Is Formula 1 broken?

[bjohnsonsmith]

Originally Posted by Mike Harte

BJ, can you tell us tight so and so's what the letter said, please.

And yet more irony; an open letter, that is placed behind a paywall.

You don't need to pay to read this Mike, you just need to login with a username and password.

I could cut and paste the whole thing but that might not be allowed.

[bjohnsonsmith]

Originally Posted by S griffin

I read it and he pulled no punches

He certainly didn't pull any.

[Mike Harte]

BJ, you must subscribe to Autosport or Autosport Plus because I cannot get read the letter without joining. I do have an unpaid subscription, which bars you from reading the Autosport Plus items, such as this letter and the article about the UK losing it's free to air coverage.

[bjohnsonsmith]

Originally Posted by Mike Harte

BJ, you must subscribe to Autosport or Autosport Plus because I cannot get read the letter without joining. I do have an unpaid subscription, which bars you from reading the Autosport Plus items, such as this letter and the article about the UK losing it's free to air coverage.

I subscribe but I don't remember paying for it. Shall I just cut and paste it?

[Mike Harte]

Originally Posted by bjohnsonsmith

I subscribe but I don't remember paying for it. Shall I just cut and paste it?

I would say, yes. It is an open letter after all.

[bjohnsonsmith]

Originally Posted by Mike Harte

I would say, yes. It is an open letter after all.

Ok.

Dear Bernie

As you may know, it was this time last year that I had a brief chat with Donald
Mackenzie, founding partner and co-chairman of CVC Capital Partners, your employer.
During our discourse, Donald suggested that I wrote "a lot of bullshit".
He was clearly referring to the fact that I constantly criticised Formula 1's
financial and governance structures. I won't belabour the discussion as it was
revealed here in an open letter to the man half the paddock consider to be your boss
- although, I hasten to add, an equal number believe you to be master of F1.

Open letters seem in vogue right now, what with the GPDA last week addressing rather
hard-hitting critiques of the same points I have been banging on about since 2012 to
F1's players. Hence I thought I would repeat last year's exercise, but make you the
recipient - particularly as I noted your response to the GPDA was essentially the
same as my take, namely that they had tabled opinions, but no solutions. In fact, I
detected distinct political overtones in their letter.

However, this got me thinking, for I guess over the years I may have been guilty of
the same malfeasance, namely hurling rocks left, right and centre, yet not offering
any viable alternatives to the way in which F1 is run. So I sat down with a blank
sheet and jotted wrote down the major issues I identified over the years. In no
particular order these are:

* A Strategy Group that is now in its third year, yet has failed to come up with a
single sustainable alternative to the existing structures, and empowers six teams to
out-vote you or the sport's governing body, the FIA, unless you and Jean Todt - with
whom you have long enjoyed an arms-length relationship - bandy together even on the
many issues you don't see eye-to-eye.

* A dysfunctional governance structure that at Formula 1 Commission level grants
signage sponsors such as Rolex the same clout as Mercedes or FOM or the FIA, yet
permits Ferrari to veto decisions it considers to be counter to its own interests

* Inequitable financial covenants such that Ferrari could retire both cars at the
first corner of every race throughout a season, yet cream more in FOM revenues than
would Williams even if Sir Frank's team won both titles

* No executive succession planning, despite the CEO of this multi-billion dollar
global business, who alone knows all its commercial secrets and operations, being 20
years beyond bus pass age. I am sure, Bernie, we don't need to belabour your
admission that you established Bambino Trust after suffering a major health scare in
1999 - and am thus somewhat surprised you have not taken similar measures to secure
the sport you profess to love

* Control of F1's commercial rights by a consortium of funds, some of whom have so
little interest that they forsake executive powers beyond remaining as investors
provided returns-on-investment exceed expectation. Those that exercise control
despite 35.5 per cent ownership have so little "feel" for this complex sport that its
slide can be traced directly back to their acquisition.
I analysed the above points with an earnest desire to make constructive proposals
based on a love for a sport I have followed with an overriding passion for over 50
years now. True, you have been involved - indeed, make that "committed" - for longer
than I have, but I doubt you feel the same hurt as do we unadulterated fans about
F1's slide. You have, after all, plenty of compensations.

The more I sought solutions, the more disheartened I got, simply as I see no way out
of the mess that has been created since 2006, when the deal for CVC Capital Partners
to acquire 63.4 per cent of F1's commercial rights from a bunch of bankers who, in
turn, acquired after loans went sour, was approved at EU Commission level.
However, this criticism of CVC and its cohorts is rather unfair, for the owners and
partners are doing none other than demanded by their share- and fund-holders - and
laid by their respective articles of incorporation - namely to maximise the
short-term.

That they succeeded admirably - indeed, way beyond expectation - is borne out by the
eye-watering amounts these number crunchers "syphoned" from F1. None of this has been
re-invested in F1 - but instead left the sport by way of via share sales, dividends
and/or loan and interest repayments over the years.

Apparently Haas has no commercial deal - despite FOM using its IP in broadcasts -
because the funds required to strike a deal are not liquid; ditto battlers Sauber and
Force India (and others), whose operations are in dire need of equitable funding, are
short-changed - which CVC refuses to (cannot?) to budge on.

I won't push the point, but let's assume F1's fragmented ownership changed hands
tomorrow at the value ($10bn according to reports) placed upon it by its majority
owner, an initial investment of around $1.6bn reaps a six-fold return. The problem is
perceived value and market price are two different animals, and so CVC keeps trying
to add value by whatever means.

We can, though, take heart from the fact that CVC's plans to list on Singapore's
stock exchange failed dismally, for the current owners now sit with exactly the mess
they figured had been bundled sufficiently neatly to shift to investors.
I find it rather churlish that teams, who have, after all, made by far the largest
"hard" collective investments in F1 - other than, possibly, race promoters, who have
alternatives, but are now also flexing their muscles - stand accused of self-interest
simply for standing up for their rights, which are, let us not forget, enshrined in
the bilateral contracts you initiated in 2012 on behalf of CVC, with a lapse date of
2020.

I fear that is not the end of it, either. If a bird is to believed, Renault accepted
a back-loaded commercial deal that runs to 2024, which suggests a continuation of
bilateral contracts, despite the EU Commission possibly stepping in as a result of
festering unhappiness at the lower end of the grid about such deals.
Now comes news that Sky TV will hold exclusive British broadcast rights from 2019.
This is equally perturbing for it means by far F1's most loyal market, one that hosts
80 per cent of teams, will receive free-to-air live broadcasts once per annum for six
years - if, that is, F1's oldest round does not go the way Italy's race could if your
recent comment are a guide. Talking of which, what happened to the Imola option?
In a nutshell, it comes down to contracts that were devised for entirely the wrong
reasons. F1 is no normal commodity such as luggage - CVC's listing of Samsonite on
Hong Kong's stock exchange provides a case study - or service industry (Belgium's
post office, majority acquired and floated by CVC), but all-consuming passion - as
you discovered as teenager.

True, there are hangovers from bygone days, such as Ferrari's veto, but, again, you
agreed to its request for what Todt refers to as "a loaded gun" when you and your
long-standing chum Max Mosley engineered the first Concorde Agreement back in the
eighties.

You held the power to rescind the veto in 1997 when you offered Ferrari a
preferential commercial deal upon acquiring F1's commercial rights - at that stage
for 10 years - and again in 2009/2012. Only you, Bernie, know why it continued in
place- and now F1 is stuck with it until 2020.

However, F1's wrongs - as you have correctly indicated, there are many, from
self-interest through F1's governance and technicalities, plus many you and CVC shy
away from - are not the cause, but symptomatic of a deeper problem: that you were
granted the 113-years commercial rights to the sport, effectively to do as you wish
and sell to whom you desire.

At the time (mid-1990s) Mosley, the former barrister who then headed the FIA,
regularly alluded to a "Don King" clause over change of ownership, yet in his memoirs
makes no mention of the alleged veto.
This "Don King" talk occurred before the FIA/FOM deal was inexplicably extended by
103 years without the former deriving additional income - indeed, the body lost due
to certain clauses not being incorporated in revised documents.

So F1 finds itself saddled with a watertight contract that was not envisaged in the
first instance, then dropped into place for all the wrong reasons, yet permits the
commercial rights holder (and successors) to act with virtual impunity for another
100 years without fear of sanction. Said document was (allegedly) forensically
audited for loopholes - with none found.

It is this 113-year deal that lies at the root of all that is wrong in F1 at present,
and not the existing bilateral contracts, for they are simply symptomatic, not the
cause. Rip them up by all means, Bernie - if, that is, the enfranchised teams permit
you to - but I bet my house that any replacement will again be tilted in favour of
the commercial rights holder, and therefore away from F1.

It has long been said that you are sport's best-ever salesman; that you
single-handedly created one of the greatest annual sporting spectacle, possibly the
greatest - and that is surely a deserving accolade. But, Bernie, I fear your legacy
will be tarnished by F1's current malaise - and that there is no way back.
Unless, that is, you persuade CVC to relinquish its grip on a 113-year contract that
has no rational reason for existing, regardless of subtle legalities. Then F1 could
be handed back to its rightful owners, namely the FIA, which could lease the rights
in 10-year blocks, as it does with World Rally Championship and World Endurance
Championship where, if promoters (as they are dubbed, for they truly promote their
genre) do not deliver, they are out at contract end.

Talking of which, please give serious thought to your succession: I know you are not
an arrogant individual, so must surely realise that somewhere amongst seven billion
humans on earth, there must be at least one who could do a half decent job of running
F1. That person simply needs to be given the keys to the safe and all its secrets.
You could do worse than knock on Ross Brawn's door, as I suggested in October 2013.
Manage that, and you will go down in history not only as the man who saved F1 from
self-inflicted demise, but as the greatest salesman the world has ever known. Now,
that would be a fitting epitaph for Bernard Charles Ecclestone.

Yours in F1,

Dieter Rencken

[Mike Harte]

Thanks, BJ.

Well, it's certainly hard hitting, but the truth is that he doesn't provide any real answers either. Yes, Mosley should never have granted FOM the commercial rights for 100 odd years, and I have oft wondered what incentivised him to do so. And, yes, there should already be someone standing by BCE to take over - I pray that he isn't immortal, and FOM could do no worse than appoint Ross Brawn, although I have a suspicion that he is enjoying his fishing too much to want to take on that responsibility.

But that doesn't address the major problems; the structure of the rule making process, and how the FIA vacillates so often when it introduces new regulations. It needs someone in the FIA that is able to stand up to Mr E and overrule him when he is being stupid like the double points fiasco, but also to stand by him when he wants to introduce something that is actually good for the sport. And it needs somebody to slash the commissioning fees for holding the races, and allow some of the more traditional circuits to actually be able to afford to put them on.

And so on. But at least it's a start, I suppose.

[bjohnsonsmith]

Originally Posted by Mike Harte

Thanks, BJ.

Well, it's certainly hard hitting, but the truth is that he doesn't provide any real answers either. Yes, Mosley should never have granted FOM the commercial rights for 100 odd years, and I have oft wondered what incentivised him to do so. And, yes, there should already be someone standing by BCE to take over - I pray that he isn't immortal, and FOM could do no worse than appoint Ross Brawn, although I have a suspicion that he is enjoying his fishing too much to want to take on that responsibility.

But that doesn't address the major problems; the structure of the rule making process, and how the FIA vacillates so often when it introduces new regulations. It needs someone in the FIA that is able to stand up to Mr E and overrule him when he is being stupid like the double points fiasco, but also to stand by him when he wants to introduce something that is actually good for the sport. And it needs somebody to slash the commissioning fees for holding the races, and allow some of the more traditional circuits to actually be able to afford to put them on.

And so on. But at least it's a start, I suppose.

You're welcome Mike.

No he doesn't provide any answers but then I didn't really expect him to. I get the feeling Dieter Rencken wrote this to partly see what Bernie Ecclestone's response would be to an open letter. After all Dieter Rencken says open letters are in vogue and he wanted Bernie to be the recipient and also to see what answers Bernie can provide, without previously having read anyone else's suggestions.

[Casper]

I don' think the future will be any brighter than the present for a few reasons and calling for CVC to get out without them receiving what they consider a good market price is dreamland stuff.

CVC Want their price.

The buyer will want their ROI.

Present operational mode will continue.

Looking into the crystal ball if CVC can unload it and BE has been talking that up recently as he does when things need a nudge or two any investor is going to demand that the cash they spend to buy in is returned to their pockets. If the buy is funded by commercially available finance and F1 starts to not deliver the cash flows that financing needs to service the debt then it is conceivable the whole lot could fall over and we have seen that before in other categories. In some ways CVC not being able to unload their shareholding could be beneficial because F1 is somewhere between a rock and a hard place at the moment.

[Richard C]

Nice letter. Well said.

Richard

[VIVA GT]

Originally Posted by Mike Harte

Thanks, BJ.

Well, it's certainly hard hitting, but the truth is that he doesn't provide any real answers either. Yes, Mosley should never have granted FOM the commercial rights for 100 odd years, and I have oft wondered what incentivised him to do so. And, yes, there should already be someone standing by BCE to take over - I pray that he isn't immortal, and FOM could do no worse than appoint Ross Brawn, although I have a suspicion that he is enjoying his fishing too much to want to take on that responsibility.

But that doesn't address the major problems; the structure of the rule making process, and how the FIA vacillates so often when it introduces new regulations. It needs someone in the FIA that is able to stand up to Mr E and overrule him when he is being stupid like the double points fiasco, but also to stand by him when he wants to introduce something that is actually good for the sport. And it needs somebody to slash the commissioning fees for holding the races, and allow some of the more traditional circuits to actually be able to afford to put them on.

And so on. But at least it's a start, I suppose.

Mike, I think you're the right man for the job. You seem to have a handle, on what's going on and never appear to be afraid to speak your mind.
I'll vote for you...

[Akrapovic]

I'd vote for Mike!

That letter is brilliant. I don't really know what I can add other than my approval of it, lol.

[Mike Harte]

Originally Posted by bjohnsonsmith

You're welcome Mike.

BJ, I should have added to my thanks the fact that when Autosport get you sent down for publishing the letter, I promise that I will visit you in prison. And not only that, but I will bring you a cake with a file hidden inside.

[bjohnsonsmith]

Originally Posted by Mike Harte

BJ, I should have added to my thanks the fact that when Autosport get you sent down for publishing the letter, I promise that I will visit you in prison. And not only that, but I will bring you a cake with a file hidden inside.

Haha. I'll plead the 5th.

[Mike Harte]

VIVA GT and Akrapovic, I shall treasure your votes for the rest of my life, and display them at every opportunity.

[bauble]

Originally Posted by Mike Harte

VIVA GT and Akrapovic, I shall treasure your votes for the rest of my life, and display them at every opportunity.

I8 creeps.

[S griffin]

I agree Ross Brawn should be in charge. He would care about the sport first and formost. He knows how to make the racing more exciting without being artificial.

[mikestow]

And so say I,and evermore should be SO!

[Mike Harte]

BCE appears to becoming more and more detached from reality, and to prove it, see ( http://www.bbc.co.uk/sport/formula1/35943033 ) the BBC's article about their latest conversation with him. He seems to live I a parallel universe to the rest of the world, and some of his comments are really beyond the pale.

[S griffin]

But then you hear some of his immoral comments, especially concerning the Bahraini government, Putin and even Hitler and you see why it's dangerous to have this man in charge of anything, let alone F1

[S griffin]

When you hear his immoral comments about the Bahraini government, Putin and even Hitler, you realise why it's dangerous to have this man in any power let alone F1

[bjohnsonsmith]

I quite like the rock concert analogy, otherwise how can he say agrees with the drivers, then follow up with: "probably what their teams had told them to say"? That makes no sense.

[Gingers4Justice]

Originally Posted by bjohnsonsmith

I quite like the rock concert analogy, otherwise how can he say agrees with the drivers, then follow up with: "probably what their teams had told them to say"? That makes no sense.

You can be sure that every word is measured. Bernie is always talking to someone in interviews like this, but it's never the fans.

[Casper]

Liking a good conspiracy theory and donning my tin foil hat I wonder if BE is deliberately appearing to be contradicting himself so everyone thinks he is losing the plot and in truth has a plan as he often seems to have to achieve what he wants.

[bjohnsonsmith]

Originally Posted by Casper

Liking a good conspiracy theory and donning my tin foil hat I wonder if BE is deliberately appearing to be contradicting himself so everyone thinks he is losing the plot and in truth has a plan as he often seems to have to achieve what he wants.

He never has revealed all, always keeping something back.