Force India and Sauber dominated headlines in the weeks since the Japanese Grand Prix when they lodged complaints to the European Commission against Formula One and what they allege to be an anti-competitive financial structure.
Such an inquiry, the launch of which has long rumoured to be poised given the financial precariousness of most of the sport’s teams, generally requires a formal complaint to be lodged before the European Commission can consider the issue’s merits. The two teams’ official move on the matter signals the beginning of a potentially revolutionary period for Formula One.
Key to their problems is that the sport’s model for prize money distribution is deeply flawed, with Formula One’s biggest teams reaping most of the benefits before the smaller independent outfits get so much as a look-in.
Ferrari, in particular, takes home almost US $100 million a season without so much as turning a wheel and certainly before taking its share from the prize pool.
The root of this desperately lopsided structure lies in 2013, when the document governing the sport’s commercial properties and binding the teams, the commercial rights holder, and the FIA, expired.
However, rather than seeking to agree to a new deal, the commercial rights holder, led by venture capitalist group CVC Capital Partners, set about preparing the sport for an initial public offering.
In order to maximise the sport’s value it offered Red Bull Racing, then the dominant constructors champion, a lucrative contract to stay until 2020, which in turn lured Ferrari into an independent deal in an attempt to protect its status as top dog of the teams. The rest of the teams had little choice but to follow suit and accept what they were given, or be cut out from the picture entirely.
The IPO, of course, never happened — machinations on the financial markets, including Facebook’s lacklustre floatation, as well as Bernie’s various high-profile court appearances put a stop to those plans, but the commercial structure remains nonetheless, to disastrous effect.
Caterham and HRT have folded under the terms. Marussia stared insolvency in the face, only to be rescued at the stroke of midnight and resurrected as Manor. Lotus, the once mighty Enstone-based team, winners of three world championships, including in 2005 and 2006 with Fernando Alonso, has been tied up in legal battles for months, the only thing saving it from administration being the possibility of a still inconclusive Renault buy-out.
Sauber, too, staved off financial collapse at the beginning of the year after having signed too many drivers in search of the on who would bring the highest-paying sponsorship package to keep it afloat. Force India exists only because Indian drinks tycoon Vijay Mallya wills it so — and thankfully remains committed to the cause.
A European Commission investigation, should it decide one is warranted, would be expected to look into all of these things as it works its way back to sport’s governing body, the FIA, before deciding who is culpable for the leaving Formula One, a billion-dollar business, in a borderline ruinous state.
Most potent amongst the commission’s powers is the ability to fine offenders up to 10 per cent of their earnings, making the prospect of an inquiry a sobering thing to contemplate for the sport.
Formula One could be in for a rough ride should an investigation proceed, but European Commission or not, one things is for certain: the sport cannot continue travelling down its current path without confronting significant change.
Meanwhile, the Formula One circus could be under new ownership by the end of the year, supremo Bernie Ecclestone said on Tuesday (Oct 6).
Speaking by video at a sports summit in Kitzbuehel, Austria, organised by German football legend Franz Beckenbauer, Ecclestone was adamant a new owner would be found this year.
"Our shareholders are in a position at the moment where they have to lose some, or all, of their shares shortly," he said.
"That's the way things are set up for them. There has been a lot of interest, and I would say there are three parties at the moment. I'd be surprised if one of them doesn't buy very shortly."
The 84-year-old, who runs Formula One Management, the company that generates and manages F1's revenue, did not reveal the names of the interested parties.
F1 chief executive Ecclestone confirmed he would sell his own five percent stake in the business as part of any deal, although he is likely to continue in his current role.
Back in June, the Financial Times claimed that American Stephen Ross, the owner of the Miami Dolphins NFL team, and Qatar Sports Investment (QSI) had both expressed an interest in buying a 35.5 percent controlling interest in F1, currently held by CVC Capital Partners.
QSI, who also own French Ligue 1 champions Paris Saint-Germain, have been wooing the International Automobile Federation (FIA), which held its annual gala at the end of last year in the Qatari capital. Doha.
Although it remains extremely popular, F1 has seen falling audiences over the last year and a lack of genuine competition in races as the Mercedes stable have taken over from Red Bull in dominating the sport.
Additional reporting by AFP.
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