Posted 10 July 2000 - 01:48
Mulling things over and looking at both threads, I am coming very close to taking a seriously long Sabbatical from all this. The RVM columns for the rest of 1961 are nearly ready and as for this Forum - well, thanks to you wonderful folks it pretty much runs itself, for which I thank you.
It is interesting to realize that I really don't even "like" a single one of the current F1 drivers with the possible exception of Jacques Villeneuve. And I certainly don't like the Nuremburg Festivals or May Day Parades that the FIA rolls out each weekend there is a race. Perhaps this is just a realization that priorities aren't called that for nothing or perhaps it is the stacks of other things sitting on the tables in my quarters that I could be doing instead of this...
At any rate, starting at the end of this upcoming week, I am gone and I am not taking my laptop with me while I am on the road for the following three weeks or so. And then it is the Usual Chaos and Confusion until the beginning of October. I am, however, making a trek to Watkins Glen at the end of August to visit the Research Library & Archives and watch Mike Argetsinger race....
Enough angst, I will have a better idea of how the next several months are going to go by mid-week. I will keep you posted.
Posted 10 July 2000 - 02:04
But I'm afraid that life in the fast lane is not what worries todays drivers. Perhaps it's for the better that they don't have to deal with death in fast lane anymore, but it's taken a little bit out of racing- nowdays anyone can race. I've seen a documentary focusing on this years 24hr Nurburgring race from viewpoint of two teams- one of which was a local gentry in BMW or something. One of them took 40min lap amidst 11min laps- because he parked the car- and went off to relieve his bowels!!! I'd coax him in '60 Cooper and send him for a spin at Nordschleife, to learn what racing is.
Posted 10 July 2000 - 02:20
If you did that, he wouldn't need to park to relieve his bowels.
Posted 10 July 2000 - 03:06
Certainly all sport has been corrupted by BIG MONEY. I also used to be an NHL hockey fan in the 70s, Les Canadiens. The game at that time was beautiful, full of speed and finesse. The players were committed to their teams, and the teams to their players. A big trade was huge news, not just one in a list of 6 trades made on any given day. The Soviets played a fine, even more artistic brand of hockey. I had to stop watching in the 1980s due to the ever-shifting rosters (you could hardly keep abreast of the trades from year to year) and the brutal, violent and skill-deprived method of playing this formerly beautiful game. Dump the puck in, chase it to the corner, hammer the guy against the boards. Bonus marks if he gets a concussion. Today, even the Russians, in their own country, play the ugly NHL hockey style. Truly sad.
So, to racing. I'm not too sure who started it in F1, it may have been the Gold Leaf Lotus team, but the humble beginnings of commercialism in motorsport have grown, like a huge tumour, into a dominant force. I just about puke up my breakfast when I listen to the P.C. "driver interviews" after the race: "Michael, another great victory, may I sniff your ass?" "Well, to be honest, I have to thank Marlboro and Shell, the car was perfect today, and I should warn you, my butt stinks ;)....". Mikey's idea of rebellion is to seek permission to wear his German Insurance Co. sponsor's hat at the interview, instead of the otherwise required Shell/Marlboro hat. Wow, that is really MAD Magazine material...
The cars look like cigarette packages, the drivers are like plastic Ken dolls, nearly all saying the right thing, or nothing, in the case of Haekkinen.
One exception is Jacques Villeneuve, a great driver among others, whose irreverent answers to the smart-ass interviewer were a breath of fresh air in 1996-98. I can't wait for him to get back on the podium.
Anyway, Villeneuve has been criticised by many in the RC Board for his refusal to consider McLaren due to their massive PR requirements. I think it is great, a sign of independent thinking, and, just maybe, a ray of hope for the future. Villeneuve seems to be a true sportsman, uncomfortable with the present shape motor racing is in. Maybe his example will be followed by other, younger, drivers...nah, everything is about the commercialism now.
But I still watch F1, and occasionally even enjoy a race, as I did a week ago. I guess I'm still a naive optimist, after all...
Posted 10 July 2000 - 04:33
I don't really know what to think about many of these things, but I know it will be a cold day in hell before I can really refrain from being interested in motor racing.
I abhor, like Jenks apparently did, what has happened to it, but it is still the only sport in which I take any interest beyond a fleeting glance.
The money side of it depresses me, the anxieties that people go through to try and join in at top levels must be suicide material. There has been one improvement over the past 25 years.. that 'buy drives' are less available to people without the talent, that the money available to the teams encourages them to scour around a bit to find new talent, so some drivers do stand a chance. If they have the right connections, are in the right place and are lucky.
Then there is the level of dedication that is required to get there and stay there. The most unrealistic way of living there is, in my view. Everything subordinated to the need to achieve in this one endeavour... what you eat, when you sleep, just like an Olympic athlete, but probably worse, for at the end of it all you can still drive into a concrete wall and bring it all to an end.
Posted 10 July 2000 - 06:16
I don't like dressing up either, so Jacques Villeneuve's attitude about clothing and appearance strikes me as being just fine. I was like him when I was a university student - it would be nice to still have that freedom.
I've made a bet with a fellow F1 fan at the office that if Jacques wins a race this season, we'll both dye our hair blond. That'll go well with the shirt and tie ;)
I think my brown and grey hair is safe for the time being, but one never knows...
Posted 10 July 2000 - 09:19
Posted 10 July 2000 - 14:39
Posted 10 July 2000 - 18:33
Not that I'd ever elect to have sex change surgery...
Interesting that Don should start to mull over things now that Mull is posting so frequently. I'm finding the RC forum better than it was when I last went there regularly, but the standard seems to drop as each GP wanes into the background.
That's the advantage we have here, the whole lot is in the background... Where's Zandvoort, 1961, Don?
Posted 10 July 2000 - 22:50
We have a saying- he who plays with children ends up with the **** in the lap. If my history knowledge does not decieve me it was not until after outbreak of war that secret Endlosung documents surfaced. And, yes, dr. Porsche was imprisoned for 5yrs for use of slave-labour. He could have refused goverment orders, but, I guess, he wasn't very thrilled about the idea of being used as decoration on lamppost in front of his house.
Posted 10 July 2000 - 23:07
Posted 11 July 2000 - 00:55
Posted 11 July 2000 - 21:55
theMot, of course, hides under a banner of respectability when he's not on the board, I expect to find he's actually quite reasonable... if only...
Posted 12 July 2000 - 01:35
Posted 12 July 2000 - 01:50
To understand what I'm saying, you must appreciate that the straight is visible to the crowd at the top of the mountain.
I'll see if I can find a picture to post to give you an idea. This is no ordinary place, this Mount Panorama circuit.
Posted 12 July 2000 - 09:03
Would your current disenchantment with most fast things on four wheels have anything to do with a certain Williams history you are working on? That would have meant digging into - gulp - the eighties and - heaven forbid - the nineties...;)
So please don't say we tricked you into depression. Or you could always leave the subject or change it into William Grover-Williams. Maybe that's a 'Williams' more endearing to you...
Posted 12 July 2000 - 15:00
It is not out of the realm that you have touched upon a part of it. As I looked at the Williams project, I decided to cover the period 1969-1999 by doing some the "easy" parts when I got a headache sorting out the "fun" parts. The more I was looking at the 90's and 80's the less I liked what I was seeing. I hadn't realized it, but I am certain it played a role since as you are aware I rarely look at anything past the 60's or the mid-70's. At any rate, renewed acqaintance with this period has not changed my opinion for the better.
However, the pressures of work have finally caught up with me and my available time out of the office is being eaten up as one thing after another keeps popping up. Plus, as I have less time, more projects pile up: RVM, 8W, Williams, German F2, various Case History profiles, my "other" historical writings (I am still a military historian), and an aviation project I am trying to work on.
It is coming apparent I will have to drop most -- if not all -- of my outside projects for awhile as I handle some issues here at work and I am on the road for some weeks over the next few months. I will know more today or tomorrow after we look at some of the things going on here at work. This has been coming and I staved it off as long as possible.
Posted 12 July 2000 - 21:07
Hey, that's morbid, isn't it?
Who's got a car they want to build and a house to renovate and this and that and the other. Fifteen years ago I reckoned I had enough life left (I don't plan to fold early, mind you), but if they were here with me now (these things tend to change in time, and with circumstances) I'd be wondering.
Posted 14 July 2000 - 12:28
Posted 14 July 2000 - 16:23
/C F Eick
Posted 14 July 2000 - 21:01
This is a question, prickly one, that should be asked when the technology exists to have it televised without the great cost.
Posted 17 July 2000 - 10:00
If you put it on TV then it becomes 'commercial', if its not on TV then everyone clamours for it to be televised
You can't win for losing...
Posted 17 July 2000 - 11:30
At the heart of one of the world’s most-watched sports, grand prix motor racing, lies a tale of extraordinary secrecy and of the financial dominance of one man, Bernie Ecclestone.
ON JUNE 28th, in the offices of the Fédération Internationale de l’Automobile (FIA) in Geneva, delegates from over 70 national motoring associations around the world, who comprise the FIA’s supreme body, its general assembly, met in extraordinary session and voted unanimously on a single resolution. It was to approve a deal, recommended by the FIA’s senate, to grant the FIA’s commercial rights to Formula One (F1) motor racing until December 31st 2110—ie, for more than 100 years—to one man, Bernard (Bernie) Charles Ecclestone. There was no auction for these valuable rights; Mr Ecclestone was the only bidder. The delegates were sworn to strict secrecy to ensure no leaks.
The price for such a sweeping concession: $360m, payment of most of which the FIA has deferred for many years. With this deal, Mr Ecclestone, through Formula One Management (FOM, the key trading company in his empire), has, in effect, sole rights to negotiate with and collect lucrative fees from the promoters who put on grand prix races. He also has sole authority to sell television rights worldwide for a sport whose 17 races each year pull in an aggregate TV audience of around 5 billion.
The FIA is a non-profit-making association that regards itself as the world governing body for four-wheel motor sport, including F1. This means it approves and enforces the sporting and technical rules established for the F1 championship. The FIA has to approve every circuit wishing to stage a grand prix; it subjects every F1 racing car to technical scrutiny, and so on. The FIA is dependent on the F1 championship for a substantial proportion of its income.
The FIA’s president since 1991 has been a suave English lawyer, Max Rufus Mosley (son of Sir Oswald Mosley). He is a longstanding associate of Mr Ecclestone. Mr Mosley worked for Mr Ecclestone and the other teams as their in-house lawyer from 1977 until he was elected as FIA president. The FIA presidency is an unpaid post. During Mr Mosley’s presidency, Mr Ecclestone has become the richest entrepreneur in Britain, thanks to F1.
In 1987, under the presidency of Mr Mosley’s predecessor, Jean-Marie Balestre, a Frenchman, Mr Ecclestone became the FIA vice-president with responsibility for promotional affairs. Mr Ecclestone, Mr Mosley and Mr Balestre comprise three of the eight members of the FIA’s powerful senate. Another member is Marco Piccinini, a director of Ferrari. Mr Piccinini is one of two directors of FOM apart from Mr Ecclestone.
As Mr Mosley puts it: “The FIA, in conjunction with [FOM],
essentially is F1...In short, the FIA and [FOM] co-operate to put on the ‘circus’.” Everybody in F1 recognises “Bernie” and “Max” as F1’s ringmasters.
The financial trail
Until very recently, there have been few clues about F1’s financial structure; for 20 years Mr Ecclestone has been the person best-placed to know how much money was flowing where and to whom. A 1998 BBC “Panorama” investigation cast some light on the sport’s highly unusual finances. Mr Ecclestone’s ultimately successful attempt to raise $1.4 billion through a bond issue in June 1999 lifted the veil a little. Over the past three months The Economist has examined the extant filings of every British company of which Mr Ecclestone has been a director since 1951. We have also followed the flow of the billions of dollars generated by F1 through Mr Ecclestone’s hands, and examined various deals involving the commercial rights for F1. This article traces that flow, and raises a number of questions about it.
A recent civil case in the English courts also shed some light on Mr Ecclestone’s idiosyncratic business methods. “He conducts much of his business by way of meetings without making notes and his memory of what occurred at such meetings is somewhat hazy,” said the judge, Mr Justice Longmore. Mr Ecclestone’s word is his bond, or so people in F1 believe. Although FOM successfully defended the case, the judge, referring to a promise made by Mr Ecclestone to the plaintiff, said: “In fact [FOM] was doing exactly that at the same moment Mr Ecclestone was agreeing that it would not. In this respect, I do have to record that Mr Ecclestone has not been a man of his word.” Neither was the judge too impressed with him as a witness: “...I have some reservations about any evidence from him that is not supported by other evidence in the case.”
Mr Ecclestone cut his business teeth selling second-hand motor cycles. Early in his career, he showed a talent for financial trickery. After he sold his motor-cycle business, he put about £10,000 of its money, rightfully belonging to the taxman, in his own pocket. When the Inland Revenue sued him, the judge described Mr Ecclestone’s “machinery” as “altogether extraordinary”, and ruled that he had breached company law. Strangely, Mr Ecclestone, never normally one to shirk a battle, did not appear as a witness. The judge said that “...the documents themselves and the admissions made out of court cry out for an explanation...and [Mr Ecclestone] does not condescend to give one...” In December 1971, he ordered him to pay over the £10,000.
Two months before that judgment, Mr Ecclestone had bought the Brabham F1 team. At this point in his career he was selling second-hand cars, and also providing finance for customers. In 1971, he also bought 26 acres of woodland adjacent to his house. To do so, he borrowed money from a company, Rochelle, based in Guernsey, an offshore tax haven—hardly the first port of call for most people financing a land purchase.
The Ecclestone revolution
Our investigation into F1 shows that an estimated $120m was
forgone in unusual circumstances by the FIA between 1987 and
1996 in favour of two companies to which Mr Ecclestone is closely linked. Moreover, Mr Ecclestone’s combined roles from 1987 as president of the Formula One Constructors’ Association (FOCA, the F1 teams’ collective voice), as a vice-president of the FIA and as owner of several F1 companies involved him in conflicts of interest.
Our investigation also shows that the FIA’s senate in 1995 approved a deal to grant FOM an exclusive 14-year lease on the FIA’s commercial rights to F1. The then vice-president of FOCA, Ken Tyrrell, says he was unaware of the deal until after it had been concluded. Its effect was to substitute Mr Ecclestone’s company for FOCA, which had been granted a series of leases on the commercial rights since 1981. It was this deal that the FIA members voted to extend by 100 years on June 28th.
How did Mr Ecclestone manage to get into such a powerful
position? When he bought the Brabham team in October 1971, he was entering a sport dominated by well-heeled amateurs. Rich businessmen, minor aristocrats and hangers-on would drift around the grand prix circuit as if it were one huge, if rather louche, party. The sport was governed by members of the “blazerati”, as they are known.
The sport was unprofessional, the circuits and the cars were
dangerous, and drivers were often killed. The ordinary fans were mad-keen enthusiasts prepared to put up with chaotic organisation and muddy fields to see their heroes flash by in a couple of seconds and a hail of spray. TV networks tended to broadcast only their national grand prix race and maybe one or two famous foreign ones, such as Monaco’s.
Mr Ecclestone saw that many of his fellow team-owners were
engineers or former drivers with little interest in the administration and politics of F1. They were content to leave such matters to him, as he developed a growing interest in negotiating with race organisers on their behalf, and took over the complicated logistics of moving the F1 circus around the world. He became president of FOCA in the mid-1970s.
At this time, the costs of running F1 were rising, leading to growing tensions inside the sport. Both FOCA and the FIA wanted control of the money from TV broadcasters and race promoters. After a bitter fight between Mr Ecclestone and Mr Mosley, on one side, and the FIA on the other, a compromise was reached in 1980, known as the Concorde Agreement (named after the Place de la Concorde, the site of the FIA’s office in Paris).
The agreement split F1’s revenues between the interested parties, the FIA and FOCA. The agreement also recognised the FIA as the supreme rule-making body and owner of all the commercial rights, including TV and radio broadcasting, to the sport. But the commercial rights were leased exclusively to FOCA for four years. At this time Mr Ecclestone was personally deputed to manage the rights on behalf of FOCA.
The practical outcome of the Concorde deals was to make the
whole sport more professional. For instance, the teams who signed them guaranteed to turn up to each race. This in turn meant that broadcasters could rely on a proper spectacle. Mr Ecclestone, spotting the potential to bring more money into the sport, signed a deal with the European Broadcasting Union (EBU) in 1982. The EBU is an umbrella organisation for public-service broadcasters in Europe. Under the new deal, according to Mr Ecclestone, European broadcasters agreed to show every grand prix, instead of the previous ad hoc coverage. This was a turning-point for the teams’ finances. TV coverage oils the wheels of F1. Sponsorship had become an essential source of income for an F1 team, and the price that a sponsor pays is directly linked to the number of TV viewers.
By the mid-1980s F1’s TV income had become more secure. Mr
Ecclestone renewed FOCA’s contract with the EBU in 1985 for a further five years. However, he did not renew the deal in 1990 because he smelled more money for F1, and, by extension, himself. So F1 became the first major global team sport to break ranks with the EBU. Mr Ecclestone realised shrewdly that there were now more bidders in Europe for the TV rights, because of the growth of commercial channels. And, by this stage, the number and demographic profile of F1 viewers were more attractive to advertisers, so TV channels could afford to pay more.
Bernie in pole position
In 1987 Mr Ecclestone entered a new phase of his F1 career. That year, he became a vice-president at the FIA. In 1988 he sold his Brabham team. A new Concorde Agreement also came into effect for five years; a similar agreement, known as the 1992 Concorde Agreement, extended it to the end of 1996. Under these agreements, the FIA once again leased its commercial rights to FOCA. This time, however, FOCA members allowed Mr Ecclestone’s then key trading company, Formula One Promotions and Administration (FOPA), to manage the rights. So these agreements were, in effect, trust arrangements between Mr Ecclestone and FOCA.
There were two streams of revenue: fees paid by broadcasters, and fees paid by race promoters (see diagram 1). TV revenues were split 47% to the F1 teams; 30% to the FIA; and 23% to FOPA. Promoters’ fees were kept by FOPA, which undertook to pay prize money to the teams, hitherto paid by the promoters. The teams ceded the promoters’ fees to FOPA because Mr Ecclestone was prepared to take some commercial risk, since not all the promoters were considered good for the money. For Mr Ecclestone’s part, this deal was a significant opportunity: the larger the fees, the more money for him.
Promoters, who are not necessarily circuit owners, bear some of the costs and financial risk of staging a grand prix. Their costs include maintaining or renting a track, advertising, FIA fees, safety personnel, and so on. They rely for their income on ticket sales, fees from concession holders, and some corporate hospitality. They must cede to Mr Ecclestone any media rights they have and agree to restrictions on promoting other types of races. Most also give up trackside advertising rights and set aside an area for the Paddock Club (a swish corporate hospitality suite that is part of the F1 circus).
By the early 1990s Mr Ecclestone was to acquire yet another hat. He himself became a promoter at several circuits. For instance, he has run the Belgian grand prix at Spa for the past decade. As the rights holder, FOCA’s name was on all contracts with TV companies and promoters. So for those races that he promoted until 1996, this led to Mr Ecclestone, wearing his FOCA hat, negotiating with himself wearing his FOPA hat.
Formula One goes offshore
Given the background of Mr Ecclestone’s dealings with the EBU, the transaction the FIA proceeded to conclude was peculiar, to say the least. For the duration of both the 1987 and 1992 Concorde Agreements, it surrendered its 30% of the TV revenues, which were worth an estimated $120m, to two companies, both called Allsopp, Parker & Marsh (APM), in return for a modest annual fee. The FIA claims that the deal was done because of uncertainty over F1 TV revenues. In the light of the EBU deals, this explanation is very hard to credit. The FIA has declined to answer any of our detailed
questions on the APM companies. Mr Mosley has told us “...most of your questions are misconceived and there is little I can usefully do, short of attempting to write your article for you.”
The biggest question is: Who was behind the APM companies? The first APM (APM1) was a British company incorporated in 1983. Its first directors were Patrick (Paddy) McNally and Luc Argand, a Swiss lawyer. Mr McNally used to work for Philip Morris, a tobacco company, where one of his jobs was to act as gofer for the late James Hunt, F1 world champion in 1976, who drove for a team that was sponsored by a Philip Morris brand. Mr McNally has been a close business associate of Mr Ecclestone since 1984. Mr Argand is a trustee of an offshore trust set up by Mr Ecclestone’s Croatian second wife as part of an elaborate tax-avoidance scheme (see diagram 2). In 1996 Mr Ecclestone transferred two of his key
companies to his wife.
APM1 had 12 shares of equal nominal value. Legal (as opposed to beneficial) ownership of ten of them can be traced via two other companies to a trust in Guernsey. Whoever was the beneficial owner, the secret was safe in Guernsey. There are other intriguing facts about APM1. A firm of solicitors made its initial regulatory filings; the person who signed some filings was Stephen Mullens. From late 1990 until early 1993 the address of APM1’s registered office was that of Marriott Harrison, a firm of solicitors of which Mr Mullens was by then a partner. This firm acted for Mr Ecclestone’s companies in last year’s bond issue. Mr Mullens is a legal adviser to Mr Ecclestone’s family trust. Mr Mullens and Mr Argand are directors of Excelis, a French company that owns the Paul Ricard racing circuit. Excelis is ultimately owned by the same family trust.
APM1 was highly profitable: its total profits were nearly $34m on sales of $46m between 1985 and 1988. This compares with profits of just over £9m ($14m) for FOPA, Mr Ecclestone’s company. APM1’s profits escaped British tax, as the firm was deemed to be non-resident in Britain for tax purposes. After changes in British tax rules in 1988, APM1 was no longer non-resident and ceased to trade.
In September 1988, a company also called APM (APM2) was
formed in the Republic of Ireland. At that time the Irish authorities allowed local companies to be non-resident for tax purposes, subject to certain criteria. APM2 was deemed to fulfil a key criterion as none of its directors, who appear to be nominees for its real directors, lives in Ireland. Nor were its legal owners based in Ireland. APM2 has two shares. Mr Argand has been the legal owner of one share since 1989, and people in his office the other one.
APM2 has never filed any accounts in Ireland. In order to keep its finances secret, it has claimed an exemption that is open only to “a company not trading for the acquisition of profit by [its shareholders]”. To qualify for this exemption, a company’s constitution must include an explicit provision to this effect. Although APM2’s constitution does contain such a provision, it was clearly trading for profit.
Documents show that APM1 and APM2 were really the same
company. So the beneficial owners of both must have been one and the same. Mr Ecclestone has told us that he has “always understood Mr McNally to be the owner of Allsopp, Parker & Marsh.” However, according to audited accounts for APM1, which Mr McNally signed, he held only one of APM1’s 12 shares. The accounts tell the same story for Mr Argand.
As Mr Ecclestone was responsible for distributing FOCA’s TV
income, he should have known about payments of the size and
importance of those made to the APM companies. However, Mr
Ecclestone has challenged this inference, saying: “Insofar as it involves payments by FOCA, your information about an agreement between Allsopp, Parker & Marsh and the FIA is not correct.” Mr Ecclestone has further links to APM2. In 1987, the FIA transferred to APM the right to exploit the broadcasting rights to FIA championships other than F1. From 1990 until 1996, APM2 asked International Sportsworld Communicators (ISC), another company controlled by Mr Ecclestone, to administer some of these rights. In August 1996, ISC concluded an agreement with the FIA under which
it obtained the rights previously held by APM. This year Mr
Ecclestone’s family sold ISC for an undisclosed sum, but certainly many millions of dollars.
As well as the FIA’s 30% share of F1 TV revenues, two other
sources of F1 revenues appear to have passed through the APM
companies: income from the Paddock Club and money from
trackside advertising which, together, now run to tens of millions of dollars a year. The financial manager for one promoter told The Economist that Mr Ecclestone had given his company no alternative but to surrender trackside advertising rights to the APM companies.
Similarly, the Paddock Club got a prime site free. He also said that he believed that Mr McNally was in charge of APM2; and that he had never heard of its registered directors. Yet Mr McNally has never been a director of APM2. It is surprising that Mr Ecclestone insisted on these benefits going to APM2 if he was not absolutely certain about its beneficial ownership.
The APM companies also have a trading relationship with Allsport Management SA (Allsport), a Swiss company set up in 1984. A Swiss company’s financial information is not available for public inspection, nor can its beneficial ownership be traced. Today Allsport is the name associated with trackside advertising rights and the Paddock Club. The current directors of Allsport are Mr McNally, Mr Argand and a Swiss woman. Mr Ecclestone has told the press that Allsport is Mr McNally’s company. While it could be argued that Mr Argand adds gravitas to the board, it is equally possible that he represents the interests of a beneficial shareholder of Allsport other than Mr McNally. Mr McNally has declined to answer any detailed questions on the APM companies or on Allsport.
Mr Ecclestone’s main company made a profit before tax (and his own pay) of £59m in the year to March 1996. He foresaw fabulous wealth if he could float it on the stockmarket. One potential problem was that Mr Ecclestone’s name was not on any of the contracts for F1 rights: FOCA’s was. This problem was solved when, in late 1995, the FIA’s senate granted the FIA’s F1 rights to FOM (ie, Mr Ecclestone) for 14 years for $8m-9m a year, instead of 30% of the TV revenues as under past Concorde Agreements. In other words, from 1997, the FIA surrendered directly to FOM income that had previously gone to the APM companies.
The teams were furious that Mr Ecclestone, as president of their association, FOCA, had done a deal with the FIA to swap his company, FOM, for FOCA as the rights holder. Three F1 teams—McLaren, Williams and Tyrrell—stood up to him. The
remaining eight teams promised support, but this soon evaporated. The three teams refused to sign a new Concorde Agreement, even though this hurt them financially.
Mr Ecclestone appointed an investment bank, Salomon Brothers, to prepare for the flotation of Formula One Holdings (FOH), but the quarrel with the three teams overshadowed his plans. These were put on hold after the European Commission started an antitrust investigation. In June 1999 it made an initial ruling that F1 was in breach of European competition laws, though Mr Mosley and Mr Ecclestone hotly dispute this. The case continues. The commissioner who launched it, Karel Van Miert, refuses to comment other than to say it was “the most menacing case” he had undertaken.
Mr Ecclestone soon came up with an alternative to a flotation: a bond issue underpinned by revenues from race promoters and TV broadcasters. To launch this the Concorde Agreement needed to be extended to ten years, for which Mr Ecclestone wanted the support of all the F1 teams. The rebel teams, one of which was under new ownership, changed their minds and signed the new 1998 Concorde Agreement. It is not clear why they did so, but the best clue may lie in the bond-issue prospectus, which states that: “Upon any flotation of FOH...some of the Formula One teams are expected to become significant shareholders in FOH.”
Despite the European Commission’s investigation, the bond issue was launched last summer, raising $1 billion for the Ecclestone trust. The co-lead managers of the bond issue were Westdeutsche Landesbank (WestLB), a German state-owned bank, and an American bank, Morgan Stanley Dean Witter. As there was little appetite for the bonds, WestLB initially took as much as two-thirds of them on to its own books, financing that purchase by issuing bonds of its own. As WestLB’s bonds were state-guaranteed, they carried a lower rate of interest than the bonds issued by Formula 1 Finance.
Since the bond issue, Mr Ecclestone’s family trust has raised a further $1 billion by selling 50% of SLEC Holdings (a holding company for FOM) to two firms, which, in turn, have sold out to EM.TV, a quoted German media company, for $1.8 billion.
Companies issuing bonds that are to be listed on a stock exchange have to prepare a prospectus. This document discloses all material matters, like important contracts, affecting a company’s business. A likely candidate for disclosure in such a prospectus was the arrangement between Mr Ecclestone and the FIA. The royalty of $8m-9m a year payable by FOM rose to $38m a year, though this still seems a small amount given that F1’s total TV revenues for 1999
were $241m. A 30% share for the FIA would be equivalent to
$72m, and F1’s TV revenue can be expected to rise over the next few years.
The relatively small size of F1’s total TV revenue surprises some observers. “Mr Ecclestone is not extracting full rents from his TV rights,” says one leading sports-rights consultant. One explanation may be the 33.3% discount that Mr Ecclestone has given to broadcasters if they agree not to show other races, such as America’s Indy 500. Another may be that Mr Ecclestone is, in effect, FOM; he spreads himself extremely thinly as he handles the negotiations with TV companies. But a cynic might predict that the rents may rise now that FOM has bought the FIA’s F1 rights for a further 100 years for a multiple of less than one times FOM’s 1998
revenues ($404m). In 1998, FOM made pre-tax profits of $202m.
Other motor-sports rights are soaring in value: the American TV rights for NASCAR, an American stock car championship, fetch $400m a year. FOM, in fact, makes most of its profits from promoters’ fees rather than TV income. FOM’s share of TV revenues has to pay the millions of dollars that it costs to provide the picture feed to broadcasters. By contrast, FOM is maximising revenues from promoters. For instance, a South Korean company was to have been charged $12m to stage a race in Korea in 1998, and that fee would have risen by 10% a year.
Mr Ecclestone’s position in F1 is now unassailable. Promoters cede any media rights they have to him. Similarly, under the Concorde Agreement, the teams surrender the right to their images. So the circuits are disenfranchised from the broadcasters who, in turn, are disenfranchised from the teams. The teams are beholden to Mr Ecclestone. His longstanding associate, Mr Mosley, is in charge of the sport’s governing body. Nearly all of F1’s affairs are shrouded in extraordinary secrecy; not only are the terms of all agreements “commercially confidential”, but even the existence of some agreements is a secret. Nobody inside F1 is seriously able to question how it is run. That is what happens when one man is allowed to establish such a financial stranglehold on a sport.
Posted 17 July 2000 - 21:07
One of the difficulties I have in understanding it all is the number of unknown parties to it all... "A Swiss woman," for instance... where does she come in?
Posted 17 July 2000 - 22:21
Posted 17 July 2000 - 23:16
One would think not, with all the money that is to be gleaned from the business... someone would take it up.
But the tobacco business headaches loom large on the horizon... maybe a consortium of Tobacco heavies will see it as a way they can continue in business, ripping to world off...
Posted 18 July 2000 - 10:22
And they would make a better fit with the modern image of F1, wouldn't they? Companies having to do with computers, software and mobile communications are perfect match for the 'sanatised' environment for which Don holds the current GP - excuse me, F1 - scene. And the current cars are sort of like a computer with software and mobile communications with four wheels and an engine attached to it.
Let's face it: fag companies should sponsor sports directly associated with heroics, noise, girls and death, i.e. how it was when they started sponsoring in the sixties. I can't imagine HHF taking a relaxed smoke in his pits, completely disregarding the danger with the refuelling tanks close by, then having a snog with Jordan mascotte Melinda Messenger before going out and drive himself to death.
Though HHF might not be such a good example, as he will be very much acquainted with death, being the son of an undertaker. Actually, the story of him discovering his talent for racing is quite good and has quite a nostalgic ring to it, since it's the way they probably found out in the old days. Apparently, his father's business had lots of Turkish "customers" and HHF regularly blasted the hearse down the Balkan freeways to Istanbul to deliver another filled coffin. As the car was needed almost every day, HHF was challenged to turn it into an overnight job. He duly delivered. In many aspects, as one can guess.
But that's an entirely different story. As are today's Frentzen coffins in the shape of a Jordan monocoque... That's another sick commercial twist by Frentzen Senior that kind of endears Junior to me. A shame he's being blown off this year by his Italian but hardly mediterrean-tempered team-mate.
Coming back to today's lack of "classic", unconforming Grand Prix drivers, I don't think Jacques is the only one. Having seen another one of Alesi's traditional brain fades in last Sunday's race, I was once again reminded of the fact Jean also is one to always speak his mind, drive with heart and will never give up, screw if it's your team mate and all. The guy is racing.
Posted 18 July 2000 - 13:30
Their replacement of the tobacco money would certainly secure the traditional European races, however.
Posted 18 July 2000 - 21:00
Posted 18 July 2000 - 22:55
Posted 18 July 2000 - 23:48
Might I inquire what is so wrong with tobacco money? I do not see why should tobacco sponsors be treated in slightest way different from other sponsors. Smoking isn't illegal (I practice it, perhaps even in excessive quantities), they pay taxes, I reckon they put a largest amount of money on the table- and as consequence they get discriminated- on half the races they don't even get names shown on cars.
Posted 18 July 2000 - 23:52
Ray, I see you're posting in this neighborhood, so I'll seize the opportunity to ask if those pics of oddball engines were any help.
Posted 19 July 2000 - 00:04
Posted 19 July 2000 - 00:16
Posted 19 July 2000 - 16:43
Posted 19 July 2000 - 21:45
Posted 19 July 2000 - 22:24
Originally posted by Ray Bell
I think it's clear that the car manufacturers will generally be engine suppliers only. Renault is going in again, but they and Honda are unique in the last forty four years, Renault alone in the last 31 years. Surely, however, there is enough competition between the IT players to keep them fighting each other through this medium?
It is true that ony Renault and honda have built their own cars recently but the car manufacturers are not only engine suppliers. They are also major suppliers of finance. DaimlerChrysler own 40% of McLaren, BMW have taken over the commercial rights of William and so on.
IT is a very fast changing business
Posted 19 July 2000 - 23:14
I hope you're not counting in Mercedes as engine manufacturer. I would be embarrased putting my logo on Illmore engines and claiming myself to be an engine manufacturer/supplier. One would expect more from company that did some serious excursions in racing world.
Posted 19 July 2000 - 23:43
I'd love to see them have a go, mixing their traditional methods with some newer technology... to choose desmodromic or air pressure... such dilemmas they would face.
Posted 20 July 2000 - 00:17
A teacher at university was telling a story that they had engine blocks* stored outside the factory in order to, due to rain and atmospheralia, age the cast to maturity before it was actually used in engine. The part I found hard to belive that chief engineer, oops! forgot his name, encouraged workers to piss!!! on them to catalyze the process.
* As I was led to belive, those blocks were unmodified BMW production blocks for 2002 model. Can anyone substantiate the fact?
Posted 20 July 2000 - 00:53
Posted 20 July 2000 - 01:57
Posted 20 July 2000 - 03:25
BMW used as blocks for the M12/13 series production blocks with those having about 60K kms generally proving to be the best for the job. The engineers found that these worked best since they were "seasoned" and withstood the boost and the other joys of turbocharged racing better than engine blocks built for that purpose. From my understanding this info was gained from when they ran turbos in IMSA and found that older blocks held up better...
Posted 20 July 2000 - 07:32
Posted 20 July 2000 - 08:05
Meanwhile, scrap yards will have a ball crushing those ugly bodies, which were also incredibly heavy, and scroungers can get all sorts of interesting little fittings off the hydrolastic suspension lines. Moreover, any leftover brake pads can have their locking device holes drilled out and be fitted to... you got it! 504s!
Posted 20 July 2000 - 08:39
Posted 20 July 2000 - 08:45
By the way, can you imagine using a BMW 2002 as a taxi? A bit cramped by Holden and Falcon standards!
Posted 20 July 2000 - 11:43
if a team is looking for a land crab block, there is one in my back yard. In fact they can have the whole car.
Posted 20 July 2000 - 12:23
He had retired, and being a perfectionist, he would do everything just right. He made sleeves, he made injection trumpets (three sets!), he bought Carillo rods (and even one of these moved while sitting on the shelf! Twisted half a degree or something, and he picked it up!), he spent time at a specialist engineering place called Kirby's.
At one time, after getting the block back from them, he took it home and established they had done something wrong. When he took it back (a V12 block in the boot of his Renault 12!) they said, "You wouldn't be able to check that, you'd need the gear we have here to do that!"
At that point he offered to show them how he had come to the conclusion, they fixed it, then got him in to check it over with their gear, including the use of a 12' square surface plate.
After he pronounced it okay, they offered him a job!
"No thanks, I'm retired..."
One day he went shopping with his wife, with whom he hadn't been able to sleep for some fifty years. He was embittered by this side of his life, but away from his wife he was fine. Anyway, she went off into the supermarket, he sat on a seat outside... when she returned she wondered why a crowd had gathered. He had keeled over.
Which he would have seen as a problem. At the time, E-types had gone through the roof on the second hand market, and I said to him, "Aren't you afraid of the value of it being affected by your taking it away from standard?"
He was, in fact, aiming to make it a 450hp flyer with docility enough to take his wife shopping, and he would have done it, you can bet.
Anyway, he said, "It doesn't matter, it's my car, it's not for sale anyway."
Then he related a story about when he and his mates all had 3-wheeler Morgans. One of them, he said, had courted his wife in his. Later, he owned a garage, and he dismantled it to rebuild (and we all know this story!) and it remained that way for many years. It was all stashed in the rafters of the garage when he died....
A mutual friend dropped in on the widow to offer condolences, and eventually swung the conversation around to the courting days and the Morgan. "What are you going to do with that?" he asked. "I just don't know," she wept. "Look, I'll give you some money for it (offering a pittance) and take it off your hands." And he got it, put it together roughly and sold it for a bundle.
"If I know I'm going to die," Kevin said, "I'm going to cut my Morgan into pieces and take it to the tip. Nobody's going to get it!"
So I understood why he didn't take too kindly to my question.
Hey, this is getting a little off the topic... maybe I should bring it back...
Kevin prepared an Elfin F2 car (twincam Ford 1600) for Enno Bussellmann for a year or two. Enno was no Perfumed Prince, worked as a roof tiler or something, never drove on the road for fear of losing his licence... which would prevent him racing.
Did that do it?