So here is a Method that’s helping Ferrari to be top dog in F1

Last week’s news on engine regulations has upset some teams. “Why” you ask? Well, good old-fashioned politics, I guess.

Teams ponder about their strong points, and wonder whether changing the status quo would benefit them. Obviously, if you are a team owner, and your team is currently top-tier, changing the formula should be considered a risk.

The case that showcases this best is the introduction of the V6 Turbo in 2014. Not that Mercedes wasn’t good before, but their engine made a killing amongst other suppliers. Most notably it killed Renault (and I still can’t believe that Honda was caught off-guard a year later). Mercedes had the best foresight, and realised that the only way of “circumventing” the token system, was to invest a lot upfront, and get it right the first time. Indeed it was they who started development as far back as 2010 albeit using a single cylinder turbo hybrid set up, before the final formula was even known.

In the highly competitive world foresight comes with a risk: the best ideas are the ones not regulated, or better still the ones in the “grey area”. Brawn did extremely well with its double diffusor, Red Bull lost a large part of its 2017 season by having to scrap its active/aero suspension.

Ferrari is one of the biggest adversaries of new regulations. Also because Liberty not only wants to change engine specifications, but also wants put the axe to the payment system. Rocking the boat will not prove easy.

Ferrari is used to playing hardball. They are threatening to leave. As Mr B. Ecclestone puts it “If they can’t win, they will put forward new regulations, and if the regulations come out where Ferrari think it is going to be a struggle and they can’t support the money then they will leave.”

This seems unlikely, as Ferrari needs F1 more than F1 needs Ferrari. True, they have been the only ones in the sport since the 1950’s and have competed in more Grand Prix than any other team. But the sum of the whole is bigger than Ferrari. Since Ferrari is so connected to F1 it is more likely that Red Bull leaves the sport which they threatened to do in 2015 (and 2016, and 2017)…

Ferrari’s CEO Italo-Canadian Sergio Marchionne said on Thursday that Ferrari and F1’s TV right owners Liberty Media “appear to be at odds in terms of the strategic development” of the sport. Marchionne continued that F1 “has been part of our DNA since the day we were born but if we change the sandbox to the point where it becomes an unrecognisable sandbox, I don’t want to play anymore.”

Ferrari has seen numerous engine specification changes, so would Ferrari be afraid to change their engine? Nah… So the DNA and sandbox Marchionne is talking about is that Ferrari gets a large cut of the F1 revenue. And that is also the reason Mr E. has an opinion about this situation: in his days he used Ferrari as a breaking iron to have other teams do what he thought needed doing. Mr. E and Ferrari had a symbiotic relationship. However, Bernard Charles Ecclestone is no longer calling the shots.

To show you some figures, below a table estimating team revenue for 2017. Estimating total F1 revenue at $1,830M. Minus $450M direct cost (FIA, Liberty), leaves $1,380M. Of this amount 68% goes to the teams= $940M

T 1 Team 2016 % T 2 Team Champ Other Total
Ferrari 36 3 13% 42.2 35 68 181.2
Mercedes 36 1 19% 61.7 39 35 171.7
Red Bull 36 2 16% 51.9 39 35 161.9
McLaren 36 6 9% 29.2 30 0 95.2
Williams 36 5 10% 32.5 0 10 78.5
Force India 36 4 11% 35.7 0 0 71.7
Toro Rosso 36 7 7% 22.7 0 0 58.7
Renault 36 9 5% 16.2 0 0 52.2
Sauber 36 10 4% 13.0 0 0 49.0
Haas 0 8 6% 19.5 0 0 19.5
Total 324.5 324.5 143 148 940.0

Where T1= Tier 1. All teams get a fee for starting. This applies for teams having competed for several years. Since it is Haas’ second season, their share is 0.

Tier 2 is based on the position in previous’ year team championship. (the column % relates directly to column team 2016)

The columns “Team Championship” and “Other” are “special deals” Ferrari, Mercedes, Red Bull and McLaren have been allowed a special category for constructor’s championship bonus payments. (I wonder how McLaren still gets away with this 😉)

In the “Other” column we find deals for being the first team to sign the latest Concorde agreement, for being the team who is around the longest (Ferrari!), and other arguments teams could think of.

As already mentioned, Mr.E is no longer calling the shots, and Liberty is in the driver seat. They are slowly steering away from Mr E.’s politics. Things that were dismissed as non-negotiable are now back on the table, like for example budget-caps and a more even distribution of money.

The budget-cap is another reason for Ferrari to complain. Marchionne: “I think you need to be absolutely clear that unless we find a set of circumstances, the results of which are beneficial to the maintenance of the brand in the marketplace and to the strengthening of the unique position for Ferrari, Ferrari will not play”

Mr E.: “Ferrari don’t want budget caps and all that. They want to spend what they can afford to spend and I’ve always said the same thing. If people can’t spend they have to go. If there are then only three or four teams something would have to be done but until that actually happens nobody is going to do anything. All the teams that say they can’t afford it shouldn’t put an entry in.”

Which some, amongst which I count myself would think “Ferrari wants to buy itself to the top”.

Racing has changed from “who is the fastest”, to “how can we out-compete teams so they cannot win”. In that sense it lost some of its romance. For better or for worse: up to you to decide.

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15 responses to “So here is a Method that’s helping Ferrari to be top dog in F1

  1. “This seems unlikely, as Ferrari needs F1 more than F1 needs Ferrari.”

    That’s the common statement from the UK, which I doubt is true.. Marchionne is a different player than Luca di Montezemolo. di Montezemolo believed Ferrari bordered on being a religion and his running it was almost like a religious calling. Marchionne is an accountant and lawyer, where the only thing that matters is shareholder value. He has undoubtedly run the numbers and knows exactly what effect pulling out of F1 would have on Ferrari and F1. While both Ferrari and Liberty are engaged in poker game and both are to some degree bluffing, if Marchionne has the facts to back up that Ferrari can pull out of F1 with minimal consequences – Liberty better be careful. And lets not forget that Ferrari also see to have the support of M-B, and that’s a combination which must really scare Liberty.

    • Agreed
      Chinese don’t give a fok about F1 and they buy the most Ferrari’s.

      Half of the grandstands are always red, so I think F1 needs Ferrari more then the other way around.

      And look what koenigsegg does. ‘Win on Sunday, sell on Monday’ is obsolete.

      • ‘Win on Sunday, sell on Monday’ is obsolete? It is not just about whether Ferrari win or lose. You only have to see the thousands of Fiat 500s with Ferrari stickers (specially in Italy) to know that quite a lot of the fairey dust rubs off onto the rest of the FIAT Group’s products. Every Italian believes that his Fiat is a Ferrari waiting to bloom. The ‘magic’ really does rub off on the rest of the group. Let us face it, Ferrari’s road cars are pretty dreadful which is why you see so many ultra low mileage cars for sale with multiple owners in the book.

  2. Ferrari wants to buy its way to the top?

    Yet the same author proffered – “Mercedes had the best foresight, and realised that the only way of “circumventing” the token system, was to invest a lot upfront,”.

    Look at any major sport and the rewards for winning are so huge that the biggest teams always spend the most money.

    PSG, Barcelona, Real Madrid, Man. City/Utd, Chelsea…

    Individuals will consume performance enhancing drugs for glory and monies unbound!

    As to your assertion about Ferrari needing F1 more than F1 needing Ferrari, trust me Ferrari leaving changes the landscape enormously.

    Ferrari, until 1973, competed in endurance racing as well as F1 and it was more prestigious winning Le Mans than Monaco. Bernies revolution made F1 the pinnacle but Ferrari leaving would take 3/4 of the viewers away from the sport. Investments would diminish and the non Ferrari fans would remain.

    Similarly, in MotoGP, figures for attendance at Donington in 2000 were just 24,000. By 2004, the attendance had increased to 120,000 on race day because of a phenomenon called Valentino Rossi. Watch any event around the world and there’s a sea of yellow.

    Of course F1 would survive, as will bike racing, but never to the same levels as now.

    Porsche, Lamborghini, Bugatti, Rolls Royce et all have no footprint in F1, yet have record sales figures. Why? Simple, F1 means nothing to the majority of the world. The USA and China, the biggest economies all know what Ferrari stands for; stunning looking, ultra performance cars built on legends like Testarossa, 250 GTO, Daytona, Magnum PI’s car. The 312 T, F2002, the shark nose means absolutely nothing.

  3. If Ferrari don’t agree with the changes being proposed, than the issue is not really to do with F1. If they feel strongly enough about their disagreements to leave, I don’t see how that can be detrimental. Nothing lasts forever – Ferrari cannot assume that they are required in F1 to make it F1. Conversely, Liberty shouldn’t view any team that way, and I applaud the fact they’re at least trying to find some small fraction of the puzzle to standardise. It broke my black, and shriveled heart, to see racers like Manor and Caterham stumble and falter – the environment too inbred and poisonous. Honestly, it would be sad if Ferrari did leave, but put the new engine formula on the table – at this point, a more level playing field might actually be exciting to watch. Less hybrid and more turbo? Yup

    • The flip side to that is that Liberty Media paid $8B to buy F1’s commercial rights are public company. Anyone who thinks that Ferrari pulling out would have minimal effects on F1’s revenue is naive. Do you want to be an investor in F1 without Ferrari?

      • I agree – the financial impact would definitely be felt if they left – but that’s really the problem. Everyone’s paralysed by fears surrounding budgets, caps and revenue, and forgotten about the spirit of the sport. If Ferrari insist on complaining and producing mostly mediocre cars – last couple of seasons the exception – whilst having the largest budget in the sport, than they should go. F1 cannot be held hostage, be threatened or blackmailed, regardless of history or marketing or investor attraction. Red Bull made it work – and others can too – there are different ways to market such a venture, without needing to rely on a legacy. If the racing is good, the sport will survive. And if it doesn’t – maybe it’s time to look elsewhere for the pinnacle of motor-sport.

        • The impact of sponsorship is something that hasn’t been discussed if Ferrari leave. If there was a significant drop in TV viewers if Ferrari left, which I believe there would be, sponsors are going to reduce what they pay for that sponsorship or even drop their sponsorship. And that will affect both the teams and Liberty itself.

  4. What the author also fails to disclose from the chart is that under Liberty’s proposed new payout system M-B, Red Bull, McLaren and Williams will see reduced money. So it isn’t only Ferrari that is going to take a financial hit. We’ll see how keen they are when they get affected.

  5. I miss the payment to Renault in the Other category. As far as I know they got a deal for historical payments to return to the sport as a constructor. They even had to agree to stay in F1 beyond the current Concorde Agreement.

    • …and yet someone thinks a historical team can leave and the landscape remains the same? Just compare how much Renault has played in F1 to Ferrari’s. Then, contrast it to the status they enjoy on their latest F1 engagement for,at least, being only the 3rd works team; (and ask yourself if Ferrari indeed leaves and Liberty Media later realises it needs Ferrari in the game, what would it cost to beg on bended knee for Ferrari to return ot F1) then one would understand some things do not change so easily. Liberty has to pray to understand what it can change and what it can’t… or needs not to change to guarantee their productivity. The economic implication to Liberty Media of being the owner that forced/failed to keep Ferrari in F1 would be… (you can fill in the gaps)

      Liberty needs to learn from Mr. E, and how his workings built the empire they know not much about, but want to regulate just because they had the money to buy it.

  6. One thing that the author neglected to mention: standardized parts for the power unit (PU). I believe this is the main reason why Ferrari don’t like the proposal – they don’t want to compete in a NASCAR type series. This brings up the age old question: what is racing all about? – drivers competing against each other with similar machinery to determine the best driver? Or racing teams competing against other teams to determine the best team/brand? For me it’s about the teams/brand. I watch F1 because it’s suppose to be the pinnacle of racing (and by association automotive) technology. I watch F1 because I want to see a team develop the best technology and use it to beat the competition. It is why brands like Ferrari, Mercedes, Renault, Honda are in F1. If the engines are all the same, why would these brands want to participate? You might as well have competition between companies like Red Bull, Coca Cola and Pepsi. If F1 goes in that direction, I will not be watching.

  7. The “Other” should be redistributed as an additional 14M as T1, that would give each team a nice 50M.

  8. The guys at Liberty / FOM are very clever businessmen. Guys who have succeeded where others fail. They didn’t just pull the 8-9 Billion out of thin air … they accrued it through shrewd decisions which brought highly competitive, like-minded companies together. In America and with it’s loyal business allies!
    That is nothing like the world of F1, where extremely wealthy, well connected European, Asian and Middle Eastern businessmen and royalty go to play billionaires games. Very few of those people like or are involved in anything that even resembles American business acumen. In fact, they deliberately distance themselves and their companies from the USA.

    Ferrari have held, and as long as they are a viable company they will always hold, a lofty position in the motor sport and exotic supercar world.
    When you have 4 Aces at a high stakes poker table, there is an air of invincibility about your next move.
    Ferrari aren’t threatening to leave, yet! They are merely positioning themselves at the negotiation table with an air of invincibility. They certainly don’t like being dictated to by a bully or peer and always seem to come out of these situations with a very competitive … if not winning hand.
    The next era of F1 needs to take a step backwards, to a time when F1 was aloof, spectacular and totally “un-missable”.
    Hybrid PUs, cost cutting, uber-safety measures and new-age media aimed at kids have collectively sent F1 bankrupt and bereft of future investors. Most teams can’t even find sponsors to join them in F1, which is the most highly visible place to advertise anywhere in the world.
    TV and social media will not accumulate anywhere near as much revenue for the teams as sponsorship and involvement can. It will only attract more young people with shorter attention spans, smaller bank accounts and a much more negative demeanour towards the world in general.
    Put simply … they aren’t Ferrari customers … far from it.
    F1 was once aloof and untouchable, that was it’s ultimate attraction. Just to sit in the crowd at a race was the ultimate spine tingling experience, for some it was a once in a lifetime thing to be remembered forever.
    It is now looking very much like becoming extremely Americanised, commercialised, garish and over-sold to people who are neither interested, captivated or wish to be involved in it.
    It’s like trying to sell cheap candy at a Dentist’s convention! Why bother?
    The world of true motor sport fans has turned it’s back on F1 in recent years because it has become a tool for automotive manufacturers to R&D boring road car technology. It’s no longer revered for being innovative and futuristic, bulging with next-gen ideas and technology which astounds us and keeps us all intrigued and holding our breath to see what will roll off the team’s transporters in Feb-March of every year. Ferrari needs this type of environment to thrive, not a place where convergence and similarity are the norm. That is a world for normal, everyday hatchback, sedan and courier van manufacturers to compete in.
    Truth is, it’s all so social media and internet website driven nowadays that the cars are unveiled with photos and fanfare on the internet, weeks prior to hitting the track … it’s all aimed at Gen Y … the ME – NOW generation … the intrigue is gone before they even put them on the trucks to go to the first test.

    The threat of a breakaway open wheel racing series has always been a spectre haunting the FIA, which is now unbreakably chained to F1. The FIA has gradually transformed it into an over-regulated series where the sole modus operandi is to design, manufacture and develop safe concepts to put in road cars to protect mums, dads, grannies and children from harm on the road.
    The essence of F1 is a blend of glamour, noise, raw speed, sublime driver skills and danger. Those attributes have been diluted down to a boring, safe, social media dominated, second rate sport where young people with tablets and mobile phones can spend 5 minutes writing on their favourite blog about how terrible F1 has become … unless it’s about Max … then it’s 1/2 an hour of dissent and disgusting commentary aimed at anyone who dares utter anything other then adoration about him. 99% of these people don’t even like the racing. It’s too long, too loud, too expensive, too exclusive, too this too that too the other thing. They will never be satisfied unless everything constantly changes to suit their whims. It’s all about their precious (anti) social media and inevitably – what’s in it for “ME”!

    If Liberty / FOM aren’t very careful, they will be stuck with an audience of pubescent, disinterested, fly-by-night fans who couldn’t give a tinker’s cuss about whether F1 exists in the near future.
    In that case, Bernie might just decide to gather his most powerful allies from Europe, Asia and the Middle East, sink a few of his “spare” billion$ into the pot and start a new series which will easily rival … and eventually devour what we currently call F1. Just to show them he was correct and they were wrong. His last hurrah to wipe the smirk off their faces.
    One of the most powerful allies at his side will be Ferrari … because they know he will always make exceptions for them when it comes to maintaining their position at the pinnacle of motor sport and in the world of manufacturing exotic supercars for the rich and famous. After all, the rich and famous are his class of people. The rest of us are simply admirers and voyeurs.

  9. A “breaking iron”? I presume the writer is Dutch and means “breekijzer”? In English that is called a crowbar.

    You’re welcome.

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