Liberty to tackle team spending; the Have’s and the Have Yacht’s

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Now that Liberty Media say they’ve passed the EU Anti-Trust concerns and raised $1.55 billion in order to acquire majority stake in Formula 1, they’ve set about tidying up the place a bit. One key area is the way in which teams spend money. The Telegraph quotes a “senior source” who is apparently familiar with what Liberty is intending to do:

“It makes no sense to have teams spending the better part of $400m (£320m)” he said. “That money is not doing anything good for fans. It is just wasted on competing on technology. That has not been driven by logic and it has created a two-class society in terms of what is spent on teams. You should have an opportunity for the underdog to win.”

This is nothing new, if you’ve followed F1 for a while, because F1 boss Bernie Ecclestone has complained and realistically said that teams will spend whatever you give them and in most case more. He’s often criticized teams for their voracious appetite for panache and high-class living with massive motorhomes and amenities that quite honestly old teams didn’t need in order to entertain sponsors and race around the world.

In the end, you have to get profitable at whatever level your sales/income is and many teams have gone well beyond that critical point. If Liberty is going to engage teams with a master plan for capping expenditures, it will be met with a jaundiced eye from top programs like Ferrari, Mercedes, Red Bull and Renault.

Liberty is said, per the article, to be working on spending controls and they’ll know that manufacturers can bury costs in their massive organizations so John Malone has in his bag of tricks remains to be seen but he’s a guy who has had to control his own organizations costs so perhaps his language and approach will resonate with manufacturers as well as independent teams. One of the major issues will be trust amongst the teams and Liberty on how they handle spending controls and that comes at a premium these days.

“The biggest thing we’ve got to change is culture. Right now, nobody trusts anybody,” a Liberty source said.

In the end, F1 is a business and there is a fine line between entertainment and individual motives of the participants. If Liberty can find, perhaps through regulations that are—as Ross Brawn alluded to—in need of a serious re-think, ways to curtail spending, they may find an equilibrium between achieving what manufacturers want from the sport and what fans deserve.

The new look of F1 will be more corporate and a larger team to work with the stakeholders in the series but is there a compelling reason to label a small-budget team with far less skin in the game an “underdog” who deserves a chance to win? There are two schools of thought here that a team like Manor can come into the sport on limited investment and demand the chance to win races against teams who have taken the commitment to a much higher level.

In this case, I tend to agree with Ecclestone that F1 appeals to the very best and the top motorsport teams. The product he has grid up for decades has been the best product he can attract and this is the real crux.

If you want a spec series in which anyone can win, then you need to race in GP2 or lower series but F1 is a product and the product is haute couture of motorsport. This is part of the reason F1 has been struggling under the new regulations, it has reduced the perception of being a top-shelf entertainment product in favor of wonkish manufacturer-driven technocrats claiming road relevancy over entertainment or so the narrative seems.

Liberty needs to worry less about equity amongst team balance sheets and more about making the series a true 3, 4 or 5 team completive series that brings the thrill of racing at the top level back to prominence. In the end, fans only see complaining between the Have’s and the Have Yacth’s. 

Hat Tip: Telegraph via Christopher Williams

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Alianora La Canta
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Alianora La Canta

The cost-cutting regulations the FIA tried before did little except increase costs. I would want to see the specific proposals Liberty have in mind before commenting on them – and for it to pass the FIA tests required to acquire a stake in F1 (it can’t have done so yet, otherwise the FIA would be shouting it from the rooftops).

As for trust… …the major players simply have too many reasons to mistrust each other, and no especial reason to think Liberty is any different to other Piranha Club members.

Schmorbraten
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Schmorbraten

I get the haute couture point, but are $400m per top team really necessary to deliver a haute couture of motor racing? I think it just makes sense that if Liberty reassesses the F1 business model, they also take into account the efficiency of the business models of all participants.

jakobusvdl
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jakobusvdl

“It makes no sense to have teams spending the better part of $400m (£320m)” he said. “That money is not doing anything good for fans. It is just wasted on competing on technology.”………..wtf??????? ‘Wasted on competing on technology’ is this for real????…….F1 is the highest class of single seat, open wheeled racing, if its not about ‘competing on technology’ what’s the point????? The driver to driver racing is far closer in so many other types of racing (mostly spec series) from GP2 all the way through to KT100 karts, F1’s point of difference is that the teams ‘compete on technology’… Read more »

geeyore
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geeyore

The new commercial rights holder – a business enterprise which has been eminently successful in so many other areas – has unleashed its army of financial analysts and managers on F1, and they’re beginning to conclude what Bernie and even Max Mosely have been saying publicly for a while. The costs of “competing on technology” and “road relevance” are too high to maintain a viable racing series which includes non-manufacturers. Because the participation costs are high, “competing on technology” also drives ridiculous promoter (track) fees, meaning sky-high grandstand fees, or conversely empty grandstands in kleptocracies. I think we all know… Read more »

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Fast Freddy

Liberty Media is a bottom line kind of company. They want to maximize their profits which includes reducing costs. Sure I’d like to see smaller teams do better, at least be able to make some money and fill the field. I don’t expect that cutting Mercedes budget will allow Manor to break into the top 10