Indeed, life’s lesson may be that there is no such thing as a free lunch and perhaps in Formula 1, that applies as well. It’s a colloquialism for sure but it is intended to suggest that you truly don’t get anything for free. It takes some level of cost or investment to gain a return…monetarily speaking of course.
Liberty Media’s Chase Carey says that the teams need to understand that there’s no such thing as a free lunch under the new ownership. This is on the heels of an approximate $40M (13% lower than last season) from in total prize money and some teams have concerns over the lavish new offices in London, the expenses F1 has incurred under new management as this reduces the prize money from which they benefit.
“I think the sport has been underserved by a continual short-term focus,” said Carey.
“I think we’ve got some fresh momentum back into it.
“A lot of things were not going in the right direction in recent years, but this year attendance is up, viewership is up and I think we’ve got a much more positive spirit behind it. The sport needed fresh energy and investment.
“To grow things, well, to use an American phrase, there are no free lunches.
“We didn’t have an organization that was able to properly develop, to build the sport. We had no research, no marketing, no digital organization and realistically if you don’t have capabilities like that, you’re going to fall behind.
“If you’re building research capabilities, normally you have to invest in those before you get to use them. It’s the reality of building capabilities that haven’t existed.
“To do things like the Trafalgar Square demo, to do things at broader fan fests, requires investment. However, all are investments in the future of the sport.
“From the teams’ perspective, sure, everybody would like to have free lunches and get the growth without the investment. [But] the world doesn’t work that way.
“I think there’s an understanding of and an appreciation for what we’re doing, and in many ways we’re very much agreed on what needs to be done for the sport.”
All good points but as I’ve been since January, I’m reticent on kicking former ownership for today’s current struggles. You own it, you fix it, tweak it or make it better. I understand his point but the “underserved” business buzz phrase is wearing thin these days and to be perfectly fair, it’s a notion we’ve all known for a long time with regards to digital media and broadcast features.
However, what Chase is bumping in to is an entire business model that was a thin layer of administrative, commercial monetization and management over a machine. What I mean by that is that Mr. E’s model was really a low-ish cost management structure with a healthy portion of profits retained for prize money. Sure, Formula One Management had costs back then too but the key here is it’s cost structure was relatively stable and it didn’t spend on marketing, Fanzone’s, new offices in high-rent district etc.
Mr. E had a business, effectively, with the teams—a sort of Joint-Venture if you will—and that’s because they stopped chasing massive sponsor dollars and began relying on prize money to keep their teams going. There are a lot of reasons for that and I am no knocking them but if you don’t have to go hunt for your food and you can structure your expenses to be covered by a pot of prize money, then who needs stickers on a car?
Now, to defend Chase on this issue, you have to spend money to make money and he’s right that FOM under Liberty Media, needs to infuse serious cash into making their product bigger and better and while the team’s don’t like it, they have to realize that Liberty needs to get serious about their investment and they are going to spend money to exploit its capacity to generate revenue. In doing so, it adds more cost to the Balance Sheet and less prize money.
If you own a team, you may say, I’m fine with my $175 million payout and I’m fine with the way things are right now because I like the amount of prize money I’m getting for my efforts in the Constructor’s Championship. You may even argue that Chase needs to find another bucket for all his growth and marketing spend. Chase will say no and he’s right to say no.
I said over a year ago that when F1 is sold to new owners, the real battle for F1’s soul would happen. Nothing has surprised me or shocked me. Not even NBC losing the broadcast deal.
We are at the tip of the iceberg here folks, the real fireworks haven’t started yet so get comfortable because when F1 wants to spend more to make more and teams earn less, all (you know what) will hit the fan and that’s because Mr. E and the teams were happy to work in this symbiotic business model and Liberty is a different entity who is more intent on spending that money to make it bigger with or without teams. The era of trying to find big sponsors may be back and that’s going to be tough as Ferrari just lost Santander.
Hat Tip: Autosport