This year’s first Formula One action begins next week with the opening test of 2014 in Jerez, Spain. But what happens on track may take a back seat to the German trial of Bernie Ecclestone, the sport’s ringmaster.
The bribery and incitement to breach of trust charges announced by German authorities last week against the 83-year-old king of the paddock could signal the end of his four-decade rule, leading to either a huge crisis for the sport – or a huge opportunity.
The F1 boss is accused of paying the man in charge of the sale of the 47 per cent stake the sport held by Bayerische Landesbank in 2005 to ensure CVC Partners won the bidding. CVC had said it would keep Ecclestone running the F1 if it took control.
The banker in question, Gerhard Gribkowsky, was convicted of receiving a bribe from Ecclestone in 2012 and sentenced to eight and a half years. Ecclestone insists the banker blackmailed him .
Ecclestone has already stepped down from the board of the company that runs F1, Delta Topco, and while he will continue to hold the reins, he can no longer approve and sign significant contracts.
With Gribkowsky’s sentence for accepting the ill-gotten payment already on the books, it’s difficult to see how any argument from Ecclestone’s lawyers could find the octogenarian skating away scot-free.
But would a paddock without Ecclestone really turn F 1 into a complete disaster?
Nobody can deny that Ecclestone took a disorganized band of weekend-warrior owners and transformed them into a well-oiled commercial machine. He also made most of them millions, if not billions, of dollars along the way.
But that was then and this is now, and this business model cannot continue. Frankly, F1 sits on the precipice of disaster due to the road it has taken under Ecclestone’s leadership.
Ecclestone jealously controls every aspect of the sport, resisting most moves to make it more accessible. Fans rarely even catch a glimpse of a driver at a grand prix, something that doesn’t go down well with today’s digital generation .
Want proof of the sport’s lack of digital intelligence? Just log on to YouTube. Or Twitter. Or Facebook. Or any other social media site.
NASCAR has 1,841 videos on its YouTube channel while IndyCar has 2,132. Formula One’s video contribution is a big fat zero because they don’t even have a channel. In fact, upload a clip from an F1 race to YouTube and you’re likely to get a note from a lawyer.
Revenue growth for F1 over the past decade has come mostly from the sanctioning fees, not television rights, since Ecclestone makes exclusive deals with one television provider in each country, excluding the rest. In contrast, NASCAR pulls in more cash just in the U.S. through splitting its television rights, selling them to the highest bidders.
The cost of hosting an F1 race under Ecclestone’s tenure has priced many countries out of the market and several popular venues continue to struggle to raise the cash needed to stage a grand prix. Meanwhile, the sport headed to deep-pocketed countries in Asia which gladly paid the fees to gain the exposure on the world stage, even if tickets to the events go unsold and many grandstands remain embarrassingly empty for the entire weekend.
Along the way, F1 happily made deals for grands prix with governments that have less than stellar records on human rights, such as Bahrain and China.
The average sanctioning fee to host an F1 race is about $30-million according to F1 business publication Formula Money, although venues like Malaysia, Abu Dhabi and Singapore pay upwards of $73-million . On the other hand, Monaco pays nothing to have F1 make its annual stop on its streets, while the venerable Monza Circuit forks over a paltry $8-million or so.
Most venues don’t get to keep any of the cash raised by the event, except for the gate receipts. A few promoters, including Octane Management that promotes the F1 race at the Circuit Gilles Villeneuve in Montreal, get the revenue from trackside advertising, but they are a minority.
In almost all cases, the races, including the June’s Canadian Grand Prix, would not happen without government support because there’s really no way for the promoters to make a profit without public funding.