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Why News Corporation is not buying Formula One

NEWS STORY
23/04/2011

From reading some of the F1 reports over the past few days you could be forgiven for thinking that Rupert Murdoch's News Corp media empire had made a bid for the sport. In fact he hasn't even spoken to F1's boss Bernie Ecclestone about a takeover and as Pitpass' business editor Chris Sylt reveals in detail in the Daily Mail, there is one very good reason why a bid from News Corp is complete fantasy. As always, Pitpass is the only place to get the inside business story of what is really going on in F1 and it is right here.

The original allegation about News Corp considering a takeover of F1 was printed in a heavily caveated blog post written by Mark Kleinman, the business editor of Sky News which is ultimately 39.1% owned by News Corp. That in itself is an important point as we will come to find out.

To recap, the blog post claimed that News Corp has been in early stage talks recently with the world's richest man, Mexico's Carlos Slim, and "people connected to at least one of F1's big car manufacturers" about collaborating on a prospective takeover of F1. After having built up readers' expectations Kleinman then wrote that "I should say for the sake of clarity that there is a good chance that News Corp's deliberations and talks with outside partners will not ultimately lead to a bid." So by Kleinman's own admission, the headline for his story could read: 'Good chance News Corp won't buy F1'. That too could be an important point as we will come to find out.

Kleinman's claim provoked some interesting responses from Ecclestone. First he told the Telegraph that the story is "rubbish" and that F1 is "not for sale." This caused Kleinman to update his blog saying that Ecclestone's comments are "not a denial of anything I've reported tonight." He added that "it may be many months before the media group and any prospective partners are ready to table anything formal, if indeed they do at all." Yet again, Kleinman went out of his way to say that his own story may well not come to anything. Why on earth would he do that?

Just in case Kleinman was in any doubt about the fact that Ecclestone's comments were indeed a denial of not just anything that had been posted in his blog story but everything in it, the F1 boss came out with an even more robust rebuttal.

"I know Rupert and James Murdoch and Carlos Slim, and if they wanted to do anything they would contact me direct. And they haven't," Ecclestone told the BBC. In a separate interview he said that Kleinman's story "is all rubbish." Obviously, contrary to Kleinman's update, Ecclestone was indeed denying his post and after it had been described as being "all rubbish" the blog wasn't updated again.

Ecclestone's comments to the BBC are a good place to start when it comes to explaining what has really happened here.

There is no doubt that the worst situation to be in when negotiating to buy something from Ecclestone (or any other businessman worth their salt for that matter) is for him to know that you want what he has got. Far better if Ecclestone thinks that you don't really want what he has got so you won't be prepared to pay through the nose for it. If he has evidence that you want something from him then he will make sure that you don't just pay over the odds but you may have to beg, borrow or steal just to afford it. In short, he will make you pay many many times what it is worth and the history of F1 is littered with examples of this. Indeed, it is one of the strategies Ecclestone has used to become a billionaire.

So, let's consider the implications of that in the case of News Corp. By revealing that News Corp is allegedly considering a takeover of F1, Kleinman notified Ecclestone about it. This gives Ecclestone and his business partners CVC time to discuss just how much money could be extracted from News Corp and Slim so that if (not when) they walk through the door to his office he could ensure that they pay as far above the odds as possible for F1.

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