Archive for February, 2009

Just listened to the Chris Moyles show on Radio 1 and they had Lewis Hamilton on, talking about the new season, doing a human beatbox impression which was actually pretty impressive and pledging £10k if the rotund Moyles can climb to the top of Mount Kilimanjaro, a task he has set himself to raise money for the Children in Need campaign. [ See the videothe beatbox bit is around 4m20s ]

I mention this because as I listened to it, I could sense Hamilton’s unease at trying to guess what level to pitch his donation at. If you are a multi-millionaire tax exiled in Switzerland how much do you offer? He started out with £5k, but then doubled it as Moyles was leaving the McLaren factory. I think that’s about right for someone like him, what do you think?

It’s like looking at the kid on the doorstep asking you to sponsor him for a charity bike ride and knowing what amount to out, except that with Lewis on Radio 1 millions of people will judge him – if he goes too low people say, “Mean git” and if you go too high you look like a flash Harry at a time when thousands are losing their jobs and homes.

How to play it during the credit crunch is becoming more and more of an issue for F1 celebrities. Look at Sir Jackie Stewart and the heat he’s taking in the Daily Mail for refusing to lower his alleged £4 million retainer from Royal Bank of Scotland.

Watch out for more F1 people struggling to set the right tone, dropping the private jet and not being ostentatious.

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Can the USF1 team get off the ground?

Peter Windsor and Ken Anderson did a press conference on the US racing channel Speed TV last night with details of their USF1 project.

On the face of it, this is an crazy time to try to get a US based F1 team off the ground, with a credit crunch, which is biting savagely in America, no US Grand Prix, and the eternal problem of logistics with most of the races being based in Europe and all points East. Also, whisper it, it’s not very green to fly racing cars back and forth across the Atlantic, when you could just as easily be based in Surrey or Oxford.

The key to this initiative is the FIA’s move to slash costs and the Formula One Teams Association’s desire to do likewise. Now a team like USF1 knows that it can get an engine and gearbox from a front running team like McLaren or Ferrari for £6.5 million a year. The FIA wants to restrict many other areas of technology and make them available in a similar fashion. The teams are moving slowly towards finding what they consider the right level. If the teams stick to stereotype and resist radical change, then USF1 will really struggle to be anywhere other than the back of the grid with only 100 employees based in the USA.

But if budgets do come down to around £50 million a year and the FIA gets its way so that any new technology a team like McLaren comes up with, has to be made available at a capped price to a privateer team, then USF1 will be the first of several new F1 teams having a go, recession or no recession. There are three empty spaces in pit lane (without Honda) and they will fill up fast if F1 becomes affordable.

F1 still offers a sensational return on investment in terms of advertising spend. A £20 million sponsorship will do far more for global brand awareness than twice that much spent on TV advertising. And if the budgets come down as they are talking about, then the business model works.

But we’ve been here before, seen many a wide eyed optimist launching in, ultimately to be disappointed. F1 is a bear pit, a piranha tank and the people who’ve been around a long time and have a lot to protect are not going to make it easy for new boys to come along and make them look foolish.

I know Windsor well, he helped me a lot with the Nigel Mansell autobiography in the 1990s and I’ve helped him out too in TV. He has always dreamed of his own team and he has been around in F1 long enough to know the harsh realities. There is a hint of fantasy about his project and I do think that they were rushed into this announcement because of leaks, where they might have liked more time beneath the radar.

But they are now committed to putting two cars on the grid in 2010 and representing the USA. How will they do it? Well there is quite a silicon valley of motorsport technology in Charlotte and Indianapolis. I’ve been there and seen it. Most of the car build will be outsourced, they have the state of the art Wind Shear windtunnel which Anderson built, just a few miles down the road. You’d also need state of the art F1 technical knowledge; Mike Gascoyne is sitting in Oxfordshire twiddling his thumbs and there are some designers in Brackley who might be available for hire shortly…

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More insight on the BBC F1 plans

Interesting response to the BBC package announced yesterday. Quite a few people think “The Chain” is a retrograde step. Andrew Baker in the Telegraph is positively evangelistic about it, reckons it’s the greatest theme music ever in a proud BBC tradition of theme tunes. I quite liked the tune to Horse of the Year show, but that’s by the by…

Quite a few of you are wondering about the use of archive footage. The standard deal is that you can use anything up to 10 years previous as part of the package. Anything before that and you have to pay extra. BBC may well have negotiated a different deal from that, Bernie does all kinds of individual deals with different broadcasters, but as the Beeb haven’t mentioned archive in any of their press materials, it doesn’t seem that it was a big priority. I know that they were much more keen to get the interactive offering the best it could be.

Anything pre 1981 is pre FOM anyway, so if you can source it, you can show it.

There are some mixed vibes coming from the newspaper men. It’s always odd for journalists to interview other journalists, but The Times has already gone for the new presenter, Jake Humphreys and thinks the public will follow,

“The biggest gamble is Jake Humphrey in the main presenting role. The corporation believes that the former children’s programme presenter is a star in the making, but others are yet to be convinced that he is sufficiently “heavyweight” for the role, ” says Ed Gorman.

Jake is very ambitious, but he is going to be really tested in this role. I wouldn’t want to be presenting a sport I’d never done before, which is hugely complex and changing all the time and also have to keep control of Eddie Jordan. Fair play to Jake if he pulls it off.

The scribes were also taunting Jordan at the launch on Tuesday. A book is running on when the famously foul mouthed Irishman will become the first to get sacked by the BBC. Eddie didn’t offer a date, but found the idea amusing.

On the subject of the coverage being Lewis-centric, check out this comment from
Tom Johnson,
“Of course the coverage should be ‘Hamilton-centric’ and it will be if the BBC want to maintain the ratings boost that ITV enjoyed. Like it or not half the audience is there for Lewis and will soon disappear if he’s not heavily featured – just like Spain for Alonso, Italy for Ferrari and Poland for Kubica – face it guys the world’s chauvinistic and to be frank we have a lot more to be chauvinistic about than Poland does with Kubica. Hamilton’s unprecedented feats in F1 should be cause for rejoicing not churlishness anyway for those that can’t bare a british broadcaster majoring on a british world champion, tough! Try living in Spain Italy Germany Brazil Poland or pretty much anywhere that has a top line driver and get real perspective on what bias is.”

It’s always a mistake to look at the world from your own little bubble and think that is how things are. Hamilton haters are a vocal majority on forums and websites, but you sense that there is a silent mass which far outweighs them among the wider public, people who feel like Tom. Lewis put another 2-3 million on the audience in the last two years and that is why the BBC paid the big dough for the rights. He’ll be front row centre in the coverage.

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A look at the BBC’s F1 TV plans

The BBC today announced exactly how it plans to cover F1 this season, its first year as the UK rights holder after 12 years of ITV coverage.

They are certainly going for it – it’s a pretty comprehensive schedule and there are some interesting and innovative touches. By using TV, radio and the online service they provide what is called in the industry ‘360 degree’ coverage.

The first point to make is that all the qualifying and race shows will be on BBC1, which means that they are going for the big audience numbers. They have to justify the huge spend on Formula 1 to their critics in Government and elsewhere and the way to do that is by getting big audience numbers, which you would not get on BBC2, daft as that may sound. ITV was getting around 5-6 million viewers for the European time zone races last year as a benchmark, with a peak of 13m for the Brazilian GP.

The only the exception to the BBC 1 rule is qualifying in Brazil, which would fall at prime time Saturday night and so is shunted onto BBC2. Canada has been dropped, otherwise that would have presented the same problem.

Timings are given for races up to Monaco and it looks like the shows are roughly the same length as ITV’s so there will be around an hour of build up material before the race, but the post race element is a bit tighter – they will come off the air on the hour, which for some races leaves only 20 minutes or so, but as there are no adverts, that still leaves plenty of time. The qualifying shows start 50 minutes before the action.

Where the BBC departs from ITV is in its ability to use the red button interactive service to show all the practice sessions, which I imagine will use the commentary from Radio 5 Live, as I cannot see Martin standing in a commentary box for three hours on a Friday.

The innovation I like the look of the most is a post race switch-over show on the red button, which runs for an hour after the main show finishes. This will probably be a bit like the X-tra factor after X-Factor or the studio post-mortem after the Apprentice.

This is a great idea and it will allow them to pick up lots of material and stories in a more relaxed way after the race. This would have been great after Spa last year, for example, to examine a real talking point incident in more depth. There is no reason not to do this, as you have all the people on site and all the gear, you just lack the airtime, but with the BBC having this interactive space, they can do this and it will be really good.

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Branson has a sense of humour

Not a serious posting with any great insight into the Honda negotiations, but just a photo someone sent me with an advert for Virgin Trains, which I absolutely love! It shows that Branson has a great sense of humour. We could do with a bit more of this kind of thing in F1.


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F1 set for another close season

I didn’t think that anything could top last season, with the championship decided in the final corners and many races where most of the field was separated by a second, but talking to the teams, the feeling is that it’s going to be very close again this year, despite the massive rule changes, which normally spread the field out.

The recent Bahrain test showed that Toyota and BMW are closer that expected to Ferrari at this stage of the game and the Toyota looks to be pretty reliable as well as fast. Meanwhile Ferrari and McLaren have also been paying close attention to the lap times being set by Red Bull and Williams.

I’m going to the Barcelona test in the second week of March to get a closer look for myself, but it seems amazing to me that in a year when the rules have been changed so dramatically and with the introduction of KERS, the cars should be so close to each other on performance.

And remember that it’s not as if Ferrari are going to do a final test at Imola where they bolt on some new Bridgestone tyres and suddenly go half a second faster ( as they did before the start of the 2004 season). There is a lot of development to go on once the season starts and it will probably by there that McLaren and Ferrari edge ahead, although you’d have to say that last year Renault made some pretty dramatic improvements over the season.

Toyota has put a lot of emphasis on making sure that the rear tyres last over race stints and they seem to have succeeded in this. Their weakness in recent times was the car’s inability to handle bumps. I’ll be interested to see if they have changed the DNA there.

The FIA’s dream is that KERS is the deciding factor in performance terms and that this will drive a development battle on regenerative technology. Toyota is not running KERS at the start of the season, and BMW, like many others, is keeping its options open, but some positive noises on KERS have been coming out of Ferrari and McLaren after the most recent tests. If they can get the system working well enough that the performance gain outweighs the disadvantage of weight and braking difficulties, then they will get an advantage from it.

In the early days of development, most teams worked out that KERS was going to cost lap time, not gain it, but I’m starting to sense with the top two that they are starting to believe it could be a net gain.

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The Honda story hots up

In the last hour or so I’ve read the story on the Real Honda F1 site about an imminent announcement of a management buyout and had an urgent message from one of my regular readers, saying the same thing.

Real Honda clearly have some solid sources within the team, because they have broken a fair bit of news about the team in recent years. Meanwhile I don’t know what insights Finn has but he is most specific about an imminent announcement (see his comment at the bottom of the Bernie/Honda post).

I’ve checked this afternoon with a party who would know if this were the case and apparently things are still quite finely balanced and an outcome is still a week or so away.

The gist of the urgent stories is that a management buyout deal has been done with Ross Brawn and another party and that Nick Fry is not part of the package. I have to say I’ve been hearing for some time from various sources that Nick is not part of the MBO deal that Honda wants to do, so it was interesting to see that he was mentioned in the News of the World’s ‘Honda snubs Bernie’ story yesterday.

Nick arouses mixed reviews, some really rate him, others really have it in for him and I certainly get a volley of correspondence whenever I mention his name here.
I’ve always got on well with him, but am aware that factions within Honda management in Japan feel that it is time to move on.

What is certain is that this morning in Tokyo, Honda had a press conference at which they announced that the president Takeo Fukui, a real F1 nut, is being replaced in June by Takanobu Ito, who is only 55.

Changes in presidency at Honda are always seismic events because what tends to happen is that two factions develop, one behind the new president and one behind the old and some serious politics ensue, which makes decision making prety tough sometimes. The F1 programme has definitely fallen victim to this phenomenon over the years, if you think of Harvey Postlethwaites’s Honda development car which never got raced, the decision to supply BAR, then Jordan as well and so on.

Speaking this morning, Fukui did not sound like a man who was about to announce a deal had been done either with Virgin or with the management. According to AFP he said, “The reality is that talks are proceeding with great difficulty.”

Honda has received several proposals, “but actually there are very few who are serious about buying it.”

This chimes in with what I’ve been hearing now I’m back in the UK, about Virgin, I think this could be another Northern Rock, where Virgin looks at it and gets lots of publicity but doesn’t actually do the deal. It’s no co-incidence that Virgin is celebrating its 25th anniversary and Sir Richard Branson is flying around the world to celebrate this fact and this F1 story has certainly got everyone talking about them. His appearance on Radio 4’s Today programme last week was certainly double edged, as he wanted to talk about Virgin’s 25 years and the interviewer wanted to talk F1.

This situation could still go either way; Honda has not ruled out the option of disbanding the team, but hopes to reach a deal in time for the first race on Match 29th.

Again according to AFP, the new president, Ito made the following, very interesting remark; “Racing is very challenging but also fun. Unfortunately, our company has a slight cold right now. But we would like to cure this cold as quickly as possible and work towards reaching that happiness” (of racing). In other words they would like to come back. But would they be able to?

Mercedes is on standby to provide engines and although there are stories about today being a deadline for them, that is not Mercedes’ style. I imagine they would want this deal to happen for the good of the sport and if that were not the case, or if there were a deadline they would have said so on the record, which they have not.

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Interesting tale in the News of the World today, where Ian Gordon has managed to get an exclusive with Bernie Ecclestone on how the Honda management team turned down his offer of financial help with their buyout of the team.

Bernie has done a series of ‘exclusives’ lately; with the FT, the Telegraph, the Express and now the NoW. The Times has been his channel of choice for years, but he now seems to be spreading it around a bit more.

This story is interesting because in it Bernie reveals that he proposed putting up some of the money to back the management buyout in which both Nick Fry and Ross Brawn would have taken 17.5% of the equity in the team. The value of Ecclestone’s offer and the percentage he would have received are not revealed. A figure of £100 million is mentioned as the cost of competing this year, but they will be able to do it for less than that, if they have to, and there is no suggestion that’s what Bernie offered. I would be sure the figure he had in mind was less than a third of that. It’s all a bit Dragons’ Den, where every now and then the money man gets turned down by the poor soul pitching his business idea.

So why did Honda and the buyout team of Brawn and Fry turn it down, and was it as simple as that anyway? Well you can be sure that it must have had a lot to do with the strings attached. One aspect of the deal which Gordon highlights is that a share of ownership of the team would have given Ecclestone the right to access to the Formula One Teams Association, which has been holding private meetings to discuss how ultimately to improve the show and get more money out of Bernie. I’m sure he’d have loved to see all the minutes of those meetings.

An aggrieved Bernie told NoW, “I tried to help with the management buy-out. They should have taken what I offered. It was a very good offer for everybody concerned. It gave them complete protection but they wanted to do things on their own. Now all we can do is hope and pray!”

As I mentioned in my post on Virgin, Bernie will still be involved in the deal if it goes that way, because Sir Richard Branson has made it clear he’s sticking pretty close to Bernie through all of this and he will want some assurances. Branson had his say on BBC Radio the other day, now Bernie has chosen this moment to break the story about his rejection. This must be significant, why would he do it otherwise?

I think firstly it is his way of showing that he has tried his best to save the team and that it’s not his fault if it fails. A bit like Donington and the British Grand Prix. He’s taken to doing this kind of pr appearance where he says “I’m doing the right thing, I’m the good guy here” a lot more lately, especially since he took such a hammering over the story about racism being ‘a joke’ late last year. He wants to show that he’s a strong chief executive – standing at the bridge and steering the ship through the stormy waters.

But his intervention in NoW also has to do with putting pressure on Honda at what is now a critical juncture in this process. They have had chances to save this team, he is saying, they still have chances to save it and do the right thing. But in his words they need to “make up their bloody minds.”

They do indeed.

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How a Honda-Virgin deal might work

As the momentum gathers behind a Virgin takeover of the Honda team, with Bernie Ecclestone throwing his weight behind the idea, I’ve been looking into how a deal might be structured and how that might compare with a management buyout, to see which is more likely and which Honda might prefer.

I should stress at the outset that this is just a look at how these deals are done, I don’t have any of the precise numbers or inside information, but these kinds of deals are not that hard to analyse from the outside if you know the right people to ask, which in this case are people working in Mergers and Acquisitions at merchant banks, because they do these kinds of deals all the time. So I’ve been asking around in those circles.

Looking at this from Honda’s point of view, they have to dispose of the F1 team in a way which will cost them the least in terms of money and loss of face. To close down the team and fulfil all their obligations, which include redundancy payments will cost around £40 million. There are assets to dispose of, which will bring income, such as the wind-tunnel, for which there is a potential buyer and the estimate is £10 million from striping out the assets. Honda has confirmed that this is still an option.

The problem with the management buyout option is the financial capital. Three years ago Nick Fry and Ross Brawn would have been able to go to a bank like RBS, or to a venture capital business like Apax or Bridgepoint and would probably have been able to get a deal which brought in working capital, in return for a 40% shareholding. But F1 is no longer very fashionable in the City, too many banks have lost money in the sport and it would be a very hard sell to any major bank at a time like this. They could look to the investment arm of an Emirate government, like Dubai or Qatar, but these too have become much more wary.

An operator like Richard Branson will be aware of Honda’s numbers. Let’s not forget he picked over the bones of Northern Rock bank with a view to taking it over. He will be in a position to say to them that he will take it off their hands if they pay him £30 million, which is cheaper for them than closing it down and it provides a credible buyer. With the £40 million they are due from TV money for last season’s results, he now has £70 million. Bruno Senna brings with him significant sponsorship, I’ve heard $14 million, which is around £10 million.

With costs due to come down that makes the team viable and I wouldn’t be surprised if he doesn’t get Ecclestone to advance him some money as a sweetener to commit to F1, or underwrite the Mercedes engine deal for example, because F1 would benefit massively from Virgin’s seal of approval at a time like this. Bernie has had an ‘involvement;’ in many teams over the years.

Branson would take the view that three years of F1 would give huge benefit to his brand globally and then he would either close it down himself, or sell it on once the downturn was over.

As I said earlier, he got a lot of headlines from his Northern Rock bid and he likes headlines, they provide free publicity for him and Virgin and this may just be another example of this. He is not a big spender, cuts everything to the bone. He has some good managers and would certainly leave Brawn in charge of the F1 team, if he had any sense. In some ways he would be an odd fit in F1.

But from Honda’s point of view, he represents a way out of a nightmare with minimum expense and maximum credibility.

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FOTA faces the public at last

I’ve just been invited to a press conference in Geneva on March 5th, where FOTA president Luca di Montezemolo will outline what the members of the Formula One Teams’ Association have been discussing lately. It’s been very intense behind the scenes, with all the teams heavily involved in discussions covering all areas of the sport.

The invite says, “Luca di Montzemolo, the FOTA president, will make a speech in which he will unveil FOTA’s plans for the future of Formula 1.

These plans are the result of a series of meetings held over the past few weeks and months, all of them with a common goal: to make Formula 1 commercially sustainable, environmentally friendly and compellingly attractive for spectators, TV viewers and internet consumers alike for years to come.”

As I see it, FOTA want to work together with Bernie Ecclestone’s organisation to improve the show, the turnover and the media reach of the sport and collaborate with the FIA and Max Mosley to come up with rules which make F1 sustainable and entertaining. The vibes I get are that both men think that there are some big advantages to dealing with one man, Montezemolo, who represents all the teams, it takes out a lot of the politics and nonsense of the past. That said, the teams’ demands are more than either Mosley and Ecclestone want to give away, so there is a serious negotiation to be had here. Rules wise it’s about 2010 and the longer future, money wise it’s about 2013 onwards, when the current deals expire.

On paper FOTA is the best thing that’s happened to the sport in decades and now FOTA has decided to become more than just a private members club for F1 team members and to become a public facing organisation at last.

Initially the senior FOTA figures I spoke to back in September were not sure whether they would ever become public facing, but now they have decided to deal out on the open, which can only be a good thing for you the fans.

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