Op-Ed: F1, modern media & malcontents

The notion that F1 needs to embrace the new world of online media and social networking is a case of preaching to the choir when it comes to a younger, more connected generation. F1 needs to be more internet savvy and seek ways to engage its fans online and through emerging social media sites such as Facebook and Twitter. That is the news coming from two major motor sport conferences this week according to multiple media outlets.

F1 Media

AUTOSPORT’s story describing a call for a more modern F1 embracing a modern media was immediately re-posted, re-tweeted or linked to by numerous blogs, Twitter accounts and other social media outlets( the irony is not lost on me in that last sentence). Mr. Noble of AUTOSPORT and Mr. Saward of Grandprix.com attended conferences with the latter choosing to attend the PRI conference here in Orlando Florida while the former chose the more glamorous Monaco location.

Mr. Noble suggested an almost unanimous feeling amongst attendees for F1 to embrace a changing, modern media with luminaries such as Lotus F1 Racing’s Tony Fernandez and Gerard Lopez, the Luxembourg-based businessman interested in acquiring Renault, calling for a massive change. Both gentlemen espoused the virtues of F1 and maintained that drastic change was needed in its engagement of modern media. Mr. Noble is fluid in his description of the events and insightful regarding its content but that is not surprising from a man who represents both online media as well as legacy print magazine strategies.

I found Mr. Fernandez’s comments about the music industry being concerned about EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) more than the internet very interesting. One could argue that nothing is worth protecting, selling or engaging if a company’s EBITDA is not managed properly or protected for its shareholders so the chicken and egg argument is at play here.

F1’s owners know what EBITDA is all too well and while they may have a large fixed asset structure as well as a large intangible asset structure, there are serious considerations for the amortization of the intangibles and depreciation for the fixed. More importantly the EBITDA of F1’s owners is crucial as it is the single most common figure used to determine a company’s cash position and ability to pay interest. Recall if you will who is still making very large interest payments…the CVC/FOM (owners of F1’s commercial rights).

Fernandez’s comments are well intentioned and I would add that EBITDA is something the music industry and F1 need to be very wary about before launching into huge online initiatives that are just now starting to garner some tangible P&L impacts. It may not be enough to scare the CVC/FOM or its titular head of operations, Bernie Ecclestone, to make a drastic move toward Twitter but the sentiment is still very applicable and still very correct.

F1’s use of alternate media to reach its fans is anemic. While former FIA president Max Mosley suggested that fans don’t care about technology in F1 I could make the counter argument that the fans of F1 are clamoring for more immediate access using the latest technology to do so. Point, set, and match Max.

This is not born from a notion that fans want to burn HD DVD’s and sell them in China for $3. It is born from a desire to get closer to the action of a global sport that has become reclusive and almost rude in its approach to the fans that support it. The cautionary tale still remains that unless CVC/FOM can identify a proper monetization model for this initiative, it is difficult to know just what method they may choose.

If you look to YouTube and Twitter for example, both are leaders in their respective niches and yet no one is quite certain—still to this day—on how to monetize these services. Twitter is free and so is YouTube and while advertising dollars seems to be the default revenue opportunity for online media, the concept of a pay-for-services mentality just isn’t bearing fruit. The notion that the internet is a prison for dreams may be closer to the truth than we once suspected.

Recently the Wall Street Journal announced it would stop providing online content for free and it can only be a matter of time until other large news agencies follow suit. Associated Press have large payrolls to sate and when they sold their content to a plethora of print media, it all made sense. Now print media is struggling to survive (although most print media pundits deny this and launch into scathing attacks of online, modern media as evidenced by my recent conversation with a USA Today reporter) and if those defunct magazines and papers aren’t purchasing AP stories anymore, AP can’t make payroll.

The internet has one common notion born from its millions upon millions of users—things on the internet should be free. Products purchased on the internet, and I am speaking of tangible products, are acceptable to pay for. That may not be my perception but it does permeate the web and perhaps it all came to a blinding realization when the rock band Metallica figured out that kids were downloading their music for free. It’s festered ever since.

The movie industry has taken a seriously (I would argue egregiously) major step to avoiding their sister industry’s major cock up regarding the internet. They convinced manufacture’s to design hardware accommodating their HDCP encryption model (owned by Intel) that places a stranglehold on the entire process. They now control their content all the way to your TV—and you thought HDMI connectors were cool.

F1’s content is video. Will they factor in encryption technology? Can they work with Intel and other hardware manufacturer’s to incorporate HDCP? Or will everyone continue to hover around Justin.tv trying to find a live feed? My bet is on Justin but that’s just pandering to the lowest common denominator. The Cheetos and Red Bull-fueled hacker who designs a program to subjugate encrypted video whilst sporting boxers and orange finger tips will always be there no matter what technology is used.

In many respects, I feel the drivers and teams could be more proactive in using social media and alternate modern media technologies in reaching out to the fans. Sponsors are also an optimum provider of resources to achieve this as they too stand to reach the world attached to a favorite driver’s image and name. It is not incumbent on CVC/FOM to promote drivers, teams, sponsors or cars. What may be more entangling is if there is language that prevents teams from major promotion via modern media due to their being signatory to an archaic Concorde Agreement (the binding agreement between CVC/FOM and the teams).

Ecclestone once commented that the internet promotional aspects are part of the TV contracts with the local host of the F1 program. Here in America that would be Speed TV. While chatting to an online manager for the station, he was very specific that this is not the case and that the online abilities that they had were very, very limited by contractual language with CVC/FOM. What he and I may both not be privy too is that Speed TV may have been offered this online promotional opportunity but didn’t have the cash or interest in paying for it. I think of the BBC’s Red Button feature that Speed TV seems devoid of as an example of a service that is available but not in the USA.

While the battle of frustration still roils between the old media (how they loath that term) and the new media, it remains to be seen just how F1 will engage the latter and the former is damned concerned that they too might become irrelevant if they aren’t blessed with F1’s first offer for becoming the preferred vehicles for this modern media transparency initiative.

If I am honest, I understand that argument. I honestly do understand the amount of resources, overhead and time that it takes for these companies to produce their old media services and offerings and as they have owned the industry for so long, it is with complete appreciation that they feel entitled to the next big thing.

There is another side to that coin however. If the old media were producing content readers wanted to read, they wouldn’t be in this position. They certainly have every right to heap vitriol on blogs, Twitter-istas and Facebook fakes but is that who is really to blame? The heavy handed arguments about “proper journalists”, cut-n-paste, and triple-checked sources inevitably comes forward and while all of those are not without their very appropriate points of concern—that isn’t the point. Arguing about “who killed who” is nonsensical because the real purveyor of this war is the reader, the fan and the fair-weather, free-or-I’m-not-reading-it internet surfer. When the sky is filled with stars, it’s hard to focus on just one.

For every aging F1 journalist, there are a thousand aspiring young journalists/fanalists looking for an outlet and the online community presents them with that vehicle (AND It’s FREE). Let me be straight here, I am sympathetic to what it took for veteran F1 journalists to get to where they are. The hard work, slogging it out in bad hotels and taking crap from bosses no one respected is certainly something I am familiar with (I am not young and I did come up through the business world pre-internet). For a young man or woman to roll up to GoDaddy.com, buy a domain and become an F1 news outlet takes one evening—that’s hard to take especially if they start gaining a huge following. I wonder how many at these conferences are clamoring for F1 to embrace the old media and keep things the way they are while ignoring the new media?

Where does it end? How can the internet accommodate F1 or vice versa? How does the new media play in to the F1 experience? How will the Old Media adapt? Will they adapt? Will they buy their position in the new world? Columbus is now being skewered for doing so in North America so be careful with that axe Eugene.

Mr. Saward’s post suggested that the “good news” is that captains of industry still find relevancy and investment justifications in motor sport sponsorship. This, as Saward says, is indeed good news. He seems genuinely excited to be in Orlando and hearing from industry luminaries who still think racing rocks. What better place for a veteran motor sport journalist?

Sponsors are the key to motor sport these days and this is indeed good news but as a captain of industry, I can tell you that the dollars in which to invest in motor sport, and its perceived value, are few and far between today. The investment opportunity has to be more tangible than just building marketing or brand equity positions. No company is in such a fluid of cash position today to invest in traditional marketing avenues and many companies are now trumpeting “creative cost-cutting” programs. How damned creative can we be here and still survive?

Sponsorships are still in existence primarily because of long contracts that were signed prior to the credit crisis and many businesses are looking for a way out. Royal Bank of Scotland comes to mind. Will the economy change? Sure. Is this message a good message? Sure. Is it true? Absolutely, but not for every company and what we may see is a change in the sponsorship industry. How damned creative can we be to get sponsors on cars, suits, shoes and websites? How can we tie the CVC/FOM product with the teams and their sponsors to create one large product that guarantees coverage for all involved with a real monetization plan that will transcend the “free internet” mentality?

I have an idea but no one is asking me so I’ll spare you the soapbox drama.

Special thanks to Mr. Saward and Mr. Noble for attending and bringing us their reports. Two “old media” veterans that I like a lot. ;) It’s a joke guys…lighten up Frances.

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