What if Ferrari bought F1

The joint statement from the two entities leaves little doubt about its intentions: Exor, one of the largest publicly listed investment companies, and News Corporation, the global media group, confirm that they have begun exploratory work on the possibility of creating a consortium aimed at formulating a long-term plan for the development of Formula One in the interest of participants and fans. In the coming weeks and months, Exor and News Corporation will approach minority partners and key figures in the sport. There can be no certainties that this will result in getting closer to the current owners of Formula One.

Bernie Ecclestone, a key figure in F1, nonetheless immediately stated: «Personally, I think CVC does not want to sell, so it is going to be a bit difficult. I see CVC being present for the long term, absolutely, 100%. If someone comes along and offers much more money than it’s worth, they will naturally say, “Sit down, let’s talk a bit.” But I have a feeling that’s not going to happen. I don’t understand why a company as big as News Corp would need to look for partners. At first, it was Carlos Slim. Now, there’s another one.»

This statement clearly indicates that the two potential partners will not contact CVC directly but rather the other minority shareholders. If Bernie Ecclestone sees CVC as a long-term presence, the British investment fund is not obliged to remain as a majority shareholder: Exor and News Corp could propose that it stays in the capital but only in a minority position. Of course, this means they would need to agree on a sale price, but such considerations should not be beyond the reach of a company that holds, among other assets, 30.45% of FIAT Auto (which also includes the American assets of the group, namely the stake in Chrysler) and FIAT Industrial as well as 17.41% of Banco Leonardo and 60% of Juventus Turin.

Nevertheless, an association between one of the teams (it should not be forgotten that FIAT holds a majority stake in Ferrari) and one of the world’s largest satellite packages could pose a number of problems. Indeed, the current Concorde Agreements stipulate that priority should be given to broadcasting on free-to-air channels wherever possible. Therefore, these agreements would need to be modified, which requires the approval of all twelve teams on the grid as well as Bernie Ecclestone, which is never a foregone conclusion.

Certainly, we might think that these new agreements could then be more favorable to the teams, which would receive a larger share of the revenues generated by Formula 1. This would resemble the economic model implemented by professional sports teams in the United States: they own their own league. The problem is that a takeover by one of them would certainly pose significant issues for the other competitors, McLaren or Red Bull in particular. The main shareholder would then have every interest in keeping a large portion of its revenues and profits to reinvest directly into the Scuderia, which would give a significant advantage to the Maranello team, something that could not be acceptable and accepted by its competitors.

But this firm statement of intent can only put pressure during the negotiations for the next Concorde Agreements, which precisely expire at the end of the 2012 season. Although the teams have committed not to mention the possibility of a competing series, as was the case in 2008, Luca di Montezemolo hinted at this quite openly last December. The president of Ferrari then referred to the NBA’s business model by indicating that it was enough to reach an agreement with television networks and circuits…

The future will tell us if this first statement will have no effect or if a major upheaval of F1 as we have known it for decades is about to erupt around ever-growing economic interests…

With the participation of RacingBusiness.fr