The deal of the century?

02/04/2008
NEWS STORY

It was inevitable that the allegations regarding Max Mosley's extra-curricular activities would lead to a slew of other stories about the man. Although Pitpass isn't the place to find tales of whips and chains, other than when Editor Chris Balfe is eulogising The Velvet Underground and their classic Venus in Furs, when the revelations are about F1's finances then this is the place to look.

A report in today's Evening Standard newspaper by Pitpass contributors Christian Sylt and Caroline Reid suggests that Bernie Ecclestone may have good reason to fear the possible departure of his good friend Max and that is because he was behind one of the most secretive and valuable deals in F1. This deal, which is still in place today, directly handed Ecclestone's company the commercial rights to F1 and gives it an astonishing annual 11,800% return on investment.

Previously the F1 teams themselves held the rights with Ecclestone negotiating on their behalf. Mosley handed the rights to Ecclestone's company Formula One Management (FOM) in 1995 and Tyrrell, Williams and McLaren were so incensed that they accused Ecclestone of breaching his legal obligations to them. Legal action never transpired but it's no surprise they were annoyed.

"Roughly speaking we get about €7 million a year from FOM," Mosley is quoted as saying. According to FOM's current owner, private equity firm CVC, the business had turnover of 828 million Euros in 2006. The explanation for the low fee was that Ecclestone needed all the money he could get to fund F1's pay-TV drive and the governing body would reap the benefits when the rights returned to it in 2010. As we well know, this never happened.

Things didn't quite go to plan as although Ecclestone spent an estimated $70 million on developing a pay-TV operation, the market crashed leaving FOM with a lot of expensive (and now outdated) digital TV equipment but an incredible commercial rights deal.

The FIA cashed out regardless as, under its 2001 agreement with the European Commission, it proposed to sell the rights to F1 for 100 years, and FOM's then ultimate owner SLEC paid $313.7m for the privilege. The payment funded the FIA Foundation, which is now a powerful global force in safety research so even if Mosley were to leave prematurely it would leave him with at least one lasting legacy.

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Published: 02/04/2008
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