What would a Rupert Murdoch takeover do for F1?

The news this week that Rupert Murdoch's News Corp is looking at buying Formula 1's commercial rights from CVC in a consortium with Carlos Slim has elicited a range of reactions; an almost instant denial by Bernie Ecclestone, some media coverage giving the idea some credence and many seasoned people thinking it's a smokescreen, or negotiating ploy aimed at other interested parties.

News Corp does make bold acquisitions. But it is also frequently trotted as a possible buyer of eye catching assets, when there is no substance to the story; it was linked with Facebook at one time. And Bernie Ecclestone and Rupert Murdoch know each other well and have spent plenty of time together in casinos.

So a leaked story like, this, particularly as it was leaked by a News Corp owned property, Sky News, could have a variety of tactics behind it.

But, in a changing media world where newspapers are in decline, the company is always on the lookout for the right assets to grow the business. It looked at buying Manchester United a few years ago, for example and has long had aspirations to control a global sport, which it can exploit commercially.

F1 is a fabulous global platform and a relatively simple structure with 12 teams, 24 drivers and a 19 race calendar.

There are some areas of F1 which have huge potential for commercial exploitation in the future, like online and mobile, which make an acquisition by a big media company in partnership with a mobile phone giant a sound idea.

The company already has extensive business with Formula 1; it buys rights for Sky Sports Germany and across Asia with the Star Sports Network among others. In the UK Sky dipped its toe in the water in the 1990s with the FOM pay per view platform, but it only lasted a few years.

But it has a wide reaching global platform of its own and the ability via a deep understanding of the market, of how to exploit the commercial rights of a sport.

A consortium with someone like Carlos Slim, who owns an extensive global mobile phone business has obvious sense behind it.

But at the same time, such a consortium, were it to be real, would not be the only interested party. The investment arm of Abu Dhabi, for example, has been looking at the sport for some time, but would probably have to form a consortium with at least one other partner, with a strong media profile in Europe and/or Asia.

As for how a News Corp takeover might work for the consumer, the fan, many fear the onset of pay TV, judging from comments sent in this week.

The Concorde Agreement, which binds the teams, the FIA and FOM together, explicitly sets out some conditions for free to air TV in certain key territories. This is to protect the interests of sponsors and manufacturers in particular. The media value of the sponsorship goes down if the broadcasts do not reach the huge audiences you get with free to air TV. But the revenues from the TV could offset that and make the teams less dependent on finding sponsors, which they find very tough.

There has been a toe in the water exercise going on recently. In a number of countries in recent years F1 has moved to a model whereby the race is on pay TV, which also screens all practice sessions and qualifying and then there is a delayed telecast on free to air later in the day.

This is what has happened for a few years now in Japan and Finland, for example, where the live race is on MTV Max and the highlights re-run is on MTV3. There was resistance to start with, especially in Finland at the peak of Raikkonen's career, but it seems to have settled down.

There is a cost to the fan, of course. Figures of around €70 a year (€3.50 per race) have been seen and there's no doubt that the fanbase is big enough and mature enough to support that.

The English Premier League is an interesting comparison, however, as it has similar global appeal to F1 but has significantly higher commercial returns and a fanbase, which has been very strong despite having to pay to watch games.

EPL has been on Sky in the UK for almost 20 years and is a commercial powerhouse. Its UK TV package is worth £600 million a year while overseas sales are slightly higher.

The 20 Premier league teams collect £40 million each with the champions earning £70 million for a season, more than F1 teams, of which there are only 12.

It's not possible to buy the EPL, but it is possible to buy F1. It has changed hands a couple of times already and is clearly approaching a turning point. CVC deny that they want to sell, but given the nature of their business, private equity, by definition there is always a sale due at the right time and at the right price.

But there are complexities, which have caught others out in the past. The Sky News story this week said that News Corp was being advised by JP Morgan, which is one of the banks left holding F1 stock when Kirsch went bust in 2002 (News Corp was also one of the creditors back then). JP Morgan know quite a bit about F1.

There are many possible reasons why this story came to life this week; to confuse the picture, to blow the cover on News Corps' plan and derail it, to prompt someone else into action, to send a warning...the list goes on.

It could just be the journalist, who broke the story, flying a kite, but given the number of stories emanating from CVC sources via Sky News in recent times, that's unlikely.

Central to all of this is the negotiation of the new Concorde Agreement, which is due to come into force in 2013. Until the terms of the new deal are resolved, a sale is unlikely. The teams and the FIA want more money, CVC wants to protect its investment and maybe make a profitable exit, while Ecclestone wants to come out on top, as he always has in the past.

The racing this year looks pretty exciting and the business off track is shaping up to be just as lively!

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