07/02/2017
FEATURE BY MAX NOBLE
To review and evaluate all the excellent reader feedback around the question "What should Liberty do now with Formula One?" I've split potential actions into three key categories. We will explore each before ending with a synthesis solution of the best ideas as to how one might move Formula One forward.
I've chosen to divide the suggestions into three categories as follows; Business Model, and Healthy Teams; Fan Engagement and Media; and Sporting Regulations. While some concepts might sit in more than one domain, and some impact all domains, I've elected to use these category definitions to simplify thinking about what at once is a very simple idea (to run a great sport for profit), and a very complex one (to run a great sport for profit, taking care of all the detail and pleasing everyone... both at the same time.
So with that modest introduction let us commence by exploring suggestions relating to the Business Model, and Healthy Teams.
I had the privilege over the past week of bathing in the sheer ecstasy of remarkable passion, not once, but unbelievably twice. First we paid a not inconsiderable amount to have the utterly brilliant and unique Bruce Springsteen meld passion, musical ability, and performance genius into a concert of epic dimensions and soaring emotion. Yes it was expensive, but the experience was beyond price.
Then, just days later, via free to air television coverage (Live and Free, as the on-scene watermark reminded us every second) we shared the thrill and passion of a most remarkable Federer, Nadal match of epic dimensions and soaring emotion. It cost nothing, but the experience was beyond price.
There we have it. Our base issues in Formula One captured in two amazing, yet very different, experiences. If Bruce charged nothing for his music he'd be living under one of the bridges or aqueducts he sings about, and only a few locals would ever have heard his music as he could not afford to tour. If the Australian Open was behind a pay wall I'd have read the result the following day. And in both instances all shared passion would have been lost. Indeed except for those directly involved the shared passion would never have been generated on a global scale. What a loss both would be to humanity!
So, with those concepts at the front of our minds, let us run a dispassionate ruler over the many suggestions from readers about what Liberty media should really be doing to fix Formula One. At the core, remember, is the need to generate engaged passion. We want to engage because it is a passionate experience we wish to repeat. If a product or service cannot capture that essence in some measure it will not build a world class brand that people actively seek out.
In our capitalist world, the bedrock has to be a functional business model that is sustainable long term. So, considering the business of Formula One first...
If Formula One were to publicly release Vision and Mission statements they might run something like this:
Vision - To provide engaging passionate world class racing to the largest annual sporting audience in the World.
Mission - Within a safe work environment enable the World's best drivers to engage in fair sporting competition while engaging passionately with fans, show-casing world class engineering, providing fair returns to team owners, and value for shareholders. Independent review of our work should consistently rate us as the largest global sport as judged by viewing numbers, turn-over, and media exposure on an annual basis. Fans should consistently rate our races as "exceptionally passionate and exciting", and Grand Prix weekends as "must attend" sporting events.
To realise our Vision, and achieve our Mission, we need to have a viable business model, functional teams, engaged fans, and world class drivers in remarkable cars.
Pitpass readers provided numerous suggestions on how this might be achieved. Some consensus appeared, but we also had many diverging, and indeed in many instances conflicting, recommendations. First the (few) things we can all agree on!
We want passion. We want close fair racing. We want the best drivers and cars. We want all those involved to make "fair and reasonable" money. Beyond that? Well let's say that the harmony of the singing drops off significantly after the opening verse.
Most readers agreed the top teams have too much, and the lower teams too little, so in general we all agree a rebalance is required. Liberty should be capable of achieving this after 2020 when current agreements expire. With three years to discuss and sign we should hopefully see some reader's ideas successfully adopted.
A formula that combines a base payment, same for each team, plus a rebalanced historic payment, to recognise long service to the sport, plus a points-based portion should not be difficult to generate. What will be difficult is obtaining the backing of teams that will see significant income reduction. In business this is usually considered as a basic retainer with a larger proportion of income being "at risk". Our current issue is that the large grandee teams have a significant basic retainer, and as a result win a remarkable portion of the "at risk" pool of money. Pitpass readers generally agree that sorting out a more reasonable distribution of the available money would flow into sorting a number of other problems around teams being viable, and increasing competition at the front of the field.
Some readers then suggested that Liberty should pay circuits for the privilege of hosting a Grand Prix. While I'm sure Silverstone would be delighted by this possibility it is highly unlikely that Liberty would see this as a beneficial business model. Freezing hosting fees and enabling circuits to access more of the revenue stream of Formula One is a more workable compromise. Again we are looking at the rebalancing of funds distribution rather than a desperate need to find additional funds to run the sport.
Readers generally acknowledged that budget caps would be very difficult to police. As a result we had some intelligent suggestions around increasing the allowances for the bottom teams with some high-value resources. For example doubling, or even unlimited, access to wind tunnels or high power computing for the lower teams. Using a formula to ramp-up allowed access times as one moves down the end of season finishing order should be possible... again over to you Liberty on this creative idea. It could be allocated and policed with reasonable ease compared to trying to ensure no other departments of a large manufacturer were providing multi-million dollar car parts for zero to the racing team.
If Liberty gets the basic funding allocation right, it is then a team management job to run a successful business. This is no different to every day business. Atari, Sinclair and Commodore, to name but three long gone companies from the "Golden Age" of computing operated in the same business environment as Apple and Microsoft. Yet they failed. That is not a flaw in capitalism. That's a flaw (often many flaws...) within the company. So it is with teams. Haas is busy making a significant success in the same business and sporting environments that just put pay to Manor. It is not the duty of Liberty or the FIA to support companies that cannot run themselves at a profit.
Liberty wants to see a return on its investment. That's simply sound business. No doubt increasing revenue would help in this situation, but the first business issue to address as identified by Pitpass readers is to rebalance the funding model. If we have healthy teams, and healthy circuit owners, then as a result of a healthy environment for the sport the competition should naturally start to become closer, improving the show, and then real revenue growth will result, rather than the Bernie Squeeze approach to business that ensures the owner makes money at the expense of circuits and teams.
So. Lesson one. Sort the funding model. Make it possible to run a back of the grid team at a profit. Make it possible to run a circuit at a profit.
Pitpass Recommendation. Larger basic retainer payments to all teams. Significantly rebalanced historic payments, and a new calculation for winnings over the season that ensure a larger percentage goes to the lower half of the grid. Similarly for circuits, freeze, or heaven forbid reduce, basic hosting fees, and allow circuits to turn a profit. Improved racing and improved race weekends will result from the healthier more competitive environment.
In part two we will review suggestions on fan engagement and the media.
Learn more about Max and check out his previous features, here