Civil war: Cases for a new series and the existing F1 championship - Mercedes-Benz Forum

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post #1 of 2 (permalink) Old 06-19-2009, 10:53 PM Thread Starter
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Civil war: Cases for a new series and the existing F1 championship

Civil war
Cases for a new series and the existing F1 championship
19/06/09 22:04

Could two championships co-exist?
As Formula One as we know it seems set to pull itself into two opposing and competing factions, we take a look at the pros and cons of two very differing championships. Of course, there could always be a last minute deal but more likely is a long drawn out court battle ahead of a final solution and two rival series competing for the same fans.

While fans and pundits alike have fierce views one way or another with many looking at the carnage in the US open wheel racing scene as the Indy Racing League went against the might of CART, there really is no parallel to the situation facing Formula One and FOTA at the moment.

To put the CART issue to bed once and for all - as I doubt the likes of Damon Hill or Eddie Irvine know Chris Pook from a hole in the wall - the newly formed IRL had the golden ticket in the Indy 500 and after poor management at CART, the manufacturers defected to the new series.

CART reinvented itself as Champ Car following its stock plummet, but as a spec-series, it was doomed. The situation here is very different and a new series as well as an old series could co-exist. Couldn’t they?

The case for a FOTA championship
Ahead of the first practice session for the British Grand Prix, the eight members of the Formula One Teams Association announced their intention to form a breakaway championship and no longer compete in the FIA Formula One World Championship from 2010.

Disagreement with the sport’s governing body dates back years with the former team alliance - the now defunct Grand Prix Manufacturers’ Association - proposing a similar breakaway back in 2005.

This time the FOTA members are fully serious and there is no reason to doubt that they will fail to follow through their actions and will race in a new series in 2010, especially when considering that the car manufacturers themselves promised support.

The reasons behind the breakaway are numerous, but most revolve around the FIA and the way in which the sport is run in terms of rule changes and the way in which those rule changes are applied. Money of course also play a factor.

The straw that broke the camel’s back - so to speak - has been the insistence from the FIA that a budget cap of €45m (US $62m) be introduced for next season. Many of the top teams and FOTA members spend many times that level and such reductions would result in massive staff reductions.

I won’t get into the decision making process or the reasons behind it, but instead what can be gained by the FOTA eight breaking away from the FIA Formula One World Championship.

As it stands, roughly half of the revenues generated by the sport go to the commercial rights holder and half go to the teams. CVC Capital Partners, a global private equity firm, purchased the commercial rights to Formula One in late 2005 with the deal given the green light early the following year.

To make things simple, effectively CVC purchased the rights from Bernie Ecclestone and his collection of companies. Ecclestone had previously purchased the commercial rights from the FIA for a 100-year period.

Now the precise details regarding the financing of the deal is complex and tedious, but CVC borrowed the reported two billion plus US dollars to purchase the rights to the series. Bernie Ecclestone was retained as CEO at CVC and remained in control of the sport he had nurtured and developed.

Now with massive debt to pay, CVC needed Ecclestone to go out there and make some serious money. New venues with state funding willing to pay top rate for a Grand Prix were given the nod by Ecclestone as the series began its drift away from its traditional heartlands of Europe and North America, to new venues in the Far East.

The teams meanwhile were dismayed when first the United States and then Canada disappeared off the Formula One calendar with both unable to meet the increasing financial demands put forward by Ecclestone and his sanctioning fee ‘escalator’.

The new series, dominated by the car manufacturers, would be able to select the markets that are important to them and would undoubtedly look to the North American markets. They would have plenty of choices in terms of circuits with Indianapolis and Montreal prime targets as well as former Grand Prix venues such as Imola, Estoril, and Mexico City able to cater to their needs. Silverstone is and Hockenheim could soon be available too.

Another advantage for the new series is that they would be able to create their own rules without influence from the FIA and keep the revenues generated by the new series for themselves to – arguably - offset the costs of the new series. In other words, they would be completely in control of their own destiny.

If FOTA found that fans preferred turbo charged four cylinder engines to the current frozen V8 engines, they would be free to make the change. If they wanted to push forward with four wheel drive technology as well as ‘green’ initiatives, they would be free to do so – assuming a collective agreement.

One way to start a new series quickly is to purchase an existing series. Tony Teixeira has already gone on record, perhaps half in jest, saying his A1 Grand Prix series could be for sale at the right price and that would be something of a turnkey solution for FOTA.

Of course fans would determine the success of any new series as would world-wide television revenues, but there are plenty of reasons as to why a new series could get under way and indeed thrive.

The case for the FIA championship
With Honda pulling the plug on their Formula One programme last year, the FIA and the commercial rights holder finally woke up to the fact that the series was in danger of running out of teams. This was largely their own doing with various barriers to entry put up over the last decade including the ludicrous ‘bond’ that had to be filed with the governing body in order to even enter the sport.

From actively discouraging new entrants a few years ago, the FIA has made a huge about-turn and is now welcoming the independent teams into the series with advance funding from Ecclestone and the commercial rights holder, plus caps on expenditure.

Formula One has global television coverage and races at the newest – if not finest nor grandstand-filled – circuits in the world. It enjoys enormous media coverage and according to CVC Capital, brings in over two billion US dollars a year in revenues.

With the FOTA eight going off to start their own series and with much lower costs in place for the 'new' F1, the series will be able to attract plenty of entrants keen on being associated with the Formula One brand. In addition to the new entrants, Williams and Force India have pledged their allegiance to the series.

With lower budgets in place, any debate about increasing the share of revenue between the commercial rights holder and the teams is now over as such massive funding to run a two car team is simply no longer required. With a cap on expenditure in place, the television revenue alone could – in simplistic terms - support a team with sponsorship becoming something of a bonus.

The FIA could continue to create the rules for the championship without the interference from the teams while CVC could continue to pay back debt and should the series prove popular with the new entrants, look to push forward the long-hoped for floatation of the series on the stock markets.

The series would return to its roots with teams that only exist for racing competing for top honours and perhaps arguably, less of a major marketing exercise for the car giants.

All of the above being said...
Of course, there is also the question of fan loyalty: established teams having world-renowned drivers are by far a bigger attraction. In the short term FOTA will have that, while F1 might be fielding a 13-team field including 11 new outfits mostly unknown to the world.

From a fan's point of view, without forgetting the tedium caused by the constant politicking within F1, a new fresh start might be the thing needed to concentrate on racing as a sport and spectacle before anything else.

And for those fans, who now see the possibility of seeing a major new open-wheel series returning to popular venues left behind by F1 – instead of state -funded destinations where grandstands are either more than half-empty, covered under canvas or supplemented by off-duty soldiers in civilian clothing – the choice might be an easy one to make.

Perhaps it really is time for a change?

Key points of the FIA-FOTA battle

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post #2 of 2 (permalink) Old 06-19-2009, 10:55 PM Thread Starter
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Key points of the FIA-FOTA battle What will the fans prefer?

Key points of the FIA-FOTA battle
What will the fans prefer?
19/06/09 17:46

Rebel teams clearly ready for the next step
Drawn-out negotiations and political battles between the FOTA alliance, FIA President Max Mosley and F1 supremo Bernie Ecclestone have resulted in the series going in one direction while the rebel teams have opted to pull out from the sport at the end of the season.

Although the Formula One Teams Association has confirmed its intention to launch a rival series, bringing all the current manufacturers, high-profile drivers, and supporting sponsors away with them, it seems the Silverstone paddock is abuzz with last-gasp discussions led by Ecclestone as he tries to save his empire and bring the warring Mosley and FOTA factions together.

As Formula One heads into disarray, here is a short history of the events which have led to what might be the final turning point.


December 2008:
Last December, Honda announced its departure from Formula One due to the economic crisis; in the World Rally Championship, Subaru and Suzuki did the same. Three major car manufacturers leaving high-profile motorsport series within the same month was the spark that convinced both FIA President Max Mosley and the Formula One Teams Association that cost-cutting measures needed to be implemented quickly.

The FOTA members applied common voluntary measures to all teams before the 2009 season even began and promised to brings costs down even further over the next two or three years by bringing in further measures with each new season.

February 2009:
The ten FOTA members propose their measures to F1's governing body FIA; Mosley has his own proposals in mind as well and warns that Formula One has reached unsustainable levels even for manufacturers, let alone private teams.

The FIA President intends to work out a plan which would allow manufacturers to compete at reasonable levels of investment while opening the door to new private teams as well.

March 2009:
Finding the FOTA measures inadequate, the FIA suddenly adopts and announces a modified set of regulations coming into effect with the 2010 season: controversy erupts immediately as a 'two-tier' system is put in place.

Teams accepting a budget limitation of €33 million (US $46m) per year will enjoy liberties such as no rev limits on the engines, no test bans, and two moveable wings amongst other advantages. Teams which refuse the Mosley plan and wish to continue with unlimited budgets will deal with constraints similar to the 2009 regulations.

The quite frustrated FOTA members refuse the concept of working with two sets of technical rules - and therefore two different types of cars on the track. In addition, with some teams seeing their F1 budget slashed by over 80% in a single stroke, FOTA states that the Mosley plan will prevent Formula One from being the pinnacle of racing and innovation, diluting it into a 'GP3 series.' The battle is on.

April 2009:
Having begun negotiations, Mosley agrees to augment the budget cap from €33 million to €45 million (US $62m), but continues to insist that his plan will save Formula One from itself by bringing costs down in a quick move rather than spanning two or three years as the teams request. The Formula One Teams Association continues to consider the amount unacceptable and talks go on between the parties.

May 2009:
The chasm widens between the FIA's position and FOTA's. Toyota, Renault, Red Bull, Ferrari, and BMW all warn they will leave the sport if significant changes aren't brought to the 2010 regulations. The threat is taken lightly, having been heard in the past.

However, the teams are not backing off and continue to persistently demand that the budget cap plan be dropped in favour of their proposals which they feel are being ignored. Ferrari brings the FIA to court, claiming an existing agreement with the governing body that prevents it from changing the rules without its input, but loses the case.

As meetings drag on with no agreements forthcoming, FOTA also demands to take part in the governance of the sport and takes up another issue with F1's commercial rights holder in requesting a greater share of revenue. For FOTA, after years of political bickering in margin of the sport, the time has come to settle several matters once and for all.

Meanwhile Mosley holds his stance and maintains the May 29 deadline for teams to file their entries in the 2010 championship with the rules as they stand, with the exception of the 'two-tier' technical aspects which have been put aside. The €45 million (US $62m) budget cap is still active, however certain major salaries and marketing expenses are not subject to spending limits.

Two days before the entry deadline and fearing its exclusion from its core business, the Williams team files its paperwork and accepts the controversial 2010 regulations. In the circumstances, the Formula One Teams Association expels Williams for breaking its ranks.

On May 29, the nine remaining Formula One Teams Association members (Ferrari, Toyota, Renault, BMW Sauber, McLaren, Brawn, Red Bull, Toro Rosso and Force India) file conditional entries for the 2010 championship and demand that they be considered as a whole and not on an individual basis.

If the regulations are changed in their favour, if the budget cap is brought closer to €100 million (US $139m), if the teams take part in the governance of the sport, and if the Concorde Agreement with Bernie Ecclestone-led Formula One Management grants them a greater share of revenue, then FOTA will sign aboard.

Additionally, the rebel teams request that all matters be agreed upon before June 12, the date upon which the FIA will be publishing the 2010 F1 championship entry list.

If not, the FOTA members' filed entries must be declared void and the nine teams will leave Formula One at the end of the current season. Threats of a rival breakaway series gather speed and credibility.

June 2009:
A week after the May 29 deadline, citing commercial obligations, Force India removes the conditional status of its entry. The team is excluded from FOTA but continues to support the rebel teams' cause. Meanwhile, an ever-increasing number of drivers criticise the Mosley plan, put their support behind FOTA, and call for an end to all the politicking.

FOM representative Bernie Ecclestone threatens to sue the rebel teams for millions of dollars if they create a rival series and approach any of Formula One's circuits or media outlets.

As expected, on June 12 the FIA publishes the list of entrants for the 2010 season. The FOTA members are all included, however an asterisk next to five teams' names (BMW, Brawn, McLaren, Toyota and Renault) indicates their presence as conditional since the FIA has decided to grant them another week of negotiations before a truly final list is published on June 19.

Claiming a pre-existing obligation with FOM (and although the FIA should not have taken a position on the matter), the Ferrari, Red Bull and Toro Rosso teams appear as unconditional entrants, indicating their participation in the 2010 championship under Mosley's plan.

The move is seen as a provocation, or at least an attempt to generate division between the FOTA members. All three teams issue statements that they are true to FOTA and indicate that the FIA's decision to list them as unconditional entrants was done against their will.

Mosley invites the eight rebel teams to drop their conditions and to sign on before the new June 19 deadline; as for the Concorde Agreement, he suggests the teams sign first and negotiate terms afterwards. FOTA has no intention of doing either.

The same day, the European carmakers association publicly declares its support of FOTA and strongly hints at its readiness to fund a new series parallel to Formula One.

On June 19, following the failure of negotiations with the FIA and FOM and accusing both of having tried to divide their FOTA alliance, the eight rebel teams (Ferrari, Renault, Toyota, BMW, Brawn, McLaren, Red Bull and Toro Rosso) announce their intention of creating a new motorsport championship.

The FOTA members stated that they "therefore have no alternative other than to commence the preparation for a new Championship which reflects the values of its participants and partners. This series will have transparent governance, one set of regulations, encourage more entrants and listen to the wishes of the fans, including offering lower prices for spectators worldwide, partners and other important stakeholders."

"The major drivers, stars, brands, sponsors, promoters and companies historically associated with the highest level of motorsport will all feature in this new series."

After first indicating that the final entry list would be published the following day, the FIA issued a press release: "The FIA's lawyers have now examined the FOTA threat to begin a breakaway series. The actions of FOTA as a whole, and Ferrari in particular, amount to serious violations of law including wilful interference with contractual relations, direct breaches of Ferrari's legal obligations and a grave violation of competition law. The FIA will be issuing legal proceedings without delay."

"Preparations for the 2010 FIA Formula One World Championship continue but publication of the final 2010 entry list will be put on hold while the FIA asserts its legal rights."

As things stand now, Formula One is set to field 13 private teams next year, with only Williams and Force India as pre-existing outfits. It is far from certain that Bernie Ecclestone's empire can survive on the long term if fans also defect from a series having 60 years of history.

The self-governed FOTA breakaway series will feature manufacturers, well-known drivers, and established teams that fans will surely continue to support. The possibility of a new championship heading for popular venues which were abandoned by F1 in favour of rich destinations displaying empty grandstands is another matter to consider.

It remains to be seen if an agreement can still be reached in such a hostile environment, but whatever the outcome, the fans will decide where there loyalties are.

Civil War - Cases for a new series and the existing F1 championship.

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