20/03/2012
NEWS STORY
Over the past year it has been hard to avoid reading about the improper practices some media outlets have been engaging in to obtain news stories. The reports have mainly focused on Rupert Murdoch's News Corporation newspapers which have been accused of hacking into phones and paying the police to get news stories. F1 has now been dragged in to the discussion about dubious editorial activity.
On Saturday Sky News, which is ultimately controlled by News Corp, printed an article which quoted from a confidential preliminary agreement between the teams and the sport's boss Bernie Ecclestone. Whilst this isn't a criminal matter like hacking phones or bribing the police, it still led to a strong negative reaction from the teams.
However, instead of standing by it online, Sky News reportedly caved in to the teams and removed the piece after just four hours. This claim is made in the Financial Times, a newspaper which is not known for its F1 coverage but it is renowned for supposedly maintaining the highest editorial standards in every edition. It doesn't live up to this reputation.
By now the F1 world is well aware of the ground-breaking news which Pitpass predicted on Wednesday last week was on the horizon and would "be one of the most important changes to the commercial landscape of the sport in its history." This is of course the fact that F1's majority owner, the private equity firm CVC, is to float part of its stake on the stock market, most probably in Singapore as Pitpass' business editor Christian Sylt revealed back in November.
The news confirming the float did not arrive with a bang but instead it fizzled out as it was jammed in to the Sky News piece along with the details about the agreement with the teams. Once it was pulled from the internet it left a complete state of confusion over whether the news was accurate.
The details of the float were reported on the Sky News' website by its business editor Mark Kleinman who has a tendency to make predictions which don't come to pass in F1. He is the person who claimed that "it's far from inconceivable" that a contender to replace F1's boss Bernie Ecclestone would be David Campbell, the former boss of London's O2 Arena. This of course is the same David Campbell who recently left his job at the F1 Group.
Kleinman was also behind the 'exclusive' (he is renowned for overusing the word) news that F1 faced "being thrown into turmoil," by an internal investigation into payments made to its former chairman Gerhard Gribkowsky. Pitpass pointed out from the start that since the investigation was internal it was effectively a rubber-stamping exercise and, lo and behold, it ended up giving F1 a clean bill of health. Last year we also got an 'exclusive', replete with caveats, claiming that News Corp was planning to make a bid for F1, which still hasn't happened. This was followed by the 'news' that CVC was in talks with former M&S boss Stuart Rose about him becoming F1's chairman. This didn't happen either.
Given this track record it is no surprise that readers might have been sceptical when Kleinman's piece appeared on Saturday entitled 'Ferrari Poised For F1 Stake As CVC Plots $10bn Float'. Removing it made a laughing stock of Sky News and unfortunately reporting of the float greatly suffered as a result of this confusion and uncertainty. Testimony to this, there are several significant F1 news outlets which have still not written about it.
Kleinman's piece claims that Ferrari will get shares in the float and a seat on F1's board. This could well be true. However, something does not seem quite right. The piece goes into detail about the sums which will allegedly be paid to the teams by the F1 Group under the new agreement after the current one expires at the end of this year. The article says the teams will get "47.5 per cent of the adjusted earnings before interest, tax, depreciation and amortisation in each calendar year between 2013 and 2020." This seems hard to follow since the teams already get 50% of F1's adjusted earnings before interest, tax, depreciation. It is unlikely (though not impossible) that their share will decrease in the new deal.
Given that the article is about an early draft of the agreement, which is believed to run into hundreds of pages, the details could well change by the time that the final version is signed. If they do, this would fit into the pattern of some of Kleinman's previous exclusives but it doesn't mean that all the claims in the article must be flawed.
One claim which is understood to be bang on the money is the valuation of F1. Pitpass regulars will remember that two weeks ago Sylt broke the news that F1's second-largest shareholder, the now-bankrupt bank Lehman Brothers, has to cash in its 15.3% stake by the end of June 2014 and a flotation is of course a perfect opportunity to exit. His report said that Lehman can expect to make $1.5bn from its stake since F1 has a valuation of $10bn which just happens to be what Kleinman says it will float for. Sylt says that, for now at least, his lips are sealed as to how he knew two weeks ago that F1 is valued at $10bn and that a float is on the horizon.
As if it wasn't enough that the Sky News report overstepped the mark and had to be removed, the details of this slip up have been laid bare in the FT today.
The newspaper claims that Jeremy Darroch, chief executive of Sky News' parent company BSkyB, ordered the story to be removed from the website after the executive producer of its F1 channel called him to complain that it had upset some teams. Interesting as this is, if accurate it indicates that Ecclestone was not the source of the leaked documents as has been foolishly suggested by some quarters. The reason for this is that it is as good as impossible to believe that BSkyB would remove a story based on documents supplied by Ecclestone simply because some teams didn't like it.
The article was republished by Sky News yesterday after it had removed multiple sections which directly quoted from the confidential documents. By then the news had spread to the sports sections of newspapers along with widespread rumours that the article was flawed. It left Sky News and Kleinman with egg on their faces as not only did the article rack up this negative coverage but it was only online for four hours when it mattered most (the start of the season). Many of the newspaper reports stated that Sky News' article had been pulled and today's FT piece is the icing on the cake.
The FT article moves from talking about the removal of the piece following the complaint to "questions about the Sky News' independence" which were raised when News Corp last year wanted to buy the 60.9% of BSkyB it does not already own. Ofcom, the UK's broadcasting regulator, questioned whether the deal (which was derailed by the phone hacking scandal) would reduce diversity in the UK news industry and to allay these concerns News Corp offered to spin off Sky News as a separate listed company. The FT adds that "the phone-hacking scandal at News Corp's UK newspaper division has also focused attention on potential conflicts between journalism and commercial interests at all British media groups."
The FT's reporting on editorial standards in relation to F1 coverage seems somewhat ironic given that Pitpass is aware of at last one incident where the newspaper's actions fell far short of anything that would be deemed decent or professional.
The episode in question took place last year when a respected external reporter, who had been covering F1 for the FT for many years, sent a lengthy news story to the paper's deputy companies editor Martin Arnold. Pitpass understands that the story was based on an interview with Ecclestone which was not especially favourable to him. Arnold forwarded the article to one of the FT's in-house reporters who phoned Ecclestone about the subject of the piece and what happened next is pretty surprising.
The newspaper had not yet published the piece and its in-house reporter wanted to ask Ecclestone some questions about what he had said. Being his usual playful self Ecclestone asked to see the entire article and lo and behold that is exactly what he got.
It's far from the first time someone in F1 has asked to see something before publication. For example, when the author Terry Lovell was writing Bernie's Game, the first biography of Ecclestone, he contacted Paddy McNally, the former boss of F1's trackside advertising division, to ask for an interview. McNally declined to do so unless he was first sent a copy of the entire manuscript. "Without it, I cannot see how we can properly consider your request," he said.
You might say that there's nothing wrong about sending an article about Ecclestone to him before publication and you may well be right. However, what makes this tale particularly toxic is that the reporter had not given the FT permission to distribute his article to anyone outside the newspaper and he wasn't told that this had happened until after the event. Surprisingly, it gets worse.
Having not heard from Arnold the reporter contacted him about whether the FT wanted to take the article. Unbeknownst to the reporter of course his work had by then been distributed without his permission and remarkably Arnold did not inform him.
In fact, the reporter was only alerted to what happened when he received a call from Ecclestone saying that the FT had been in touch. This spurred the reporter to contact Arnold again and he bluntly told him that Ecclestone had asked to see the article so it was sent to him.
Arnold even put it in an email telling the reporter that "BE asked us to send him the story. We saw no reason not to, as there was nothing in the article that could cast you in a bad light." It seems it never occurred to him that regardless of the content of the article it should not have been distributed externally since the FT did not have permission to do so.
Pitpass understands that formal complaints were made, including one to the UK's National Union of Journalists, and apologies were received. Companies editor Sarah Gordon described what had taken place as "utterly unacceptable" whilst UK companies editor Oliver Ralph admitted "it's not the kind of thing we do here to send out an article without someone's permission to do so. He should have said it isn't my article to send."
Given that the reporter has such a long track record writing for the FT, the newspaper's actions seem particularly astonishing and it is remarkable that he continued to write for the paper.
The very idea that the FT could send material to Ecclestone (simply because he asked for it) without prior permission and without even telling the person who provided it is an incredibly sobering thought for anyone in F1 planning to deal with the newspaper. On hearing about what took place one board level executive at a firm which operates at the highest level in F1 said he was shocked to think that confidential correspondence with the FT could ever be passed to an external party without permission.
It is a stunning statement about the activity at a newspaper which bills itself as "one of the world's leading business news and information organisations, recognised for our authority, integrity and accuracy." More to the point, it goes to show the effect Ecclestone has on some journalists and the lengths they will really go to for him. That is why he is F1's most valuable asset and when it comes to floating the sport it would be foolish for anyone to forget that.