iSport | For the Fans, by the Fans

I was traveling last Friday when the inevitable news story broke out. FOTA had issued a press release stating that they were ‘forced’ into a breakaway championship after a series of non-productive meetings with the wise-men of the FIA.

The news was relayed to me over a frantic call from one of the iSport writers [Thanks Sahil] and only got me all awakened for my early morning flight. I sprung into action and my wingman Soulfly got hold of the press release but before I could download it on my phone to read – the plane was just about readying for take off. So while I was restless all these weeks due to the growing tension between the FIA and FOTA, the timing and the delivery of the news ensured that I was restless throughout my flight!!

So at about 30,000 feet above the ground I was wondering what just made this happen. I had the news but not the reason behind the news. So I decided to do a stake holder analysis of everyone involved in this mess and atleast make it look less messy on iSport.in.

Formula1 is often called a circus – and a circus it is. F1 travels across the globe, reaching upto 17 cities in just about 7 months. Let’s not get into the analysis of the logistics involved in running this circus – rather let us identify who plays what role in this ‘circus’!

The FIA – the global governing body does indeed govern the sport. They provide with the marshals, the stewards, safety, medical and all other necessary requirements to ‘govern’ this circus. And yes of course, the FIA is also the body that writes [and re-writes] the rules on which Formula1 is run!

Over the last decade – F1 has elevated to a different league. More manufacturers have participated in the sport and as a result the expenditure of running teams too has gone up. Rules, as a matter of fact, are an important ingredient to ‘govern’ these costs too! While much of the rules are really complex, a few rules have gone a long way in actually reducing operating costs. [esp. the gearbox and engine rules and this year the in-season testing rule!!]

However, due to the severe competition that the sport offers, often the team that spends the most would be the team to beat on track. While this isn’t a rule of thumb – front runners like Ferrari, BMW and Mclaren are one of the highest spenders too. They also attract a higher number of sponsors considering their lineage in the sport and otherwise.

Having said that – F1 also proved its global status last year; when global economies went through a slow down, F1 not only lost multiple sponsors but also a manufacturer team altogether. Even after their exit, the teams still couldn’t keep their spends in check – so the grand-daddies of the FIA decided to step in and take things in their command. A wise step indeed considering that F1 was getting unaffordable – not just for the sponsors and fans but also for the teams!!

They unanimously decided to introduce a rule in F1 that would encourage a cap on the budgets. Lets leave the numbers aside – but the rule interpretation meant that teams had an option to operate within the budget cap. If they did, they had more technical freedom to build their cars. Thus, the rule encouraged a ‘twin tier’ Formula1. FIA’s first mistake!! Never in the history of motorsport have twin tier categories worked with the audiences! [take Le Mans for eg]

Mistake No. 2: The FIA and the FOTA [Formula One Teams Association] usually decide and agree upon the future rules and regulations together. This time however, the FIA chose to work impose the rules on the FOTA – thereby triggering a ‘power game’ with the big-wig manufacturers! 

Well what was the FIA to do? Let the number of teams diminish? Let the sport die? What would they have to manage then? Their stakes had to be safeguarded by bringing down costs – however as with their past decisions, this too was a hasty one.

Bernie Eccelestone’s FOM: So who on earth is Bernie Eccelestone? If the FIA is governing the sport and the teams are ‘performing’ in the sport – who on earth is this short Brit guy who keeps throwing his weight around the F1 circles? Well, funny or not – logical or not, Bernie Eccelestone is the Commercial Rights owner of the sport of Formula1. His company FOM is the company that ‘owns’ and ‘runs’ the sport. All logistics, circuit management, tickets, hospitality, etc. is handled by them. In short, they are the guys that ‘operate’ the circus – which is why Bernie is famously called as the ‘Ring Master’.

So what is Bernie’s stake in the FIA – FOTA war? How does it affect him! Well Bernie is affected the most – and is the person who is being crushed in this war. And why?

Now that the FOTA have decided to break away – Bernie won’t have the top teams in participation next year. That is indeed a big threat and might drive away the spectators both at the circuits and on the TV. Not only that – his TV production and distribution deals will be tossed out of the window too. All in all, the value of his commercial rights will fall drastically.

So what does Bernie have to do? He has to play the balancing act to perfection. He has to support the FIA and of course the FOTA. FOTA is understandable – because his circus does need performers, but why the FIA?

Lets face it, cost reduction is a good step forward that the FIA has taken and it does work in Bernie’s favour too! And why? Well, F1 lost the Honda team last year, it almost lost Toyota and Renault too. Privateer teams have entered F1, but again with shoe string budgets and not healthy financial backing. In the last decade or so, no new team has been added to the grid. Team ownership has only exchanged hands and citizenship and this is of course a concern for Ring Master Bernie! Imagine owning a circus and having a constant fear that some of your star performers might just ‘pull out’ anytime!!

Bernie of course is a shrewd businessman and everyone on the grid knows that – trust him to come up with an ace when the time is right. Wait and watch his move!!

Now to the important one: The FOTA – The FOTA or the Formula One Teams Association as it is called is a body that represents the ‘performers’ in the circus i.e. the racing teams. The FOTA not only comprises of the manufacturer teams but also the privateers and is a body that guards the interests of the teams in the sport. In layman terms, it is a union of the teams.

When the FIA announced the budget cap and the two tier F1 system, the otherwise weak FOTA maintained a unified stance against the rule. Did it make sense? Wouldn’t cost cutting work in their favour rather than against? The answer is a mixed one. Cost cutting surely made sense – but not a drastic one and for sure the two-tier formula didn’t make any sense.

It is widely known that top F1 teams spend close to $400 million on their F1 program annually. Yes, that is an enormous figure to spend on racing just two cars on 17 circuits every year, but the teams have been doing it and successfully so. Over the years they have mastered the art of running teams and cars, they have mastered the business and the financials.

So if the FIA is to get up overnight and ask them to run the same team at nearly 1/10th the cost – the teams are bound to protest. Worse, they are forced to do so and worst, they are only given a year to comply – you are rubbing some of the world’s largest car manufacturers the wrong way! And the FIA did just that!!

So why did the FOTA refuse? And if Williams and Force India could agree with the budget cut, why not the others? FOTA did welcome the budget cut – but not a drastic one. With the proposed rules, F1 teams will not only have to sack much of their workforce but also shut their R&D on automobile technology. One has to remember that most F1 teams are also global car manufacturers who use the platform of F1 to test newer technology which then makes its way onto their road cars. They run integrated programs – not only on the technology front, but also on their marketing front.

Hence, if they were to take the budget cut – their reason to exist in Formula1 would cease. They wouldn’t be able to test revolutionary systems [like the KERS?] and that would also indirectly hamper their road car development programs. Also, most F1 teams have existed over decades and their investment in Formula1 has not been commercial alone. Ferrari’s road car empire is more or less built on their successes in Formula1 and they are more emotionally connected to the sport than any other team.

However, having said that, the FOTA too supported the budget cut but in a more systematic and phased manner rather than the new ad hoc proposal. But the FIA of course chose to ignore the suggestion. [Mistake no. 3]

Coming to Williams and Force India and their acceptance of the rule – if one analyses their reason for existence and the business model in operation, they had no option but to accept the rule. Williams is the most successful private F1 team yet and their only business is to run their F1 program. They don’t have cars and energy drinks to go back, sell and make money out of. They survive on sponsorship alone and we all know the fate of their title sponsor, RBS. The same is with Force India! Dr. Mallya bought the team to race – and not sell his Kingfisher beer!

FOTA breakaway – well the FOTA was pushed into a corner they didn’t like – and the FIA chose to mess around with the worlds most powerful auto brands. As a result of their ‘power game’ the FOTA decided to break away from the FIA and FOM agreement and hence announced their own single seater championship. Wise step? I would beg to differ – but considering what’s at stake for the FOTA – oh hell yeah!

And last but not the least – the most important stake holder for all – you, me and every Formula1 fan: we’ve been subjected to some really cruel power games in the last few years. Not to mention the umpteen number of rule changes and penalties that have been thrust upon us - with a take it or leave it attitude. An average motor-racing fan tunes in to watch good wheel-to-wheel action and drama every fortnight and not some political battle that surrounds around 20 cars running on track!

That the FIA and FOM haven’t realized the value of the fan yet means that they are either not bothered or they are just happy to be fighting their own internal battles, leaving us to pick up the pieces.

However, the ‘war’ has only gotten uglier and with the special Council meeting of the WMSC scheduled later this week, we are sure to get some more action on this front.

Watch this space to know more…

PS: What is iSport’s stand? Well, the breakaway is easier said than done. We personally believe that the FOTA is using this as a tool to squeeze the FIA – however, if push comes to shove, the breakaway might just take place in 2010. However, one thing is certain that the world can’t afford two Formula1s – so we might just see Darwin’s theory being put to test here – which one will survive!