Ron Dennis Looks For Measured Evolution In F1

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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.

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BobHereYo
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BobHereYo

Man it sorta sounds like Tony George incentivizing teams to compete in the whole IRL season with his cash and engine incentives. What about the incentive to be competitive will that get lost if you care guaranteed X-Share every year? I found it very exciting watching the backmarkers fighting for every precious point last year because it all meant big money in the constructors championship fund. Although, Revenue Sharing Seems to Work Very Very Well for the NFL here and when you factor in every NFL team (each team respectively) can spend over $116 million a year on the their… Read more »

WonkyDave
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WonkyDave

Wow. Negative Camber has become Negative Economics. Whoda thunk it? I don’t have a problem with sharing TV revenues evenly, but isn’t that a drop in the bucket compared with the potential amount of money a team can make worldwide? This is as close to a pure capitalistic sport/business as I can think of, but as we’re seeing with Honda, throwing the wealth of small nations at a team will not buy you success. Conversely, it has worked at BMW because they currently have something that Honda does not: a business plan executed by those who know what they’re doing.… Read more »

Negative Camber
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Dave, Shouldn’t you be at work right now? Go land 480 on some robot so they can build a better car of tomorrow for NASCAR. :) I think I mentioned Mr. E’s position on this but I think you may have summed up my sentiments much better than I. Mr. E is not in the business of subsidizing teams and yet he already does on many levels with revenue sharing etc. Ferrari received $100M from the FOM for their portion of the TV revenue in 2007 and their place in the constructors championship. It happens now but I think maybe… Read more »

WonkyDave
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WonkyDave

I am at work, but while my knee heals, the largest corporation on the face of the earth has me pushing papers in front of a computer. What a waste for an electrician… The championship money is the prize for doing well. To the vector belongs the spoils. I fear what Mr. Dennis is edging towards is a system where everyone is rewarded just for being there. No, no, no, no, no, no, no. Bad, Ron, bad. Sit, boy. Stay. You really haven’t lived until you’ve tasted 480v. And don’t talk to me about NAStyCAR. Loading...

Negative Camber
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LOL. I am reticent on a pay to participate type program as well. It would be a very complicated and long program that would have to be developed to make it work. Something about 200,000 pages long in legalese. :)