is and Hockenheim could soon be available too.
Another advantage for the new series is that they would be able to create their own rules without influence from the FIA and keep the revenues generated by the new series for themselves to – arguably - offset the costs of the new series. In other words, they would be completely in control of their own destiny.
If FOTA found that fans preferred turbo charged four cylinder engines to the current frozen V8 engines, they would be free to make the change. If they wanted to push forward with four wheel drive technology as well as ‘green’ initiatives, they would be free to do so – assuming a collective agreement.
One way to start a new series quickly is to purchase an existing series. Tony Teixeira has already gone on record, perhaps half in jest, saying his A1 Grand Prix series could be for sale at the right price and that would be something of a turnkey solution for FOTA.
Of course fans would determine the success of any new series as would world-wide television revenues, but there are plenty of reasons as to why a new series could get under way and indeed thrive.
The case for the FIA championship
With Honda pulling the plug on their Formula One programme last year, the FIA and the commercial rights holder finally woke up to the fact that the series was in danger of running out of teams. This was largely their own doing with various barriers to entry put up over the last decade including the ludicrous ‘bond’ that had to be filed with the governing body in order to even enter the sport.
From actively discouraging new entrants a few years ago, the FIA has made a huge about-turn and is now welcoming the independent teams into the series with advance funding from Ecclestone and the commercial rights holder, plus caps on expenditure.
Formula One has global television coverage and races at the newest – if not finest nor grandstand-filled – circuits in the world. It enjoys enormous media coverage and according to CVC Capital, brings in over two billion US dollars a year in revenues.
With the FOTA eight going off to start their own series and with much lower costs in place for the 'new' F1, the series will be able to attract plenty of entrants keen on being associated with the Formula One brand. In addition to the new entrants, Williams and Force India have pledged their allegiance to the series.
With lower budgets in place, any debate about increasing the share of revenue between the commercial rights holder and the teams is now over as such massive funding to run a two car team is simply no longer required. With a cap on expenditure in place, the television revenue alone could – in simplistic terms - support a team with sponsorship becoming something of a bonus.
The FIA could continue to create the rules for the championship without the interference from the teams while CVC could continue to pay back debt and should the series prove popular with the new entrants, look to push forward the long-hoped for floatation of the series on the stock markets.
The series would return to its roots with teams that only exist for racing competing for top honours and perhaps arguably, less of a major marketing exercise for the car giants.
All of the above being said...
Of course, there is also the question of fan loyalty: established teams having world-renowned drivers are by far a bigger attraction. In the short term FOTA will have that, while F1 might be fielding a 13-team field including 11 new outfits mostly unknown to the world.
From a fan's point of view, without forgetting the tedium caused by the constant politicking within F1, a new fresh start might be the thing needed to concentrate on racing as a sport and spectacle before anything else.
And for those fans, who now see the possibility of seeing a major new open-wheel series returning to popular venues left behind by F1 – instead of state -funded destinations where grandstands are either more than half-empty, covered under canvas or supplemented by off-duty soldiers in civilian clothing – the choice might be an easy one to make.
Perhaps it really is time for a change?
E. A. © CAPSIS International