In a speech given in Bahrain today, Ron Dennis outlined his view of the future of F1.
Most of what Ron said is to the point and taken in the spirit intended (well, by this F1 fan anyway). what i think was most interesting in his comments, including the obligatory environment position, was his statement about entrepreneurs.
“Entrepreneurship remains essential to the future development of F1.
“If all the current F1 teams are to be involved fruitfully in terms of the profitable enjoyment of every F1 stakeholder, and if the six major car manufacturers currently involved in F1 are to continue to maximize the return on their investment – Mercedes-Benz or Daimler, of course, but also Ferrari or Fiat, Renault, BMW, Honda and Toyota, then the rules by which we go motor racing must be conducive to that entrepreneurship.”
Ron is correct that the big six makers involved, while huge in size, are still entrepreneurs in their own right. My hunch is that Ron is suggesting that teams big and small have to have a return on their investment (I know, that seems obvious but bear with me here). That return will look different to each team as their expenditures are certainly different and the reason for existing in F1 is different. Eddie Jordan was not in F1 to sell cars or Mugen Honda parts. Mercedes is. Eddie didn’t spend the money that Mercedes spends on the program and therefore the return on his investment is not as great as Mercedes. If you spend $150 million on your program and get a 20% return after all SGA is covered, tax obligations and sponsors are settled; that is $30 million on the upside. I am talking mark-up not margin here. Given this rudimentary math and percent return as an example only, Mercedes would be looking for something over twice that amount.
ultimately, my hunch (and it’s only a hunch), is that Ron is hinting at revenue sharing proportional to the amount invested. This is where things are a little foggy. I think Ron is fully endorsing the privateers here. I really think Ron wants them there and knows that they are the heart of F1 even though they operate in a penumbra of the bigger teams. The inference could be that TV revenue be distributed to include more total dollars to spread proportionally across the paddock. Mr. E will most certainly have issue with that today but perhaps Ron is speaking of the future and hinting that the revenue machine of F1 needs to oil the wheels of the teams that take the risk and make the show. On many levels i can agree to that idea but to be fair to Mr. E, if I own FOM; a business to run and bottom line to keep. No different really that Ron does. Strangely I think at some point Mr. E will be placed in a position to work with the teams on some process to recognize dollars / pounds in return for participation. Force India can only get the kind of advertising dollars Mercedes gets if they are running up front and they need the help of TV recenue to stay in the game. At this point, Mr. E has to be saying “why is it my problem to subsidize your operation?”. Not sure i can argue with him.
Well done Ron.
