As we mentioned earlier, the Telegraph’s Tom Carey covered the bold statements of Ferrari’s CEO Luca di Montezemolo at a press function this week in which the Italian threatened another breakaway series as a possible option should the teams not receive more of the revenue from F1’s commercial rights holder, CVC.
The comment comes on the heels of last year’s threat of a breakaway series by FOTA (Formula One Teams Association) that was quelled with some delicate negotiations and the removal of FIA president Max Mosley. There are a host of reasons, some known and some unknown, as to why this happened but suffice to say it is not over.
As evidenced by Mr. Carey’s story and Luca di Montezemolo’s statements, the issue is still prevalent and I have been reading several news stories and websites today with interest to their opinion and commentary. The issue is a galvanizing one as to be sure and has brought forth some strong opinions on the matter within the old and new media circles.
Mr. Carey neither asked for nor would he most likely want my defense of his article but I must say that Pitpass was incredibly heavy-handed in their coverage of the story in which they lambaste the veracity of Luca Montezemolo’s statements as well as launch into an all-out scolding of Mr. Carey for even mentioning the story and “not knowing better”. Odd way to trumpet the perceived talents of their own staff writer Christian Sylt by engaging in character assassination of a Telegraph reporter over a story that is news regardless if Sylt thinks it will happen or not.
Ferrari’s position is not Ferrari’s alone. The teams in F1 would all welcome more revenue from the series. The issue at hand is the 50% that CVC takes from the series. This, according to Montezemolo, is not enough. The reason? I think its many reasons but interesting that Luca said, “For me the presence of Bernie is a priority because Formula One can’t be ruled by the Stock Exchange,” he said. “We need people with credibility, personality and experience. “But in the end we can always find a different promoter. At the end of the day this business is not so complicated.”
I read Joe Saward’s comments and he always does a good job of delivering three-sided views of a subject. The past, present and future of an event or issue. It’s one of the charming things I like about Joe. He is, in my opinion, on target with his assertions and offers a realistic expectation for FOTA. I have worked with several promoters in my day and the notion of a 10-20% return, as Joe mentions, is fairly typical. Joe explains this is one thing that could drive the conversation or next move and I think he’s perfectly correct in his assumption. I’m sure he would equally not want my endorsement but I offer it just the same.
It bears keeping in mind that the contractual obligations of the FIA to CVC are something we have not read but suffice to say they are certainly a large part of this as well. I don’t want to marginalize their part in this equation. They contractually are the regulatory body for the series. It is their series to regulate but I am not sure if they could be a part of a breakaway series or not. Most likely the answer would be no from a non-compete standpoint but having no knowledge of what that contract looks like, it’s all guess work on my part and most likely off the mark.
Will there be a breakaway series? Odds are not good as they’ve tried this before with little success other than bolstering the teams bargaining position. What does CVC/FOM boss Bernie Ecclestone say? Reuters covers the comment:
“It’s what he (Montezemolo) says every time he goes to Monza every year,” he said. “‘We need more money’. It’s all nonsense.
“They’re not going to break away. They’ve tried it all before. Luca’s a lovely guy but he likes to say these things and then he forgets what he is saying,”
Will CVC take less of a return? I’m sure they aren’t excited about that notion. If you ask me, it’s the future that is at stake as Ecclestone is not getting younger and the teams most likely are using the 2012 expiration date of the Concorde Agreement to secure their future in, what will be inevitably, a series devoid of Ecclestone’s touch, acumen and savvy. Are they happy with the leadership of CVC and convinced that the firm is the right commercial partner for the future? I am sensing the answer is no. Would CVC be willing to sell their interest to someone else who would accept 20% instead of 50%? Maybe but the price has to be right and the acquiring group would have to be in it for the long term to service that amount of debt with only a 20% return per annum.
While Luca plied Ecclestone with platitudes, the reality is that the CVC’s ability to service their debt relies on the current returns they are getting. That was part of the deal Ecclestone cut with CVC I am sure. Perhaps the contract had some verbiage that stated the percentage return was subject to fluctuation but there is no way of knowing. There are several reasons I can think of why Ecclestone would rubbish Montezemolo’s statement and the preservation of the CVC return is, in my estimation, tied to the total package that Ecclestone sold. Perhaps his ability to be made whole on the deal is CVC’s ability to service the long-term structured debt. Did Ecclestone carry a portion of the note based upon his confidence in the series? Who knows?
Either way, Ferrari are the most vocal about it all and usually go straight to the heart of the matter with a blunt object such as “breakaway” but if truth be told, the other teams wouldn’t mind more revenue and a long-term stable partner not tied to the volatility of world markets and one who has a passion for F1 instead of just the money it makes. Say what you will about Ecclestone, but I truly believe he loves this sport like no other. The money and the deals are all part of his business acumen but at the heart of the man exists the soul of a race fan. So too does Luca di Montezemolo’s heart pump petrol. Does the CVC’s? Good question huh?