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Insight: Next 48 hours decisive for the future of Formula 1 ownership

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Insight: Next 48 hours decisive for the future of Formula 1 ownership
Sep 5, 2016, 11:04 AM

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 an...

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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Series Formula 1
Tags innovation