Extended Fat Hippo’s Rant: Can #F1 be fixed?

by Danilo Schöneberg

Please note that this feature expresses a personal opinion that doesn’t neccessarily match the opinion of other TJ13 writers or anyone else for that matter.

In yesterday’s Hippo’s Rant I proposed that those teams, who cannot afford F1’s huge costs, leave a contrail and if too few remain, to let F1 as we know it, die in peace. Predictably that was met with criticism from the readers and most of them still cling to the hope that F1 as they have gotten used to can still be salvaged, but it can it?

Why is F1 in such a sorry state?

The kneejerk reaction is to shout ‘credit crunch’ or ‘global economic crisis’, but that’s just hogwash. The economic crisis was mainly about the banks, who got punished for their corrupted methods of systematically defrauding their customers. F1 is a big company business, but the blast wave of the imploding banking sector mainly hit small and medium businesses and people, who were poor in the first place. All the big corporations, who shed crocodile tears about having to lay off people, were either using the economic climate as a welcome excuse to maximise their profits or they were so badly run that they would have hit problems, even without a disintegrating banking sector.

The F1 teams do not produce consumer goods. F1 is the world’s most expensive “mine is bigger than your’s” competition. They build highly advanced prototype cars for the sole purpose of determining, which one is the fastest. Since they don’t produce anything they can sell, an F1 team’s major or only source of income is to seek sponsors, who pay them money to have their name or logo painted on them. Another source of income is the share of money they get from the earnings of showing F1 to the world.

Saying that sponsors went away because of the current climate is not logical. A gloomy economic atmosphere is making people shy of buying things that are not a strict necessity. So if anything, to fight falling sales, companies have to increase their efforts on advertising, not reduce them. The real problem is that no industry really took over the big spending trousers of the tobacco industry, which was chased away by bigoted governments, who forbid tobacco advertising, but subsidize tobacco farmers. I’m looking at you, European Union. It is legal to sell cigarettes, it is legal to own them and the state gladly collects the massive tobacco tax, yet advertising them is illegal. Why? To quote the late George Carlin: “Kids don’t start to smoke, because a camel in sunglasses tells them to.”

So not only were the biggest sponsors F1 had since the 60s chased away, the incentive for others to take over is greatly reduced by F1 literally being all over the place. Back in the day most races were run in Europe with a few overseas stops in Americaland, Japan and Australia. Consequently sponsors with a strong interest in the European market were lining up. But unless you are a company that wants to sell its wares literally everywhere, you don’t get much exposure for your money even with more races than in the olden days. Russian gas multi Gazprom is a big spender in terms of sports sponsoring, so they would be a natural match for the rear wing of the Marussia cars, wouldn’t they? No, they aren’t because they operate mainly in Europe, which is why they sponsor big European football clubs instead of a Russian motorsports team that is forced to toil about on god-forsaken Tilkedromes at the wrong end of the world.

The second big problem is that Ecclestone and his shady bunch of business partners, all proud alumni of the Cosa Nostra School of Applied Fraudulent Methods presumably, are siphoning money out of F1 by the bucket load. F1 generates such a gigantic amount of money from TV rights, hosting fees and whatnot, even Marussia could operate on a 100 million budget before they even slap on the first sponsor sticker. Problem is that Bernard E. and his kleptomaniac posse pocket half of the revenue for no reason other than to become filthy rich. In 2012 that left about 700 Million to be distributed among the teams. That’s how big the pie was after the toad from Suffolk had wolfed down half of it already.

The terminally naive will now think that we divide those 700 million by twelve and everyone gets 58,3 million, thats massively more than Marussia’s entire budget. But no, first a slice of 17.5 million is taken off the top and given to Ferrari for being Ferrari. That others like McLaren and Williams have also been in F1 since the Romans left and even privateer squad Sauber is soon having its 20th F1 anniversary is just a pesky little detail. The remaining 682.5 million are divided into two pots of 341.24M each. The first pot is distributed in equal shares among the 10 or 9 teams, who have been in the top 10 twice in the last three years. That’d be 34.2M each. Mind you, that’s still a Marussia budget’s worth of money. The second pot is divided by a tricky formula, otherwise known as witchcraft, based on final championship position in the constructors championship.

These numbers are somewhat simplified, since there are also ‘special treats’ involved for teams, who willingly bend over the nearest piece of furniture. when Bernard wants to ‘service the account’, like for instance letting go Adam Parr, because the dwarf doesn’t really like him. But in essence that means, those who could spend the most will automatically get more money back, unless you are Toyota or Honda and have no idea what you’re doing in the first place.

Call me stupid, but I cannot see how such a system can achieve anything but to deliberately starve thos to death, who have to operate on a smaller budget to begin with. Germany has something called the Länderfinanzausgleich, which in essence means, those states like Bavaria and Baden-Würtemberg, who are finacially and economically stronger than others, like Hamburg or Mecklenburg-Vorpommern have to pay some of their earnings into a fund, from which the weaker states get some money to help them along and avoid a ‘poverty line’ across Germany, like the stark difference between northern and southern Italy for instance. What might sound like Communism or Waldorff school, makes sense on a second look. After the war Bavaria was a piss poor agrarian state, who was firmly on the receiving side of this financial construct. They invested that money, industrialized their state and are now the biggest constributor to the fund, which in turn strenghens other states and Germany as a whole economic power. Why not indroducing something like that in F1? Take part of the revenue, put it into a pot and pay it out proportionally in reverse order. As Marussia gets financially stronger, they might rise in ranks, but the higher they climb, the less ‘extra money’ they get and they either keep going by their own strength or will drop down the order again. May sound prepostrous, but it makes more sense to me than handing out money, just because your cars are red.

Can F1 be fixed?

Theoretically yes. We could wait until the German prosecutors have locked up Ecclestone and then reverse the fraudulent deals that enable him to milk money out of F1 in biblical proportions. Then give the money back to those, who worked for it – the teams. But that would make a trifle too much sense for the world we live in. In a world in which career criminals don’t get locked up, but become Italian Prime Minister instead or rule F1, you can’t really expect any sort of sanity.

The first and foremost thing to do is getting rid of Ecclestone. As long as he and his crooked background posse are about, F1 is terminally doomed. He may be the reason for making F1 the global sport it is now, but he’s also the one, who didn’t notice when the cow’s udder was empty, he kept on squeezing and squeezing. Now the cow’s about to die.

The next thing – the kneejerk reactions have to stop. Back in 2009 – as ‘means to reduce cost’ – the testing ban was introduced. First of all that cost a lot of jobs as most teams basically had to sack their dedicated test teams and in return teams invested even more money to build obscenely expensive simulators. Back in the day Ferrari was pounding around Fiorano day and night and that got them a development advantage over smaller teams like Minardi, but even Minardi could afford a few test days every year and more importantly, it allowed them to sell test drives to rich gits for added revenue. The smaller teams of today cannot afford a simulator, thus they have nothing at all. Minardi’s (perhaps) 10 testing days to Ferrari’s 200 was still a better quota than Marussia’s grand total of Zilch to Red Bull’s 200 simulator days. It achieved the exact opposite.

Is the cost cap the way to go?

If you read yesterday’s rant, you already know what I think about this hogwash. First of all, you cannot enforce it. If you control how much Mercedes’ Brackley factory is spending, how do you make sure that Merc doesn’t have a few engineers and a supercomputer back in a Stuttgart basement doing additional development work. How do you make sure that some of Ferrari’s development team isn’t securely obfuscated and buried within Alfa-Romeo? How can you ensure that a Red Bull technology intern, who officially is the dedicated paper delivery boy for the stratosphere jump team, wasn’t in fact secretly Adrian Newey’s personal pencil sharpening assistant? The moment that the teams agree to a cost cap, is the moment they have worked out how to cheat it.

And why should the costs be capped? How about not letting them occur in the first place? Track testing is cheaper than an obscenely expensive simulator. Yes, the bigger teams will be able to afford more testing, but the smaller teams will at least be able to afford SOME testing as opposed to none at the moment. And get rid of the idea that the playing field has to be levelled. That doesn’t happen in any sport. Nobody proposes to put Usain Bolt in lead shoes, so that someone else can win for a change. The Austrian Ski jumping team puts a lot of money into youth development and material research. That’s why the majority of ski jumping events in recent years were won by Austrians. Nobody proposes a training ban to hobble them.

The whole point of F1 is to build a car that is massively faster than all others. If you invent gimmicks, like double points for a fake showdown, you destroy the very essence of what F1 is all about.

And finally, get F1 back to were it belongs, Europe. Back in the day for most races you put your cars and stuff in the back of a few lorries and went to the track. These days for most races you have to book expensive flights, because the race is held on a brand new Tilkedrome in North-Dictatorstan, because they paid more money than, let’s say, Estoril.

If you really want to get the costs down, stop introducing expensive malarkey like masses of overseas races, simulators and rubbish tyres that need extra testing just to make sure they don’t kill the drivers. Oh, and before I forget: Get rid of Ecclestone. It’ll help much more effectively than any cost cap.

31 responses to “Extended Fat Hippo’s Rant: Can #F1 be fixed?

  1. Just a couple of questions,
    1. How many people would stop watching F1 if Ferrari didn’t race?
    2. How many people would watch a rival championship with all the F1 teams but named something different?

    Personally, I would still watch without Ferrari and I’d follow the teams, not the name. It just seems madness that the teams all bend to the will of Bernie and the Prancing Horse.

    • On point 1 – a low fewer than the scaremongerers would have you believe ….

      On point 2 – Bernie aka FOM have stiched up the rights to most F1 suitable circuits. A rival race series would have problems finding alternative venues unfortunately 🙁

      P.S. Danilo – you forgot to mention needing to get rid of Todt, the F1 Strategy Group and all the other buffoons making a total cockup of running F1.

      But like you – I agree we should let F1 as we know it, die in peace.

      • we can only hope that F1 is never fractured by Ferrari or any other marquee team trying to start a rival series, if what came to pass in w/ the CART/irl example.

        CART vs. IRL: Who Won the War? | FEBRUARY 2004 | BY BOB ZELLER | Car and Driver magazine

        In the struggle for dominance of open-wheel racing, it looks like everyone lost.

        http://www.caranddriver.com/features/cart-vs-irl-who-won-the-war

        |||||||| “One of the notable lowlights of the long, bloody war in Indy-car racing occurred earlier this year when more spectators attended the 29th running of the Long Beach Grand Prix than watched it on television.

        Open-wheel-racing enthusiasts already knew the bottom had fallen out of Indy-car TV ratings, whether you chose not to watch the Indy Racing League, or avoided the Champ Car World Series staged by Championship Auto Racing Teams (CART). But this news was stunning. Estimated Long Beach race-day attendance: 95,000. Estimated nationwide television audience on Speed: 69,000 households.

        It was just the latest indignity in a never-ending debacle. Or then again, maybe it is ending. As this story went to press, CART was still hanging on, but just barely. A takeover bid by Open Wheel Racing Series LLC—headed by car owners Paul Gentilozzi, Gerald Forsythe, Kevin Kalkhoven, and others who offered to buy up CART’s stock at 56 cents a share—was still pending. CART stock had been as high as $35.63 in 1999….” ||||||||

        I believe in fair competition and the ability to build a better mousetrap, but the historical precedents for a breakaway series in open-wheel racing don’t seem good to me as a fan. Obviously FOM thought there was enough of a danger to the business to bribe Ferrari not to leave…and isn’t that really the issue? Even though we slag Ferrari and rightly point out that they’re just another team, one of 11 right now, the danger would always be in how many other marquee squads could they take with them? If Ferrari didn’t enter F1 in 2014 I would not at all stop watching the 10 other teams in F1, but if Ferrari quit F1 and took 4 other teams with them (especially if they were marquee names)…ugh. not good. I don’t know if permanently bribing Ferrari and giving them influence over the running of F1 beyond what any other team enjoys is sustainable either, tho!!

        Again, this is indy cars and not F1, but still a scary warning can be taken from this quote by Andrew Craig, the President and CEO of CART from 1994 to 2000. (Owns the Craig Company, an international sports consulting firm that assisted Vancouver, B.C., in its successful bid for the 2010 Winter Olympics and is working with London on its bid for the 2012 Summer Olympics. [2004 article!!]

        |||||||| “I don’t see any winners. I don’t think either side can regard itself as a winner. What I see is that the division of the sport has led to its decline. It has disenchanted fans, it has confused fans, and perhaps most important of all, it has caused energy that could and should have been devoted to building the sport to be wasted just trying to survive…” ||||||||

        Ferrari is considered the world’s most powerful brand, after all:

        http://www.ferrari.com/english/about_ferrari/corporate/Pages/130218-cor-ferrari-the-world-s-most-powerful-brand.aspx

        |||||||| “Ferrari took the number one spot of the top five most powerful brands in 2013 ahead of the likes of Google, Coca-Cola, PwC and Hermes on a list that includes the 500 most famous companies in the world. Because of its size, the Maranello company cannot compete with the large multinational brands in terms of overall revenues. However, its brand rating takes into account other financial metrics, such as net margins, average revenue per customer, and advertising and marketing spend, as well as qualitative parameters, such as brand affection and loyalty. ” ||||||||

  2. Can I suggest that the new RedBull school on the block first reads some F1 history books and then thinks things over once more?

    • since that statement makes less sense than a FIA press release, would you care to elaborate?

      • Sure: Nil novi sub sole. As a self-declared nihilist I would have expected you to know. My point is that F1 will be just fine, I can’t remember a season without identical or similar issues as the ones you most eloquently raise, but it’s simply the nature of the sport or business, whatever you want to call it.

        • F1 should be allowed to “die” if it can’t continue in a form at least somewhat like what current hardcore/traditional fans appreciate.

          If you’re going to try to fix F1, you have to understand what the root cause of problem is and that’s not the poorly performing global economy. Rather…

          F1 is in bad financial shape now b/c teams are too dependent on sponsorship for revenue, and after the EU screwed-over F1 by banning tobacco advertising, no similarly-spending sponsors have been recruited…and the EU is very very douchebaggy for kicking out the cigarette companies!

          F1’s global schedule is actually detrimental towards recruiting sponsors.

          F1 is run and administered cynically and inefficiently and the governance is intended to benefit the elite, rich teams and discourage participation by non-rich teams. Oh and there’s no vision of sustainability in governance b/c the people in charge are pretty much thieves who are extracting as much wealth as they can (i agree with that)!

          So to fix F1…

          Bernie is very bad for F1 and he and his gang of crooks need to go (agreed!).

          Cost-capping is nice in theory but impossible to implement effectively b/c you can’t police spending of teams that survive by finding innovative ways to cheat spirit of technical rules. So…

          Eliminate the ban on testing and ban simulators, b/c small teams could afford to test for 10 days, at least, but they can’t afford simulators.

          Abandon F1’s global schedule and return racing to Europe for the most part.

          And for emphasis Danilo says, “Oh, and before I forget: Get rid of Ecclestone. It’ll help much more effectively than any cost cap.”

          • The ban on tobacco sponsering was allready aplied in several EU member states before the EU wide ban. One of the reasons the tobacco industry did sponsor motorsports was that most other sports did want to be linked with them.

            Regarding simulators, banning them is a weird idea. Having a simulator is not that expensive, it just depends on the level of detail you put in your simulator. Your PS4 can be a (low level) F1 simulator. (from an IT perspective)

  3. Whilst I have enjoyed reading this Danilo…

    I wholeheatedly disagree with so much of what you have written here!

    • Folks, it helps if you tell us at least some of the things you disagree with 😉

      • “Call me stupid, but I cannot see how such a system can achieve anything but to deliberately starve thos to death, who have to operate on a smaller budget to begin with. ”

        I liked this line and it sounded like the kind of honest out-of-the-mouths-of-babes truth that kids unintentionally speak…that is, unvarnished, unfiltered, uncynical truth! carry on.

    • +1 @adamac

      I would be exhausted picking holes in this and arguing the opposite.

      Let’s just leave it at me saying pretty much the exact opposite to pretty much everything. We’d be there, or there abouts that way.

  4. 1. restrict the amount of fuel – or maybe joules to be used per session and race
    2. 1 km testing = 2 km simulator. Total testing = 20.000 kms
    3. Rock hard tyres
    4. No wings

    This creates the racing which is needed to attract viewers. Why? Aero dependence is reduced and skill is rewarded. Also it makes F1 attractive to companies such as Google (hello quantum computer).

  5. To be fair, F1 income etc is banded around willy nilly, but the fat hippo is not far fro the mark.

    This year, the money distributed to the teams 63% of the operating profit of the commercial rights owners. $1.5bn is the estimated turnover – which after $300m of FOM costs leaves just under $1.2bn operating profit from which the teams get their 63% – $750m….

    What most people do not understand is that CVC et al have leveraged a portion of the future income of the F1 commercial rights and paid out a dividend on this to themselves and the other new shareholders over $2.5bn.

    The banks will argue whoever holds the commercial rights owes them $2.5bn+

    The FIA should they take on Ecclestone et al and attempt to reclaim the rights under anti corruption regulations may face claims for these loans made.

    Then again, the loan contracts were made with the commercial rights owners and the banks may well start with them in any attempts to recover the debt.

    So when the Singapore sovereign fund bought 10% of CVC’s equity in 2012, they received a dividend payment based from the loans organised by CVC for the amount they invested pretty much the next day.

    Looks like a win – win huh? Unless the lenders chase the commercial rights owners for the cash, which would mean CVC now only has 50% of the liability they had 12 months ago.

    What the North American pension funds, Singapore sovereign fund et al appear to have missed is were the rights to be legally reclaimed by the FIA, the banks will chase them first for repayment of the dividend they received, which covered their payments to CVC for their investment.

    • Actually, if they sale itself was illegal, would the banks have any claim on future holders of the commercial rights? If I steal a, oh let’s say Hublot for the sake of general deliciousness, and subsequently pawn it for $200,000 dollars who loses the money if the watch is restored to it’s rightful and vertically challenged owner?

      I’m pretty sure the watch owner is off the hook, though a clever pawn shop owner might seek a reward for having turned it in, the owner would be under no compunction legally to pay said money. Instead, the sad faced shop owner would have to come after me and my multiple off-shore accounts to try and regain their monies, to which I say good luck to you and it probably serves your greedy asses right for being so naive in the first place. 😉

  6. Thinking out loud here, how about having F1 alternate seasons between Europe and Americas?

    Kind of like using the Olympic model where one nation hosts all events for one Olympiad, but for F1 use an entire continent instead? Then reduce the schedule to 12 races max therefore increasing the value and relevance of each race.

    I agree on allowing free testing anytime at any track the team chooses.

  7. Hi Danilo, As you know I haven’t always been highly impressed by your writing style but now you’ve dispensed with the expletives, and upped the humour, I find this piece to be one of the best rants I’ve ever read. It is more comprehensive, more sincere and more lucid, and an enjoyable read, whatever one might think of your opinions – and mostly I would accept them, especially as your general view seems to be to hugely reduce antagonistic regulations.

    Using this new technique I would humbly suggest you will communicate much further than before… and that surely is your desire…

    Just wanted to thank you for a ‘good read’…
    Now get back to your *$#!*%! day job, before you get the sack! 😉 😉

    • “Using this new technique I would humbly suggest you will communicate much further than before… and that surely is your desire…” —-

      …high praise indeed, and now I’m curious to know what was so objectionable about Danilo’s writing previously, sooo… I’ll have to go back and peruse the archives! lol.

      “Clerk of the Court?! Clerk?…get over here! Bring me all the Fat Hippo dockets from 2012-2013!!!” lol…

  8. Danilo, have you completely lost your mind???!! Just yesterday in the comments I was using the analogy of MLB Baseball and their “Luxury Tax” for how I thought that F1 should handle dealing with spending, even though certain commenters (manky, it’s possible I’m looking at you) insisted on calling the system a cap, though it is not. I even suggested that the payout occur in reverse budget order (unlike baseball where the money goes different directions) and be required to be plowed back into the sport and not siphoned off to supplement the FIA’s caviar budget.

    And here you are today and we completely agree with each other, which, TBH, not what I expected at all. I shall have to go have a large glass of whisky. The world is getting stranger everyday, LOL. BTW, love the Länderfinanzausgleich, sounds like the way to go for sure. Now I shall have to go find someone new to argue with. *Sigh* You’re also completely correct about Ecclestone as well. I’m bereft.

      • Yeah, they’re all slightly different. I like the idea of the cap less than the tax because the tax will encourage careful thinking beyond a certain level about development and marginal gains, but also because it’s a way to keep parity in budgets without trying to control a teams spending (which I think they will constantly be finding ways around).

        I disagree about the workability of the tax (obviously) because it seems to do just fine in baseball and I feel there will be less motivation for the teams to be completely dishonest since they are not being prohibited from spending above a certain level. No it won’t be perfect, but it will be better than nothing and clearly the rules can evolve over time as necessary. You have to start somewhere, and this seems like a good compromise.

  9. Levelling the playing field doesn’t happen in any sport? Really? How about horse-racing where successful horses get handicapped in subsequent races to help keep them competitive? How about American Football where teams which do badly get more/earlier picks of the following year’s new player intake? (An idea not a million miles from giving more prize money to the teams which finish last – if it works in US football, why shouldn’t it work as well in F1?).

    Rather than doubling the points for later races, why not make teams carry a pound of ballast for every point that driver has scored in the last ten races? The more you win, the harder it gets to keep winning. Again, it works for horse-racing, so why not for F1? Or double the ballast for qualifying so you start a race with faster cars further down the grid, stocking up overtakes for the race.

    If you reward success with finance which produces success then you perpetuate success. Look at the UK premier league for football, or indeed many others in Europe. You get in the top four it’s worth a fortune which lets you buy the players to finish there again. So you get a very small of clubs trading the title between them. Which I note doesn’t happen in American Football because success makes it harder to keep winning, not easier.

    Lots of ways to make things work better…

    • Because that’s all Waldorff school, where the bright kid is punished for being less dumb than the drooling dimwit in the corner. Levelling the playing field breeds mediocrity. We didn’t come to were we are by hobbling out own prowess, so the smilodon had a fair chance to catch one of our ancestors once in a while.
      We were faster and therefore live, while the smilodon went extinct. It’s survival of the fittest. You don’t improve by dragging along the weak and stupid.

      • So giving a greater challenge to the top teams would breed mediocrity??? I think in most people’s universes performance is sharpened by increased challenge, not reduced.

        Granted if you define “mediocrity” as “a slower lap than the leading car could have done if not handicapped” then yes. But that would be to miss the point by several miles.

        Oh, and you know what happened to tribes that didn’t drag along their weakest members? They went extinct, because it’s not a good idea to let the smilodons eat all your women! Sometimes throwing the weak to the wolves (or cats) is not actually the best idea.

    • Good argument IMHO. Have been thinking for a whole that we need to add ballast to the cars if they win but also like the qualifying ballast idea 🙂

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