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Why F1 future may spin out of control | Why F1 future may spin out of control |
(39 minutes later) | |
Analysis By Theo Leggett Business reporter, BBC News | Analysis By Theo Leggett Business reporter, BBC News |
Lewis Hamilton's McLaren team is among those that may break away | Lewis Hamilton's McLaren team is among those that may break away |
On the eve of the British Grand Prix, one of the oldest and best loved events on its calendar, the glamorous world of Formula One motor racing is in turmoil. | On the eve of the British Grand Prix, one of the oldest and best loved events on its calendar, the glamorous world of Formula One motor racing is in turmoil. |
Eight of the 10 teams, including Ferrari and the Brawn GP team of championship leader Jenson Button, have announced plans to set up a rival championship. | |
Yet Formula One is as popular as it is ever been, attracting a huge television audience. So what has gone wrong? | Yet Formula One is as popular as it is ever been, attracting a huge television audience. So what has gone wrong? |
Well, fundamentally, it is about business, not sport. | Well, fundamentally, it is about business, not sport. |
The catalyst has certainly been the global economic downturn with the Honda team's decision to leave Formula One last year sending shivers through the series. | The catalyst has certainly been the global economic downturn with the Honda team's decision to leave Formula One last year sending shivers through the series. |
It pulled out because its sales had fallen dramatically and it could no longer justify spending hundreds of millions of dollars a year on racing. | It pulled out because its sales had fallen dramatically and it could no longer justify spending hundreds of millions of dollars a year on racing. |
The threat is a potentially expensive headache for Bernie Ecclestone | The threat is a potentially expensive headache for Bernie Ecclestone |
That prompted fears other carmakers could follow - leaving millions of television viewers watching just a handful of cars. | That prompted fears other carmakers could follow - leaving millions of television viewers watching just a handful of cars. |
Revenue row | Revenue row |
Motor racing's governing body, the FIA, responded with a package of proposals to cut costs dramatically. It included plans to limit F1 budgets to $60m (£36.6m). | Motor racing's governing body, the FIA, responded with a package of proposals to cut costs dramatically. It included plans to limit F1 budgets to $60m (£36.6m). |
This went down badly with teams who until recently were spending close to $500m a season. They also objected to plans to limit their technical freedom. | This went down badly with teams who until recently were spending close to $500m a season. They also objected to plans to limit their technical freedom. |
But while the row over how far costs need to be cut and how to do it may have triggered off the dispute, it is emphatically not the main issue. | But while the row over how far costs need to be cut and how to do it may have triggered off the dispute, it is emphatically not the main issue. |
Both parties will be weakened if this happens and someone else will gain Chris AylettMotorsports Industry Association | Both parties will be weakened if this happens and someone else will gain Chris AylettMotorsports Industry Association |
The real argument, which has been simmering for years, is about how the sport is run and what happens to its commercial revenues. | The real argument, which has been simmering for years, is about how the sport is run and what happens to its commercial revenues. |
While the teams compete in F1, and the governing body makes the rules, the commercial side is looked after by the Formula One Group. | While the teams compete in F1, and the governing body makes the rules, the commercial side is looked after by the Formula One Group. |
These companies are run by Bernie Ecclestone and are majority owned by private equity group CVC Capital Partners. | These companies are run by Bernie Ecclestone and are majority owned by private equity group CVC Capital Partners. |
The group makes close to $1bn a year from television rights, trackside advertising, and the large fees it charges racetracks for the right to host Grands Prix. | The group makes close to $1bn a year from television rights, trackside advertising, and the large fees it charges racetracks for the right to host Grands Prix. |
But only half of this money comes back into the sport as payments to the teams; the rest goes into the coffers of the F1 Group. | But only half of this money comes back into the sport as payments to the teams; the rest goes into the coffers of the F1 Group. |
According to the independent F1 financial guide Formula Money, much of it is used to repay debts run up by CVC when it bought its stake in F1. | According to the independent F1 financial guide Formula Money, much of it is used to repay debts run up by CVC when it bought its stake in F1. |
Will the drivers be celebrating a breakaway group? | Will the drivers be celebrating a breakaway group? |
The teams are privately questioning why they are being asked to cut costs so dramatically when a great deal of revenue is going out of the sport. | The teams are privately questioning why they are being asked to cut costs so dramatically when a great deal of revenue is going out of the sport. |
They are also concerned at the way in which they say the FIA is trying to impose its will on them and ignoring their wishes. | They are also concerned at the way in which they say the FIA is trying to impose its will on them and ignoring their wishes. |
Fan split | Fan split |
The FIA insists it has to act tough to prevent F1 turning into a "financial arms race". | The FIA insists it has to act tough to prevent F1 turning into a "financial arms race". |
So does their threat to create a new series hold water? | So does their threat to create a new series hold water? |
Yes it does, according to Chris Aylett, chief executive of the Motorsports Industry Association. | Yes it does, according to Chris Aylett, chief executive of the Motorsports Industry Association. |
"These are companies of high repute. Some of them are large multinational organisations. And this is a pretty big card to play." | |
This is bad news for the debt holders. In fact it doesn't get any worse Christian SyltFormula Money | This is bad news for the debt holders. In fact it doesn't get any worse Christian SyltFormula Money |
If the teams do carry out their threat, viewers would be left to choose between two rival series - something that could prove highly damaging. | If the teams do carry out their threat, viewers would be left to choose between two rival series - something that could prove highly damaging. |
A similar situation arose in American Indycar racing - a close cousin of Formula One - which split in two in the mid 1990s. | A similar situation arose in American Indycar racing - a close cousin of Formula One - which split in two in the mid 1990s. |
The result was that neither series proved truly successful - as fans voted with their remote controls, and migrated to other sports. | The result was that neither series proved truly successful - as fans voted with their remote controls, and migrated to other sports. |
"Both parties will be weakened if this happens," says Chris Aylett, "and someone else will gain." | |
Distraction | Distraction |
Christian Sylt of Formula Money says it's a prospect which terrifies key investors in F1 - the banks who hold the Formula One Group's debt. | Christian Sylt of Formula Money says it's a prospect which terrifies key investors in F1 - the banks who hold the Formula One Group's debt. |
Jenson Button is streaks ahead in the drivers championship. | Jenson Button is streaks ahead in the drivers championship. |
"This is bad news for the debt holders. In fact it doesn't get any worse," he says. | |
So those influential investors could yet have a role to play. | So those influential investors could yet have a role to play. |
In the weird, wonderful and highly political world of Formula One, of course, things can change very quickly. | In the weird, wonderful and highly political world of Formula One, of course, things can change very quickly. |
It is far from certain that F1 will split. But insiders say the prospect is becoming alarmingly real. | It is far from certain that F1 will split. But insiders say the prospect is becoming alarmingly real. |
A distraction, to say the least, as the teams gear up for the British Grand Prix. |