Analysis: Why F1 doesn't need News Corp

11/07/2011
NEWS STORY

Anyone who has picked up a newspaper or watched a news report in the past few days will know that News International, the newspaper division of Rupert Murdoch's News Corporation, is under fire like never before.

It has come to light that it has been using shockingly unethical and unprofessional tactics involving illegal hacking into mobile phone voicemails. Whilst Pitpass would not normally report these kind of matters, since they are inherently unconnected to F1, they are relevant in this case because News Corp has gone to great lengths to try to associate itself with F1. It is an association that the sport can do without.

It is not just the details of the scandal itself which are deeply concerning but also the way in which News Corp has handled it. On Wednesday last week, when the scandal was getting into full swing it was the main headline on the cover of almost every UK newspaper except for News Corp's own Times which instead chose to run a piece on judges being 'too male, too white, too elitist.' That said, some of News Corp's staff are likely to be seeing a lot of them over the coming years as a result of the phone hacking scandal.

News Corp has received global condemnation for its actions and has already paid a hefty price. The only newspaper so far linked with the hacking has been closed and numerous companies have distanced themselves not just with News Corp's newspapers but also with the BSkyB television network in which it has a 39% stake. The scandal casts a shadow over the integrity of the entire company since if this is how low the standards are in one of its newspapers then one wonders what they are like in its others. The cover of the Times on Wednesday spoke volumes about the reporting in what is billed as being News Corp's most credible publication.

News International encompasses numerous newspapers and it is no surprise that there is movement between them. As the Evening Standard recently pointed out one of the reporters covering the phone hacking story for BSkyB's Sky News channel was previously a news reporter on the News of the World newspaper which was responsible for the phone hacking.

News Corp's response to the current situation leaves a lot to be desired. News International's chief executive Rebekah Brooks was editor of the News of the World when phones were hacked but instead of being fired Murdoch has come out in support of her.

Indeed, just over three weeks ago Mark Kleinman, business editor of Sky News, wrote an article claiming that Brooks' phone had also been hacked. He stated that this raises questions about whether her phone had been "hacked on behalf of journalists working for the News of the World, or for rival newspaper publishers." The report added that "it's important to point out that this news comes just ahead of a ruling by Jeremy Hunt, the Culture Secretary, on whether News Corporation, which owns [News International], is allowed to pursue an offer for the majority stake in BSkyB that it does not currently own."

Indeed it is interesting that, according to one News Corp-owned outlet, other newspapers may have also been involved with phone hacking. It is also interesting that the Sky News business editor decided to cover something which is not directly business news. Regardless, it makes a very nice distraction from the real issue of why News Corp's own newspapers allowed the hacking to take place.

This isn't the only example of fortunately timed coverage from a Murdoch-owned outlet. Back in February Sky News reported that City firms Ernst & Young and Freshfields had launched an investigation into the circumstances surrounding the sale of F1 by German bank BayernLB to current owner private equity firm CVC in 2006. The investigation followed the arrest in January of F1's former chairman Gerhard Gribkowsky who was accused of receiving 30m for allegedly undervaluing F1 when it was sold to CVC.

Sky News business blog proclaimed that as a result of the investigation "Formula One motor racing faces being thrown into turmoil." However of course this turmoil never materialised. Pitpass' business editor Christian Sylt knew from the moment the Sky News report was published that the turmoil would not be forthcoming because F1 is a client of Ernst & Young and Freshfields. It was always incredibly unlikely that their investigation would reveal any wrongdoing since they had advised on the sale to CVC in the first place so they already had intimate knowledge of the circumstances surrounding it.

Sylt sent a text message to Kleinman to inform him that F1 is a client of Ernst & Young and Freshfields but the prediction of "turmoil" nevertheless ran on loop on Sky News and, remarkably, the company even sent out a press release about it. Again, this made a very well timed opening salvo which was followed by a claim by Sky News two months later that News Corp is considering whether to bid for F1.

Again, Pitpass said right from the outset that News Corp will never take majority control of F1 but if its value fell as a result of concern over alleged turmoil it could of course make the business more attractive to buyers. Whatever next? Once the current scandal calms down a little is it too far of a stretch to imagine News Corp actually making a bid for F1 to give the media something else to write about the company other than phone hacking?

As Pitpass has reported in detail, it is incredibly unlikely that News Corp would be allowed to buy F1 even if it made a bid so it would have little to lose by doing so. Sure, as Pitpass has reported, it would have to pay advisers to work on a bid which would have next to no prospect of success but this could well be classed as cheap crisis management PR if it distracts attention from the current scandal engulfing News Corp.

Indeed, News Corp could even have a seemingly valid reason to make a bid for F1 since it looks like its planned offer for the majority stake in BSkyB that it does not currently own may well be blocked by the UK's Ofcom regulator which could deem that it is not a fit and proper owner. This would give News Corp free capital which it could claim is available for an F1 bid. However, if this transpires then F1 should take its lead from Ofcom and it should actively boycott News Corp's approach.

Pitpass has already written a great deal about the ulterior motives which News Corp could have for a phantom bid for F1. The current scandal further calls into question News Corp's integrity and statements emanating from its companies. There is little doubt that F1 has enough of what could be classed as credibility problems so the last thing it needs is the involvement of an internationally shamed company. Anyone in F1, whether it is media or otherwise, should avoid advocating a News Corp takeover unless they don't mind being sullied with the same brush which has tainted the company.

One wonders whether F1's independent non-executive director Martin Sorrell would still be prepared to publicly stand by his comments, made in reference to the possibility of News Corp taking over F1, that he sees "no harm whatsoever in a pay-TV company investing in or owning Formula One."

One F1 blogger who has been extremely supportive of the News Corp F1 takeover has also been highly critical of Flavio Briatore, whose ban from the sport has been overturned. In light of the recent atrocious revelations about News Corp one hopes that said blogger will change his views, for in the wider scheme of things the accusations about News Corp are far more severe than anything Briatore has been charged with and, according to many reports, the worst news about News International is probably yet to come.

In light of all this it is hard not to agree with former FIA president Max Mosley who believes that News Corp is not a fit and proper owner of F1. It is difficult to imagine current FIA president Jean Todt contradicting this if he ever needed to decide whether to allow a Murdoch takeover.

Todt's agreement is required for any takeover of F1 and one imagines that he is well aware of the criticism which would be directed his way if he gave a green light to News Corp's ownership of the sport. This criticism is something Todt is unlikely to have to face. Given that the press in his home country of France is even more tightly controlled than it is in the UK one imagines that Todt must be particularly abhorred by the current scandal. Pitpass has already said that a News Corp majority takeover of F1 was never going to happen but now it seems as good as impossible.

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Published: 11/07/2011
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